I love hacker news for discussions about business and about learning about how the smartest programmers in the world think about programming.
When articles that deal with the world outside of startup finance appear on Hacker News, the articles and comments usually have so little knowledge behind them they are practically unreadable.
It would be nice if this community could keep the articles they post based on VC funding, angel funding, debt funding for start ups, option pools, etc.
The comments here are more representative of political ideals and not based on facts.
(Also, I understand that is not entirely true as some comments are actually quit interesting, but I have to wade through so much garbage to find them that it isn't worth it.)
When articles that deal with the world outside of startup finance appear on Hacker News, the articles and comments usually have so little knowledge behind them they are practically unreadable.
Sometimes these issues just don't require that much knowledge to understand, though, and I think this is one of those.
When upside returns are based on a percentage of your winnings, and downside is limited to the loss of a job, at worst, the course of action is clear: shoot the moon, take on as much risk as you possibly can. Push the rules as far as they'll go to crank up the variance of your returns, and half the time, it'll pay off.
There are no subtleties here, no deep knowledge of banking required to see what's wrong with this picture. I'll agree that finding a solution might be tricky, but the fundamental problem has nothing whatsoever to do with politics, it's simple arithmetic.
Hell, even the people that benefit from these sort of incentive schemes - they're most definitely not a stupid lot, if you've ever interacted with them! - tend to think that they're crazy, they agree that what's good for them personally tends to be bad for their companies, and bad for the economy at large. But being fairly rational decision makers, they optimize for personal profit, just as most of us would if we were in their shoes.
I would tend to disagree that this article is not relevant, startup finance and access to funding for startups is highly dependent on the health of the financial system, and this article deals with the economics and the gaming of that system.
He didn't say the topic wasn't relevant, he said getting to an insightful comment required wading through a ton of garbage. I tend to agree.
Designing comp packages that work is incredibly complicated. Anyone who proclaims some sort of blanket "solution" to the problem of how to compensate "bankers" probably knows so little that they don't know what they don't know. Normally in situations like that people on hn don't comment at all, but because this issue is so political everyone thinks they have the answer and need to share it with the world.
You mentioned how bankers you worked with gamed the system in your other post. If gaming the system is so easy as a banker, please tell us how much money you gamed?
If you were there for 18 years as you said you were then you should have gamed a ridiculous amount of money out of the system and you would have been through at least 1 if not 2 recessions, 1 of which as a fairly senior banker.
I never said the game was easy and yes I saw several economic cycles, at several different institutions, on both the credit side (when Glass-Steagal actually meant something) and the investment banking side. I was well rewarded for the efforts I put in becoming a junior partner/MD and receiving adequate bonuses a year before the first collapse. Not everyone was consciously gaming the system, but you started to realize it when on successful deals like Global Crossing, which went from (a market cap of US$ 5 bn to chapter 10 bankruptcy the following year), senior exec were taking 20 million+ bonuses, and then being fired a year later. A clear indicator that there was something significantly wrong with the corporate governance bonus systems then.
Now 10+ years later when you see things like the 2008 recession, the current bankruptcy of MF Global and some of the Internet IPOs that are being pitched and sold to smaller institutions and retail investors, and the fees that are being taken, you have to wonder whether anything has really changed and really see how such compensation systems are not in the interests of a healthy financial system. Especially when taxpayers and shareholders have to bailout or bear the economic costs of the distortions created by these bonus systems.
Don't get me wrong there is nothing wrong with people being paid good bonuses and good compensation but as Nassim indicates the amounts being paid are excessive and don't truly reflect the risks being taken.
I don't know how relevant any compensation number would be to the point I am making. But if you did your research amongst the sec filings I am sure you will raise your eyebrows about how much money has been gamed and how disproportionate this is compared to the costs borne by taxpayers and others.
As a banker please recommend SEC filings that would be helpful in determining "gaming". Typically the media likes to use ridiculous numbers like average salary or average bonus per employee etc. (I've never seen a gaming loss section on a 10-K)
You do not need to take risk to make a lot of money in the United States. That is what makes us the greatest economic power house in the world. (yes, far greater than China who's average income is less than $5,000 per day) and especially Europe who is transferring all of their wealth to US treasuries to prevent loosing their money.
The rest of the world isn't even worth mentioning.
Your comment would be more helpful if you could explain why some of the garbage is based on ideals instead of facts, or provide your own facts. I'm not saying this to support the so-called garbage, but because I am about as unqualified a consumer as anyone of "comments on op-eds that address banking regulation", and maybe you could sift the wheat from the chaff for people like me.
The normal critical thought displayed by HNers seems to evaporate when the subject is politics or finance. Post titles that would otherwise be called link-bait, like "Goldman Sachs has engineered every US crisis" and "investment banks have caused world famine" (paraphrasing the title of 2 recent posts), are accepted as truth. Another example is any post dealing with HFT.
Subjectively, these discussions appear to have a lot more of downvoted (grayed out) comments. Either they're bad comments, or they're reasonable comments that are downvoted for going against the "hivemind". In either case, it's a bad sign.
This sort of post, while interesting, should be treated as articles about electoral politics and hence off-topic. But the only apparent solution is via moderation.
Can you give examples of reasonable comments that are grayed out on finance threads? My impression is that this happens from time to time, but I haven't noticed it happening any more on HFT/Finance threads than in general.
It does not take a wallstreet genius to understand "too big to fail" and that huge amounts of bailout were payed for nothing in return. Nobody had to answer for what happened and things went right back to business-as-usual.
When articles that deal with the world outside of startup finance appear on Hacker News, the articles and comments usually have so little knowledge behind them they are practically unreadable.
It would be nice if this community could keep the articles they post based on VC funding, angel funding, debt funding for start ups, option pools, etc.
The comments here are more representative of political ideals and not based on facts.
(Also, I understand that is not entirely true as some comments are actually quit interesting, but I have to wade through so much garbage to find them that it isn't worth it.)