Unraveling of Forensic Psychiatry fellowships makes participants paranoid on both sides of the market

 Where lawyers speak naturally about rules, psychiatrists don't shy away from talking about feelings, and the current disorder in the market for forensic psychiatry fellowships is making many participants miserable.

The Fellowship Application Process Must Be Reformed  by Octavio Choi, Journal of the American Academy of Psychiatry and the Law Online September 2021, 49 (3) 300-310; DOI: https://doi.org/10.29158/JAAPL.210088-21

"These are unhappy days in the world of forensic psychiatry fellowship programs. Here is the crux of the problem: too much product, not enough customers. Agapoff and colleagues report that for the 2016–2017 academic year, forensic psychiatry fellowships achieved a 56 percent fill rate, with 65 residents spread over 44 programs offering a total of 116 positions.1 Since then, the number of forensic programs has continued to grow, up to 48 ACGME-accredited programs offering 127 positions in 2018–2019. Seventy-three of those positions were filled, equating to a 57.5 percent fill rate.2 Things were better in the older days. According to ACGME records, in 2012–2013 there were about the same number of active residents (70) in just 36 programs.3

"The implications are clear: forensic fellowship programs are increasingly desperate to recruit a small number of applicants. From the perspective of program directors such as me, the rational strategy to pursue in this situation is to identify promising applicants early and try to sign them up before anyone else can get to them. Indeed, in recent years, fierce competition has led programs to make earlier and earlier offers that are time-limited (also known as the “exploding offer”). Paranoia is high. Given the nontransparent nature of most transactions in the applications process (no one really knows what anyone else is up to), and lack of objective referees, it only takes the slightest hint of malfeasance for outrage and fear of missing out to amplify.

"The overriding fear of many program directors is that they will not fill their available positions. In addition to bruised egos, being left with open positions means contracts will be left unfilled, possibly leading to cancellation and, ultimately, reduction or elimination of programs. Literally, to not fill risks death (of the program). The imperative, then, is to avoid not filling at all costs.

"On the other side is a paradox. For applicants, low fill rates should translate into a buyer's market, yet because the market is unregulated, the current system inflicts much suffering on them. As one recent applicant succinctly described the process: “it's a hot mess.” Competition by programs for the limited number of applicants has led to earlier and earlier offers being made with shorter and shorter times to decide; too short to adequately assess and receive offers from other programs. Indeed, the whole point of an exploding offer, from the program's point of view, is to curtail assessment of other programs by forcing applicants to make decisions before they might otherwise be ready. In marketing parlance, the idea is to pick up a bargain by taking a good off the market before it can be fairly priced.

...

"The failure of the current system is not about program directors being bad people. It is about the fragile nature of voluntary agreements during difficult times. The math is simple. If each program director has a 95 percent chance of behaving ethically over the course of the applications cycle, and there are 48 programs, there is only a .95 to the forty-eighth power probability (=8.5% chance) that all 48 directors will behave ethically in any given year. A single program director acting less-than-fully ethically is enough to kickstart a paranoid feedback loop that devolves into chaos: “If program X isn't playing by the rules, I don't see why I need to keep playing by the rules, especially if it's going to hurt me.”

"But note that system failure does not even require any actual unethical behavior; all that is required is the perception that others are behaving unethically, a perception that is encouraged to flourish in the context of desperation and lack of transparency"

Keeping the market for new economists thick: AEA guidelines on timing of interviews

 Below are some guidelines suggested by the American Economic Association for the conduct of this year's job market for new Ph.D.s

AEA Guidance on Timeline for 2021-22 Economics Job Cycle

"The AEA Executive Committee, in conjunction with its ad hoc Committee on the Job Market, recognizes that it is to the benefit of the profession if the job market for economists is thick, with many employers and job candidates participating in the same stages at the same time.  Moreover, the AEA's goals of fairness, inclusion, and diversity are fostered by having a timeline that remains widely accepted, even as public health conditions necessitate a virtual ASSA meeting again this year. With these goals in mind, and in light of inquiries from both students and departments about how to proceed, the Association asks that departments and other employers consider the following timeline for initial interviews and “flyouts” in the upcoming job cycle.

Interview invitations
The AEA suggests that employers wait to extend interview invitations until at least Thursday, December 2, 2021.

Rationale: the AEA will deliver signals from job candidates to employers on December 1. We suggest that employers review those signals and incorporate them into their decision-making before extending interview invitations. Job candidates from under-represented groups may lack informal networks and thus, may especially rely on the signals to convey their interest. Waiting to review the signals before issuing invitations promotes a fairer, more equitable process.

We also ask that all employers indicate on EconTrack when they have extended interview invitations; this allows candidates to learn about the status of searches without visiting websites posting crowd-sourced information and potentially inappropriate other content.

Interviews
The AEA suggests that employers conduct initial interviews starting on Monday, January 3, 2022, and that all interviews take place virtually; i.e. either by phone or online (e.g. by Zoom). We suggest that interviews not take place during the AEA meeting itself (January 7-9, 2022).

Rationale: In the past, interviews were conducted in person at the AEA/ASSA meetings. This promoted thickness of the market, because most candidates and employers were present at the in-person meetings, but had the disadvantage of precluding both job candidates and interviewers from fully participating in AEA/ASSA sessions. Given that the 2022 AEA/ASSA meetings will be entirely virtual, we suggest that interviews NOT take place on the meeting dates to allow job candidates and interviewers to participate in the conference.

We recommend that employers wait until January 3 to interview candidates because job candidates may have teaching or TA responsibilities in December, and to ensure that candidates have accurate expectations of the timing of the stages of the market. An unraveling of the market works against the Association’s goal of having a thick market at each stage and also against candidates having uniform expectations of the market’s timing. All interviews should be conducted by phone or online to prevent risk of exposure to COVID, and to promote equity among the candidates.

Flyouts and offers
Flyouts and offers generally happen at times appropriate for the employer, and the AEA sees no reason to suggest otherwise.  We ask that all employers indicate on EconTrack when they have extended flyout invitations and closed their searches.

Job market institutions and mechanisms
Please keep in mind the various job market institutions and mechanisms created by the AEA to improve the job market:

• The JOE Network includes a database of job openings for economists.

  • Employers may sign up here: https://www.aeaweb.org/joe/employer.

  • Job candidates may search the database here: https://www.aeaweb.org/joe/listings.

  • The JOE Network has an electronic clearinghouse for job candidates to submit job applications. Job candidates may register here: https://www.aeaweb.org/joe/candidate.

• The AEA ad hoc Committee on the Job Market releases data and guidance on the job market here: https://www.aeaweb.org/joe/communications.

• EconTrack: a board on which employers can indicate when they have extended interview and flyout invitations, and closed their search: https://www.aeaweb.org/econtrack.

• EconSpark: a moderated forum in which one can discuss topics of interest to the profession, including the job market: https://www.aeaweb.org/forum/categories.

Thank you for your attention to this initiative."

Unraveling for consulting: recruiting for next summer has begun.

 Here's a (gated) story from Business Insider, saying that big consulting firms have already started recruiting college juniors for Summer 2022 internships.  The article points out that investment banks are already recruiting very early too, and suggest that this is the consulting firms' reaction.

Deadlines for summer 2022 internships at Big 3 giants like McKinsey, Bain, and BCG are already whizzing by. Here's why they've kicked off recruiting earlier than ever. Reed Alexander and Samantha Stokes 

 

 

The Art of Experimental Economics: Twenty Top Papers Reviewed , edited by Gary Charness and Mark Pingle

 Here's a forthcoming book that provides a unique and entertaining review of twenty influential papers in experimental economics. Katie Coffman and I wrote the review of the classic 2007 paper on gender and competition by Niederle and Vesterlund.

The Art of Experimental Economics: Twenty Top Papers Reviewed  Edited By Gary Charness, Mark Pingle  Forthcoming by Routledge

Item will ship after August 27, 2021  ISBN 9780367894306

Chapter 1: Introducing 20 Top Papers and their Reviewers  Gary Charness and Mark Pingle

Chapter 2: An Experimental Study of Competitive Market Behavior (by Vernon L. Smith)  Reviewed by Charles A. Holt

Chapter 3: The Strategy Method as an Instrument for the Exploration of Limited Rationality in Oligopoly Game Behavior (by Reinhard Selten)  Reviewed by Claudia Keser and Hartmut Kliemt

Chapter 4: An Experimental Analysis of Ultimatum Bargaining (by Werner Güth, Rolf Schmittberger and Bernd Schwarze)  Reviewed by Brit Grosskopf and Rosemarie Nagel

Chapter 5: The Winner’s Curse and Public Information in Common Value Auctions (by John H. Kagel and Dan Levin)  Reviewed by Gary Charness

Chapter 6: Group Size Effects in Public Goods Provision: The Voluntary Contributions Mechanism (by R. Mark Isaac and James M. Walker)  Reviewed by James Andreoni

Chapter 7:  Rational Expectations and the Aggregation of Diverse Information in Laboratory Security Markets (by Charles R. Plott and Shyam Sunder)    Reviewed by R. Mark Isaac

Chapter 8: Experimental Tests of the Endowment Effect and the Coase Theorem (by Daniel Kahneman, Jack L. Knetsch, Richard H. Thaler)   Reviewed by John A. List

Chapter 9: Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh and Tokyo: An Experimental Study (by Alvin E. Roth, Vesna Prasnikar, Masahiro Okuno-Fujiwara and Shmuel Zamir) Reviewed by Armin Falk

Chapter 10: Unraveling in Guessing Games: An Experimental Study (by Rosemarie Nagel)  Reviewed by John H. Kagel and Antonio Penta

Chapter 11: Trust, Reciprocity, and Social History (by Joyce Berg, John Dickhaut, and Kevin McCabe) Reviewed by Vernon L. Smith

Chapter 12: Cooperation and Punishment in Public Goods Experiments (by Ernst Fehr and Simon Gachter)  Reviewed by Yan Chen

Chapter 13: A Fine is a Price (by Uri Gneezy and Aldo Rustichini)  Reviewed by Alex Imas

Chapter 14: Giving according to GARP: An Experimental Test of the Consistency of Preferences for Altruism (by James Andreoni and John Miller)  Reviewed by Catherine Eckel

Chapter 15: Risk Aversion and Incentive Effects (by Charles Holt and Susan Laury)  Reviewed by Kevin McCabe

Chapter 16: Does market experience eliminate market anomalies? (by John A. List) Reviewed by Matthias Sutter

Chapter 17: Promises and Partnership (by Gary Charness and Martin Dufwenberg)  Reviewed by Urs Fischbacher and Franziska Föllmi-Heusi

Chapter 18: The Hidden Costs of Control (by Armin Falk and Michael Kosfeld)  Reviewed by Laura Razzolini and Rachel Croson

Chapter 19: Do Women Shy Away from Competition? Do Men Compete Too Much? (by Muriel Niederle and Lise Vesterlund)  Reviewed by Katherine B. Coffman and Alvin E. Roth 

Chapter 20: Group Identity and Social Preferences (by Yan Chen and Sherry X. Li)  Reviewed by Marie Claire Villeval 

Chapter 21: Lies in Disguise—An Experimental Study on Cheating (by Urs Fischbacher and Franziska Föllmi-Heusi)  Reviewed by Uri Gneezy and Marta Serra-Garcia

***************

Here's my Foreword to the book:

 Twenty carefully chosen papers in experimental economics, reviewed and put in context by veteran experimenters, provide an excellent, close-up introduction to the richness and diversity of the field, and where it is coming from. These twenty papers appeared over a period of half a century, from 1962 to 2013, during which economic experiments went from being quite rare to taking their place among the standard tools of economics.

When John Kagel and I edited the Handbook of Experimental Economics, volumes 1 and 2 (1995 and 2016), we encouraged the chapter authors not to try to tell readers how to do good experiments, but to show them. And so it is with these papers: there are lots of ways to do good experiments, and here is a collection of twenty that have been influential. The reviews make clear that a successful, influential experiment is part of a scientific conversation that began well before the experiment was designed and conducted, and continued well after it was published and replicated. These conversations aren’t only among experimenters, nor are they only among economists: experiments add to scientific conversations of all sorts, answering some questions and raising others, often questions that couldn’t even be posed with equal precision in naturally occurring environments.   

Reader, beware. After reading this volume, you will want to read more, and, your curiosity aroused, may find yourself on the slippery slope of designing and conducting your own experiments.

Alvin E. Roth, Stanford University, December 2020.

Bibliography:

Kagel, J.H. and A.E. Roth (editors) Handbook of Experimental Economics, Princeton University Press, 1995.

Kagel, J.H. and A.E. Roth (editors) Handbook of Experimental Economics, Volume 2, Princeton University Press, 2016.

NRMP Position Statement On The (In)Feasibility Of An Early Match

 There has been some suggestion that dividing the resident match into early and late matches might be a way to address the congestion in applications and interviews that has bedeviled the transition from medical school to residency in recent years.  The NRMP now has a statement pointing out that there are serious problems with that idea.

NRMP Position Statement On The Feasibility Of An Early Match

"For the past eighteen months the National Resident Matching Program® (NRMP®) has been working closely with other national medical education organizations to examine the current state of the transition to residency. Conversations have focused on mitigating burdens for both applicants and programs in the selection and recruitment process and addressing uncertainty in the future of the interview cycle.

...

"Among the proposed solutions to current challenges in the transition to residency are calls for an early match. Specifically, NRMP has been asked to implement the Early Result and Acceptance Program (ERAP) pilot program proposed for Obstetrics and Gynecology, created through American Medical Association’s Reimagining Residency Grant, “Transforming the UME to GME Transition: Right Resident, Right Program, Ready Day One”. The stated goals of the ERAP pilot are to allow applicants to engage in strategic decision-making, reduce burden on programs while hypothesizing that the change will result in holistic review, and reduce necessary applications and interviews. ERAP calls for an early match to begin in September 2022 for the 2023 Match cycle. ERAP permits applicants to apply to a maximum of three programs in the early match with programs including up to 50% of their positions if they choose to participate. This statement outlines NRMP’s concerns about the structure of the ERAP pilot program, the lack of evidence supporting the proposed changes to the Match, the implications of an early match for the matching process, and preliminary findings of modeling an early match being conducted by experts in market design and the matching algorithm.

"The NRMP has reviewed the ERAP pilot program with consideration for whether changes to the matching process have the potential to inadvertently disadvantage Match participants. It is through that lens NRMP remains concerned with the following aspects of the ERAP pilot:

"Although voluntary, applicants may feel pressured to participate in an early match where up to half the available positions in a specialty may fill before the Main Residency Match® opens.

"There exists no mechanism for demonstrating how an early match will make visible less competitive applicants and those underrepresented in medicine, which is hypothesized in the project document.

"The proposed limit of three applications per applicant could force applicants to make compromises not present in the Match today. ...While the ERAP investigation team hypothesized that the application limit will increase holistic review by programs, there are no mandates to ensure that programs conduct holistic review nor are there restrictions on the number of applications programs may accept, interviews they may offer, or applicants they may rank. With no objective evidence to support the hypothesis, we cannot conclude that the proposed application limit would increase holistic review of applications.

"There exists no mechanism for safeguarding an applicant’s failure to match in the early match from programs as they enter the Main Residency Match, which could result in the applicant being viewed as less competitive.

"In addition to concerns about disadvantaging applicants, NRMP is mindful of possible behavior changes resulting from changes to the Match process that could affect Match outcomes for all Match participants.

• "The structure of an early match does not allow for mixed-specialty couples ranking or multispecialty individual ranking, which may cause applicants to reconsider their specialty choices, fundamentally changing their career path.
• "Programs may have insufficient information (e.g., clinical evaluations, MSPE, LORs) to evaluate applicants fully and fairly in the early match.
• Programs may see a surge in non-traditional applicants as the early match provides three opportunities to enter training through either the early match, the Main Residency Match, or SOAP®. This may result in an increased number of applications or applicants who may otherwise not select the specialty.
• Not matching in the early match is likely to increase the number of applications per individual in the Main Residency Match, as applicants enter a matching cycle with only half of the positions remaining available. This may increase stress, cost, and could adversely affect the wellness of applicants.

...

"it is important to first outline the core concepts of the match as a stable “market”. The Match was established in 1952, to solve a “congestion” problem in medical residencies involving applications, offers, and acceptances. In a May 2021 pre-submission working paper, Itai Ashlagi, Ph.D. and Alvin Roth, Ph.D. describe the consequences of congestion as “unraveling” where programs initially responded to congestion by making “exploding offers” that prevented applicants from considering many programs because they were pressed to accept an early offer, before knowing whether an offer from a more preferred program might be forthcoming if they waited. The authors note that NRMP’s matching process, in its current form, has four distinct properties that are relevant to managing the problems of congestion and unraveling and maintaining a stable matching market. Specifically, the NRMP matching process

"1. Is Uncongested: participants make all decisions (on Rank Order Lists) in advance, so there is no delay in processing offers, rejections, and acceptances, which is done by the computerized Roth-Peranson algorithm.

"2. Defers acceptances: preferences of applicants and programs are not finalized until all preferences have been considered, thereby producing stable matching: i.e., matching in which there are no “blocking pairs” of applicants and programs not matched to one another but who both would prefer to be.

"3. Promotes true preferences: it is safe for participants to state their true preferences when they submit their Rank Order Lists (ROLs).

"4. Establishes a “thick” market: most residency programs in most specialties participate in the NRMP Match, which also allows for multi-specialty applications and couple matching (including for mixed-specialty couples).

"The authors opine that an early match such as the proposed ERAP pilot followed by the Main Residency Match would not share three of the four important properties of the Match:

"1. An early match would dilute the thick market: not all positions would be available at the same time (and further, it would not allow applicants to express multi-specialty preferences, nor would it accommodate mixed-specialty couples).

"2. early match would introduce complicated strategic decisions into the formulation of ROLs: it would no longer be safe for participants to submit ROLs straightforwardly corresponding to their preferences.

"3. An early match would not produce a stable matching: there would be mutually disappointed blocking pairs of mismatched applicants and programs. This would also make it less safe to report ROLs that straightforwardly corresponded to preferences."

The market for radiation oncologists

 Dr. Wes Talcott at Yale points me to some contemporary discussion of the labor force in radiation oncology.  As with a number of other medical specialties, there's a tension between the number of staff needed to prep a patient for treatment and the number of new board certified specialists needed to supervise such treatment. Residents fill the first kind of position, and time and training transforms them into the second.

The contemporary discussion seems to focus on proposals that individual residency programs should reduce the number of residency positions they need to fill, in a decentralized manner, either by offering fewer positions in the Match, or declining to fill positions that aren't filled in the main Match. There is a concern that a coordinated reduction in positions would invite antitrust scrutiny, although other specialties (such as gastroenterology*) have managed that.

Here's an article from the International Journal of Radiation Oncology*Biology*Physics:

Chicken Little or Goose-is-Cooked? The State of the US Radiation Oncology Workforce: Workforce Concerns in US Radiation Oncology by Chirag Shah, MD and Trevor J. Royce, MD, MS, MPH, Published:March 11, 2021 DOI: https://doi.org/10.1016/j.ijrobp.2020.11.056  

"oversupply worries have reached a fever pitch among trainees, with the job market being the primary concern and 52% perceiving an increasingly competitive market10; these concerns have manifested in a precipitous decline in student interest, with 14% of RO residency positions unmatched in the 2020 Match (compared with previous rates of near 0%) and worse numbers expected for the 2021 match."

#####################

Here's a reply, suggesting that the current situation presents an opportunity for the RO profession to remake itself in various ways:

When in a Hole, Stop Digging: In Reply, Workforce Concerns in US Radiation Oncology  Louis Potters, MD, FASTRO, FACR,  Published:March 11, 2021, International Journal of Radiation Oncology*Biology*Physics, DOI: https://doi.org/10.1016/j.ijrobp.2020.12.024

#####################

A different kind of reply is that fewer U.S. medical graduates are applying for RO residency positions in the Match:

No Longer a Match: Trends in Radiation Oncology National Resident Matching Program (NRMP) Data from 2010-2020 and Comparison Across Specialties  by Chelain R.GoodmanM.D., Ph.D.aAustinSimM.D., J.D.hElizabeth B.JeansM.Ed, M.D.dJustin D.AndersonM.D.bSarahDooleyM.D.cAnkitAgarwalM.D., M.B.A.gKarenTyeM.D., M.S.eAshleyAlbertM.D.fErin F.GillespieM.D.iRahul D.TendulkarM.D.kClifton D.FullerM.D., Ph.D.aBrian D.KavanaghM.D.jShauna R.CampbellD.O. Available online 11 March 2021,In Press, Journal Pre-proof International Journal of Radiation Oncology*Biology*Physics https://doi.org/10.1016/j.ijrobp.2021.03.006

"In the 2020 NRMP, 122 US MD senior graduates preferentially ranked radiation oncology, a significant decrease from 2010-2019 (Median [Interquartile Range],187 [170-192], p<0.001). Across all specialties, radiation oncology experienced the greatest declines in the 2020 NRMP cycle relative to 2010-2019 in both the number of ERAS applicants from the US and Canada (-31%) as well as the percentage of positions filled by US MD or DO senior graduates (-28%). Of 189 available positions, 65% (n=122) were filled by US MD senior graduates who preferentially ranked radiation oncology as their top choice of specialty, a significant decrease from 2010-2019 (Median=92% [IQR, 88-94%], p=0.002). The percentage of radiation oncology programs and positions unfilled prior to the SOAP was significantly increased in 2020 compared to 2010-2019 (Programs: 29% versus 8% [5-8%], p<0.001; Positions: 19% versus 4% [2-4%], p<0.001). Despite >99% (n=127 of 128) of US senior applicants successfully matching in the 2020 NRMP, 16 of 24 remaining unfilled positions were filled via the SOAP. Radiation oncology was the top utilizer of the 2020 SOAP, filling 15% of total positions versus a median of 0.9% [0.3-2.3%] across all specialties (p<0.001).

Conclusions

Supply of radiation oncology residency positions now far exceeds demand by graduating US medical students. Efforts to nullify a market correction revealed by medical student behavior via continued reliance on the SOAP to fill historical levels of training positions may not be in the best of interest of trainees, individual programs, or the specialty as a whole."

##################

*The reduction in gastroenterology residency positions was combined with an increase of a year in required training, and this combination contributed to the unraveling of the gastro Match, which has since been restored. See the background discussion in

McKinney, C. Nicholas, Niederle, Muriel and Alvin E. Roth, "The collapse of a medical labor clearinghouse (and why such failures are rare)," American Economic Review, 95, 3, June, 2005, 878-889.

***************

Update: here's a discussion of the RadOnc situation by the Rad Onc Virtual Visiting Professor Network

Unraveling of neurology fellowships

 From the journal Neurology:

Current controversies in neurology subspecialty education: Insight from clinical neurophysiology  by Heidi M. Munger Clary, Michelle Bell  Neurology® 2020;95:669-670. doi:10.1212/WNL.0000000000010754

"Juul et al. help elucidate factors contributing to the unraveling of neurology’s fellowship application market. There has been mounting discontent among neurology residents and residency leadership regarding the timing of fellowship applications. Seventy-eight percent of residency program directors believe that the fellowship application cycle occurs too early, and 87% of residents believe that the process should start no earlier than the second half of postgraduate year 3.4,5 With each subsequent year, it appears that the application process occurs progressively earlier, a phenomenon described in economics as unraveling. This phenomenon is seen in unstable markets and has been described in fellowship applications for other specialties before the establishment of a match."

Akhil Vohra on unravelling (and on the job market this year)

Akhil Vohra, who will be finishing his Ph.D. in Economics at Stanford this year, has been thinking about unraveling for a long time.  His job market paper explores a novel channel by which markets can unravel in time, with early, inefficient hiring, even when talent isn't scarce.

Unraveling and Inefficient Matching by Akhil Vohra 

Job Market Paper, November 5, 2020

Abstract: Labor markets are said to unravel if the matches between workers and firms

occur inefficiently early, based on limited information. I argue that a significant determinant of unraveling is the transparency of the secondary market, where firms can poach workers employed by other firms. I propose a model of interviewing and hiring that allows firms to hire on the secondary market as well as at the entry level. Unraveling arises as a strategic decision by low-tier firms to prevent poaching. While early matching reduces the probability of hiring a high type worker, it prevents rivals from learning about the worker, making poaching difficult. As a result, unraveling can occur even in labor markets without a shortage of talent. When secondary markets are very transparent, unraveling disappears. However, the resulting matching is still inefficient due to the incentives of low-tier firms to communicate that they have not hired top-quality workers. Coordinating the timing of hiring does not mitigate the inefficiencies because firms continue to act strategically to prevent poaching.

You can see him talk about his job market paper in this four minute video:

 

He applies his model to a number of labor markets, both those which are unraveled and those which aren't:

***********

My advice if you're hiring: check him out.

Will curtailing early hiring/unraveling help diversity?

If you run a company that hires very early, you likely hire from familiar places.  If talented recruits from more diverse backgrounds are harder to identify very early, you might want to slow things down a bit.  Here's a WSJ story, about what might signal a change in the famously unraveled market for young analysts in private equity:


Blackstone to Bypass Scramble for Investment-Bank Talent in Bid to Diversify Hiring
On-campus recruiting will be expanded to 44 schools from nine in 2015
By Miriam Gottfried, June 24, 2020

"Blackstone Group Inc., ...one of the most coveted employers on Wall Street, is throwing out a key section of its recruiting playbook in a bid to improve its hiring process and increase diversity.

"The investing giant and its private-equity peers have long engaged in a yearly race to pluck junior investment bankers already trained in spreadsheet and PowerPoint wizardry from firms such as Goldman Sachs Group Inc. and Morgan Stanley. The prize for those lucky enough to make the jump: entry-level jobs that can pay as much as $300,000 a year at some firms.

"Now Blackstone officials say the firm plans to sit out that contest in favor of on-campus recruiting, already its main source of talent and one that it is expanding to bring in more candidates directly from schools, including historically black colleges and universities and women’s colleges. Blackstone, which has been working for years to extend its campus reach, says it will directly recruit from 44 schools this academic year. That is up from just nine in 2015.
...
"Blackstone, the largest buyout firm with $538 billion of assets, received nearly 15,000 applications for just 90 full-time analyst roles that started last year. It has two main sources of new junior talent: campuses and investment banks, which have their own hotly competitive entry-level hiring operations.

In the case of the latter, recruitment used to happen during the summer after applicants’ first year on the job, but it has steadily crept forward as private-equity firms jump the starting gun in hopes of securing the best candidates. In 2019, recruiting took place in September, just a couple months after candidates began working at banks—for roles that wouldn’t start until summer 2021."

***********
Here's an earlier related post (from long ago, before Covid-19 and George Floyd...):

Monday, December 9, 2019

Unraveling has made investment banks the farm teams of private equity...

Unraveling of finance internships, and a black market for courses

Mallesh Pai points me to this story in Philadelphia Magazine, from the University of Pennsylvania:

Desperate for High-Paying Wall Street Jobs, Penn Students Try Buying Their Way Into the Right Classes--Out-of-control corporate recruiting — and a new black market  by DAVID MURRELL

"...students had been posting in Penn student group chats saying they’d be willing to pay their way into courses they hadn’t been able to get into. There was a simple workaround: These students would offer money to entice another student to drop the class, then swoop in through the online registration portal to take the newly free seat. The going rate looked to be about $50 to $60 for a class.
...
"Five years ago, sophomores like Current might not have been so desperate. Back then, finance companies hired for their all-important junior-year summer internships just a few months ahead of time. But recently, in an attempt to scoop up the best students before anyone else, companies have moved up the timeline. It’s now standard practice for finance firms to recruit sophomores like Current — who has only completed three semesters of college and hasn’t even declared a major — for those same junior-year summer internships a full 18 months in advance.
...
"As it happened, Current’s scheme to buy his way into Corporate Valuation didn’t quite work as planned. He was foiled by the course registration system. His co-conspirator did indeed drop the class, but a spot never opened up. (Current now thinks he failed to account for a wait-list.) But while he came up empty, other students say they know people who have succeeded.

“This is very common,” says junior Valentina Losada, another vet of the corporate recruiting wars. “It’s not even seen as something bad.”
...
"firms have realized they don’t need the university anymore; they can conduct phone and Skype interviews, then bring candidates to New York City for the final round. When deciding whether to recruit on campus at Penn or bypass the school and face no institutional regulation, guess which option the banks have chosen?

"Having granted themselves free rein, many companies are now acting like monopolistic bullies. They move the recruiting cycles ever earlier in a race to reach job applicants first. (Shout-out to the free market!) They don’t give students time to consider other internships, sometimes requiring job commitments just one or two days after the initial offer. Escudero says she’s had friends who received offers only to be told they had to give their answer on the spot — take it or leave it.
...
"The pressure also produces some peculiar unintended consequences, like the underground course-swap marketplace. Both Losada and Bomba say they have friends who have successfully bought or sold classes. "
************

Here's a related story in the Daily Pennsylvanian:

Ilyse Reisman | Penn students, please don’t sell your classes | Classes should not be treated like stocks

Unraveling of appellate court clerkships (only more so)

Steve Leider writes:

"I know you keep an eye on the unraveling of judicial hiring.  Listening to a podcast about the supreme court they gave an example of even more extreme advance hiring.  At about 51:30 minutes into this podcast (recorded at Michigan, ...) they talk about an Appeal's Court judge (Judge Katzmann, 2nd Circuit) currently hiring for the 2024 term.

https://strict-scrutiny.simplecast.com/episodes/standing-cheese 

 As one of the hosts noted - "A law student could get married, give birth, and have a baby - and the baby would be in pre-K before the clerkship even starts."

Unraveling has made investment banks the farm teams of private equity...

...at least that's the argument made in this article (full of nitty gritty detail) at Vanity Fair:

“IT’S, LIKE, LAWLESS”: HOW PRIVATE-EQUITY HEADHUNTERS ARE BLEEDING WALL STREET
In the battle for young talent, investment banks have been reduced to prep schools for private equity. Inside the cutthroat recruiting process launching the next generation of the superrich—and what it reveals about the status realignment rocking Wall Street.
BY WILLIAM D. COHAN

"The recruitment calendar keeps accelerating. Two years before he started at Morgan Stanley, the former analyst said, the private-equity vultures began circling the investment banks in March. The following year, recruiting began in April. Today, analysts who begin at Morgan Stanley in August are being courted by private-equity firms in mid-September—just weeks after they arrive.

"This super-charged dynamic can make for very odd interviews. “It’s so accelerated. Basically what you’re doing at the private-equity firm is you are saying, First of all, can this person hold a conversation?” the former analyst says. After that, the private equity people want to know what members of the new class are specializing in, and at which Wall Street bank. “Kids that are working in the mergers and acquisitions group at Morgan Stanley are probably going to get a great experience 8 times out of 10,” he explains. “Nine times out of 10. So I will want to interview those people that I consider to be in good groups at strong banks, where I hope and I assume that they are going to get the experience that they need that, by two years from now, when they come in the door, they are educated and their analytical skills and financial skills are up to snuff.”
...
"Somewhat surprisingly, most firms don’t seem to object. Rather, they have come to grips with the reality of the situation, even if they don’t like it, and recognize that they risk not getting the analysts at all if they put up too much of a stink. Some firms even encourage the analysts to go to private-equity firms—because that gives them a better chance of getting the very best college graduates. A partner at one firm even went to bat for one of the analysts who made it through the second round of recruiting at a big private-equity firm, but did not make it to the final round. The partner called up someone he knew at the private-equity firm and got the analyst back into the process. He got the job. “It’s like, I’m going to get you whatever job you want, but you’re going to bust your balls for me for the next two years,” the partner tells me.

"One young banker who got an offer from Blackstone recalled the supportive response when he walked into a partner’s office to share the good news. “He said, ‘That’s great. I’ve got to do a good job training you so that Jon Gray’”—Blackstone’s new president and chief operating officer—“‘thinks that I did a good job with you.’” (There is one exception to this good humor: Goldman Sachs, which has a three-year analyst program. “If they find out you are recruiting, they’re going to fire you,” says one analyst. “It’s official policy.” A Goldman spokesman says while that is true, some of their analysts still get recruited away from the firm.)".
************

Earlier post:

Monday, September 23, 2019

Private equity races for young talent even earlier this year

Unraveling and (lack of) self confidence by Dargnies, Hakimov and Kübler

Online, in Management Science, a behavioral look at unraveling via early exploding offers:

Self-Confidence and Unraveling in Matching Markets
Marie-Pierre Dargnies , Rustamdjan Hakimov, Dorothea Kübler
Published Online:22 Oct 2019https://doi.org/10.1287/mnsc.2018.3201


Abstract
We document experimentally how biased self-assessments affect the outcome of labor markets. In the experiments, we exogenously manipulate the self-confidence of participants in the role of workers regarding their relative performance by employing hard and easy real-effort tasks. Participants in the role of firms can make offers before information about the workers’ performance has been revealed. Such early offers by firms are more often accepted by workers when the real-effort task is hard than when it is easy. We show that the treatment effect works through a shift in beliefs; that is, under-confident agents are more likely to accept early offers than overconfident agents. The experiment identifies a behavioral determinant of unraveling, namely biased self-assessments. The treatment with the hard task entails more unraveling and thereby leads to lower efficiency and less stability, and it shifts payoffs from high- to low-quality firms.

Private equity races for young talent even earlier this year

Eric Budish sends me this pointer to the continued unraveling of the recruiting of young investment bankers into private equity firms:

Private-equity firms are already interviewing 22-year-old bankers who will start in 2 years. Their earliest-ever hiring kickoff shows how crazy the battle for talent has gotten.  

"Private-equity firms are already interviewing first-year investment-banking analysts to fill 2021 associate positions, marking the earliest-ever kickoff to recruiting for those roles, sources told Business Insider.

...

"Last year, firms started interviewing in late October, recruiters said. This year, the PE firms are already moving in after analysts — typically 22-year-olds who just graduated from college the previous spring — who have only a few weeks of work experience under their belts.  

"Sources including academic advisers, recruiters, and insiders at PE firms told Business Insider that the activity was widespread, including at firms such as Thoma Bravo and TA Associates that were early movers last year but also at some of the largest firms including Warburg Pincus, TPG, and KKR. 

...

"Private-equity firms have pushed up the recruiting timeline over the past several years, despite how difficult it is to assess bankers so early in their careers. Still, they feel the need to remain competitive and get first dibs on the best talent.  "

The Department of Justice opposes limits on early admissions, and other admissions agreements among colleges

Forbes has the story:

The Department Of Justice Aims To Unravel The College Admission Market
 Brennan Barnard

"Thanks to a two-year, ongoing investigation by the Antitrust Division of the United States Department of Justice (DOJ), the wheels are about to come off in college admission. As the National Association for College Admission Counseling (NACAC) prepares to meet later this month for their annual conference, the leadership reached out to members last week about proposed changes to the Association’s Code of Ethics and Professional Practice (CEPP). These potential amendments are a direct result of fruitless conversations with the DOJ, which have left NACAC with few options.
...
"Specifically the DOJ has taken issue with ethical guidelines that prevent colleges from “offering exclusive incentives for Early Decision, recruiting first-year undergraduates who have committed elsewhere, and recruiting transfer students.”
**********

Regarding early admissions, the DOJ wants colleges to be able to compete more vigorously through early admissions, e.g. by offering special access to dormitories, or other perks to students who commit early.  It will be interesting to see where this leads, but it could easily lead to more unraveling of admissions, making more admissions decisions earlier.

Here's the relevant page from NACAC, the National Association for College Admissions Counseling:

2019 Assembly Meeting Background
NACAC’s Code of Ethics and Professional Practices and Antitrust Provisions
Kentucky International Convention Center
Saturday, September 28, 2019

Disrupting black markets

If markets can be facilitated, they can also be obstructed. The NSF announces some grants aimed at this:

NSF invests in research to help disrupt operations of illicit supply networks
9 early concept awards to detect, disrupt, disable networks that traffic people, weapons, drugs and more

"Networks that illegally traffic in everything from people and opioids to human organs and nuclear material pose threats to U.S. health, prosperity and security. Nine new awards from the National Science Foundation (NSF) will advance the scientific understanding of how such illicit supply networks function -- and how to dismantle them.

"The new awards support research that combines engineering with computer, physical and social sciences to address a danger that poses significant consequences for national and international security. Nimble and technologically sophisticated networks traffic in contraband that includes people, illegal weapons, drugs, looted antiquities, and exotic animal products. Unencumbered by national boundaries, they funnel illicit profits to criminal organizations, and fuel transnational and terrorist organizations.

"Other federal agencies and organizations have worked on this issue for many years, with involvement of specialized fields in the academic community. The new NSF awards leverage fundamental research, taking an engineering systems-based approach made far more powerful by the integration of other scientific disciplines.

"We've been studying commercial supply chains for years and figuring out how to make them resilient -- now we want to use these same principles to make illicit networks less resilient. We want to break them," said Georgia-Ann Klutke, NSF program director for Operations Engineering in the Directorate for Engineering. "These are systems that operate by the same dynamics and use the same infrastructure components as legal commercial distribution systems. Our goal is to provide fundamental insights into the operations and economics of these networks that other federal agencies and organizations can use to attack this very complex problem."
...

Below are the nine new projects being funded, along with the principal investigators and awardee organizations.

• Disrupting exploitation and trafficking labor supply networks in post-Harvey rebuild: an evidence-based multi-agent stochastic decision-making framework, Matt Kammer-Kerwick, University of Texas, Austin
• Network analysis and optimal interventions for disruption of organ trafficking, Naoru Koizumi, George Mason University
• A data analytic approach to understanding human trafficking networks, Renata Konrad, Worcester Polytechnic Institute
• Unraveling illicit supply chains for falsified pharmaceuticals with a citizen science approach, Marya Lieberman, University of Notre Dame
• Anticipatory interdiction in narco-trafficking networks, Nicholas Magliocca, University of Alabama
• Modeling operations of human trafficking networks for effective interdiction, Lauren Martin, University of Minnesota-Twin Cities
• Detecting and disrupting illicit supply networks via traffic distribution systems, Nick Nikiforakis, Stony Brook University
• A new multi-layered network approach for improving the detection of human trafficking, Louise Shelley, George Mason University
• Advanced analytics, intelligence and processes for disrupting operations of illicit supply networks, Steven Simske, Colorado State University

Private equity job offers to young investment bankers unravel earlier this year, while investment banks try to stem their own unraveling

Two stories from the WSJ about unraveling, at different parts of the financial industry.

1. The WSJ has publishes this year's unraveling story earlier than last year's...

No Experience? No Problem. Private Equity Lures Newbie Bankers With $300,000 Offers.
Annual recruitment drive starts earlier this year as firms try to get a jump on preferred candidates

"An industrywide scramble is under way this week to hire young investment bankers.

"The instigator was Thoma Bravo LLC, which extended its first job offers this past weekend, according to people familiar with the matter. Word spread quickly to rivals, and by Monday interviews were under way at nearly every big firm, including Blackstone Group LP, Apollo Global Management LLC, Carlyle Group LP and TPG.

"Welcome to private equity’s annual recruitment, the frenzied window of interviews and fast-expiring job offers that firms use to fill their junior ranks. The candidates graduated college as recently as last spring and landed at Wall Street investment-banking desks just weeks ago.

"Those lucky enough to get offers will finish their two-year bank analyst programs and start at private-equity firms in the summer of 2020...
...
"Recruiting used to take place during the summer, once applicants had at least a year of experience under their belts. But it has crept earlier as firms try to get a jump on preferred candidates. In 2014, interviews began in February. Last year, recruiting started before Christmas. Applicants describe a frantic period of interviews and “exploding” offers that can expire in 24 hours or less.
**********

2. The investment banks also hire very early in students' college careers, and here's a story about an attempt to resist that urge (good luck with that):

 Goldman, JPMorgan Hit Pause on Intern Recruiting ‘Madness’
A push in recent years to move up application deadlines isn’t bringing in the kinds of candidates the banks need

"Two Wall Street investment banks are easing up in the race to hire their most junior employees.

"Goldman Sachs Group Inc.  and JPMorgan Chase & Co. won’t interview or extend summer internship offers to college sophomores this year and will go back to recruiting students in the fall of their junior year, executives said.

"It is a nod to a softer Wall Street, eager to cast off its sweatbox image to compete with perk-happy Silicon Valley. It is also an acknowledgment that a push in recent years to move up application deadlines isn’t bringing in the kinds of candidates banks need as they try to diversify their overwhelmingly white and male ranks.

“We were contributing to an environment that pressured students to choose rather than to explore,” said Dane Holmes, Goldman’s top human-resources executive. “I want people who want to be at Goldman Sachs, not people who felt they had to say yes to an offer.”

Marketplaces, Markets, and Market Design (my Presidential address in the July AER)

Here is the paper that grew out of my Presidential address as I stepped down from the AEA presidency in January. It attempts to summarize my current views on market design.

Marketplaces, Markets, and Market Design

• Alvin E. Roth



AMERICAN ECONOMIC REVIEW
VOL. 108, NO. 7, JULY 2018
• (pp. 1609-58)

Download Full Text PDF 
(Complimentary)

• Article Information

Abstract

Marketplaces are often small parts of large markets, and both markets and marketplaces come in many varieties. Market design seeks to understand what marketplaces must accomplish to enable different kinds of markets. Marketplaces can have varying degrees of success, and there can be marketplace failures. I'll discuss labor markets like the market for new economists, and also markets for new lawyers and doctors that have suffered from the unraveling of appointment dates to well before employment begins. Markets work best if they enjoy social support, but some markets are repugnant in the sense that some people think they should be banned, even though others want to participate in them. Laws banning such markets often contribute to the design of illegal black markets, and this raises new issues for market designers. I'll briefly discuss markets and black markets for narcotics, marijuana, sex, and surrogacy, and the design of markets for kidney transplants, in the face of widespread laws against (and broader repugnance for) compensating organ donors. I conclude with open questions and engineering challenges.

Citation

Roth, Alvin E. 2018. "Marketplaces, Markets, and Market Design." American Economic Review, 108 (7): 1609-58.DOI: 10.1257/aer.108.7.1609

****************
Here's the video of my delivery of a preliminary version of this longish paper as a (relatively) short (1 hour*) talk at the AEA meetings in January, 2018:
AEA Presidential Address - Marketplaces, Markets and Market Design
Alvin E. Roth, introduced by Olivier Blanchard
View Webcast
***************

*the video has adjustable speed. If you listen to it at 1x, you hear it as I presented it.  If you listen to it at .5x, you hear me as my students probably do, droning slowly on. If you listen to it at 1.6 or 2x, you might not be able to hear individual words, but you can enjoy the body language...