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My Time at Lehman

304 points by sakai 14y ago

growlerphone 14y ago
fascinating writeup
anonymoushn 14y ago
The submitted URL is to the front page of the blog. The URL for the individual post is http://nickchirls.com/my-time-at-lehman http://nickchirls.com/my-time-at-lehman
PeterisP 14y ago
"When you’d rather have someone shit on your face than go to work, it’s probably time to leave." sums up the article.
danielna 14y ago
I have a strange sense of sadness for my friends who are "stuck" on Wall Street. Strange because it's weird to feel sad for someone making $250k+ per year, but I've heard their first hand accounts of how much they hate their jobs. If you're the type of person who can step back from the ego-driven culture of investment banking I feel like everyone reaches the same meta-conclusions that Nick did. It's just unbelievably hard for them to step away from the money. I mean, I'd like to think I would be able to make that choice and that purpose and meaning would ultimately trump a large paycheck. But nobody's putting $250k+ in my pocket so it's genuinely hard to say. Kudos to Nick for leaving. It took guts.
- pekk 14y ago
  Step back from the ego-driven culture of investment banking, into the ego-driven culture of startups. Hmm...
  - motoprog 14y ago
    ding!
- malandrew 14y ago
  One of the hardest parts about leaving is that after a few years all the friends in the world that you have are in finance because they are the only ones that can afford the restaurants, bars and activities as you. Then when you decide to leave it means giving up all those friends because after leaving you no longer will be able to afford hanging out with your friends from finance. It's surreal to have friends that you can only maintain via your current job.
- freyr 14y ago
  > it's weird to feel sad for someone making $250k+ per year, but I've heard their first hand accounts of how much they hate their jobs. Most people hate their jobs. And very few make $250k+ per year. Investment bankers and traders are smart enough and rich enough to make a leap into a new career, if they really desired. Your friends should grab a wad of $100 bills from each of their wallets, wipe away their tears, and do something proactive about their lives.
plg 14y ago
some will read this and think: "disgusting. thanks for the honest appraisal of what it's like... and it's disgusting." Others will read this and think: "holy crap man, the people that are screwed by the company still make just under a million! I totally want to work on wall street. I'll be rich" It's a jungle out there
- patrickgzill 14y ago
  When Michael Lewis wrote Liar's Poker he was shocked over the number of people who contacted him, asking for advice on how to get into investment banking.
  - GFischer 14y ago
    I read Liar's Poker, and the above article. I probably wouldn't like the environment at such bank. But yet, making U$ 20.000 a year, a million dollars is the stuff of dreams - 50 years at my current salary. The freaking lottery here in Uruguay doesn't give a million dollars !! (the current Cinco de Oro pool is U$ 125.000) PD: Yes, I'm quitting as soon as I get something else that pays the bills. I neglected to stay up to date in tech and am struggling to get a good job on the open market.
jwb119 14y ago
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.
- nilkn 14y ago
  > 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.
  - pc86 14y ago
    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.
    - nilkn 14y ago
rayiner 14y ago
"Which, it turns out, is a trader’s field day. What this meant, in its simplest form, is that these traders (or salespeople) could buy bonds at the "market" price from intelligent hedge fund managers in NYC and sell this same crap at much higher levels to unsophisticated (but legally considered "sophisticated") pension funds and insurance companies in middle America. What I discovered, quite starkly, is that the part of Wall Street that I worked in was simply transferring wealth from the less sophisticated investors often teachers’ pension funds and factory workers’ retirement accounts, to the more sophisticated investors..." "'We are important providers of liquidity that create stable financial markets. We’re a crucial part of a system. And besides, if we don’t do it, someone else will.' These are the lies that people tell themselves so that they can buy larger homes." Both of these things are completely true, and that's why American public policy is having such a hard time grappling with Wall Street. We try to rationalize the state of affairs by pointing out all the ways that Wall Street has an "unfair advantage" but the fact of the matter is that: what do you expect in a free market system that rewards every marginal advantage other than wealth to flow from less sophisticated people to more sophisticated ones? We like the idea of letting everyone transact freely, but we are uncomfortable with the "winner take all" implication of that policy. Wall Street: 1) Hires some of the brighest people in the country (e.g. 40% of the author's class at Yale); 2) Aggressively weeds out that impressive pool by forcing out all but the most promising people within a few years; 3) Trains them rigorously and maintains a level of institutional knowledge transfer that tech companies can only dream of. Why are we surprised that they disproportionately get the better end of every transaction?
- ig1 14y ago
  This. "Caveat emptor" applies heavily in b2b transactions be they financial or otherwise. If you're buying a product then you need to spend money to hire sophisticated buyers, because if your buyers are dumber than the sales-people you're buying from they're going to be fleeced. This is true if your buying a financial asset, a car or an enterprise software licence. Just because Oracle sells into companies that could just as well have used postgres that doesn't mean that Oracle aren't producing anything of value, it just means they're taking advantage of the buyer being less sophisticated than they are.
lifeisstillgood 14y ago
The experience reminded me of one as a child when I unfairly sold some worthless items to neighbors at a stoop sale in front of our house in Brooklyn. When my parents found out that night, they made me go from home to home on our block returning the money. I think I like his parents :-)
- nchirls 14y ago
  Indeed, they're quite wonderful and I'm very lucky :-)
  - lifeisstillgood 14y ago
    :-) I remember living in Wood Green, a vaguely rough area of London, where people put the sofas they no longer wanted out in the front garden in case someone else did. Anyway, we were getting rid of an Ikea box-case-thing, and stuck it outside, and a kid of say 11 asked if he could have it, and took it off on a toy truck. He came back and pushed a card through the door saying thank you (it would be "just right to keep all my toys in"). I am pretty sure his mum made him write it, (long story) but we kept that card in the back of various drawers through maybe two house moves because it was an unexpected example of politeness and parental guidance. One of the crazy things that social media might sort out one day is that i would strongly consider recommending that kid for a job, or university, simply on the strength of that one act. No idea who or where he is of course but there we go.
jdross 14y ago
Not to be too self-promotional, but this is literally the problem we're solving at Addepar. 15 years ago the power shifted from banks to hedge funds, and then in 2008 it started shifting to investors. But they still don't have the tools to understand what's going on. If you're interested in solving problems like this in an engineering-led company, please email me. I'd love to talk.
- orangethirty 14y ago
  What are your plans to deal with this?
  - neilk 14y ago
    I think it's explained on the Addepar site: https://addepar.com/technology/ https://addepar.com/technology/ Looks like graph theory to analyze investments as a set of relationships, rather than bar charts just showing aggregate stats.
  - jdross 14y ago
    There's a whole lot we don't discuss on the website, which is focused towards current target customers of the tool we've built vs. our broader goals to bring transparency to the financial world. First we've built a (we've been told) very powerful tool to quickly group, filter, sort, and compute standard financial metrics on a portfolio. Importantly, we don't care where you own your securities. It can be holdings from financial accounts, operating companies, homes, art, private options, manually brokered CDSs, whatever. Shockingly, our customers like to pay us a fair amount of money for this tool alone! On the back end this wasn't easy. We have to normalize the incredibly varied (and often inaccurate) information from banks, third party data providers, excel spreadsheets and other systems. Reconciliation, all day. Second, if facebook has a friend graph, we're creating the financial graph by aggregating ownership across all sources for our customers to analyze and report on. At a high level, the financial world (shockingly) lacks a standardized way of communicating information about ownership and transactions. There are complex and specific protocols like SWIFT and FIX, but no standard way of saying "this is what I own, this is what I used to own, this is how it's changed, etc." Banks each make them up with hundreds of unique data formats, often sent with COBOL-style headers. It's 30 year old technology. Long term, we'd like to open this open both as a data format for representing financial data and as a set of APIs for building tools to interact with financial data. To use another analogy, if you wanted to make a phone game in 2004, you had to build a phone. Then the iPhone came out. If you want to make a program to analyze portfolio risk in 2013, you need to build out relationships with an entire network of banks, data providers, and customers. We want to be the "app store" for those tools. There are a million other ways to make a platform like this valuable, but I'll save some of the juicier (and more strategic) ones for personal conversations if you're interested :)
dba7dba 14y ago
Brain Drain of American industries, by American Banks Wall Street, in its current form, is a poison for America. "I was later told that of my class of 1400 graduates from Yale, forty percent took jobs in finance." Of course when he says finance, it means Wall Street banks. I strongly believe Wall Street is the reason for the continuing decline of American industry and America itself. First reason is causing a massive brain drain out of other American industries by offering such ridiculous salaries for NEW hires. The second reason is exporting jobs (and intangible knowhow) for better margin/profit, which is really caused by top execs who want a bigger bonus check, which in turn is encouraged by Wall Street/stocks. Think about it, you have to agree all those 560 (probably top tier at Yale) Yale graduates are BRILLIANT people. Yes some probably got in because of family connection etc, but most are brilliant and hard working. These are the kind of people who would've risen above others in their given field and eventually lead others to greatness. Their talent (however inexperienced initially) really has no boundary. But of course following a non-banking career path would mean actually working for years WITHOUT easily making 0.25 million bucks a year. And of course in non-banking industry you may never get to a position of making 0.25 million bucks a year ever in your working life. So the choice is a really EASY one for the graduates. And once they start down the career path, it's incredibly hard to get out. What will you do? You have no other real skill and you are used to a 0.25 million dollar lifestyle. So what does this vicious cycle translate into? 1. Other American industries (or career fields) don't get the best talent available in the nation. They get the second best. Meanwhile other nations like China, S Korea, Japan etc are in a different situation. They don't have a banking system like Wall Street. Their banking systems aren't as powerful as Wall Street and hence don't offer such out of proportion compensation, for NEW hires. So their top graduates really don't have a choice BUT go work in a non-banking industry. Sure they would be bitter for not making 0.25 million bucks a year but their talent contributes concretely to their industry, create jobs, and keep their tax receipts rolling, which in turn help fund creating better education and infrastructure. 2. Wall Street is sending jobs abroad to fatten its bonus checks, while giving out some crumbs to some execs of other non-bank industries. As long as numbers look good, top execs at companies get fat checks, so they make incredibly stupid decisions that are bad for the company long term. But what do they care when they get 10 million when leaving the position. And all of this is shaped/encouraged by the Wall Street, who need cooperating ceos to make the wheels of Wall Street turn, printing out money for the top execs of Wall Street and their new hires. I'm sure people in Wall Street are patriots. In cynical mode, why wouldn't they be? America is capitalism and in capitalism people with money are the kings. In non-cynical mode, I believe they are really patriotic. But they have to know, they are slowly strangling the life out of American industries, and America itself. One solution I can think of is limiting the compensation of NEW hires of Wall Street. Make them work for compensation similar to maybe new doctors or lawyers from top law schools. Only once they are promoted after a few years, should be be allowed 0.25 million dollar salary. Maybe this will force some graduates think twice about jumping into Wall Street. Now you ask why in heck would Wall Street leaders limit themselves? Well my warning is, at this rate, Wall Street itself will have to move to Shanghai or Singapore. You are being stupid if China will just stop at taking over non-banking industries. They want to be the central place for exchanging money on the planet too. Who wouldn't be? So unless the leaders of Wall Street aren't too keen about moving their HQ and homes to China, they better rethink their hiring practice. Oh btw, China is full of Chinese (duh) bankers who would LOVE to take over the role of current Wall Street kings.
ttrreeww 14y ago
Welcome to modern day capitalism in America.
dsdjung 14y ago
I remember a friend who was telling me that only reason this wall street thing works is because there are enough not-well-informed people who will continue to feed money into the market for other well informed people to profit from. It is about people being in a market that they know very little about in a hope of making some riches.
pisarzp 14y ago
Great article. I had similar thoughts when I quite my Investment Banking career. What I was surprised by in the bank is how many people think that the money make other people respsect them. They forget though, that most billionaires are respected for the things they created, not money they made. Money is just the by-product.
jnewell 14y ago
I cringed when I read this headline on HN because I too worked for Lehman between 2006 and 2008. I felt the same way Nick did even around the same time (wanting to go back to making "real things"). However, lately I feel like I have come back somewhat full-circle. Many of the issues he complains about is rampant in almost of every industry. For example, Groupon was basically taking advantage of unsophisticated small businesses. How much brain power in SV is devoted to tricking people to click on ads, "covert users" or become addicted to Zynga-style games? How many things are sold only because that company has the strongest name-brand even though better versions exist? Could you have sold the product for less than the customer paid and still make a profit? You are almost always taking advantage of a customer in some ways but still providing a service or product that the customer ultimately wants. WS is just easy to pick on because they are the most blatant about this practice while at the same time protected by the government.
- SourPatch 14y ago
  I think you raise a very interesting point. When you read stories about trading, often people bring up the question, "What value does it provide to society?" Much of the commentary I read wants to apply that judgement to trading, but nowhere else. Are designer jeans a benefit to society? Is fast food? Are casinos? Does everyone's job need to be beneficial to society? And if so, who makes that call?
  - bearmf 14y ago
    Clearly designer jeans and fast food are more beneficial than casinos and zero-sum trading. The first two are at least somewhat useful, are not that addictive and do not harm anyone except maybe people who eat too much fast food. Casinos are of some entertainment value, but are very addictive and have negative effects on neighboring communities. Zero-sum trading is tricky, it is not that addictive but very few people benefit from it at all, less than from casinos and much less than from designer jeans. At the same time negative externalities probably exist but are not well studied.
- rayiner 14y ago
  Bingo! All the interesting, financially-remunerative jobs these days for ambitious young people are bullshit. Not in the sense of not creating value (because I think there is value created in these industries), but because they are all open to criticism of this sort in one way or another. Are you a rocket scientist? You probably make your money directly or indirectly from the military industrial complex. Are you a doctor? You'd make much less money if the AMA didn't artificially restrict the supply of doctors. Are you working in Silicon Valley? Your product is either based on ads, or is a side-project of some company that makes all its money on ads (e.g. Google, vis-a-vis Glass or self-driving cars). It's not worth worrying about this shit. Do something you find interesting if not morally fulfilling, and try to make a lot of money doing it because we live in a country where your kids can't see a doctor unless you can write the checks.
tomkarlo 14y ago
I worked at Lehman for 4+ years (left in 2008) and while I didn't feel so negative about work (I was more senior than the OP) I definitely was in a spot where I knew that if I kept at it for another 10-20 years -- no matter how much money I made -- I would feel like I wasted my time. I went back to tech, and now I have a job where I'm still well paid by any reasonable standard, and I really enjoy what I work on and who I work with. Given how much of our lives we spend at work and thinking about work, it can be a mistake to overvalue compensation as an element in our career decisions.
- nchirls 14y ago
  Amen.
- mynewwork 14y ago
  I'm always curious when I hear things like "Lehman for 4+ years" because, based on the numbers thrown around on HN and blogs like this, it seems likely you could have a net worth over a million dollars. While not the "F You" money many here dream of, it still seems like a few years on wall street would give you a nest egg that would make it easy to live comfortably on any other salary (whether that's tech or teaching or bartending). Do many of wall streeters who left after 5ish years do that? Or do most of them blow all their money? I think being under 30, a millionaire and having $PRESTIGIOUS_FIRM on your resume would be a pretty good setup, even if the work itself sucked.
  - tomkarlo 14y ago
    That's not generally how it seems to work. For junior bankers under 30 (analysts and associates) you're making good money, but not such great money that you're putting away hundreds of thousands of dollars a year after your expenses and taxes. I can't recall ever hearing of someone saying, "I've worked 5 years, I've saved $500K, but instead of making $500K next year, I'm going to retire." Also, the lifestyle (and partner, and kids) that you end up with while making banker money means that $1M is not remotely "quitting money", because it won't last long enough. I'd guess most folks would talk about $25M or $50M min for that in the industry, and you're not saving that anywhere below MD. Bankers have banker wives, banker mortgages, and their kids have banker tuitions. (One of my bosses had an $8M mortgage on a $12M home. That's ~$30K in mortgage payments a month... no way he could quit) I'm not saying anyone should feel bad for them, just the whole idea of "save up $1M and quit" doesn't make any sense in reality. Finally, there's a lot of pride/ego/image folks have in their job and their job title, for better or worse. Even if it ruins their life. I didn't love being a banker, but I can't deny it's not fun telling folks you're an investment banker. (Also, it's worth pointing out that people don't go work 100 hour weeks for years on end just so they can quit with $1M. They're doing it to have $10M or $100M.)
iTrollFreely 14y ago
so sad. i've seen hundreds of similar sob stories from the wall st fallout during 08 09. from his linkedin I can see this guy didn't last 2 years at lehman. He states he started as an analyst, presumably never even made it to associate, and has the balls to call himself a 'trader' in linkedin. What a joke! As a first year s&t analyst you don't do shit. You are not a trader. You are not a junior trader. You are not an assistant trader. You are basically a back/mid office donkey. All this demonization of wall street by wannabes that never made it past the first five years in the business is all too common. "Oohh they're all too evil, I just had to get out of the business" "oh I got out of the industry cuz my moral compass wouldn't allow it" BULLSHIT. they would be singing another song if they made it. michael lewis and henry blodget, i'm lookin at you.
mgkimsal 14y ago
"In what possible reality can someone receive a million dollars and feel as though they got fucked?" It's all relative. I've got friends living in $500k homes, and they still feel the need to keep up with the neighbors, at great expense. Keeping up with the Joneses is a sure way to be perpetually on edge. But more to the point, a person in a company like that might get $1m, but knows the people around them got more for doing less, because they had a better boss, or knew someone who knew someone. I don't think the dollar amount specifically was what pissed that person off as much as knowing how much of a political game the whole thing is.
retube 14y ago
I was at Lehman in 2007-08 and saw first-hand the firm implode. But what interests me was this statement: "I would spend days attempting to understand the intrinsic value on structured bonds collateralized with physical jet engines or commercial real-estate scattered across various regions of the country." Everybody bangs on about how complicated and opaque products like derivatives and asset-backed securities are... yet the most complex product of all no one bats an eyelid at: the share (or stock). The pay-off of a derivative can be modelled by a mathematical formula (and if not a closed-form solution than via a Monte Carlo distribution) but the pay-off of a stock - that's quite different. Modelling future company cash flows is not trivial.
bjhoops1 14y ago
"... of my class of 1400 graduates from Yale, forty percent took jobs in finance." This reminds me of an interview with the President of Iceland, where they let their megabanks fail. Speaking of the downside of having a huge banking sector, he said "... since then you have seen a great growth period in the Icelandic IT sector, the high-tech sector, the manufacturing sector, because they could suddenly get the engineers, the mathematicians, the computer scientists." Really interesting interview. http://www.businessinsider.com/olafur-ragnur-grimsson-iceland-2012-4 http://www.businessinsider.com/olafur-ragnur-grimsson-icelan...
biznickman 14y ago
"When you’d rather have someone shit on your face than go to work, it’s probably time to leave." What's unfortunate is that money is capable of convincing people to stay around in situations where they may even come close to such a state of mind. While I'd like to say that I'd leave well before, everybody has a price, and it sounds like Wall Street is willing to pay it.
bravura 14y ago
Not exactly related, but nonetheless interesting: A blog post by Doc Faustroll (@faustroll on Twitter) on the strain of being evil, including reference to Dick Fuld of Lehman "Fuld at least had something of the physiognomy of the raptor, of the beast of prey, a kind of last remnant of aggressive character." http://congruenz.wordpress.com/2010/10/27/the-strain-of-being-evil/ http://congruenz.wordpress.com/2010/10/27/the-strain-of-bein... On my wall hangs a Japanese carving The mask of an evil demon, smeared with opulent gold In sympathy I see – Bulging veins on the forehead, expressing the strain it is to be evil. -Bertolt Brecht
incision 14y ago
This reads a bit like a hyper-condensed version of Liar's Poker [1]. 1: http://www.amazon.com/dp/039333869X http://www.amazon.com/dp/039333869X
leoh 14y ago
So awful, being a trader. It seems like they destroy themselves to destroy others.
hkmurakami 14y ago
>What this bizarre reality really meant is that I couldn’t be myself. Ugh. In my experience, this is one of the most painful situations to be in (I've been in one myself, obviously). Pretending like you're someone who you're not (or worse yet, feeling that you have to dance this dance) is unexpectedly draining and demoralizing.
samcrawford 14y ago
I too joined Lehman as a graduate in 2007. My experience was different; I was based in the London office and was in a back-office role (IT Infrastructure). I also worked there as an intern in 2005-2006 (or "Industrial Placement" in Lehman-speak). I have to say I enjoyed my time there. I primarily worked as a developer in a non-developer team, but was continually encouraged by management to pursue this work. This led to work with development teams in other regions, which really helped expand my horizons. When I started making money from my website (independent of Lehman and unrelated to finance) and wanted to start it as a business, I had to approach legal and my division's MD for approval. They were completely supportive and again encouraged this work. The downfall of Lehman was a sad but strangely exciting time for me. I remember staying up all night on September 14th watching the number of remote access sessions running, and suspected those users were doing the same as me and watching Bloomberg for an announcement. The following days and weeks saw a lot of interesting events take place, particularly from an infrastructure point of view. Barclays and Nomura (who bought different regions of the bank a few weeks apart) both rushed to connect their infrastructure to Lehman's, which resulted in some curious situations I'm still reluctant to mention publicly! The most interesting part of it was the transition to Nomura for me. I stayed on there until mid-2010. It was a very different environment to Lehman. Our small team was given vastly expanded responsibilities to build out key services and infrastructure lost during the bankruptcy, and our team truly operated like a startup for about 9 months. We toiled tirelessly with teams in other regions to get services online before deadlines, and got a real sense of achievement out of it. As things at the day-job settled down, my website became a startup and it was time to join that full time. Again, management was very supportive (incidentally the same management as at Lehman). I look back on my time at Lehman/Nomura with fondness and truly believe my time there gave me experience I couldn't have received anywhere else.
larsonf 14y ago
"In what possible reality can someone receive a million dollars and feel as though they got fucked?" The reality where if you play for the Yankees you do not care if you beat the Jamestown Little League Allstars.
nazgulnarsil 14y ago
zero-sum all the things.
a_p 14y ago
Investment bankers make money because they are allowed to borrow enormous sums of money (leverage) to invest. In other words, they are allowed to gamble with the money of others with very little consequences. There is no other industry where a company would be allowed to take on that much debt. It's like the old joke: How do you make a million dollars? Start with n million dollars! Even if you do make money in finance, your contribution to shareholders is probably a lot less than it would be in another line of work. Here [1] is an excellent write up about it. In 2008, Barclays had over 43 times as much assets as they had equity (leverage ratio) while GlaxoSmithKline had a leverage ratio of 5. In 2011, GSK had a return on assets (money made from assets at its disposal) of 15%. Barclays had a ROA of 0.25%. GSK had a return on equity (ROE) of 67.2%, while Barclays had a ROE of 6.1%. In the same year, Barclays Capital (investment bank part of Barclays PLC) had a ROE of 10.3%, but had a leverage ratio of 55 and a ROA of just 0.18%. If you paid Barclays Capital employees the same salary as GSK employees, the pre-tax profits of BarCap would have doubled. That is why bankers pay should be limited — their ROE would be better although their leverage ratios are still way too high. TL;DR version: If you want to work in a field where you generate real value instead of gambling with someone else's money, find a job where you make things. The world doesn't need more inappropriate math models of finance (no, the market is not always rational and large volatility is more common than you think) — it needs real research. [1] http://www.moneyweek.com/news-and-charts/economics/uk/bankers-dont-have-talent-just-lots-of-borrowed-money-57728 http://www.moneyweek.com/news-and-charts/economics/uk/banker...
- rrrrtttt 14y ago
  I don't know the numbers but I'm not sure using 2008 data gives a fair picture. If the ROA of Barclays would have been consistently so much lower than that of GSK, the capital would simply gradually move to GSK. Banks are not allowed to borrow money, their creditors want to lend them money. (Presumably because TBTF lending is perceived to be a safer business than risky development of pharmaceuticals.)
elango 14y ago
The government needs them, who else is going to buy the bonds issued by these Governments. For example, in India , only 19(as of Jan 12) fat ass financial companies are authorized to buy Indian Government bonds at primary market, and if few of them had to collapse, who would buy it (less competition -> less demand -> low value)

304 points by sakai 14y ago

fascinating writeup

The submitted URL is to the front page of the blog. The URL for the individual post is http://nickchirls.com/my-time-at-lehman http://nickchirls.com/my-time-at-lehman

PeterisP 14y ago

"When you’d rather have someone shit on your face than go to work, it’s probably time to leave." sums up the article.

danielna 14y ago

I have a strange sense of sadness for my friends who are "stuck" on Wall Street. Strange because it's weird to feel sad for someone making $250k+ per year, but I've heard their first hand accounts of how much they hate their jobs. If you're the type of person who can step back from the ego-driven culture of investment banking I feel like everyone reaches the same meta-conclusions that Nick did. It's just unbelievably hard for them to step away from the money. I mean, I'd like to think I would be able to make that choice and that purpose and meaning would ultimately trump a large paycheck. But nobody's putting $250k+ in my pocket so it's genuinely hard to say. Kudos to Nick for leaving. It took guts.

pekk 14y ago
Step back from the ego-driven culture of investment banking, into the ego-driven culture of startups. Hmm...
- motoprog 14y ago
  ding!
malandrew 14y ago
One of the hardest parts about leaving is that after a few years all the friends in the world that you have are in finance because they are the only ones that can afford the restaurants, bars and activities as you. Then when you decide to leave it means giving up all those friends because after leaving you no longer will be able to afford hanging out with your friends from finance. It's surreal to have friends that you can only maintain via your current job.
freyr 14y ago
> it's weird to feel sad for someone making $250k+ per year, but I've heard their first hand accounts of how much they hate their jobs. Most people hate their jobs. And very few make $250k+ per year. Investment bankers and traders are smart enough and rich enough to make a leap into a new career, if they really desired. Your friends should grab a wad of $100 bills from each of their wallets, wipe away their tears, and do something proactive about their lives.

plg 14y ago

some will read this and think: "disgusting. thanks for the honest appraisal of what it's like... and it's disgusting." Others will read this and think: "holy crap man, the people that are screwed by the company still make just under a million! I totally want to work on wall street. I'll be rich" It's a jungle out there

patrickgzill 14y ago
When Michael Lewis wrote Liar's Poker he was shocked over the number of people who contacted him, asking for advice on how to get into investment banking.
- GFischer 14y ago
  I read Liar's Poker, and the above article. I probably wouldn't like the environment at such bank. But yet, making U$ 20.000 a year, a million dollars is the stuff of dreams - 50 years at my current salary. The freaking lottery here in Uruguay doesn't give a million dollars !! (the current Cinco de Oro pool is U$ 125.000) PD: Yes, I'm quitting as soon as I get something else that pays the bills. I neglected to stay up to date in tech and am struggling to get a good job on the open market.

jwb119 14y ago

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.

nilkn 14y ago
> 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.
- pc86 14y ago
  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.
  - nilkn 14y ago

rayiner 14y ago

"Which, it turns out, is a trader’s field day. What this meant, in its simplest form, is that these traders (or salespeople) could buy bonds at the "market" price from intelligent hedge fund managers in NYC and sell this same crap at much higher levels to unsophisticated (but legally considered "sophisticated") pension funds and insurance companies in middle America. What I discovered, quite starkly, is that the part of Wall Street that I worked in was simply transferring wealth from the less sophisticated investors often teachers’ pension funds and factory workers’ retirement accounts, to the more sophisticated investors..." "'We are important providers of liquidity that create stable financial markets. We’re a crucial part of a system. And besides, if we don’t do it, someone else will.' These are the lies that people tell themselves so that they can buy larger homes." Both of these things are completely true, and that's why American public policy is having such a hard time grappling with Wall Street. We try to rationalize the state of affairs by pointing out all the ways that Wall Street has an "unfair advantage" but the fact of the matter is that: what do you expect in a free market system that rewards every marginal advantage other than wealth to flow from less sophisticated people to more sophisticated ones? We like the idea of letting everyone transact freely, but we are uncomfortable with the "winner take all" implication of that policy. Wall Street: 1) Hires some of the brighest people in the country (e.g. 40% of the author's class at Yale); 2) Aggressively weeds out that impressive pool by forcing out all but the most promising people within a few years; 3) Trains them rigorously and maintains a level of institutional knowledge transfer that tech companies can only dream of. Why are we surprised that they disproportionately get the better end of every transaction?

ig1 14y ago
This. "Caveat emptor" applies heavily in b2b transactions be they financial or otherwise. If you're buying a product then you need to spend money to hire sophisticated buyers, because if your buyers are dumber than the sales-people you're buying from they're going to be fleeced. This is true if your buying a financial asset, a car or an enterprise software licence. Just because Oracle sells into companies that could just as well have used postgres that doesn't mean that Oracle aren't producing anything of value, it just means they're taking advantage of the buyer being less sophisticated than they are.

lifeisstillgood 14y ago

The experience reminded me of one as a child when I unfairly sold some worthless items to neighbors at a stoop sale in front of our house in Brooklyn. When my parents found out that night, they made me go from home to home on our block returning the money. I think I like his parents :-)

nchirls 14y ago
Indeed, they're quite wonderful and I'm very lucky :-)
- lifeisstillgood 14y ago
  :-) I remember living in Wood Green, a vaguely rough area of London, where people put the sofas they no longer wanted out in the front garden in case someone else did. Anyway, we were getting rid of an Ikea box-case-thing, and stuck it outside, and a kid of say 11 asked if he could have it, and took it off on a toy truck. He came back and pushed a card through the door saying thank you (it would be "just right to keep all my toys in"). I am pretty sure his mum made him write it, (long story) but we kept that card in the back of various drawers through maybe two house moves because it was an unexpected example of politeness and parental guidance. One of the crazy things that social media might sort out one day is that i would strongly consider recommending that kid for a job, or university, simply on the strength of that one act. No idea who or where he is of course but there we go.

jdross 14y ago

Not to be too self-promotional, but this is literally the problem we're solving at Addepar. 15 years ago the power shifted from banks to hedge funds, and then in 2008 it started shifting to investors. But they still don't have the tools to understand what's going on. If you're interested in solving problems like this in an engineering-led company, please email me. I'd love to talk.

orangethirty 14y ago
What are your plans to deal with this?
- neilk 14y ago
  I think it's explained on the Addepar site: https://addepar.com/technology/ https://addepar.com/technology/ Looks like graph theory to analyze investments as a set of relationships, rather than bar charts just showing aggregate stats.
- jdross 14y ago
  There's a whole lot we don't discuss on the website, which is focused towards current target customers of the tool we've built vs. our broader goals to bring transparency to the financial world. First we've built a (we've been told) very powerful tool to quickly group, filter, sort, and compute standard financial metrics on a portfolio. Importantly, we don't care where you own your securities. It can be holdings from financial accounts, operating companies, homes, art, private options, manually brokered CDSs, whatever. Shockingly, our customers like to pay us a fair amount of money for this tool alone! On the back end this wasn't easy. We have to normalize the incredibly varied (and often inaccurate) information from banks, third party data providers, excel spreadsheets and other systems. Reconciliation, all day. Second, if facebook has a friend graph, we're creating the financial graph by aggregating ownership across all sources for our customers to analyze and report on. At a high level, the financial world (shockingly) lacks a standardized way of communicating information about ownership and transactions. There are complex and specific protocols like SWIFT and FIX, but no standard way of saying "this is what I own, this is what I used to own, this is how it's changed, etc." Banks each make them up with hundreds of unique data formats, often sent with COBOL-style headers. It's 30 year old technology. Long term, we'd like to open this open both as a data format for representing financial data and as a set of APIs for building tools to interact with financial data. To use another analogy, if you wanted to make a phone game in 2004, you had to build a phone. Then the iPhone came out. If you want to make a program to analyze portfolio risk in 2013, you need to build out relationships with an entire network of banks, data providers, and customers. We want to be the "app store" for those tools. There are a million other ways to make a platform like this valuable, but I'll save some of the juicier (and more strategic) ones for personal conversations if you're interested :)

dba7dba 14y ago

Brain Drain of American industries, by American Banks Wall Street, in its current form, is a poison for America. "I was later told that of my class of 1400 graduates from Yale, forty percent took jobs in finance." Of course when he says finance, it means Wall Street banks. I strongly believe Wall Street is the reason for the continuing decline of American industry and America itself. First reason is causing a massive brain drain out of other American industries by offering such ridiculous salaries for NEW hires. The second reason is exporting jobs (and intangible knowhow) for better margin/profit, which is really caused by top execs who want a bigger bonus check, which in turn is encouraged by Wall Street/stocks. Think about it, you have to agree all those 560 (probably top tier at Yale) Yale graduates are BRILLIANT people. Yes some probably got in because of family connection etc, but most are brilliant and hard working. These are the kind of people who would've risen above others in their given field and eventually lead others to greatness. Their talent (however inexperienced initially) really has no boundary. But of course following a non-banking career path would mean actually working for years WITHOUT easily making 0.25 million bucks a year. And of course in non-banking industry you may never get to a position of making 0.25 million bucks a year ever in your working life. So the choice is a really EASY one for the graduates. And once they start down the career path, it's incredibly hard to get out. What will you do? You have no other real skill and you are used to a 0.25 million dollar lifestyle. So what does this vicious cycle translate into? 1. Other American industries (or career fields) don't get the best talent available in the nation. They get the second best. Meanwhile other nations like China, S Korea, Japan etc are in a different situation. They don't have a banking system like Wall Street. Their banking systems aren't as powerful as Wall Street and hence don't offer such out of proportion compensation, for NEW hires. So their top graduates really don't have a choice BUT go work in a non-banking industry. Sure they would be bitter for not making 0.25 million bucks a year but their talent contributes concretely to their industry, create jobs, and keep their tax receipts rolling, which in turn help fund creating better education and infrastructure. 2. Wall Street is sending jobs abroad to fatten its bonus checks, while giving out some crumbs to some execs of other non-bank industries. As long as numbers look good, top execs at companies get fat checks, so they make incredibly stupid decisions that are bad for the company long term. But what do they care when they get 10 million when leaving the position. And all of this is shaped/encouraged by the Wall Street, who need cooperating ceos to make the wheels of Wall Street turn, printing out money for the top execs of Wall Street and their new hires. I'm sure people in Wall Street are patriots. In cynical mode, why wouldn't they be? America is capitalism and in capitalism people with money are the kings. In non-cynical mode, I believe they are really patriotic. But they have to know, they are slowly strangling the life out of American industries, and America itself. One solution I can think of is limiting the compensation of NEW hires of Wall Street. Make them work for compensation similar to maybe new doctors or lawyers from top law schools. Only once they are promoted after a few years, should be be allowed 0.25 million dollar salary. Maybe this will force some graduates think twice about jumping into Wall Street. Now you ask why in heck would Wall Street leaders limit themselves? Well my warning is, at this rate, Wall Street itself will have to move to Shanghai or Singapore. You are being stupid if China will just stop at taking over non-banking industries. They want to be the central place for exchanging money on the planet too. Who wouldn't be? So unless the leaders of Wall Street aren't too keen about moving their HQ and homes to China, they better rethink their hiring practice. Oh btw, China is full of Chinese (duh) bankers who would LOVE to take over the role of current Wall Street kings.

ttrreeww 14y ago

Welcome to modern day capitalism in America.

dsdjung 14y ago

I remember a friend who was telling me that only reason this wall street thing works is because there are enough not-well-informed people who will continue to feed money into the market for other well informed people to profit from. It is about people being in a market that they know very little about in a hope of making some riches.

pisarzp 14y ago

Great article. I had similar thoughts when I quite my Investment Banking career. What I was surprised by in the bank is how many people think that the money make other people respsect them. They forget though, that most billionaires are respected for the things they created, not money they made. Money is just the by-product.

jnewell 14y ago

I cringed when I read this headline on HN because I too worked for Lehman between 2006 and 2008. I felt the same way Nick did even around the same time (wanting to go back to making "real things"). However, lately I feel like I have come back somewhat full-circle. Many of the issues he complains about is rampant in almost of every industry. For example, Groupon was basically taking advantage of unsophisticated small businesses. How much brain power in SV is devoted to tricking people to click on ads, "covert users" or become addicted to Zynga-style games? How many things are sold only because that company has the strongest name-brand even though better versions exist? Could you have sold the product for less than the customer paid and still make a profit? You are almost always taking advantage of a customer in some ways but still providing a service or product that the customer ultimately wants. WS is just easy to pick on because they are the most blatant about this practice while at the same time protected by the government.

SourPatch 14y ago
I think you raise a very interesting point. When you read stories about trading, often people bring up the question, "What value does it provide to society?" Much of the commentary I read wants to apply that judgement to trading, but nowhere else. Are designer jeans a benefit to society? Is fast food? Are casinos? Does everyone's job need to be beneficial to society? And if so, who makes that call?
- bearmf 14y ago
  Clearly designer jeans and fast food are more beneficial than casinos and zero-sum trading. The first two are at least somewhat useful, are not that addictive and do not harm anyone except maybe people who eat too much fast food. Casinos are of some entertainment value, but are very addictive and have negative effects on neighboring communities. Zero-sum trading is tricky, it is not that addictive but very few people benefit from it at all, less than from casinos and much less than from designer jeans. At the same time negative externalities probably exist but are not well studied.
rayiner 14y ago
Bingo! All the interesting, financially-remunerative jobs these days for ambitious young people are bullshit. Not in the sense of not creating value (because I think there is value created in these industries), but because they are all open to criticism of this sort in one way or another. Are you a rocket scientist? You probably make your money directly or indirectly from the military industrial complex. Are you a doctor? You'd make much less money if the AMA didn't artificially restrict the supply of doctors. Are you working in Silicon Valley? Your product is either based on ads, or is a side-project of some company that makes all its money on ads (e.g. Google, vis-a-vis Glass or self-driving cars). It's not worth worrying about this shit. Do something you find interesting if not morally fulfilling, and try to make a lot of money doing it because we live in a country where your kids can't see a doctor unless you can write the checks.

tomkarlo 14y ago

I worked at Lehman for 4+ years (left in 2008) and while I didn't feel so negative about work (I was more senior than the OP) I definitely was in a spot where I knew that if I kept at it for another 10-20 years -- no matter how much money I made -- I would feel like I wasted my time. I went back to tech, and now I have a job where I'm still well paid by any reasonable standard, and I really enjoy what I work on and who I work with. Given how much of our lives we spend at work and thinking about work, it can be a mistake to overvalue compensation as an element in our career decisions.

nchirls 14y ago
Amen.
mynewwork 14y ago
I'm always curious when I hear things like "Lehman for 4+ years" because, based on the numbers thrown around on HN and blogs like this, it seems likely you could have a net worth over a million dollars. While not the "F You" money many here dream of, it still seems like a few years on wall street would give you a nest egg that would make it easy to live comfortably on any other salary (whether that's tech or teaching or bartending). Do many of wall streeters who left after 5ish years do that? Or do most of them blow all their money? I think being under 30, a millionaire and having $PRESTIGIOUS_FIRM on your resume would be a pretty good setup, even if the work itself sucked.
- tomkarlo 14y ago
  That's not generally how it seems to work. For junior bankers under 30 (analysts and associates) you're making good money, but not such great money that you're putting away hundreds of thousands of dollars a year after your expenses and taxes. I can't recall ever hearing of someone saying, "I've worked 5 years, I've saved $500K, but instead of making $500K next year, I'm going to retire." Also, the lifestyle (and partner, and kids) that you end up with while making banker money means that $1M is not remotely "quitting money", because it won't last long enough. I'd guess most folks would talk about $25M or $50M min for that in the industry, and you're not saving that anywhere below MD. Bankers have banker wives, banker mortgages, and their kids have banker tuitions. (One of my bosses had an $8M mortgage on a $12M home. That's ~$30K in mortgage payments a month... no way he could quit) I'm not saying anyone should feel bad for them, just the whole idea of "save up $1M and quit" doesn't make any sense in reality. Finally, there's a lot of pride/ego/image folks have in their job and their job title, for better or worse. Even if it ruins their life. I didn't love being a banker, but I can't deny it's not fun telling folks you're an investment banker. (Also, it's worth pointing out that people don't go work 100 hour weeks for years on end just so they can quit with $1M. They're doing it to have $10M or $100M.)

iTrollFreely 14y ago

so sad. i've seen hundreds of similar sob stories from the wall st fallout during 08 09. from his linkedin I can see this guy didn't last 2 years at lehman. He states he started as an analyst, presumably never even made it to associate, and has the balls to call himself a 'trader' in linkedin. What a joke! As a first year s&t analyst you don't do shit. You are not a trader. You are not a junior trader. You are not an assistant trader. You are basically a back/mid office donkey. All this demonization of wall street by wannabes that never made it past the first five years in the business is all too common. "Oohh they're all too evil, I just had to get out of the business" "oh I got out of the industry cuz my moral compass wouldn't allow it" BULLSHIT. they would be singing another song if they made it. michael lewis and henry blodget, i'm lookin at you.

mgkimsal 14y ago

"In what possible reality can someone receive a million dollars and feel as though they got fucked?" It's all relative. I've got friends living in $500k homes, and they still feel the need to keep up with the neighbors, at great expense. Keeping up with the Joneses is a sure way to be perpetually on edge. But more to the point, a person in a company like that might get $1m, but knows the people around them got more for doing less, because they had a better boss, or knew someone who knew someone. I don't think the dollar amount specifically was what pissed that person off as much as knowing how much of a political game the whole thing is.

retube 14y ago

I was at Lehman in 2007-08 and saw first-hand the firm implode. But what interests me was this statement: "I would spend days attempting to understand the intrinsic value on structured bonds collateralized with physical jet engines or commercial real-estate scattered across various regions of the country." Everybody bangs on about how complicated and opaque products like derivatives and asset-backed securities are... yet the most complex product of all no one bats an eyelid at: the share (or stock). The pay-off of a derivative can be modelled by a mathematical formula (and if not a closed-form solution than via a Monte Carlo distribution) but the pay-off of a stock - that's quite different. Modelling future company cash flows is not trivial.

bjhoops1 14y ago

"... of my class of 1400 graduates from Yale, forty percent took jobs in finance." This reminds me of an interview with the President of Iceland, where they let their megabanks fail. Speaking of the downside of having a huge banking sector, he said "... since then you have seen a great growth period in the Icelandic IT sector, the high-tech sector, the manufacturing sector, because they could suddenly get the engineers, the mathematicians, the computer scientists." Really interesting interview. http://www.businessinsider.com/olafur-ragnur-grimsson-iceland-2012-4 http://www.businessinsider.com/olafur-ragnur-grimsson-icelan...

biznickman 14y ago

"When you’d rather have someone shit on your face than go to work, it’s probably time to leave." What's unfortunate is that money is capable of convincing people to stay around in situations where they may even come close to such a state of mind. While I'd like to say that I'd leave well before, everybody has a price, and it sounds like Wall Street is willing to pay it.

bravura 14y ago

Not exactly related, but nonetheless interesting: A blog post by Doc Faustroll (@faustroll on Twitter) on the strain of being evil, including reference to Dick Fuld of Lehman "Fuld at least had something of the physiognomy of the raptor, of the beast of prey, a kind of last remnant of aggressive character." http://congruenz.wordpress.com/2010/10/27/the-strain-of-being-evil/ http://congruenz.wordpress.com/2010/10/27/the-strain-of-bein... On my wall hangs a Japanese carving The mask of an evil demon, smeared with opulent gold In sympathy I see – Bulging veins on the forehead, expressing the strain it is to be evil. -Bertolt Brecht

incision 14y ago

This reads a bit like a hyper-condensed version of Liar's Poker [1]. 1: http://www.amazon.com/dp/039333869X http://www.amazon.com/dp/039333869X

leoh 14y ago

So awful, being a trader. It seems like they destroy themselves to destroy others.

hkmurakami 14y ago

>What this bizarre reality really meant is that I couldn’t be myself. Ugh. In my experience, this is one of the most painful situations to be in (I've been in one myself, obviously). Pretending like you're someone who you're not (or worse yet, feeling that you have to dance this dance) is unexpectedly draining and demoralizing.

samcrawford 14y ago

I too joined Lehman as a graduate in 2007. My experience was different; I was based in the London office and was in a back-office role (IT Infrastructure). I also worked there as an intern in 2005-2006 (or "Industrial Placement" in Lehman-speak). I have to say I enjoyed my time there. I primarily worked as a developer in a non-developer team, but was continually encouraged by management to pursue this work. This led to work with development teams in other regions, which really helped expand my horizons. When I started making money from my website (independent of Lehman and unrelated to finance) and wanted to start it as a business, I had to approach legal and my division's MD for approval. They were completely supportive and again encouraged this work. The downfall of Lehman was a sad but strangely exciting time for me. I remember staying up all night on September 14th watching the number of remote access sessions running, and suspected those users were doing the same as me and watching Bloomberg for an announcement. The following days and weeks saw a lot of interesting events take place, particularly from an infrastructure point of view. Barclays and Nomura (who bought different regions of the bank a few weeks apart) both rushed to connect their infrastructure to Lehman's, which resulted in some curious situations I'm still reluctant to mention publicly! The most interesting part of it was the transition to Nomura for me. I stayed on there until mid-2010. It was a very different environment to Lehman. Our small team was given vastly expanded responsibilities to build out key services and infrastructure lost during the bankruptcy, and our team truly operated like a startup for about 9 months. We toiled tirelessly with teams in other regions to get services online before deadlines, and got a real sense of achievement out of it. As things at the day-job settled down, my website became a startup and it was time to join that full time. Again, management was very supportive (incidentally the same management as at Lehman). I look back on my time at Lehman/Nomura with fondness and truly believe my time there gave me experience I couldn't have received anywhere else.

larsonf 14y ago

"In what possible reality can someone receive a million dollars and feel as though they got fucked?" The reality where if you play for the Yankees you do not care if you beat the Jamestown Little League Allstars.

nazgulnarsil 14y ago

zero-sum all the things.

a_p 14y ago

Investment bankers make money because they are allowed to borrow enormous sums of money (leverage) to invest. In other words, they are allowed to gamble with the money of others with very little consequences. There is no other industry where a company would be allowed to take on that much debt. It's like the old joke: How do you make a million dollars? Start with n million dollars! Even if you do make money in finance, your contribution to shareholders is probably a lot less than it would be in another line of work. Here [1] is an excellent write up about it. In 2008, Barclays had over 43 times as much assets as they had equity (leverage ratio) while GlaxoSmithKline had a leverage ratio of 5. In 2011, GSK had a return on assets (money made from assets at its disposal) of 15%. Barclays had a ROA of 0.25%. GSK had a return on equity (ROE) of 67.2%, while Barclays had a ROE of 6.1%. In the same year, Barclays Capital (investment bank part of Barclays PLC) had a ROE of 10.3%, but had a leverage ratio of 55 and a ROA of just 0.18%. If you paid Barclays Capital employees the same salary as GSK employees, the pre-tax profits of BarCap would have doubled. That is why bankers pay should be limited — their ROE would be better although their leverage ratios are still way too high. TL;DR version: If you want to work in a field where you generate real value instead of gambling with someone else's money, find a job where you make things. The world doesn't need more inappropriate math models of finance (no, the market is not always rational and large volatility is more common than you think) — it needs real research. [1] http://www.moneyweek.com/news-and-charts/economics/uk/bankers-dont-have-talent-just-lots-of-borrowed-money-57728 http://www.moneyweek.com/news-and-charts/economics/uk/banker...

rrrrtttt 14y ago
I don't know the numbers but I'm not sure using 2008 data gives a fair picture. If the ROA of Barclays would have been consistently so much lower than that of GSK, the capital would simply gradually move to GSK. Banks are not allowed to borrow money, their creditors want to lend them money. (Presumably because TBTF lending is perceived to be a safer business than risky development of pharmaceuticals.)

elango 14y ago

The government needs them, who else is going to buy the bonds issued by these Governments. For example, in India , only 19(as of Jan 12) fat ass financial companies are authorized to buy Indian Government bonds at primary market, and if few of them had to collapse, who would buy it (less competition -> less demand -> low value)