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Laid Off Bankers

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IHateTheGMAT
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Laid Off Bankers [#permalink] New post   28 Apr 2008, 09:35
I just don't buy this idea that applications are going to skyrocket because of laid off I-bankers. I mean, don't get me wrong I do think applications will increase due to the economy but I dont' think apps will increase by as much as people are expecting and I don't think I-bankers will flood bschools. Here's why:

First, most bankers have an MBA! I think everybody keeps forgetting that fact. How many people on this board are getting an MBA because they want to get into I-banking? 1, 2 and 3 year analysts at I-banks have only a bachelors. Associates, VPs, MDs and above have MBAs. So my guess is that a lot of laid off people already have their MBA. In addition, 2nd and 3rd year analysts that were just laid off were probably already planning on applying in Fall 09 anyway so these aren't really NEW applicants.

Second (related to #1), when apps skyrocked during the last recession it was mostly due to laid off dot com workers. How many dot com workers already had their MBA? Very few. Compare this to the number of bankers that already had an MBA (above). So I think the layoffs and subsequent application boom was a different phenomenom last time. In 2001 the people laid off were almost universally under 30 and without an MBA (dot com people) versus the current round of Wall Street layoffs which will be heavy on MBAs and some analysts that were already planning on applying this year anyway.

Third, US GMAT registration during the first 3 months of the year are only up 5.25% (granted international GMATs are up way more but we are talking about Wall Street, ie US apps). Layoffs and fear of layoffs were huge during these months, yet the rate of increase is slightly less than it was last year. I think that is partially due to the fact that....

Fourth, MBA application volume is already very high due to 3 straight years of significant increases (including a major surge thsi year). When your base of applications is this high, your rate of growth must naturally be lower (think start up company vs mature company growth rates)

And lastly, how many people on this forum (or BW for that matter) are laid off bankers that are planning to apply to Bschool? I have seen very few.

What do you guys think? Clearly, as a Fall09 applicant I am a bit biased and trying to be optimistic but I think my analysis is sound.
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sam77sam7
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 09:40
All I can say is...

I sure hope you are RIGHT!

;)

See you for '09.

~Sam
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 09:44
Check out my post on this discussion last week-

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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 09:49
i disagree on several of your points. there has been a trend in recent years for star analysts to make associate without an mba, and for bypassing the mba in general. the financial downturn is affecting more than just ibankers, and i would think there are a lot of junior leval employees opting for an mba to wait out the downturn.

the increase in gmat tests may only be 5% or so, but that is still a big number considering there are around 200,000 tests taken a year, and bankers are all aiming for top 10 schools.
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 09:58
dabots wrote:
the increase in gmat tests may only be 5% or so, but that is still a big number considering there are around 200,000 tests taken a year, and bankers are all aiming for top 10 schools.


I think Dabots hits this one right on the head.... Think about it - even if only 20% of that 5% increase (1% absolute) is attributed to the downturn in finance (or more conservatively, just attribute that increase in applicants to Top 10 schools), thats an additional 2,000 applicants to top ten schools. Given that your applicant pool for any given school is between 5,000 to 10,000 apps (with only HBS and Wharton having close to 10k), thats anywhere from a 20%-40% increase in applicants (adjusting downward for each applicant not applying to every school - so maybe more like 10-30% increase).

Puts into context the fact that if this year the growth rate is 6%+ instead of being ~5% - that could lead to another uptick of about 10-30% in each top 10 school's app pool.
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 10:09
Come on guys, can't we all just live in blissful hope that only the GMATClub members will even apply next year at all; thus securing admits to all our dream schools?!

~Sam
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 10:10
Steel wrote:
dabots wrote:
the increase in gmat tests may only be 5% or so, but that is still a big number considering there are around 200,000 tests taken a year, and bankers are all aiming for top 10 schools.


I think Dabots hits this one right on the head.... Think about it - even if only 20% of that 5% increase (1% absolute) is attributed to the downturn in finance (or more conservatively, just attribute that increase in applicants to Top 10 schools), thats an additional 2,000 applicants to top ten schools. Given that your applicant pool for any given school is between 5,000 to 10,000 apps (with only HBS and Wharton having close to 10k), thats anywhere from a 20%-40% increase in applicants (adjusting downward for each applicant not applying to every school - so maybe more like 10-30% increase).

Puts into context the fact that if this year the growth rate is 6%+ instead of being ~5% - that could lead to another uptick of about 10-30% in each top 10 school's app pool.


I think saying that 20% of that increase is applying full time to the Top 10 is extremely high. Maybe in our world everybody applies to the top 10 but not in the real world. There are 200-300+ non top 10 MBA programs out there. To say that 20% of these increased applicants will be applying to the Top 10 just seems way out of line to me. I think the economic downturn will make more than just the top candidates consider an MBA (in fact you could even argue that the less impressive are more likely to be affected by the downturn and thus more likely to apply to Bschool). Overall, applicants to the Top 10 programs probably comprise what? 1-2% of MBA applicants? So, I don't think they are 20% of the increase in apps this year. In fact, if the less stellar candidates are the ones more affected by the downturn (and thus applying to MBA) it could be that less than 1-2% of this increase is from students applying to the top 10. I see no reason to think that the applicants that comprise this 5% increase would be any different (in terms of the proportion applying to the top 10) than the other 200k people that took the GMAT
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 10:39
IHateTheGMAT wrote:

I think saying that 20% of that increase is applying full time to the Top 10 is extremely high. Maybe in our world everybody applies to the top 10 but not in the real world. There are 200-300+ non top 10 MBA programs out there. To say that 20% of these increased applicants will be applying to the Top 10 just seems way out of line to me. I think the economic downturn will make more than just the top candidates consider an MBA (in fact you could even argue that the less impressive are more likely to be affected by the downturn and thus more likely to apply to Bschool). Overall, applicants to the Top 10 programs probably comprise what? 1-2% of MBA applicants? So, I don't think they are 20% of the increase in apps this year. In fact, if the less stellar candidates are the ones more affected by the downturn (and thus applying to MBA) it could be that less than 1-2% of this increase is from students applying to the top 10. I see no reason to think that the applicants that comprise this 5% increase would be any different (in terms of the proportion applying to the top 10) than the other 200k people that took the GMAT


I think this claim may stand on firmer ground than you might suspect. We have good data from this year showing that GMAT test taking increased ~5%, but applications to schools like H/S/W/K/MIT/Chi/Col/etc. increased 30-50% on average. Only some of the 30-40% can be attributed to more people reapplying than in the past / people applying to more schools. Thus I think it is safe to assume a lot of this increase is in new applicants (thus the correlation to the GMAT percentage). Sure - how much of the increase that can be attributed to new applicants is hard to say, but I imagine its a big chunk (even if only 1/2, thats 15-25% increase in new applicants - or roughly 0.5%-1% in terms of new GMAT takers)

Granted we're all shooting in the dark here.
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 10:48
I have the Wharton numbers from the welcome weekend: applications are up 11% at 7,350. However, it appears that fewer people were accepted because yield is expected to be higher (I heard 1,050 instead of 1,150, but don't quote me on that). All in all, Admission rate went from 18% to ~14%. Not a HUGE decrease, but still substantial (instead of taking 1 out of 5/6 applicant, Wharton is now taking 1 out of 7)

Hope this helps!
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 11:10
Steel wrote:
I think this claim may stand on firmer ground than you might suspect. We have good data from this year showing that GMAT test taking increased ~5%, but applications to schools like H/S/W/K/MIT/Chi/Col/etc. increased 30-50% on average.


FACT: Apps were up 7% at Columbia this year.

https://www4.gsb.columbia.edu/mba
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 12:13
ryguy904 wrote:
Steel wrote:
I think this claim may stand on firmer ground than you might suspect. We have good data from this year showing that GMAT test taking increased ~5%, but applications to schools like H/S/W/K/MIT/Chi/Col/etc. increased 30-50% on average.


FACT: Apps were up 7% at Columbia this year.

https://www4.gsb.columbia.edu/mba


Well given that Wharton and Columbia weren't schools I have been in the know about, thats why I'm off there.... I'm curious to hear the HBS, Kellogg, and MIT statistics (the ones that I've heard to be in the 30-40% increase range).
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 12:34
Last year US GMATs were up 8% and overall (includes intl) were up 13%. The Columbia and Wharton numbers we just got were in line with this. This supports my contention that increases in apps to the Top 10 is proportional to increase in apps overall. The schools that saw the big increase in apps (Cornell up 30%, etc) were the traditional "back up" schools because many applicants applied to an extra safety out of fear of the increased application volume.
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 12:58
While I agree that the increase might not be huge, even a 10% increase in apps is going to impact your chances significantly (I think). As Elhajoui pointed out, with an increase in apps, you will find that the yield drops as well and schools tend to admit a fewer %.

I feel that there is usually a snow-ball effect with the apps- people see/hear that the number of apps is going to go up significantly, and then apply to more schools, especially "safeties" and then that filters down to all the schools. Then applicants who had been putting this b-school off for a few years, all of a sudden feel that it might just get worse. And to top it all off - programs such as 2+2 from HBS just encourage younger applicants. I think the increase in this years app was not due to laid off bankers but from young ones with 1-2 years work-ex who would not have applied in the previous years but with all the schools encouraging them, they tend to be throwing in an app.

Just take GMATClub - there are a lot of applicants/admits who are < 25 yrs old (1-2 yrs work ex). And then there are manylander/kryzak, the oldies ;)
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 13:12
Quote:
A bad summer on Wall Street could translate into fewer job opportunities later, and with increased competition — applications at the Massachusetts Institute of Technology Sloan School of Management, for example, were up by 28% this year — getting that plum investment banking job next year will be harder than ever.
- NY SUN https://www2.nysun.com/article/74351

This information has been published in more than one paper. I got similar anecdotal information from HBS regarding their application increase.
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 13:33
dabots wrote:
there has been a trend in recent years for star analysts to make associate without an mba, and for bypassing the mba in general.


my comment is a little off topic but still related:

i work in finance (not banking) and am not so sure about this. i know a lot of younger people in finance like to trash the mba because they expect to become star analysts and rise to associates without an mba (why waste two years!), but this is pretty rare. only a handful make associate without an mba, and those who do frequently have a difficult time rising to VP and MD levels. the fact is that you might be able to skip up to a post-mba job without an mba if you are good, but that you often still need an mba to see career progress down the road. from my experience, there are plenty of people in finance who work 2 years in IB, and then ~2-3 more years in IB, PE or HF before returning because they know they can't move up much more without an MBA. for all the hype and talk, if you look at the websites of most top firms (blackstone and that ilk), almost everyone above associate has a top 2 or 3 mba (blackstone looooooooves HBS). anyway, i am not saying that someone HAS to have an mba, but i think it's still pretty much par for the course. perhaps your research shows something different -- i would be interested in hearing your findings / experience.
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 13:46
I know a banker who was a VP before returning to school this year. He said he saw the writing on the wall and decided that now was a great time to get an MBA (he had kept moving up without it so hadnt bothered before)...pretty much said you risk getting laid off these days sticking around because they are getting rid of so many folks. An MBA no matter where you are if you are under 30 will bump you up when you graduate. So even someone who was an associate or VP will benefit from getting one.

I think overall a crappy economy leads a lot of folks to decide now is the right time, whether its because you lose your job, may lose it, or want to switch careers and graduating following the downturn could be a big plus. Overall companies in general arent hiring nearly as much as they were a few years ago so its a good time for almost everyone to take a break. A lot of MIT's class are engineers not coming out of finance so their showing a 20%+ increase tends to support this.

If you do the math and figure a 10% increase of applicants and a 5% increase in yield (more applicants meaning fewer folks getting into multiple top schools). That is going to have a pretty significant impact on admission rates. Schools in the low 20s will now be in the high teens...pretty much you could go from a 1 in 4 chance to 1 in 6 or worse. Dont fool yourself its going to be tough, and you should plan accordingly and be realistic about this whole process.
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 14:04
riverripper wrote:
I know a banker who was a VP before returning to school this year. He said he saw the writing on the wall and decided that now was a great time to get an MBA (he had kept moving up without it so hadnt bothered before)...pretty much said you risk getting laid off these days sticking around because they are getting rid of so many folks. An MBA no matter where you are if you are under 30 will bump you up when you graduate. So even someone who was an associate or VP will benefit from getting one.


good example, river. i can't speak to this particular person, but i am sure that it is not uncommon for people to move up without an mba during an upcycle -- the bank is expanding and positioins are available, so why not bump someone up as needed? it's obviously a much different story during a down cycle. the last year or so has yielded all sorts of ridiculous articles and stories about unqualified 25 year old hedge fund managers etc., etc. that just scream "top of the cycle" (google gregory hammond and read the WSJ article that came out a few months ago for a good example). at the risk of beating my redundancy drum, many people in finance who were able to skip an mba in recent years may no longer be able to do so.
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 15:42
sudden wrote:
dabots wrote:
there has been a trend in recent years for star analysts to make associate without an mba, and for bypassing the mba in general.


my comment is a little off topic but still related:

i work in finance (not banking) and am not so sure about this. i know a lot of younger people in finance like to trash the mba because they expect to become star analysts and rise to associates without an mba (why waste two years!), but this is pretty rare. only a handful make associate without an mba, and those who do frequently have a difficult time rising to VP and MD levels. the fact is that you might be able to skip up to a post-mba job without an mba if you are good, but that you often still need an mba to see career progress down the road. from my experience, there are plenty of people in finance who work 2 years in IB, and then ~2-3 more years in IB, PE or HF before returning because they know they can't move up much more without an MBA. for all the hype and talk, if you look at the websites of most top firms (blackstone and that ilk), almost everyone above associate has a top 2 or 3 mba (blackstone looooooooves HBS). anyway, i am not saying that someone HAS to have an mba, but i think it's still pretty much par for the course. perhaps your research shows something different -- i would be interested in hearing your findings / experience.


I've seen plenty of counter-examples to this, in fact several of the brightest people I've met in a professional setting were guys in PE or at HFs that have bypassed the MBA. They usually already have pedigree though, whether from top schools or IB/MC or both.
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 17:04
I hypothesize (optimistically) that the predicted increase in 2009 apps will make it harder for bankers to get in, but for non-traditional people (engineers, scientists, non-profit?), it may be easier to get in because not as many will want to leave their presumably steady jobs in an uncertain economy.
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Re: Laid Off Bankers [#permalink] New post   28 Apr 2008, 17:07
dabots wrote:
i disagree on several of your points. there has been a trend in recent years for star analysts to make associate without an mba, and for bypassing the mba in general. the financial downturn is affecting more than just ibankers, and i would think there are a lot of junior leval employees opting for an mba to wait out the downturn.

the increase in gmat tests may only be 5% or so, but that is still a big number considering there are around 200,000 tests taken a year, and bankers are all aiming for top 10 schools.


I agree with dabots. Also when the downturn spreads to other areas (banking-->other areas in finance, notably mortgage related-->others such as retail, etc), one of your points would not hold. Anyway, i personally don't think bankers/consultants would be the main competitors for say IT/engineers as far as admissions is concerned as they are very different profiles but I may be wrong.
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Re: Laid Off Bankers [#permalink]
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