The Edge

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Teflor Lyorian
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The Edge

Postby Teflor Lyorian » Fri Feb 04, 2011 8:28 pm

http://www.reuters.com/article/2011/02/ ... X820110204

Public anger over bank employee compensation may strip the US of an edge in recruitment of top talent.
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Re: The Edge

Postby Ragorn » Mon Feb 07, 2011 3:30 pm

Image

Approves.
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Re: The Edge

Postby Corth » Mon Feb 07, 2011 5:22 pm

The only way they can maintain such high salaries over the long hall is a rigged system. If there was any substantial competition on price then the large financial institutions and investment banks wouldn't be able to make such high margins. I'm not really able to articulate exactly how it's rigged - but my gut tells me it is.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth

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Teflor Lyorian
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Re: The Edge

Postby Teflor Lyorian » Mon Feb 07, 2011 7:03 pm

It's rigged on the trampled dreams of the uninformed investor. Duh. Don't forget that they're really only competing over the very top talent, probably less than 0.5% of the employees in the financial industry. Everyone else are middle managers or process implementors.
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Re: The Edge

Postby Corth » Mon Feb 07, 2011 7:36 pm

I'm not talking about the markets being rigged. I'm talking about the financial industry. If I start a business.. say I'm doing kid's birthday parties.. and I have a novel idea and I'm making a lot of money, then that is a good thing. But you know that eventually I will also have competition and will end up making less money. So why isn't the same thing happening to Goldman Sachs? Why are people willing to do business with them when they are making such enormous fees? Why not find a competitor to do business with? I really don't have an answer for that. Though if I had to figure one out I would probably start by looking into why some institutions got favored 'bailout' status over others.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: The Edge

Postby Sarvis » Mon Feb 07, 2011 8:08 pm

Corth wrote:Why not find a competitor to do business with?


Because to be a bank you pretty much need to start off with a large amount of money in the first place. That's a big barrier to entry, so there aren't going to be many new competitors.

Now the rest is conjecture, but... if there are only a few players, and a big barrier to entry... why wouldn't the players collude?
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Re: The Edge

Postby Teflor Lyorian » Mon Feb 07, 2011 8:42 pm

Sarvis wrote:
Corth wrote:Why not find a competitor to do business with?


Because to be a bank you pretty much need to start off with a large amount of money in the first place. That's a big barrier to entry, so there aren't going to be many new competitors.

Now the rest is conjecture, but... if there are only a few players, and a big barrier to entry... why wouldn't the players collude?

There are thousands of banks.
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Re: The Edge

Postby Corth » Mon Feb 07, 2011 10:24 pm

There are thousands of banks.. and gosh if Goldman were simply paying people off not to compete that would seem like an expensive proposition.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: The Edge

Postby Sarvis » Mon Feb 07, 2011 10:38 pm

Corth wrote:There are thousands of banks.. and gosh if Goldman were simply paying people off not to compete that would seem like an expensive proposition.


Thousands of banks that could handle transactions on the level of Goldman Sachs? You think?

I also never said they were paying anyone off, I said they were colluding. If there's three companies capable of offering a service it's not hard to call up the other two guys and discuss increasing your prices.
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Re: The Edge

Postby Kifle » Mon Feb 07, 2011 11:55 pm

Sarvis wrote:
Corth wrote:There are thousands of banks.. and gosh if Goldman were simply paying people off not to compete that would seem like an expensive proposition.


Thousands of banks that could handle transactions on the level of Goldman Sachs? You think?

I also never said they were paying anyone off, I said they were colluding. If there's three companies capable of offering a service it's not hard to call up the other two guys and discuss increasing your prices.


I've seen this happen, but I will not admit whether I was or wasn't a part of it...
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Re: The Edge

Postby Corth » Tue Feb 08, 2011 12:47 am

Goldman Sachs bankers make on average about a million dollars a year. As far as I can tell and having met a few, they are only slightly smarter than the average bear. I don't see why other people and banks couldn't do exactly what they do given adequate training. I honestly just don't see what is so special about them.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Teflor Lyorian
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Re: The Edge

Postby Teflor Lyorian » Tue Feb 08, 2011 12:53 am

Sarvis may have a point on the whole colluding thing: http://www.aflcio.org/
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Re: The Edge

Postby kiryan » Tue Feb 08, 2011 11:47 pm

Corth... its a simple bell curve. To go from 95% to 98% may be just 3%, but its a move that reduces the population from thousands to a handful. Simple supply and demand dictate that the extra 3% is worth a lot more than the 95% in terms of supply and demand.

I do agree with you that most companies... are probably better off paying a lot less for 95% of the talent than paying 100x as much for that extra 3% in terms of absolute value. Unfortunately, its not partly because of celebrity status and partly because of the importance of decisions. Mere words from the CEO of a company can instantly send the markets crashing... do you want someone who says the right thing 95% of the time, or 98% of the time at the helm of a company you've invested in?

Would you play a game where you have a 99% chance of winning $1 and a 1% chance of losing $150? At 1% you lose 50%, reducing your 1% risk by 0.5% would be worth 25% profit while swinging the other way will result in a loss exceeding 100%. With "thin" margins and massive amounts of market capitalization, being 1% better might make the difference between a BP that was irrevocably harmed by the Obama administration, or a BP that salvages some sort of continued US based operation...

The answer to the question of what the problem is I think is in why it makes that big of a difference to have the 98% talent vs the 96% talent... which would be the size of the companies, the speed with which valuations change, speculation and human emotion. With more, smaller companies, you'd still have people compensated at the same rates, but the aboslute figures would be smaller. For example 1% of a 1 billion a year company vs 1% of a 100 million a year both as compared to the floor of minimum wage. With a slower valuation change (media + market), you'd have more tolerance for mistakes or time to remedy mistakes which would also reduce speculation and temper human emotion.

I enjoyed this article. Its about how superstar pay causes income inequality and a reduction in motivation.
http://www.nytimes.com/2010/12/26/busin ... cerpt.html
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Re: The Edge

Postby Teflor Lyorian » Thu Feb 10, 2011 7:08 pm

Corth wrote:I'm not talking about the markets being rigged. I'm talking about the financial industry. If I start a business.. say I'm doing kid's birthday parties.. and I have a novel idea and I'm making a lot of money, then that is a good thing. But you know that eventually I will also have competition and will end up making less money. So why isn't the same thing happening to Goldman Sachs? Why are people willing to do business with them when they are making such enormous fees? Why not find a competitor to do business with? I really don't have an answer for that. Though if I had to figure one out I would probably start by looking into why some institutions got favored 'bailout' status over others.

It doesn't happen with Goldman Sachs because they keep finding, buying, or developing the novel ideas and banking on it. They're very active in looking into small ideas that they can throw their weight behind and profit on.

That's why Goldman Sachs has such an interest in protecting their ability to continue to have the best access to the top 0.01% of financial industry workers - they want their visions, ideas, and leadership.
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Re: The Edge

Postby Corth » Fri Feb 11, 2011 1:01 am

I dispute that one two counts. First I dispute that the quality GS is getting is really that high. And second, even if they really are getting the top .01% of the brightest people out there, I really don't think there is any substantial difference between the top .01% and the top 10%.

As I mentioned earlier, I'm familiar with several GS bankers and former GS bankers. One of them got his job by virtue of a close relationship with a very well known politician (top .01% huh?). Basically, they were bright people, but there was nothing earth shattering about them. I think if you take just about any guy or girl who graduates from a decent school, you can train them just as well as any GS banker to do the same job.

Which does not mean they don't deserve to make a zillion dollars. If they can do it (legitimately - not by virtue of the government bailing out their counterparties), then god bless them. BUT, what I don't get is why, given the enormous profit margins, nobody is really competing with them.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Teflor Lyorian
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Re: The Edge

Postby Teflor Lyorian » Fri Feb 11, 2011 2:58 am

Corth wrote:I dispute that one two counts. First I dispute that the quality GS is getting is really that high. And second, even if they really are getting the top .01% of the brightest people out there, I really don't think there is any substantial difference between the top .01% and the top 10%.

First and foremost, there's a substantial difference between the top 0.01% and top 10% in anything and everything. 4/10ths of a second may not seem to make much of a difference, but it does mean that your slow ass ain't going to the Olympics for the 100m dash.

Corth wrote:As I mentioned earlier, I'm familiar with several GS bankers and former GS bankers. One of them got his job by virtue of a close relationship with a very well known politician (top .01% huh?). Basically, they were bright people, but there was nothing earth shattering about them. I think if you take just about any guy or girl who graduates from a decent school, you can train them just as well as any GS banker to do the same job.

Connections are equally important as intelligence - this is how many top law firms make their money.

Corth wrote:Which does not mean they don't deserve to make a zillion dollars. If they can do it (legitimately - not by virtue of the government bailing out their counterparties), then god bless them. BUT, what I don't get is why, given the enormous profit margins, nobody is really competing with them.

No one deserves to make a zillion dollars - no one likes a rich guy. But that's not the point. If people can't get fabulously wealthy, it indicates a society that has very poor freedoms and liberty for its people.
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Re: The Edge

Postby Corth » Fri Feb 11, 2011 5:13 am

A few hundredths of a second, as you correctly state, can be the difference between a gold medal and mediocrity - since it's a race. But I fail to see how the incremental difference in talent makes much of a difference in banking.

I'll concede the point on connections. I suspect that connections are a lot more important to GS and it's profit margin than the difference in talent between the top 1% and the top .01%.

And I further suspect that is where the rigged part comes into play as well. How many former GS bankers end up as cabinet secretaries?
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: The Edge

Postby kiryan » Fri Feb 11, 2011 7:14 pm

Good point tef/corth.

connections are an important driver of profits

which is why we need to keep government out of business.
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Re: The Edge

Postby Corth » Sat Feb 12, 2011 1:20 am

Well yeah - if government doesn't wield much power then influence and connections aren't nearly as important. Why do you think lobbyists get the big bucks...
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



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Re: The Edge

Postby Sarvis » Sat Feb 12, 2011 4:29 pm

Corth wrote:Well yeah - if government doesn't wield much power then influence and connections aren't nearly as important. Why do you think lobbyists get the big bucks...


Corth... really? You really think like that? You don't think connections are "important" in the business world too?

Hell, if there were no government connections would probably be even more important.
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Teflor Lyorian
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Re: The Edge

Postby Teflor Lyorian » Sat Feb 12, 2011 7:52 pm

Corth wrote:A few hundredths of a second, as you correctly state, can be the difference between a gold medal and mediocrity - since it's a race. But I fail to see how the incremental difference in talent makes much of a difference in banking.

I'll concede the point on connections. I suspect that connections are a lot more important to GS and it's profit margin than the difference in talent between the top 1% and the top .01%.

A new messaging server that was milliseconds faster than anything out there recently hit the market - allowing people to submit their trades just hairs before the other guy. This messaging system you could get installed for a few million per site.

Honestly, investment is a competition and a race, which is why I find that seemingly small difference to be important.
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Re: The Edge

Postby Botef » Mon Feb 14, 2011 8:29 pm

Sunamit group-says 'imrex west, tibek backstab touk i think his name is on entry'
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