Morning Coffee: The new least desirable recruits at Goldman Sachs. And get yourself an internship by playing video games.
It’s a pretty straightforward logical consequence – if a firm wants to have a higher proportion of female employees, it is going to hire fewer men. But how many fewer? It depends on how serious Goldman is about its new policy of aiming to maintain a 50/50 gender balance. As David Solomon said in yesterday’s internal memo, “Experienced lateral hiring has been an important part of the firm’s growth. However, it has also been a significant contributor to the dilution of our diversity at more senior levels and we need to address this”.
The thing is, this becomes significantly more difficult to achieve the higher up the ranks you go. At present, GS has a specific numerical target of 50/50 for its college recruiting, to which it is “nearly there”. The new policy extends that target to lateral hires into the analyst and associate classes. But that’s really the low hanging fruit. Analysts and associates, by and large, cover people in their early to late twenties. And in those age groups, there’s not so much of a problem in maintaining gender balance; the pool of applicants is large and itself reasonably balanced.
But as people get older, they tend to start families. And this, notoriously, is the career stage at which the investment banking industry has historically not been too good at hanging on to its senior women; the thinning out begins at the vice-president rank and gets steadily worse as you go up to director or managing director.
So, while the need to search a little bit harder to get a balanced recruitment pool for associates and analysts is an inconvenience, for Goldman to achieve the same trick at VP and director will be more of a task and at MD something close to an impossibility. To gender-balance senior hiring would require Goldman to be on the bid for pretty much every female banker promoted by any other bank anywhere in the world.
So the plan must be to fill the associate ranks with enough promotable women to have an excess supply, and then to do as much as they can to reduce the attrition rate. It’s certainly a bold move. But – and here is where the logical implication comes in – every new hire at vp level or above who is a man (and particularly a white man, as there are now ethnic diversity targets too) will be taking GS further away from where they want to be.
Goldman has always had a reputation on the Street for being a difficult firm to join and for preferring to promote people internally. Internal candidates always have the benefit of being more of a known quantity with respect to culture and fit and going forward, the internal talent pool is likely to be more in line with the diversity goals too. It is, to say the least, probably a bit early to declare Game Over for white males in the senior ranks at GS, but they’re going to have significant disadvantages to set against the advantages.
Other banks have slightly different strategies for increasing diversity. At JP Morgan, for example, they are potentially trying to remove any implicit bias and expand the pool of applicants by delegating the intern hiring process to a video game. The bank is testing out technology from a startup called “Pymetrics”, which will compare the candidates’ playing styles against those of successful existing employees. The games are apparently based on neuroscience, although it is not explained precisely how. Unilever and Accenture are also apparently clients of the same company though, and claim to have got good results from a combination of the video games plus machine-learning sorting of the resumes, with tweaks to the algorithms to take out potential bias.
The new system is set to be in place for the 2020 internship classes and will only form “one step” of the process, which feels a bit timid. Computer simulations of trading desks have been used as part of the graduate recruitment process for years, after all. And once the candidates have got onto the trading floor through their video games prowess, they will be able to secretly take part in online tournaments and eventually make a career in eSports.
Banks have put staff on standby for emergency moves to European offices in the event of a no-deal Brexit. A few dozen key traders might literally have to move overnight (Guardian)
Going in the other direction, Webb Traders of Amsterdam has acquired small UK brokerage GST in order to get its license to deal in the UK, in case that is needed post-Brexit (FT)
Good signs for a rebound in capital markets revenues after a Q1 that is likely to be highly disappointing. After the Lyft and Nexi IPO announcements, a further $6bn worth of deals were announced on Monday. The fees won’t be hitting revenue lines until later in the year, but the ECM bankers will be happy to be busy. (Bloomberg)
UBS are following the two hottest trends in IBD revenue at present – tech and the MidWest – hiring MDs from Jeffries and SunTrust Bank to staff up their US tech team (Bloomberg)
And Bank of America’s role in funding the activist stake of Edward Bramson’s Sherborne Investors in Barclays might have broken down the “gentlemens’ agreement” or uneasy truce whereby big banks don’t assist in attacks on each other (Financial News)
Other banks ask their employees to more or less guess what to wear when they say that the dress code has to be “in line with client expectations”. Frankfurter Sparkasse is carrying out a survey to see what its customers want their bankers to look like (Bloomberg)
Wild story about Chatham Asset Management, a hedge fund that owns the National Enquirer and which apparently isn’t shy about using sex-scandal stories as part of its litigation strategy (Bloomberg)
One obstacle to the CommerzDeutsche merger is cleared as the finance ministry gives (tentative, in principle, informal) approval to the tens of thousands of job cuts that would be needed (Bloomberg)
After a former PIMCO CEO and current TPG partner were caught in the college-admissions scandal, academic research shows that their kids would probably have been all right anyway; when you’re that level of privileged, getting into a top university doesn’t really add much. As the article says “when you’re a 19 year old YouTube star who spends the summer on a billionaire’s yacht, things are probably going to work out” (NYT)
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