HBS Grads on Wall Street? Watch Out

To the hordes of graduating Harvard students headed to high-paying investment banking jobs next fall, a cautionary note: as the number of Harvard MBAs entering the securities industry rises, the stock market tends to tumble.

New Jersey-based financial consultant Ray Soifer has studied the career choices of Harvard Business School graduates for two decades, and he’s found that when the fraction of MBAs going straight into securities industry jobs tops 30 percent, the stock market plummets.

But investors can breathe a sigh of relief: only 26 percent of the MBA Class of ’04 headed to Wall Street. At least 30 percent of the Business School’s grads took securities industry jobs in 2000, 2001 and 2002—and leading market indices fell all three years.

The figures don’t necessarily reflect poorly on Harvard grads’ managerial decisions, Soifer said. Rather, the securities industry attracts more top-notch MBAs when I-Banking is booming and starting salaries are high, so grads often jump on the tail end of a bull market.

“People working in the stock market are always looking for indicators of one sort or another—whether it’s skirt lengths or the Super Bowl,” said Soifer, who spent decades on Wall Street as an investment banker and research analyst.

In the 1920s, a business professor at the University of Pennsylvania’s Wharton School postulated that markets are bullish when hemlines inch upward. And when a team from the old American Football League beats a National Football League squad in the professional gridiron championship, stocks tend to sour.

“One doesn’t always know why statistical indicators work, which then makes one suspicious about them,” Soifer said. But when the B-School Class of ’65 grad flipped through data from his alma mater, “the numbers just hit me one day.”

“SHEEP” TO THE SLAUGHTER

Several financial publications have reported on Soifer’s findings, and last week, Slate Magazine columnist Daniel Gross penned a story on the data entitled “Why Harvard Is Bad for Wall Street.”

“Dan Gross wrote that as a true Cornellian, I’m sure,” Soifer quipped.

Gross—who in addition to his undergrad degree from Cornell, also holds a master’s in history from Harvard—wrote in an e-mail that he does “not believe that the mere presence of Harvard MBAs in entry-level (or senior-level, for that matter) positions on Wall Street is bad for markets.”

“And no, I didn’t write the headline,” Gross added.

He said that Soifer’s patterns stem from the fact that Harvard grads’ career decisions reflect broader market dynamics. “MBAs are like very well-paid sheep,” Gross said. “They move in herds.”

Soifer predicted that an analysis of other top business schools would produce “comparable but not quite as dramatic results.” He speculated that “students who go to Wharton and [MIT’s] Sloan [School of Management] are more quantitatively-oriented than the ones at Harvard.”

Whereas Wharton and Sloan students might head to securities industry jobs that require advanced mathematical backgrounds regardless of economic conditions, Harvard grads—who Soifer said are trained to be “generalists”—might spurn Wall Street offers during a bear market for business jobs not directly linked to the stock exchanges.

“CAREER COUNSELING”

Soifer warned investors not to use his data in making stock decisions. “The problems are two-fold,” he said.

First, “there’s a long reporting lag,” he said. The Business School doesn’t publish career data from the previous graduating class until November—while most second-year MBA candidates accept job offers the preceding spring.

Second, because the data is self-reported, it only “reflects those who got jobs and who were willing to talk about it,” Soifer said.

“Two or three years ago in the bad market environment, I gather through the grapevine that 20 percent of Harvard MBAs were not getting jobs,” Soifer said, so the career data for those years may be inaccurate.

But he said the data could point to broader lessons for graduating students. “MBAs and Harvard College grads as well should bear in mind that the job markets they’re going into are literally just as cyclical as the markets that affect the companies that are hiring them,” Soifer said.

Kenneth A. Froot, who is Jakurski professor of business administration, wrote in an e-mail that he finds Soifer’s analysis “wonderfully amusing.” But he advised that “anyone who would take this into account when making career decisions should spend some serious time in career counseling therapy.”

And Froot jested, “If you are contemplating using it for investment decisions, please make an appointment with me. There is a bridge over the Charles that I think you may want to buy from me...”

—Staff writer Daniel J. Hemel can be reached at hemel@fas.harvard.edu.