Why You Should Stop Reading BusinessWeek and Start Using Common Sense Instead: What the Mainstream Media is Missing About Recession Recruiting
“Wall Street is over.”
“Students once interested in finance are now thinking about moving to nonprofits and pursuing other interests.”
“Investment banking is so over.”
While I was on my lovely 24-hour flight and airport adventure (don’t you love it when you miss connections?), I had the misfortune of reading some recent headlines.
As usual, though, the mainstream media is getting a few things wrong about the current environment.
What’s happening now is no different from what happens in any market cycle. So don’t pay too much attention to BusinessWeek.
A History Lesson: What Happened from 1996 to 2000
Spurred on by the Netscape IPO in 1995, suddenly everyone in school wanted to join a startup – and those already working wanted to quit their jobs and join startups.
If a 24-year old kid could create a $2.6 billion company (on only $16 million of revenue and no profit) and get rich overnight from an IPO, it couldn’t be that hard to replicate, right? Right?
Computer science and engineering departments saw a huge increase in enrolled students; even those who couldn’t figure out how to use Microsoft Word were jumping into these programs.
Investment banks even started to compete with startups for top talent – students could no longer decide which would make them more money!
History Lesson, Part 2: The 2001-2003 Era
Following the market implosion, enrollment in technical programs at universities plummeted. I remember reading stories about confused professors wondering what was happening.
“Do they no longer care? Do they think everything is going to be outsourced?”
Nope. It’s just that the money had left the room and people stopped thinking they could get rich quick.
There was always a core group of students interested in technical fields – the bubble just added tons of people who really had no business trying to be the next Marc Andreessen anyway.
And when the bubble burst, so too did this influx of newcomers.
History Lesson, Part 3: What Happened from 2003 to 2007
Driven by bonuses growing to record levels and a few lavish parties thrown by Steve Schwarzman and his friends, finance became the dream destination for students, accountants and yes, even Chinese gold farmers (I admit it, I am obsessed), from 2003 to 2007.
I was almost part of this wave as well. I entered for somewhat different reasons (that’s another story for another day), but I hadn’t seriously considered banking until it was rather late – and after I had already eliminated consulting and technical work as possibilities.
I don’t have the exact numbers, but I remember reading how firms kept expanding their hiring each year… every year… over those 4 years – until recently, of course.
You had lab researchers who never gave finance the time of day suddenly start wondering if “investment banking might be something they would be interested in” and others who wondered if investment bankers had “hot stock tips” start pursuing the field.
They got caught up in the hype before investigating what was actually involved.
What’s Happening Now
The current situation is similar to the 2001-2003 period for the tech industry, when the bubble burst and all the get-rich-quick guys dropped out.
There’s always a core group of students and professionals who are interested in finance / banking, and nothing is going to change that – recession or no recession.
Similarly, companies always have a need to raise capital and to buy other companies.
So financial services will continue to exist in order to meet these market needs.
But since the number of jobs has fallen significantly, only those who have a serious interest – who haven’t just heard about it from their roommate’s uncle – stand a good shot at getting into the industry now.
What This Means for You
So what will happen in the near-term?
The number of people applying to finance jobs will decrease, so in theory it should be easier to stand out and get interviews – at least in terms of raw numbers.
But it will be more difficult than ever before to actually land offers.
Why You Should Stop Reading BusinessWeek
I don’t expect you to actually stop reading BusinessWeek.
Just remember that they’re not telling you anything that you don’t already know.
Of course the number of people interested in finance will decrease – when a get-rich-quick scheme no longer “works,” interest fades away – whether it’s startups in 2001 or finance these days.
And that’s both good and bad for your own recruiting efforts.
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