I worked at Lehman from 2004-2008 in investment banking and on the bond trading floor and I think I have a little more balanced view.
Yes, there are people on wall street that hate their jobs. Yes, there are people obsessed with money. That's easy to point out. But there are also some people that are there because they like working with their friends and making big bets, and getting proven wrong or right. It's actually similar to the culture of being a contrarian that I see in SV. And as to the point where the guy felt shorted by a million dollar bonus, wouldn't you feel shorted if you made the company 10x that in profit on your trades, and all your friends at other firms that made 10x got a bigger check than you? That's human nature, not something specific to wall street, even if it's easy to throw up your hands and say how shocking it is because of the amounts involved.
Anyway, I don't mean to be overly harsh on the article. It's possible my additional time there put some blinders on, and I still have a lot of friends that work on the street (a good percentage of whom actually like their jobs). It was really interesting to get Nick's perspective, and it's especially awesome that it's from someone else who has jumped over to startups from wall street. Just throwing my 2 cents in.
One more point regarding the bonus question. I don't believe that Wall Street properly accounts for the amount of risk traders take. Should that trader receive 10% of the money he made for the bank that year? No, absolutely not. Because he or she could lose just as much or more the next year. The time horizons are skewed and people on Wall Street are compensated based on short time horizons when the risk in fact is spread over many years. Unfortunately, when things go sour, the general public pays disproportionately.
Yes, exactly. This nails the fundamental problem with the street in my view: unlimited upside, limited downside. You risk everything and have a great year you are rolling in cash. You aim high and fail miserably you probably get fired and maybe even picked up at another bank. This doesn't even get started on the lack of criminal enforcement for fraud, etc. Right on.
Oh, I didn't mean to imply that there is fraud in the vast majority of cases. Just that there is some subset of that behavior that produces fraudulent activity.
Appreciate this perspective. Not hard to imagine why working with friends would be fun. I have many friends who still work on Wall Street or in the financial industry. I don't disrespect them for it, although I do wish more young smart people were focused on making things rather than transacting. I tried to write this post specifically about MY experience and stay away from generalizations as much as possible.
> I don't disrespect them for it, although I do wish more young smart people were focused on making things rather than transacting.
It's six of one, half a dozen of another. You either peddle exotic financial instruments on Wall Street, or peddle advertising in Silicon Valley (or work on something like Glass or self-driving cars that's completely subsidized by advertising profits). I don't think there is anything more noble about finding new ways to convince people to buy cheap Chinese crap they don't need.
> I do wish more young smart people were focused on making things
Yep, I'm with you! Thanks for writing the article, I enjoyed reading it. We may have even walked by each other on the third floor at 745 7th ave at some point. Ha.
> wouldn't you feel shorted if you made the company 10x that in profit on your trades
That guy didn't make the company all that money entirely on his own. Lehman supplied the capital, they get the bulk of the profit. That's how it works.
If he wants the truly big bucks (as if a million isn't), then he should trade his OWN money. But of course he probably didn't have anywhere close to enough to do so.
> That guy didn't make the company all that money entirely on his own. Lehman supplied the capital, they get the bulk of the profit. That's how it works.
Capital doesn't sit there and make money by itself. The allocation between how much of the profit the bank gets versus the trader is itself a market transaction--if the bank low-balls traders consistently, they'll just go to another bank. If the supply of traders who can do that is low relative to the amount of capital available to invest, bonuses will go up and traders will take a larger allocation.
Yes, that's true. In fact, that's true of all employees at all companies (just replace "trader" with "employee" and "bank" with "company").
However, we do not know that this trader was underpaid relative to other traders. All we know is that he was unhappy with his bonus. Once you join the Manhattan rat race, you'll find all sorts of ways to be unhappy with your bonus no matter how big it is and regardless of whether you are paid the same relative to your peers or not. In Manhattan, the sky is the limit as far as apartment prices go, for instance. If you want a place just slightly nicer or in just a slightly more ideal location, after a certain point that might be an extra million right there. There's a culture of making everyone constantly feel poor, especially after a transition in the 1900s where it became hip to live in the city rather than out of the city.
You conveniently ignored "and all your friends at other firms that made 10x got a bigger check than you." People compare themselves to their peers. That's how it works.
I "ignored" that because it's total speculation, invented by the person above. It wasn't included in the source article at all.
And it's also completely irrelevant. Some of his peers on Wall Street got a bonus not of $2 million but of $20 million. If you can't emotionally handle that, then yes, you should definitely get off of Wall Street. You will never be the guy making the most money there.
The only people who are compensated exactly for the value they create are the people who risk their own money.
What likely happened is the guy in question pissed off a Senior VP and he and all his friends made the first ~$10-15 million. His friends get $2 million and he gets half.
I'd be mad, too. Just because it's a lot of money doesn't mean he should be happy with getting a less proportionate amount.
Yes, there are people on wall street that hate their jobs. Yes, there are people obsessed with money. That's easy to point out. But there are also some people that are there because they like working with their friends and making big bets, and getting proven wrong or right. It's actually similar to the culture of being a contrarian that I see in SV. And as to the point where the guy felt shorted by a million dollar bonus, wouldn't you feel shorted if you made the company 10x that in profit on your trades, and all your friends at other firms that made 10x got a bigger check than you? That's human nature, not something specific to wall street, even if it's easy to throw up your hands and say how shocking it is because of the amounts involved.
Anyway, I don't mean to be overly harsh on the article. It's possible my additional time there put some blinders on, and I still have a lot of friends that work on the street (a good percentage of whom actually like their jobs). It was really interesting to get Nick's perspective, and it's especially awesome that it's from someone else who has jumped over to startups from wall street. Just throwing my 2 cents in.