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No the end of bonus culture is never coming to Wall Street. It sounds nice in theory and makes for a good headline but it never works in real-life, particularly

No the end of bonus culture is never coming to Wall Street. It sounds nice in theory and makes for a good headline but it never works in real-life, particularly for performance oriented jobs like fundraising, sales, etc. The reason is that when you work in environment that's all about getting more funds, selling more products it's not a rewarding job like marketing or software development. The only rewarding part is making money, scoring deals and beating your other colleagues, competitors. Other than that, most people hate these jobs. And even to manage sales teams isn't easy. High-turnover rates, bunch of high-testosterone jerks ... I'm talking about finance here. Yes software sales or gym membership sales you can be a nice consultative sales person who's simply there to maintain the status quo and benefit from a good product that sells itself. Turn these jobs into regular consultative sales and you're going belly up. That's because in wall street you don't simply have a game-changing product like some Silicon Valley startup - that's solving real need. There's no difference in what you offer other than how you can win clients on your side. And most of these clients don't want to deal with average sales dude ... because they're simply not one of them. The top traders at the floor in one of my past jobs didn't even sell, they talked about cars, yachting, girls and played golf and poker with clients. And yes, everyone gets bonuses in investment banks, but it's really the commissions they earn and dealmakers who drive the performance.

Bubbadoo 7y ago
Don't know how long ago you worked in trading, but the changes, technically and culturally, have been coming hot and heavy since about 2010. First the technical: as the Bloomberg article points out, most traders today are also coders. Trading floors on the big equity exchanges are empty and quiet as most trades occur electronically. Many seven and eight figure/year NYSE specialists have had to find new careers or retire. You many remember the old NYSE DOT and super DOT program trading systems, both of which sent orders directly to the specialists on the floor, preserving their hold on the exchange-based trades. All of which has gone the way of the dinosaur. Along the way, low, low commissions, low-friction, low touch, low-latency trades are now the new normal. On top of this, I started in this business almost 40 years ago, when guys were animals on the trading floor. When I think of the misbehavior from that era and the new ultra-PC, metoo social environment, I'm amazed the old culture has all but been erased from today's trading floors. I do miss the levity, the practical jokes and general yuks we had, but that's the price we pay.
- michalu 7y ago
  Sure, most guys are coders, but every hedge fund, every investment bank 100% relies on people who raise money. To have a hedge fund is all about your ability to attract funds, 95% don't outperform index. Nobody will do this without huge bonuses, they'll simply launch their own funds, hire developers themselves and offer bonuses to other people like they are.
  - SEJeff 7y ago
    We should let the market decide. This is exactly how it does it.
  - n4r9 7y ago
    Bit of a rookie here, but aren't the people who are giving the funds doing at least some due diligence researching how much better the returns will be than on index funds?
    - realtalk_sp 7y ago
      There are a number of tactics used to obfuscate the likelihood of underperformance, such as rotating funds within the firm (it's amusing to see how many funds were closed/created around 08/09), advancing an esoteric investment thesis (often in a way that plays well to various cognitive biases; this is where the salespeople come in), having a strong personal brand (e.g. Bill Ackman), showing strong past performance and misleadingly implying future success (success is quite often one-off or close to it), etc. And maybe the most powerful weapons Wall Street has have nothing to do with them: investors get really amped up about an occasional big win (especially failing to understand when that win is predominantly explained by being near the top of an economic cycle or more generally correlated with some random variable well outside of anyone's control) and/or fail to track net results over time.
      - n4r9 7y ago
        Hah, fascinating. I've read a bit about that anecdote where Warren Buffett set a public challenge to outperform a basic index fund, and I was stumped as to why hedge funds are as popular as they are. You'd intuitively assume that agents become more rational the farther up the ladder you go, but this seems like a testament to the contrary. It reminds me a little of a blanket email that was sent out to the entire mathematics department while I was a grad student. The sender was looking to poach people who'd be interested in implementing his idea for the sports betting industry. He explained that he understood that any strategy was likely to have runs of poor performance, and his idea whenever it happened was to "swap" to a better performing strategy which was having a good run at the same time.
steve76 7y ago
Tech's no different. Don't fool yourself. They wouldn't make the money they made if people didn't flock their and loose their family's savings. Tech's big accomplishment of "solving real needs" have put hundreds of millions out of work and inflated prices all with just debt. The real money's not on Wall Street. They are frugal and hidden. Business is business. A jobs a job. It's either this or kill each other, which unfortunately a lot of the world is so happy to do. Just don't loose. 2% a year is about as best as you can do. When you see a hanging curve ball swing for the fences.
munk-a 7y ago
> particularly for performance oriented jobs like fundraising, sales, etc. I've always been a bit confused and frustrated by this job categorization. Someone good on CS can easily have a stronger effect on contract retention than the flashy sales folks - and all of our jobs are performance oriented, it's just a question of being fired vs. keeping our jobs instead of the magnitude of bonus.
- michalu 7y ago
  On retention, yes. On closing deals with 0.01% of rich people, largest funds, I can't imagine how.
  - munk-a 7y ago
    But the system being sold is usually the result of a team working together - just because one person ended up closing the sale why are they potentially receiving a much larger pay day than those employees supporting the product?
    - blawson 7y ago
      Because to build the system you need to sell the employees to come join. The power dynamic starts from the get-go.
    - throwlaplace 7y ago
      cynically it's because you can quantify the contribution of a sales person - they added xMM to business this quarter. the same kind of itemization/attribution is very difficult for software. the infamous patio11[1] blog post about how to leverage credible bottom line contributions can be used to get paid more as a dev. but more genuinely i do think sales does bring more value. customers aren't rational actors so closing a deal isn't about features or stats or whatever material a software dev contributes. it's about value prop and trust and meeting needs and all the language sales people use. [1] https://training.kalzumeus.com/newsletters/archive/consulting_1 https://training.kalzumeus.com/newsletters/archive/consultin...
hinkley 7y ago
I knew someone who worked for an R&D company and the lead for grant proposal writing was making just shy of twice as much as the lead developer. Base salary. Now to be fair, this person had tried to leave before so they had to sweeten the pot for retention purposes, but it was serious serious business, and this employee was functionally irreplaceable. I may write all the code we sell but I won't do that if the paychecks stop coming. I think one of the things that the ridiculously wealthy have trouble finding is people they trust - deservedly or otherwise. Money they've got figured out. Next week they'll have a little more or a little less, but they know where to find it if things get bad. All that yammering on the phone is building rapport, and putting in time interacting. It doesn't sound that different than the way that informants are recruited (eg, The Like Switch). They feel comfortable with the guy who gave them tips on how to get out of a sand trap. Despite the fact this proves nothing about whether IBM is a good buy right now.
derefr 7y ago
An interesting speculative-fiction writing prompt: performance-based compensation gets declared illegal. All salespeople instantly change careers, because, without performance-based compensation, their jobs are awful and they hate them. Every company in every market suddenly has to get by without the ability to actively get their products into people's hands. What happens next?
- dbspin 7y ago
  The world is vastly improved as all search results are now 'organic', and people find the products they need without being bombarded with advertising and cheap behavioral economic manipulations to encourage them to purchase products and services they don't need.
  - derefr 7y ago
    I think you're thinking of marketers/advertisers, who are not, in fact, compensated based on performance.
    - notfromhere 7y ago
      That’s not true. Marketers these days increasingly have revenue targets
      - derefr 7y ago
        Target-based compensation (i.e. “getting a bonus if the project succeeds”) and performance-based compensation (i.e. “working on commission”) are different things. One directly rewards effort; the other (mostly) rewards office-politicking, by e.g. finding your way onto projects on the cusp of success.
        notfromhere 7y ago
        No. Lots of marketing is directly tied to revenue generated and get compensated on their direct ability to generate pipeline. It's directly tied to performance.

Bubbadoo 7y ago

Don't know how long ago you worked in trading, but the changes, technically and culturally, have been coming hot and heavy since about 2010. First the technical: as the Bloomberg article points out, most traders today are also coders. Trading floors on the big equity exchanges are empty and quiet as most trades occur electronically. Many seven and eight figure/year NYSE specialists have had to find new careers or retire. You many remember the old NYSE DOT and super DOT program trading systems, both of which sent orders directly to the specialists on the floor, preserving their hold on the exchange-based trades. All of which has gone the way of the dinosaur. Along the way, low, low commissions, low-friction, low touch, low-latency trades are now the new normal. On top of this, I started in this business almost 40 years ago, when guys were animals on the trading floor. When I think of the misbehavior from that era and the new ultra-PC, metoo social environment, I'm amazed the old culture has all but been erased from today's trading floors. I do miss the levity, the practical jokes and general yuks we had, but that's the price we pay.

michalu 7y ago
Sure, most guys are coders, but every hedge fund, every investment bank 100% relies on people who raise money. To have a hedge fund is all about your ability to attract funds, 95% don't outperform index. Nobody will do this without huge bonuses, they'll simply launch their own funds, hire developers themselves and offer bonuses to other people like they are.
- SEJeff 7y ago
  We should let the market decide. This is exactly how it does it.
- n4r9 7y ago
  Bit of a rookie here, but aren't the people who are giving the funds doing at least some due diligence researching how much better the returns will be than on index funds?
  - realtalk_sp 7y ago
    There are a number of tactics used to obfuscate the likelihood of underperformance, such as rotating funds within the firm (it's amusing to see how many funds were closed/created around 08/09), advancing an esoteric investment thesis (often in a way that plays well to various cognitive biases; this is where the salespeople come in), having a strong personal brand (e.g. Bill Ackman), showing strong past performance and misleadingly implying future success (success is quite often one-off or close to it), etc. And maybe the most powerful weapons Wall Street has have nothing to do with them: investors get really amped up about an occasional big win (especially failing to understand when that win is predominantly explained by being near the top of an economic cycle or more generally correlated with some random variable well outside of anyone's control) and/or fail to track net results over time.
    - n4r9 7y ago
      Hah, fascinating. I've read a bit about that anecdote where Warren Buffett set a public challenge to outperform a basic index fund, and I was stumped as to why hedge funds are as popular as they are. You'd intuitively assume that agents become more rational the farther up the ladder you go, but this seems like a testament to the contrary. It reminds me a little of a blanket email that was sent out to the entire mathematics department while I was a grad student. The sender was looking to poach people who'd be interested in implementing his idea for the sports betting industry. He explained that he understood that any strategy was likely to have runs of poor performance, and his idea whenever it happened was to "swap" to a better performing strategy which was having a good run at the same time.

steve76 7y ago

Tech's no different. Don't fool yourself. They wouldn't make the money they made if people didn't flock their and loose their family's savings. Tech's big accomplishment of "solving real needs" have put hundreds of millions out of work and inflated prices all with just debt. The real money's not on Wall Street. They are frugal and hidden. Business is business. A jobs a job. It's either this or kill each other, which unfortunately a lot of the world is so happy to do. Just don't loose. 2% a year is about as best as you can do. When you see a hanging curve ball swing for the fences.

munk-a 7y ago

> particularly for performance oriented jobs like fundraising, sales, etc. I've always been a bit confused and frustrated by this job categorization. Someone good on CS can easily have a stronger effect on contract retention than the flashy sales folks - and all of our jobs are performance oriented, it's just a question of being fired vs. keeping our jobs instead of the magnitude of bonus.

michalu 7y ago
On retention, yes. On closing deals with 0.01% of rich people, largest funds, I can't imagine how.
- munk-a 7y ago
  But the system being sold is usually the result of a team working together - just because one person ended up closing the sale why are they potentially receiving a much larger pay day than those employees supporting the product?
  - blawson 7y ago
    Because to build the system you need to sell the employees to come join. The power dynamic starts from the get-go.
  - throwlaplace 7y ago
    cynically it's because you can quantify the contribution of a sales person - they added xMM to business this quarter. the same kind of itemization/attribution is very difficult for software. the infamous patio11[1] blog post about how to leverage credible bottom line contributions can be used to get paid more as a dev. but more genuinely i do think sales does bring more value. customers aren't rational actors so closing a deal isn't about features or stats or whatever material a software dev contributes. it's about value prop and trust and meeting needs and all the language sales people use. [1] https://training.kalzumeus.com/newsletters/archive/consulting_1 https://training.kalzumeus.com/newsletters/archive/consultin...

hinkley 7y ago

I knew someone who worked for an R&D company and the lead for grant proposal writing was making just shy of twice as much as the lead developer. Base salary. Now to be fair, this person had tried to leave before so they had to sweeten the pot for retention purposes, but it was serious serious business, and this employee was functionally irreplaceable. I may write all the code we sell but I won't do that if the paychecks stop coming. I think one of the things that the ridiculously wealthy have trouble finding is people they trust - deservedly or otherwise. Money they've got figured out. Next week they'll have a little more or a little less, but they know where to find it if things get bad. All that yammering on the phone is building rapport, and putting in time interacting. It doesn't sound that different than the way that informants are recruited (eg, The Like Switch). They feel comfortable with the guy who gave them tips on how to get out of a sand trap. Despite the fact this proves nothing about whether IBM is a good buy right now.

derefr 7y ago

An interesting speculative-fiction writing prompt: performance-based compensation gets declared illegal. All salespeople instantly change careers, because, without performance-based compensation, their jobs are awful and they hate them. Every company in every market suddenly has to get by without the ability to actively get their products into people's hands. What happens next?

dbspin 7y ago
The world is vastly improved as all search results are now 'organic', and people find the products they need without being bombarded with advertising and cheap behavioral economic manipulations to encourage them to purchase products and services they don't need.
- derefr 7y ago
  I think you're thinking of marketers/advertisers, who are not, in fact, compensated based on performance.
  - notfromhere 7y ago
    That’s not true. Marketers these days increasingly have revenue targets
    - derefr 7y ago
      Target-based compensation (i.e. “getting a bonus if the project succeeds”) and performance-based compensation (i.e. “working on commission”) are different things. One directly rewards effort; the other (mostly) rewards office-politicking, by e.g. finding your way onto projects on the cusp of success.
      - notfromhere 7y ago
        No. Lots of marketing is directly tied to revenue generated and get compensated on their direct ability to generate pipeline. It's directly tied to performance.