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> At the end of 2023, Jane Street employed 2631 people > About 80 per cent of the company's capital comes from employee equity, which has swelled to $21.3bn at
by Smaug123 2y ago
> At the end of 2023, Jane Street employed 2631 people
> About 80 per cent of the company's capital comes from employee equity, which has swelled to $21.3bn at the end of 2023
o.O
- llm_trw 2y agoThat works out to 8 million per person on average. I'd be interested to see if the Pareto distribution holds here as well, namely that 1% of employees (26) hold half the wealth ($10b).
- ProjectArcturis 2y agoHedge fund comp is extremely skewed. When I worked at one, in good years my boss made more than 10x what I made, and I made about 10x what my reports made.
- baq 2y ago(PSA: 50/1 is approximately the same distribution as 80/20)
- llm_trw 2y agoIt is the same distribution, just makes the point more clearly.
- infecto 2y ago"Jane Street has 40 “equity unit holders on a full-time basis and in good standing”, with an average tenure of 16 years" - I suspect a large portion of it would come from those 40 but that is purely a guess.
- gruez 2y agoI thought the Pareto distribution was most famously associated with 80-20? Of course you can change α to get whatever ratio you want but this is the first time I heard of the 50-1 ratio being used.
- NoobSaibot135 2y agoSeems like Pareto 80/20 law is not too dissimilar from powers of 2. In binary, most significant(left most) bit is twice the magnitude of the previous bit. So that bit (or person) would contribute and get compensated accordingly. Would also be similar to segment trees with each leaf node having a value of 1 with parents recursively summing the children?
- zmgsabst 2y agoThey’re the same: 20% of 20% of 20% (or 0.8%) of people will hold 80% of 80% of 80% (or 51.2%) of the wealth.
- gpderetta 2y agoA power-law distribution probably describes it better.
- queuebert 2y agoPareto is a power-law distribution.
- coldtea 2y agoThe Pareto can be applied recursively. If 20% of the people have 80% of the wealth, then 20% of them will have 80% of that 80% (64%) and so on
- dchftcs 2y agoIt probably includes the founding partners, so it might be that ~0.15% hold more than half.
- chii 2y agoonly 1 founding partner is still there apparently (from the article). Rob Granieri
- ethbr1 2y agoIt makes you wonder if there's a retirement-encouraged culture for inactive partners. Which is probably what you'd want in a high-performance firm, less everyone look at the absent top level extractors and it turn into a law firm.
- dchftcs 2y agoEquity holders are probably forever, and the incentive problems are a hard thing to solve. But you won't be a founder or early joiner if you're not allowed to keep your equity anyway. Fortunately it doesn't take that much to get top talent, because so many other companies underpay. Jane Street only has to pay out a small fraction of their PnL and doesn't even need to have a non-compete.
- chii 2y agowith a profit margin at 70%, they can afford very high pay. And the equity holders would get diluted a bit when new employees are offered equity, but looking at the rate of profitability, each new employee more than earn their share in equity, even at the high end. Therefore, it is in fact, in the existing equity holder's interest to get diluted a bit to hire these employees, who would produce way more value (and thus increase the total value) compared to the loss in dilution!
- AJRF 2y agoDon't you mean Zipfian distribution?
- mywittyname 2y agoZipf is an inverse power law.
- bogtog 2y agoAre you telling me that one of American capitalism's peaks is basically a worker collective?
- JumpCrisscross 2y ago> one of American capitalism's peaks is basically a worker collective? Finance tends to pay its workers better than shareholders—most banks’ trading and IB groups pay out more than 50% of profits to workers.
- lupire 2y agoUnknown but unlikely. Doubtful that ownership shares are anywhere near equal.
- paxys 2y agoIs Google a worker collective just because new employees are thrown a handful of shares?
- MichaelZuo 2y agoIf 80% of Google was employee owned, then it would be.
- paxys 2y agoPlenty of companies are "employee owned" because the founders control the majority of shares. One person or a small group of people – whether they are employees or not – having total decision making power is the opposite of what worker collective means.
- MichaelZuo 2y agoWho decided on that definition? In my books share ownership can be unequal, so long as the bottom rung still have a few shares each.
- 2y ago
- paxys 2y agoA little further down: > The real money is at the top. The bond prospectus reveals that Jane Street has 40 “equity unit holders on a full-time basis and in good standing”, with an average tenure of 16 years. Among those there will be at least a handful of billionaires, even if no Jane Streeter appears on any rich lists. Sounds like any other partnership. A few people at the top are providing the equity and getting a profit share, and the thousands under them are getting salaries.
- wuj 2y agoRentech uses this model too. The equity-to-salary ratio of an employee increases the longer they remain at the firm. It's for incentivizing employees to stick with the firm in the long run such that they don't work for any other firms and become a competitor (especially true in trading given the small population of talents).
- ethbr1 2y ago> and the thousands under them are getting salaries. The difference is that these thousands also get to invest in Jane Street, which seems a pretty profitable investment (70% margins, etc).
- paxys 2y agoTypically at such companies you have to be at the very top of the hierarchy to be able to buy in and get a slice of the profits. It is very unlikely that rank and file employees are able to participate, at least at a scale larger than, say, a Google employee buying some extra shares.
- alxhill 2y agoFor what it's worth, a friend of mine is a lawyer in a well-known hedge fund and he gets access to their funds too (funds that would not otherwise be accessible without making a substantially larger investment I believe).
- robertlagrant 2y ago