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Thursday, 10 March 2011

Money, so they say… is the root of all evil today. Revisiting the bonus conversations (2)

Money it's a crime
Share it fairly but don't take a slice of my pie
Money so they say
Is the root of all evil today
But if you ask for a raise it's no surprise that they're
giving none away

After writing my flaming plea about bonusses yesterday, I was wondering why this phenomenon is so hard to suppress in reality.

I think that even the most hardened Wall Street or London City dweller with an excellent job at ‘Blankfein, Steinhacker and Sons’ Bank LLC is sometimes wondering how he can earn a salary, inclusive bonusses of 15 - 150 times the salary of a normal administrative worker at the same bank. You know: the one that enters his orders into the computer system. And not even to mention the Mexican or African cleaning person that cleans his desk at night.

You have to be more thick-skinned than a rhinoceros with eczema to not ask this question to yourself. As I asked myself this question too (pure envy of course, as ICT consultants with an attitude are not paid that much), I came with the following three reasons. I hope that you, my readers, can add a few too. From the numbers that already read yesterday’s article about bonusses, I know it is an issue that draws a lot of attention.

1.   Reason 1: The current hedonistic culture with the emphasis on possession. Your intrinsical value is decided by the value of your possessions: net worth is self worth.
2.   Reason 2: The longlasting culture on colleges and universities all over the world to boost the ego’s of their students until students think they are better people due to their study
3.   Reason 3: The sometimes enormous student loans/ study debts that exist among alumnae after they finished their studies.

Reason 1

Todd Harrison of Minyanville ( has written some interesting articles about this subject with as returning themes:
-   Net worth isn’t self worth,
-   having fun isn’t happiness
-   the destination we arrive at pales in comparison to the path we take to get there.

Todd Harrison is always a good read and he is one of the few traders and previous big bonus collectors that asked himself the question in the wide open: is my self worth decided by my net worth?

The world in the eighties and between 1998 – 2008 was quite a hedonistic place. People working in good positions had to show off with:
-     their salary:at least more than 100K per year to not be considered a bum;
-     their watch:big(!), Swiss, mechanical, made from gold and topped off with diamonds ;
-     their car: at least Porsche, although this of course is a Volkswagen on steroids;
-     their suit and shoes: tailormade and with the Italian waisted fit around their trained bodies;
-     the restaurants they visit: with more Michelin stars than the universe and a price tag that makes it inaccessible for common people;

Nowhere was this hedonistic culture more visible than among the ‘fat cat’ bankers in the London City, Wall Street and Frankfurt and the Russian oligarchs and 'nouveau riche', like Roman Abramovich, Michail Chodorkovski and many, many others. If your self worth is so much decided by your net worth and you think that a Ferrari and a platinum Patek-Philippe wrist watch are indispensable parts of your life, the day your bonus is handed is the best day of the year.

Unfortunately these people didn’t always notice how much the world has changed since 2008. The Russian Oligarchs sometimes learnt the hard way (Chodorkovski), that the times are achangin’, but a lot of those guys are still living in Moscow and ‘Londongrad’, thinking the world is their oyster.

And what about the London and Wall Street bankers? Well, read the Financial Times, the Wall Street Journal and the “Frankfurter Allgemeine” for a week and you notice that after a few hard years all diffidence among the bankers has disappeared and the sky is the limit again. Will this change? Not until the ECB and the European and American governments decide that NO bank is ‘too big to fail’.

Reason 2

Colleges and Universities boost the ego’s of their students during their study years:
-     “You are the elite of the country. The people that make the decisions of the future”
-     “Five presidents and multiple captains of industry studied at this university”
-     “When you finished this college, you’ll get a red carpet treatment everywhere”

In spite of the fact that I “only” did do a study on a college in a rural area of The Netherlands and I must have been the worst student to pass exams without unsatisfactory grades, I felt like a million dollar when I left school:
-     I had a job at the same company quoted at the stock exchange where I was before as a trainee.
-     I had co-developed a concept / invention that has changed car body shops as we know them up to this day.
-     I had succesfully applied for a European economic subsidy of $150,000 for my company and project.
-     The college had boosted my ego so much, that I thought I would get a red carpet treatment everywhere I went and I could virtually write my own paycheck.

I had the (bad) luck that my project was sold to Akzo (now Akzo Nobel) without me and that 1993 was a very bad time to be unemployed. When I got a job again after numerous applications:
-     I didn’t whine about the salary
-     I didn’t whine about the fact that the red carpet wasn’t out there when I came
-     I didn’t whine too long about the fact that it was not a suitable job for me.

I learnt very much about myself at that time (believe me: the very hard way). Afterwards I took my chances in the ICT up to the point that I am now a respected ICT and Business Consultant with a very decent salary, a good house with an affordable mortgage and a lovely wife and three lovely children. I am a satisfied man.

But students that left school in 1996 at the start of the dot com-bubble or in 2003 at the start of the housing bubble got in the situation that good workers were very scarce and paychecks were ‘updated’ every quarter. Boosted ego’s that didn’t get a ‘deboost’ in the beginning of their careers started to think that they were ‘heaven sent’.

Especially in the finance world where salaries for talented people have always been very high, these boosted ego’s thought that they had a divine right to 150K+ salaries + bonusses. And who could blame them really… The real problem is that a lot of these guys still have these thougths.

Reason 3

I was lucky enough to be able to leave college without a student loan: Tuitions at Dutch schools and universities were almost nil (€ 500 per year at the time + the cost of school books), I lived with my parents and my father was more than happy to pay for it.

However, if you had a study at an expensive private school, a prestigious Ivy League / Oxbridge university or another famous business school like Insead at Fontainebleau, the tuitions were far from nil. If you didn’t have a stipendium or a rich father, student loans of $75,000 or more at the end of your study were almost inevitable and these loans ought to be paid back by the succesful students.

Well, the best way to pay these loans back is by getting a very high salary, enlarged by an annual bonus. And where is the place to get these salaries? Hence: the financial world.

So the problem of getting rid of bonusses in the financial world and outside is in a way an attitude problem, but in practice also a financial problem. People need to pay back their student loans to have a life out of poverty and to have the possibilities to build up a family. And once you enjoyed $150K+ payments per year, it is extremely hard to say goodbye to it.

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