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Morning Coffee: The elite universities whose graduates earn the most in finance. Most employable banking boss is back on the market

There are probably some extremely intelligent young people out there right now who are actually in the position of being able to choose between university offers from Harvard and the Massachusetts Institute of Technology.  But only a few.  There might also be some proud and rich parents who have set aside a few hundred thousand for elite preschools and admissions coaching, who might be wondering where it’s best targeted.  For the rest of us, the question of “which elite university produces the highest earning graduates” is purely one of bragging rights.  Either the bragging that you might be able to do, or what you might be subjected to from the most privileged person in your office.

According to numbers crunched by the Burning Glass Institute, a think tank focused on the future of work, it’s not particularly close.  They took information from Glassdoor and Lightcast, and calculated the premium earned by graduates of various universities over the average earnings for finance workers, for the first ten years after graduation.  In principle, this ought to control for choice of job, and the ten year averaging period means it shouldn’t be affected too much by differences in starting salaries.

On this basis, MIT wins, hands down – the “annual premium” for an MIT graduate is $48,051, compared to $39,879 at Harvard, with Princeton and UPenn less than a thousand dollars behind that.  Or so it appears at first glance.  The true picture might be a bit more complex, though.

Because although MIT grads in banking earn more on average, there are fewer of them.  Only 4% go into finance, compared to 8.8% at Harvard and over 12.5% at UPenn.  This might mean that the average could be skewed by a small number of huge earners – since quant firms like Jane Street recruit heavily from MIT and are known to pay very well, there might be some big outliers. 

More importantly, though, we shouldn’t necessarily assume that the future will resemble the past.  The lower proportion of MIT students going into finance is likely to have reflected a higher proportion going into Big Tech and startups; now that this alternative bid is less competitive, we might see significant reversion to the mean.  Ten years from now, we might still see bankers earning more than traders on the sell side, or maybe ChatGPT will have replaced us all.

And the real thing to remember is that actually, whatever it feels like, ten years into a finance career is the start of the real earning period, not the end.  The dataset has to come to an end somewhere; after a decade, most bankers have built up enough of a track record and reputation to not need to mention their alma mater all the time (although some still do).  After ten years, some of the highly paid coders and quants will be close to burning out, while the lacrosse players will just be starting to lead private equity deals.  In the long run, there will even be graduates of the University of Colorado at Boulder (a mere $5,500 premium) who outperform the fanciest Ivy Leaguers simply because they learned persistence, hustle and empathy.

Elsewhere, SPACs now appear to have joined “Driver’s Licence”, “Bad Habits”, “Sing 2” and other 2021 phenomena, to be forgotten until someone starts circulating “Only Pandemic Kids Will Remember” memes.  It’s hard to remember that they were once 50% of the IPO market, or that launching one was a credible alternative career for a superbanker like Jean-Pierre Mustier.  Now Pegasus Acquisition Co is going to be liquidated, and the money handed back to shareholders.

This is a much better outcome than most SPAC investors got; it seems that Mustier has done the right thing rather than chasing after an overvalued or poorly considered deal in order to hang on to the fees.  This is bound to further enhance a reputation that’s had him associated with more or less every big job going in global banking for the last five to ten years.

And now he’s back on the market … just as UBS has potentially kicked off another round of consolidation in Europe, and with unclear succession plans at some of the top global banks.  At 62, Mustier is at a useful age; he’s young enough to have a good few years left in him, but not so young as to upset anyone’s long term ambitions.  Any bank CEO who’s currently underperforming or arguing with their board ought to be a little bit more worried today, as there’s now at least one name that could be announced as a replacement and likely welcomed by the markets.

Meanwhile …

Although there was talk of a management buyout of the investment banking operations of Silicon Valley Bank, it seems that the bankers are leaving in small platoons rather than staying with the mothership. After several senior MDs went to Moelis. HSBC has now taken 40 tech and healthcare bankers, led by David Sabow. (FT)

It shouldn’t really need to be reiterated, but in an environment in which deals are taking longer and longer to execute, one of the most important characteristics of a successful banker is the ability to keep one’s mouth shut. (Bloomberg)

This is likely to happen a lot as in-demand bankers don’t fancy waiting around to find out how deep the cuts will go - Sam Speer, the head of small cap sales for Credit Suisse Australia, was one of the names brought in last year to shore up the franchise and now he’s gone to Jefferies. (AFR)

The objections from EY’s North American partners to the terms of the plan to split audit from consulting have apparently been severe enough to scupper the whole deal. (Financial News)

Charlie Javice, the fintech founder who is being charged with defrauding JPMorgan, was prevented by her bail terms from contacting any JPM employee.  It turns out this is quite difficult since she has a mortgage from the bank; she’s asking the court for a limited change to the terms to allow her to talk to the mortgage advisor. (Bloomberg)

More important legal precedents – it is considered “natural” (for the purposes of English employment tribunals at least) to laugh when a colleague falls over on a slippery floor, and doing so is not evidence of harassment or bullying. (Daily Telegraph)

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AUTHORDaniel Davies Insider Comment

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