Random Thoughts on The City, Wall St & Capitalism

Infamy, infamy – they've all got it in for me!"

Kenneth Williams - Carry On Cleo


This is how the Goldman employees must be feeling at the moment.Suprisingly for a firm that's so slick, they haven't handled their bonus season PR very well. The public backlash has been quite a bit more vocal this year.Even more surprising because recently their head of PR - Lucas Van Praag was made a Partner Managing Director only a couple of months ago.Ooops!

The media backlash about bonus envy happens every year.That's understandable from journalists, they tend be poorly paid hacks who have chosen a career of gossip mongering.Nobody put a gun to their head and told them to write for a newspaper.What must really irk financial journalists is when they interview 'rainmakers' and dealmakers, and realise that those being interviewed are no smarter or harder working than they, but for an accident of fate they could easily be picking up a few million dollars.

Then come the unwholesome moanings of career politicans, about the unfairness and inequity of it all.The whole protestant work ethic, fair days pay for a fair days work nonsense is peddled out. Everyone suddenly turns into a socialist in the face of what is regarded as unwarranted largesse.The truth is that if everyone was paid a fair wage for a fair days work, then capitalism wouldn't work.Its a zero sum game.There would be no one to exploit and therefore no margin to mark up. We would all be poor.

Contrary to popular thinking,bonuses do not need to be defended.There is nothing to defend.The general rule is the closer you work with money the more you get paid.It's not fair, but neither is being struck by lightning. So why all the envy.

Reasons not to engage in bonus envy

• Everybody conveniently forgets to mention that people pay tax. So if your bonus is 50 million Dollars, 40% of that will go in tax. Wouldn't you rather one person paid 20 million dollars in tax, than you paying more tax dollars.

• 30 million dollars net, isn't what it used to be. In the real scheme of mega-wealth it's actually not material, no pun intended. Do you like to collect paintings?, well £15 million pounds might buy you two thirds of a recently sold Van Gogh (L'Arlesienne, Madame Ginoux ) which sold earlier this year for £22 million. It would buy you about a quarter of a second hand Gulfstream G550, for sale at 52 million dollars. See http://www.controller.com/listings/forsale/detail.asp?OHID=1110645&guid=34594EBFA2EB458D9BA0E347E55665B8tp://www.controller.com/listings/forsale/detail.asp?OHID=1110645.

So you can't even afford to fly like a minor pop celebrity.

• Compared to the wealthy of the gilded age, and adjusted for inflation, this is very little money. It might buy enough imported marble from Italy to build a small toilet at one of the old Vanderbilt homes, here maybe http://tickets.newportmansions.org/mansion.aspx?id=1000.

• We all lose sight of the fact however much you are paid, these people are still just employees and office workers. In the abnormal parallel world that is office life , everyone is someone's bitch. Even the CEO is the shareholders' bitch. They are all still in bondage to the dreary world of office life. They might get a bonus but they are not free to do as they please. Management Ego and insecurity demand that even superstars do the bidding of those in charge.

• No one ever questions the sums paid to film stars. When Tom Cruise demands 20 million dollars a film and a percentage of the gross proceeds , it never makes the news, yet banking is just the publicity shy cousin of the movies. The compensation and work system is almost identical. So why does anyone care that much.
  
  
• In the current issue of the Harvard Business Review there is an essay on 'Extreme Workers', white collar workers who choose to work 70 plus hours a week. Many of these are in banking. Any employee that was working 70 hours a week in an office job which is neither interesting, nor difficult needs treatment. I would begin to wonder what they are doing all day, are they dyslexic, or slow or inefficient. They will tell you it's the buzz of the deal, instant results, being recognised as the 'best', the stimulus of working with smart colleagues. All of this of course is just rubbish. Denial is not just a river in Egypt. Office work by it's very nature can never be 'interesting' except to dullest individual. It's the same power point to the same clients, with the same spreadsheet, with the same dull colleagues, only the dates and logos change. If you spend enough time brainwashing yourself you can justify most things. It's delusional, in the clinical sense. Smart people don't tend to work in offices for other people for 70 hours a week. A typical mid-size investment banking project should not take more than 10 hours a week.Most people in banks seem to hang around the other 60 hours to look good, or perhaps they have no friends. Smart people don't tend to work financial services, Smart arsed people do though.

• If time is money, then the big bonus receivers have traded in their time ( including what spare time they may have had) for money. Imagine how dull they are as people. All their social lives, friends, acquaintances, conversation will be work related. This doesn't produce fully formed individuals, just good workers. The time/money equation is never reversible. That is to say the more time you forego may give you more money but no amount of money will be able to purchase more time. If we consider Chuck Palahniuk's theory that "on a long enough timeline the survival rate for everyone drops to zero"then it makes no sense to choose excess money over time, for a normal person. In the end we should pity these people rather than envy them.
  
• RB