You can select as well as be selected

Running hiring rounds or other application processes is extremely hard. As a reviewer, you have at most a few minutes to spend reading each initial written submission, with extremely little information to go on as you try to whittle down the number of candidates ten- or a hundredfold.

Importantly, institutions have control over how they handle applications, and you can therefore draw conclusions about their priorities and abilities based on your experience as a candidate. One such inference might be that companies with overly convoluted or tiresome application processes are unimaginative and incompetent, at least with respect to recruiting. I can believe this is true in some cases, but I claim that shoddy-seeming processes are often actually the product of deliberate optimisation. In this post, I’m going to explain why, and argue that this is a reason to steer clear of jobs whose applications you dislike (cough cough, management consulting and finance).

An analogy

Before that, let’s take a brief detour to discuss insurance. Imagine we live in a world where there are two types of people: the Cautious and the Reckless. Each individual’s type is known only to themself, and although everybody has a non-zero risk of an accident, misfortune befalls the Reckless far more frequently. People might want to buy insurance protecting them against the risk, but how should insurers set prices?¹

Since the insurers can’t observe each individual’s type to figure out if a potential customer is Cautious or Reckless, you might think that they just offer one full insurance policy priced according to the average risk of Cautious and Reckless types (weighted by their respective shares of the population). It turns out, though, that this situation is not stable. Because the Cautious individuals know that they’ll rarely have an accident, they would be happy buying only partial coverage and paying a lower premium. So, another insurer could come along and offer such a policy, siphoning off all the Cautious types from the other firms. The other firms would be left selling to only Reckless types while still charging based on the population average risk level. That’s a quick way to lose lots of money.

In equilibrium, then, there will be two insurance packages available for purchase: an expensive one with full coverage, and a cheaper one with only partial coverage. What’s clever here is that the contracts are designed so the Reckless will prefer to buy the expensive contract, leading to separation between types. Intuitively, even though the price of the other policy is lower, the partial coverage makes it unattractive to Reckless individuals who know they’re very likely to have an accident and need reimbursement. Notice how the insurers don’t need to put in any work to achieve this result once they’ve figured out the correct prices and coverage levels, as consumers will rationally sort themselves by type based on the contracts being offered.²

Applications

How does any of the above relate to hiring? The labour market, like the insurance industry, is an environment where firms can’t directly observe important characteristics of the individuals they’re dealing with, whether potential employees or customers. You have a much better picture of your own attitude and abilities than any company you’re applying to does, but they would very much like to know those facts. And while firms do invest time and money into actively gathering information about their applicants (e.g. through assessments, interviews, and references), they also construct their application processes to passively filter for the sorts of candidate they want – similarly to how appropriately-designed sets of insurance packages can dissuade the “wrong type” of customer from buying a particular policy.

Consider advertising, right at the top of the recruitment funnel. The Atlas Fellowship’s website is much fancier-looking than ESPR’s, but I don’t really think that’s because Jonas has better design taste/ability than Gavin. Rather, the difference is a natural consequence of strategic decisions about the desired culture and participant profile for each programme. If you manage to promote your summer camp in a way that is reliably appealing to those you’re aiming to attract and offputting to the rest, you’ll get a vastly better signal:noise ratio in the applicant pool, and hopefully have fewer people you don’t want to accept adversarially hacking your admissions process.

Later stages of the funnel can also be crafted to encourage certain kinds of candidates to persist and others to drop out. When seen in this light, some of the characteristics I like least about applications for a stereotypical investment bank internship seem far more likely to be features than bugs:

• A large number of stages to get through; interview questions that mean you must memorise various technical terms and be up-to-date with case studies and macro trends
  • This filters for people who can cope with working extremely long hours, because they’re willing to stick at tiring & tedious tasks in order to get to a prestigious & well-paid position (now, the internship; once they’re employed, a promotion).
  • (Having a genuine passion for finance would also help here, but if that was all you cared about I think you’d spend your time learning cool stuff rather than persevering with these applications.)
• An expectation that you will wear a suit and tie for interviews (and have tidy hair…)
  • This filters for people who understand what is culturally expected of them, are happy to do it, and would therefore avoid rocking the boat as junior employees.
• HireVue prompts and cover letter rubrics that ask you to explain what you like about the particular firm you’re applying to, even though you are probably care no more about them than any other company
  • This filters for people who are good at identifying what an individual or institution wants to hear, and convincingly telling them that – in this case, that they are special and valued for such-and-such reason. I suspect that doing this well is very important for successful relationship management.

Application components like these are much less aversive to the candidates companies want to hire than those they don’t. Looking at lists of finance summer internships, I saw a series of annoying hoops I had no inclination to jump through, and so I simply didn’t apply to them. Even if I had got started, chances are I would’ve got fed up partway through. By setting up the conditions for differential attrition rates like this, firms are able to eliminate unsuitable candidates like me without any expense on their part, making the entire hiring round cheaper to run.

In some ways, this is very similar to Spence’s model of education as a way for high-productivity workers to credibly signal their type to employers.³ Under my formulation:

• Some workers are Glib and others are non-Glib.
• The non-Glib types find it more effortful and unpleasant to complete a HireVue with false sincerity.
• As a result of this high cost, non-Glib types choose to not produce the HireVue signal, revealing their type and forgoing the opportunity to be hired for the role.

Receiving signals

However, there are two important differences from the standard labour market signalling setup. First, Glib-ness is not strictly better than non-Glib-ness – it is more like a disposition or preference than an ability. While every employer would pay more for the high-productivity worker from Spence’s model, only certain firms value Glib-ness (and some may disvalue it). Low-productivity workers definitely want trick employers into thinking they’re high-productivity ones, as doing so would win them higher wages. Non-Glib workers, however, do not necessarily have any reason to pretend to be Glib. For sure, the finance firms we’re talking about would not want to hire them, but being non-Glib merely means that they should optimally pursue a different career (which may be just as well-paid!).

This feeds into our second point of departure from Spence – the presence of uncertainty on the part of workers. Young people aren’t sure about the kinds of work they will or won’t enjoy, so “testing fit” for different career paths is a useful thing to do before committing to any single one. Although I may know the cost of acting Glib in an interview, I start out knowing very little about how much Glib-ness a firm will require from me as an employee, and therefore uncertain about the value to me of a position there.

Collecting information is something that workers need to do as well as employers, then. This isn’t a new insight: everybody understands that if you do a 10-week internship and hate it, you probably wouldn’t enjoy a full-time position, and that learning this fact through the internship is preferable to only realising it on the job. Exactly the same holds earlier on in the hiring pipeline: disliking the recruitment process for a role gives you evidence that you will dislike the role itself. As I have argued, firms have strong incentives to design these processes in a way that reflects their culture, so you should make use of application processes as a comparatively cheap way to get information on how you feel about that culture. If you find yourself really hating the grind of applying to internships in the widget industry, consider exploring other options and re-evaluating whether you actually do want a career in as a widget-maker!

Putting it more directly: the application experience for jobs in finance and consulting is near-universally described as terrible. If you have applied to any of these roles, my guess is that you didn’t enjoy it very much. So, please, think carefully about whether that corporate life is one you’re excited to live.

Some qualifications

The main recommendation of this post runs counter to a very sensible point Lydia made back in October while I was complaining about the prospective internship grind: it’s foolish to let life choices like what career to pursue (& which companies to aim for) be shaped by relatively weak preferences about job applications. The annoyance of dressing up and putting on a show for a one-hour interview is really tiny in comparison to the scale of costs & benefits associated with actually having that job (or any other).

Moreover, personal satisfaction is only one good among many you might hope to get from a job. Gritting your teeth through a painful application process for a job you anticipate you won’t enjoy might be perfectly reasonable if that is the best way to gain some experience you really want, or earn money you really need.

Still – I think many of us could do with paying closer attention to our current-self’s tastes, and really reflecting on what it is we want to be doing with our lives (especially if, like me, you had a lucky draw in the lottery of life and now have the good fortune of several options to choose from). Hopefully this post is persuasive to the right people!

Appendix: two applications I’d be happy to do again

For reference, here are the details of two recruitment rounds I recently went through, along with some thoughts on what they might have been selecting for. In both cases, it struck me that the firm was putting a lot of human resources into the process, taking employees away from their usual work to run interviews. This made things much more pleasant (there were actual humans to interact with & bounce ideas off, rather than repeated rounds of talking into a computer), and also made me feel like the company actually valued my time, or at least had an incentive not to waste it – every interview they put me through was pretty costly for them, so they must have believed that each one was worth it. I would have taken a much dimmer view of a company that expected me to spend hours doing unpaid assessed work or interview preparation.