Twin Peaks and Contrarian Private Equity Indicators

I’ve written various times here on the current excessive ardor among MBAs and the like for private equity and venture capital, despite the relatively small number of jobs. There are some particularly choice examples in a New York Sun piece today on the hunger for private equity:

  • Harvard’s Venture Capital and Private Equity course has 192 slots, but 400 students applied (half the Harvard class)
  • Almost 75% of HBS students want to do private equity or venture capital”, said one student
  • 700 of Wharton’s 1,600 students are members of the private equity club
  • 600 of Columbia’s 2000 students are members of its club

As one Columbia professor says at the end of the piece, surges of MBA interest in anything generally indicate a market top. It happened in investment banking in 1987, in real estate in the early 1970s, in dot-coms in the late 1990s, and, after a private equity mini-peak in 2000, and to paraphrase the giant in Twin Peaks, it’s happening again.

[via Carlos]

Related posts:

  1. The Private Equity Boomlet
  2. The Private Equity Bubble
  3. LPs Offer Private Equity Pecking Order
  4. The Brain Drain — to Private Equity
  5. The Rise of Public Private Equity

Comments

  1. Sean says:

    Inquiring contrarian minds want to know which courses have the LEAST demand from the students.

  2. Accounting Ethics 101 ;-)

  3. We’ll also be seeing another peak shortly in Forex trading. I’ve seen one to many articles in just the past week trying to convince me what a great idea it is to get in the “super hot” foreign currency exchanges. I’m thinking “not good idea” given the global currency bubble we’re in.

  4. Guillaume says:

    Hi Paul,
    While I agree with your point, the evidence you give is (perhaps) misinterpreted:
    1. “said one student”: if you ask the president of the PE club, he might not be very objective. And of course surveying one person is not a good indication. Plus, the number of members of the PE club doesn’t represent 75% of the class. So total BS.
    2. & 3. I would interpret this in another way: because PE is the hot topic now, you need to get information. That’s why I’m a passive member of the PE club of my school. That being said, I had and have no intention to work in that sector. Of course you have the die-hards in the club but they must make less than 50% of the crowd. Finally, many clubs have people who sign up at the start of their MBA (when they’re all excited joining B-school) and then never do anything with the club but don’t de-register.
    But yes, I agree with you – PE is too hype to be good. I wish my school could realise that and put emphasis on something else now (but that’d be hard because they are seen / wanted to be seen as the powerhouse…)

  5. Hey Guillaume — The student comment wasn’t intended to be statistically significant, just anecdotally interesting about sentiment.
    Wrt club membership, I think we’re saying the same thing. PE is the hot topic right now, and people are collecting information because far more of them than usual want to work there. We can argue about what that means, but as a veteran of the finance wars my bet is on a bubble.

  6. fartikus says:

    mba meme patterns have always been trailing indicators. not sure why this datapoint is surprising in that context.

  7. Susan Wu says:

    Smart MBAs who want to anticipate the market should be looking at the ‘next hot thing’. Right now, that’s Sustainable Global Enterprise. As much as I am excited by the opportunities in open source, software, and consumer Internet applications, the amount of innovation that’s going to be taking place in the emerging markets at the Base of the Pyramid is going to dwarf all.
    Disclaimer: current MBA student.

  8. Thomas Tirney says:

    All good reasons why it is probably a good environment to start a business now. With the money pouring into private equity and VC, as well as eager MBAs wanting in on a get rich quick scheme, it is no doubt a good time to be raising money now for a new or nascent venture. Your post makes me wonder about the scarcity (or surfeit) of business managers and/or entrepreneurs.