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Information Cascades and Banking Recruiting

https://www.wsj.com/articles/goldman-jpmorgan-hit-pause-on-intern-recruiting-madness-1540819063

In class and in the textbook, we learn that information cascades influence the decisions we make – both on a daily and long term basis. We are unable to take a step back and evaluate what we believe – getting caught up in the rat race that Cornell is – in an attempt to prove to our peers about our newest job offers, interviews, accomplishments, and how everything on the surface is ‘fine’. Groupthink permeates teams and organizations alike, as many people strive to be the best example of what others believe, rather than staying true to their own values. A primary example of this is in finance recruiting.

The cascade begins when sophomores realize that they not only need to find an internship for their sophomore year, but then also hear about how banks are having information sessions for sophomores for internships for theirĀ junior summers – a full 1.5 years later. The fear of missing out and seeing influential classmates go to these information sessions to compete for these lucrative opportunities creates a cascade which leads many students – who may have not declared a major, taken a finance class, or even know what investment banking is – to believe that this is their passion and career.

In the eyes of banks, no one wants to be the first to pull back – a different type of cascade. When a top bank (like Goldman, J.P Morgan, Evercore, Lazard, Morgan Stanley, Citi, BAML) moves its timeline up, other banks (UBS, Wells Fargo, HSBC, Lincoln, Nomura) follow since they don’t want to miss out on top candidates. This article describes how Goldman and J.P Morgan have realized that the hype behind this cascade isn’t actually producing the candidates that they are looking for, and therefore, are moving recruiting back. Other banks will follow, along with students in the classroom.

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