Harvard MBA Indicator for Wall Street (HBS)

/ Adam Nash

I caught this article a few days ago in the New York Sun. It came up in one of my Google News searches:

Equities Swing with Harvard MBAs

It’s a fun piece, and it brought me back to my Private Equity class with Prof. Bill Sahlman at Harvard Business School in 2000. One day, Bill shows the entire class these beautiful rising bar charts. It turns out that each of them shows the rise in percentage of HBS graduates at key times in history – Wall Street in the late 1980s, Internet companies in the late 1990s, and in 2000, a rising trend towards Private Equity. The conclusion was obvious – a strong ramp in HBS hiring looked like a pre-cursor to a bust.

The article quotes Ray Soifer, who was HBS Class of 1965. He seems to have tailored the theory exclusively to measuring the ups and downs of Wall Street. Investment Banking always draws a large number of HBS graduates, but for Soifer, the magic number is 30%. When the number of Harvard MBAs destined for banking in a given year crosses that threshold, it’s bearish. Lower, is neutral or bullish.

Interestingly, a little web searching reveals that Mr. Soifer seems to trot out this theory every year, and speaks on it quite a bit. Check out this list of articles on his website. It includes this one from Slate in 2004 that sounds awfully familiar…

My take on the theory is little less dramatic, but more plausible. Harvard MBAs tend to be very intelligent people with excellent credentials. They also tend to be expensive and discerning hires, since most people go to business school to not only learn but also to take their careers to another level. The breadth of the student body introduces them to a wide number of global industries, and provides contacts and insights into most of them. It’s not surprising that the industries that are currently economically flush have more resources to pursue these candidates, and its not totally surprising that when one industry gets too flush, it’s a sign of some sort of bubble.

As part of my searching, I found the Coyote Blog, from another HBS graduate now running a small business in Arizona. He found another version of Soifer’s piece, but used it to describe his take on career paths for HBS graduates:

A more interesting HBS graduate job indicator for me has been “how has the jobs people have evolved since they graduated”. When I graduated, everyone seemed to be investment bankers and consultants. At our fifth year reunion, everyone was posturing as to how successful they had been, how far they had risen, etc. Most people were still in the same type jobs, with only a few outliers who had switched careers already. Our tenth reunion was totally different. At our tenth, no one talked about their job – everyone talked about their kids. The contrast was dramatic. Many people were in different careers, including a number who were testing the dot-com waters.

At the fifteenth reunion, everyone seemed much more relaxed. Job performance stress at from the fifth and family starting stress at the tenth were mostly gone. Many, many people (including me) had their own businesses, and few of these were ones anyone would have predicted; I don’t think anyone was a consultant anymore. Here are a few examples just from our 90-person section of businesses graduates are running now:

My observation – very few were the types of businesses that come recruiting at HBS.

My parting observation about career choices through life comes from Dan Simmons’ great Hyperion series, where the prophet Aenea gives here famously concise advice to humanity:

Choose Again.

Certainly true with careers.

 

I just got back from my fifth year reunion in June, so this gives me something to think about.