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Morning Coffee: The elite students and no-hopers of Goldman and JP Morgan. Video games professionals are transferring their skills to banking

If you had been wondering what the balance between fear and greed was among young people today, the statistics on graduate applications to investment banks might shed some light. On the one hand, since this time last year the banks have rapidly and repeatedly increased the salaries they’re offering to new recruits. On the other, a banking career looks somewhat riskier than it did 12 months ago, and publicity about working conditions hasn’t got any better. So, which of the two effects won out?

The answer is … ambiguous. According to data crunched by Financial News, applications to Morgan Stanley, Credit Suisse and HSBC were down, while Goldman Sachs and JP Morgan were up on last year, Citi was flat and Bank of America declined to comment. Since there were likely to be some firm-specific perception issues in play – constant bad headlines at CS, geopolitical uncertainty with respect to Hong Kong at HSBC – it looks like kids are still keen on the industry.

But the real question which might be raised from looking at the data might be something more like - do any of these numbers make sense? For Goldman Sachs, the global internship program received 236,000 applications for 3,000 places. At JP Morgan, it was 270,855 applications for 4,604 places, of which 54,000 applications went in for the 480 places in the investment bank. Across the industry, even at the firms which saw slight year-on-year falls, the norm seems to be that the crude percentage chance of getting accepted to an investment banking graduate program is a bit more than 1%, but significantly less than 2%.

By comparison, the acceptance rate at Harvard is 5%, Oxford University is 17.5% and for the Navy SEALs it’s about 6%. This might be considered a good thing for the industry, in so far as it represents a conscious attempt to broaden the pool of applicants and take the very best of the best from a wider range of young people. On the other hand, there needs to be a reality check here – in any given year, does it really seem likely that there are nearly a quarter of a million people graduating who would have a realistic chance of making a career at Goldman Sachs?

And if the answer is no, then the challenge to graduate recruiters is almost impossible. No matter how hard they work, there has to be some degree of arbitrariness in the process by which the mountain of applications is cut down to a manageable number which can be given serious attention. It’s pretty likely that the ones who are accepted are, indeed, among the very best. But when you have so many applications to reject, you can be pretty sure that there are also some great candidates among the ones that got thrown away without a proper look.

No wonder there is such a growth industry in algorithmic scoring, video interviews and artificial intelligence for recruitment. Perhaps it’s the modern equivalent to the process apocryphally used by a famous hedge fund manager, who used to throw applications up in the air and pick up the ones that landed right side up. His reasoning was simple – “the last thing I need are unlucky traders”.

Elsewhere, it’s a bit of a cliché to compare securities trading to a video game. But according to William Archbell, an engineering team lead at Citadel Securities, developing high-performance systems for market making really is like developing video games. And he should know; after a decade in the gaming industry, he left a Microsoft-backed studio to work in finance.

The video game industry is notorious for its working practices, and it does indeed seem that Archbell might be one of the few people in the world able to truthfully say that he went to work for Citadel in search of better work-life balance. But his main insight appears to be that the real difference between trading systems and games is that platforms are “optimised for P&L” rather than “optimised for fun”. Other than that, it’s all C++ and it’s all about user testing, iteration and minimising latency. It almost seems a shame – wouldn’t you like to, just once in a while, use a piece of banking software that had been optimised for fun?

Meanwhile

The intern class of 2022 have been living it up on TikTok, making videos showing the lifestyle, the parties and the free food. There is also a growing number of junior banker/influencers, although they seem to be a bit more cautious about revealing which bank they work for. (Bloomberg)

Sam Trabuco, co-CEO of Alameda Research and right-hand man of Sam Bankman-Fried, has stepped down in order to concentrate on “travelling, visiting friends and family, working on myself and whatnot”; he’s also bought a boat. (Twitter)

Cynics of ESG investment often suggest that the “sustainability” factor is really nothing more than “short oil and gas”. Given that, it’s perhaps understandable that Strive Asset Management has decided to capitalise on the success of its first “Anti-ESG” exchange traded fund by launching another one. Every flight delay seems to mean that the bar runs out of champagne. (Bloomberg)

Although “non-financial misconduct” is an enforcement priority for regulators in the City of London, freedom of information requests reveal that neither the FCA nor the Bank of England has fired anyone for drug or alcohol misuse since 2018. There has been some use of employee support lines (about which they’re understandably reluctant to give details), but very few compulsory drug tests. (Financial News)

As more and more people find clever hacks and premium credit cards which allow them into airport lounges, conditions are getting more and more crowded and unpleasant for the road warriors and investment bankers who regard them as their own turf. (Bloomberg)

A strange story of someone who suffered a traumatic brain injury and found that it made her less inhibited and more outgoing – rather than trying to get her old personality back, she decided to use it as an opportunity for reinvention. (WIRED)

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AUTHORDaniel Davies Insider Comment
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