UKC

PMQs dominated by this today.

So perhaps they should be regulated, especially where the taxpayer owns 80% of the bank. Or perhaps this would be pointless, just increasing salaries instead.

But either way, doesn't the existence of a milion pound salary for shuffling money around, with a million pound bonus on top if bets work out favourably just point to a massive, fundamental failure of the version of capitalism we operate?

There are colossal sums of money being shuffled around and gambled, and the whole world's economy seemingly rests on this. And yet what this activity is motivated by, and therefore what it produces, is nothing more than individuals getting their hands on the largest sum they possibly can, for no apparent purpose. What can one do with that much money that is rewarding? Buy bigger, fancier homes, faster cars, planes and helicopters, like a teenage boy might fantasize about?

A system that worked would harness the pathetic, trivial greed of individuals and use it to motivate them to produce something useful. All that money should be going somewhere - invested into solving big problems: it should be going into research, to make cures for diseases, or ways of producing efficient transport or energy or anything with a point.

I'm not saying that we can have an economic system based on rarified, positive humans traits such as the ability to plan for the future or share resources, that would clearly be absurd: people are greedy, dishonest and short-termist, and that needs to be faced up to. But we need a way of keeping those pathetic, childish urges to "win" for the sake of it, to get more stuff than the next guy regardless of what that stuff is, to show-off, under control so that product of the economy is steered towards some kind of useful purpose.

No amount of limiting bonuses to 100% of ludicrous salaries is going to make any difference to this. We are taught to aspire to be the one who can waste the most, there is no reward for doing anything useful.

Anyone got any ideas?

In reply to Jon Stewart:

There was an interesting article in New Scientist a few months ago about the fundamental flaw in the bonus payments. If I recall it went something like this:

- you get your bonus for meeting (or exceeding a target)
- most years you will win the gamble (that's the nature of the system)
- you therefore take huge risks each year knowing that you're likely to win but if you fail, someone else picks up the catastrophic losses. You're out of the game, but you've accumulated several years of winning
- someone else takes over your job and repeats the process.

Basically, the rewards are for gambling (with good odds) with someone else's money. You keep the profits but don't get hit with the losses. Human nature means this system will always fail eventually. The only way is to regulate the hell out of it, but people like the winning years.

In reply to Jon Stewart:

I listend to PMQs today, Cameron ate Milliband for lunch, and totally destroyed Balls.

I actually felt a bit sorry for them, they need to change their leadership.

On to your point about bonuses. The amount of people at RBS earning £1m basic and hoping for a £1m bonus are so few that it doesn't really fit into your Tom Wolfe/Easternn Ellis view of investment banking.

Its an emotive subject that gets everyones blood boiling but the reality is we are talking about just hundreds of people across the whole of the City (the worlds largest financial centre and main FX trading point...5 trillion dollars a day pass through their offices) that would earn those amounts (far less than millionaire premiership footballers)

Banging on about planes and helicopters is so far off the mark. The bulk of the trading floors in the City will have traders earning between £100k-£400k. £500k plus becomes pretty rare. £1m plus even rarer.

This is not to say that certain people at banks have behaved dishonestly and there have been many examples of shoddy behaviour and huge fines paid out. I personally think the answer is in punishment rather than cutting pay (I would say that as a veteran of the square mile ...but in all seriousness, where are the 20 year jail terms for fixing LIBOR? why are the regulators so weak at pushing criminal prosecutions? It's always fines...banks love fines...they are a piece of p1ss to pay. Start throwing individuals in jail. Banning them from working in finance again is hardly a threat when you have already made £5m in your career

In reply to hang_about:






Sadly that is very accurate, and is entirely the fault of management for setting the bonus mechanisms that way, and bank shareholders for permitting it.

However, there is a flip side to the whole "bonus" debate that many people overlook, largely due to the use of the word itself (most banks call it variable compensation or such like)

In many cases, the "expected" bonus is part of the going rate for the job, e.g. base salary £100k, expected bonus £200k = overall package £300k. Setting aside the very valid arguments above, in a good year that person might expect to get a bonus of maybe £300k, in a bad one maybe only £100k...but all around the median overall comp of £300k...it sounds frightfully greedy but you don't do a £300k job and expect to walk away with only £100k at the end of the year. All this huffing and puffing does is to encourage the banks to put more in the fixed bit of the comp and less in the bonus, thus increasing fixed costs and making the bank more vulnerable to a downturn.

In reply to Nic:

Also, a large part of that £200k bonus will not be cash anymore but deferred shares. Usually do not vest for 5 years and you will not receive any if you leave/get fired etc.

In reply to Nic:

Hmmm, I wonder if the average worker on 20-40K per year would think if his salary would 'almost' certainly be doubled or trebled by a 'bonus' at the end of the year. Delighted I would think.

In reply to Bjartur i Sumarhus:

Ah, don't start me on deferred shares (or shares of any description)...many was the time when I took along my profit pot of £x million only be told (take your pick) "Ah, Bloggs in FX took a wrong bet on the dollar this year and lost us $5bn, so I am afraid we are cutting your bonus by 50%"...or "Hank in the US made the wrong bet on mortgages and lost us $10bn so I am afraid..." etc.etc....

In reply to Al Evans:

You're missing my point, I am not trying to argue the merit of the amounts, I am just pointing out that the comparison would be your "average worker" being paid a salary of £10k and a bonus of between £10 and 30k.

In reply to Jon Stewart:


Try not to get too depressed about this reality, it's not changing any time soon.

jk

In reply to Bjartur i Sumarhus:




You miss the point. It's the fact that the system relies on individuals aspiring to be one of the handful who do have the multi-million salary and helicopter that gets my goat when the topic comes up. The point of the work is not to generate anything with a purpose, it is to ascend another step towards the pointless goal at the top. The most productive people in society aren't producing anything with any value, the system diverts its products essentially down the toilet - because the aim is profit for the sake of profit at the corporate level, and personal wealth for the sake of personal wealth at the individual level. Nowhere in the system are there incentives for the resources to be channeled into anything useful.


Yes that could improve the dishonesty that the system incentivises. Not really the heart of the issue though.

In reply to Al Evans:


Personally: Somewhat concerned that my £80K 'salary' may come in £60k short and there'd be not much I could do about it.

jk

In reply to jkarran:

Why is that a problem if you have been promised double the 40k average if all goes well, a salary of 20k over the average is still good going, it would be even better if higher taxes were devolved to bigger earners.

In reply to Jon Stewart:

Most of the clever ones who are serious earners do not work for banks but for hedge funds. And more are doing so these days as HF hotels offer a desk/phone/prime broker and capital for a good strategy and you get to keep a decent % of what you make (15-25%). Far better than working for a giant bank (if your good)

I dont know anyone who owns a helicopter or a plane BTW. Fair enough to be annoyed at those types or the culture they work in, but RBS is not the employer where those guys work.

In reply to Jon Stewart:



This is an important point that is pretty much always overlooked.

Incidentally, on the idea of giving such big bonuses to officers of banks that are not performing well is particularly bizarre given that the banks make most of their money from interest on loans that they create out of nothing (they don't lend you their stocks or other people's money when giving you that morgage, they create the money electronically out of nothing and enjoy the interest payments as pure profit). Given the advantageous position that this puts them in, any bank that shows poor profits and/or dodgy practices (libor etc) should certainly not be seeing any bonuses, never mind ones more than 100%!

F

In reply to Frogger:

I think you may be confusing retail banking and merchant banking slightly.

jcm

In reply to Jon Stewart:


Which rather implies that other jobs and careers have much more worthwhile goals. Really? sports people who bash balls around, artist who unmake beds, civil servants who enjoy a bit of prestige if they make it the top of their greasy pole, hospital administrators who piss off medical staff, business executives who do wicked things like get petrol to our cars or put cheap food in our supermarkets….cameramen who take er pictures…..you get the gist……..

In reply to Postmanpat:

Nurses, Doctors etc etc

In reply to Al Evans:


Probably but I'm not even sure about that. Is a doctor doing private medicine for rich people, or even highly specialist medicine for a selected few doing it for the right moral purpose or because it pays most or he finds it interesting and prestigious?

In reply to Postmanpat:

I struggle to think of a job with less worthwhile objective.

In reply to Postmanpat:


Well yes, there are plenty of professions with intrinsic merit, and plenty without, and a view on that is partly subjective. Few would doubt the intrinsic merit of medical research, Turner Prize winning artists less so. Few would argue that estate agents are anything other than poisonous leeches, sucking the essence of life from humanity.

But the point is that we face problems whose solutions require the application of resources. We need technologies to reduce our reliance on burning carbon and to provide cheap ways to sustain massive populations. But the result of the competition for more wealth isn't to make these things happen - there is no reward for investing resources in anything with any value. Thus, people compete for wealth, and wealth is spent on disposable, flashy tat.

There is no reward for doing anything useful.

In reply to The New NickB:

What job is that specifically?

In reply to Postmanpat:

The doctor is a good example of mobilising the desire for status to generate useful, productive behaviour. We don't rely solely on people wanting to do good for others; if they're motivated by having a nice house and being looked up to, that's fine, as long as when I need an operation someone has the skills to perform it.

In reply to Jon Stewart:

unfortunately this debate falls down on the initial hurdle that you reason that making money as a commodity is worthless as opposed to something physical or I'd guess services.

It doesn't matter what the product is as such, it's what you can trade it for that alters our lives. Money can be traded for just about anything else. Therefore money is just as worthwhile as anything else you can imagine.

Ok there's then the tricksy concepts regarding the lack of manufacturing exports in relation to the national economy, but that's 1/ too complicated to really get involved with for this purpose, 2/ not something an individual company should or would really be caring about - they're looking at personal success.

In reply to Jon Stewart:


So you acknowledge that the motives are not in fact the problem?

But you are implying that all doctors do something useful and no finance people do. Actually much of finance meets a useful purpose of allocating capital, providing pensions etc etc and quite a lot of doctors do useless things like botox injections or whatever.

I'd be the first to agree that some people in finance are highly overpaid and crap and that the short termism of the bonus structure was ridiculous but i don't accept that financiers are either uniquely greedy or egocentric or their activities are particularly useless.

In reply to Jon Stewart:

What about when you want to buy that Bike on Ebay from Germany? Paypal per chance? That's Deutsche Bank handling your money and processing the FX and making a bit of profit. Thanks "banking" for making that easy and seemless

Are Doctors and Nurses the only noble professions out there these days?

In reply to Scarab9:



That is a peculiar argument and doesn't relate to what I'm saying. I'm talking about what activities are rewarded, and where resources flow, due to the incentives inherent in the version of capitalism that has emerged as our economic system.

In reply to Jon Stewart:





ok that's making more sense and steering away from the way the thread was going.

In this I agree. It is unfortunate that there isn't more reward for working on causes that are beneficial to the greater good.

Also unfortunately, there's no real solution seen to work on this. To do that you need to unify purpose, which can be done by persuasion or by a different influence. Lets ignore persuasion because that only gets so far (though can be fantastic, look at Bill Gates and his campaign to get loads of the mega-rich to donate their money), how do you enforce a unified purpose? Well you need someone making the decision of what to point your resources at. ie. the/a governmental body.

The issue there is you're giving increasing amounts of power (not just over national issues, but over concerns on a smaller scale such as our personal day to day decisions) to the few and taking it away from the individuals and smaller groups (businesses).

In theory that could work nicely, but it's been seen to work pretty piss poorly (real life communist states).

There really is no solution.

oh there's a 3rd, the government leaves control up to others but offers huge financial subsidies for companies specialising in the good causes. Like offering money to landowners willing to allow wind turbines / fracking /etc on their land....but oh yeah that's not popular either :-/


it all boils down to
1/ as a group we all have our own opinions and can't decide the best cause
2/ even the most altruistic folk will look after their own first and others later if pushed

In reply to johncoxmysteriously:

Not really... doesn't it apply to both?

In reply to Jon Stewart:


yeah sorry ignore the previous comment, I was thinking along the lines of debate some others were at the time which was more about the usual bonuses going to people who fail arguements and what-not

In reply to Jon Stewart:

Most resources in the UK flow into property. How many of you commenting on this have decided to invest your money in SME's or start ups or bought AIM IPOs...or have you stuck everything on your earn into a (glass) house?

In reply to Postmanpat:


You're leaping to the defensive by assuming that I'm making a personal attack on bankers. My assumption is that people in general are greedy, dishonest and short-termist, and for that reason we need a system that harnesses those motivations to put resources in the most useful places. The level of bankers bonuses is a sorry indictment of the fact that usefulness and reward are simply unrelated, and that our system works without direction towards improving anything.


Not really. I'm talking about the relative usefulness and the flow of resources and incentives for people to involve themselves in more useful, rather than less useful activities. A successful economic system would reward the doctor who advances techniques to save lives, and leave the botox-injector at the bottom, lacking status and incentivised to do something more valuable.


As I say, not what I'm arguing for. Someone does need to manage some numbers so that pensions can be paid. It is a useful job, and someone should continue to do it. But should the brightest people be incentivised to use their talents gambling for personal gain, or would we be better off if those with the top degrees and high levels of motivation were out in the world trying to solve problems, and being rewarded for that instead?

In reply to Bjartur i Sumarhus:


As I say, it's about relative usefulness. Paypal is quite convenient, but in the context of stuff we need for success in the long term, it is entirely trivial.

In reply to Bjartur i Sumarhus:


Can you explain how investing in SMEs while paying rent rather than a mortgage is a sensible strategy? It makes no sense.

In reply to Jon Stewart:



Well actually you were making a personal attack on bankers, but that's fine

Your general point seems to be that market capitalism is imperfect at allocating incentive and reward to do what you regard as the most important roles in life. Obviously I'd agree, but I think you would also agree that neither is a centralised State much good at either so we are left with tinkering with or manipulating the market to achieve what we regard as better outcomes.

The obvious problem is that your preferred outcome is not necessarily mine or anyone else's. It seems that the democratic vote via the payment of money is for footballers to be richer not only than most bankers but many many many times richer than doctors. Personally I think that's mad.
So how we decide the optimum outcome let alone the way to achieve the optimum outcome?

I'd also suggest that quite a lot of what you call "gambling" or "money shuffling" is actually providing the incentives to achieve the outcome you want. the outcomes you want require risk to be taken and that requires rewards at the end, either for the provider of capital or of the provider of knowledge and skill.

In reply to Jon Stewart:

"But should the brightest people be incentivised to use their talents gambling for personal gain, or would we be better off if those with the top degrees and high levels of motivation were out in the world trying to solve problems, and being rewarded for that instead?"

there is a degree of truth in this and I can sympathise. I sat next to Norwegian chap a while ago who was a senior guy at the Max Planck institute for astro physics(probably knows Coel and left to become a quant because the pay was so much better.

In a way though his contribution is useful because it is mitigating risk and reducing the likelyhood of a blow up in the area of trading he is working on. Not as cool as finding new stars though

In reply to Scarab9:


No, I can't see one, I agree with your points.



Can it really be that hard though? Oh yeah, it can, people will even refuse to accept plain facts if they interfere with short-term interests.


Yes. But what I'm really getting at is that there is no limit to looking after our own. There seems no point at which the lust for personal wealth is satisfied and a desire for something of intrinsic value takes over. It baffles me how someone on £500K is motivated to work harder by the promise of £600K - it's surely just about competition, not "looking after your own". And that competition is just generating and then wasting resources - there is an excess that instead of being put to use is being flushed away.

In reply to Jon Stewart:

The thing that occurs to me about big salaries is that if you're that way inclined you can always find things to spend that money on - my brother works in risk for an investment bank, and earns what I consider to be a very good salary indeed, but to him it's not that big because a lot of his peers earn more and can thus do more with it. In turn, one of his partner's best friends married a hedge fund manager and their disposable income each year is something like £750k - mind-boggling to me, but, as PP and BIS say, peanuts to footballers.

I think the way I rationalise it is to consider that there aren't *that* many people earning huge amounts of money, but that even if they're avoiding as much tax as possible, they are still paying a hefty chunk back to the government somehow or other, which then trickles down to us proles. Simplistic, perhaps, but hey, that's me.

In reply to Tall Clare:

I agree, but I think Jon's point is that any excess profits should instead be channelled away from employees and to more altruistic endeavors.

I can only think of an annual windfall tax on banks that might manage this. Then the money ends up with the government.....hhmm

Incidentally, most of the banks in Canary Wharf do a lot in the local community, we have reading clubs, interview and CV clubs...sponsor local events at schools etc where employees give up there own time to help local children....not all bad selfish people

In reply to Postmanpat:


It's more than just roles/salaries. There's no incentive for investment in solving problems. For example, even though drugs can be sold at a huge profit, funding the creation of new drugs is so inefficient that crap drugs which don't work get sold and the information about how crap they are is hidden and obfuscated. The system is built of examples of precisely this nature: bad behaviour is rewarded, useful work leaves you behind in the competition.


The solutions are not forthcoming from UKC today, no.


It isn't a democratic view. It's the action of the market concentrating wealth in the most pointless places. Who would seriously vote to reward footballers as they are?


No idea. I guess I'm proposing that the excess resources are not taxed away from bankers and footballers, but that they might feasibly be encouraged to put that money somewhere useful. Not donated necessarily, but invested. This comes down to an idea that profit is not an end in itself, that activity should have some intrinsic value.


I think it's unbelievably inefficient at achieving useful outcomes, but probably more efficient that the faux-alternative of a centrally planned economy.

In reply to Bjartur i Sumarhus:
>
But surely it's the software engineers that actually make your life easy as user of this and they certainly aren't paid huge salaries or in-line for huge bonuses for that matter........

In reply to Bjartur i Sumarhus:



Exactly, I'm not keen on the idea of excesses being taxed away.


But it's precisely this level of tokenistic "corporate responsibility" that prevents anything genuinely useful happening. I'm talking about the product generated a bank or corporation being invested in something that solves problems, rather than being re-gambled for even greater profit.

In reply to Jon Stewart:


You mean like companies and start ups that invent things and make things and drill for things, or in governments that provide hospitals and welfare and justice and defence?

In reply to fraserbarrett:

The point I was making was that banking is useful to all of us everyday, its not just guys in red braces puffing on cigars cornering the wheat futures market for profit regardless of the effect on world food prices

In reply to Jon Stewart:

Its a nice idea but unworkable IMO

Using the Premiership analogy...if all Prem teams were told to cut salaries by 2/3rds and direct money into productive research for the "greater good"...most of the players would move to La Liga etc.

In reply to Jon Stewart:

I love to read Joe public's perceptions on what goes on in the city! Basically folks, to earn the big bucks in an investment bank you either:

1) are a deal maker in M&A. i.e a big dick who can win client mandates to structure and finance mergers and take overs for billions of dollars.
2) In sales - flogging fixed income products, equities, whatever. You are brilliant at managing relationships and your clients buy what you are selling.
3) A good trader - you understand what drives your market (which will be incredibly niche), and can put on bets to, ahem, "manage risks" that arise from the products the sales people sell, or just make a bit on the side with the banks' money, all within appropriate risk limits and properly supervised.

All are hard to do well, and these individuals are commoditised (i.e. they can be poached by a competitor for more bucks), therefore under the current model banks are falling over themselves to pay enough to retain their best talent. So if your current employer doesn't pay, adios amigo. Usually taking their team with them, and a revenue stream walks out the door.

hard to legislate this away because the brightest and best will go and work for a hedge fund in Zurich. Or so they would have you believe.

In reply to Jon Stewart:

There are quite a few hedge funds that pass all their profits to charitable trusts.Childrens Investment Fund.Look them up..it's serious stuff.

In reply to Postmanpat:

The point is that drilling for oil makes a faster buck than creating low-carbon technology. That defence comes from companies who also sell arms to oppressive regimes. There is no incentive for that investment to be useful, only for it to be profitable. Anything useful that comes out of it is secondary to the primary goal of making a profit. By this system, yes, some useful outcomes are achieved, while we are also burning every last gram of carbon in the ground, arming regimes that crush their people, denying people in the greatest need of healthcare the drugs they need, etc, etc.

In reply to Max factor:

I've no doubt that the market rewards people for skills that are useful for making a profit. I'm not arguing that the market is irrational and rewards people for nothing. I'm arguing that the market rewards things without regard to intrinsic merit or usefulness to society, and that the result is a society in which people aspire to be wasteful and gaudy while having achieved nothing of any purpose. But you seem to have completely missed that.

In reply to Bjartur i Sumarhus:


I agree. There is no solution.

The fact that en masse, we have no value for value itself, kind of gives a bit of gloomy outlook for the old human race.

In reply to Jon Stewart:


But you said that was Ok for doctors and that the motive wasn't the point!

The finance industry channels money to the State so if the State wants to use it for something they consider useful that is up to them.

What you now appear to be saying is that your particular view is that a) that society should not eg.consume fossil fuels so the "City" should not enable them to. This seems somewhat undemocratic.

b) That the "City" doesn't channel funs to longer term or unusual investment ideas. It does this three ways 1) By channelling money to the State to do these things 2) By investing in and lending to large companies to do these things c) Financing start ups to do these things.

Does it always pick winners and avoid losers? Of course not but do you think any form of allocating limited capital would do so?

In reply to Postmanpat:

I haven't said anywhere that motive matters. I said in the case of doctors, the incentive of a nice house and high status led to a useful outcome; that is unusual in this system.


Unfortunately, the state is quite busy providing day-to-day public services. Where there are long term problems that require solutions through the application of resources for example in research, then I'm saying an economic system that worked well would channel funds to those problems, rather than towards burning as much oil as we can so we can all go on holiday.


I'm not proposing new controls, I'm just saying that the system we have leads to unhelpful outcomes, because activity in it is motivated by individuals' desire to accumulate gaudy tat, not a collective aim to achieve anything useful. I'm saying that the idea that the market harnesses people's desire to accumulate gaudy tat to produce useful outcomes is false - any useful outcomes that are achieved happen by coincidence.


The point is that there is no preference/bias for funding useful activities over pointless or wasteful ones which destroy useful natural resources and rot people's health. It is the lack of bias in favour of value, combined with the sad fact that it's usually easier to do something harmful for a profit than something useful that makes our system a failure at distributing resources appropriately.

In reply to Jon Stewart:

>
So what are you implying by by " anything useful that comes out of it is secondary to the primary goal of making a profit. "


So the State doesn't prioritise it, the people don't prioritise it and you don't believe the City prioritises it. Why focus on the City (and their bonuses) as the nub of the problem?
>

>
I think your problem is with people and democracy rather than bankers' bonuses.

In reply to Postmanpat:


I think we're at cross-purposes here. I don't care what motivates useful activity being done. If it's driven by greed, then hey, that's great if it's still getting done.



You're right about that. But bankers' bonuses are the nadir of our economic system. They exhibit neatly what "productivity" means: generating profit that has no function, that is channeled into the hands of individuals so they can buy gaudy tat for themselves and their families.

In reply to Postmanpat:

I think it's the cartel aspect of banking that gets people's goat. Footballers, popstars etc do clearly have an ability that is truly exceptional, so supply (small) and demand (high) seems to work. Bankers it would seem don't have any special ability, indeed, they seem spectacularly incompetent at times, yet still pay themselves vast sums.

In reply to Jon Stewart:

I was thinking about the points you have raised on my commute home.

I think a more likely and effective way of achieving what you desire would be for an employee to make a point of publicly donating their bonus to research or a charity, and in doing so, raise the awareness of huge bonuses, attempt to shame a few others into doing the same and try and gain traction with an organised mobility of excess funds, playing on bankers consciences.

In reply to MG:

Cartel? There are at lest ten "bulge bracket" investment banks in London and god knows how many wannabe competitors or specialists. Ending the cartel was what "Big Bang" was all about. The pattern of the last thirty years has primarily been of margins being cut to shreds on existing businesses, hence the constant need to reinvent. This was the. Impetus for proprietary trading!
Curiously the part of the business that seems to maintain the characteristics of a cartel is the pure "investment banking" in which the clients are big corporations who should have the clout to push back.

Actually, for all it's failings the finance industry is one of the ultimate multicultural meritocracies. Nobody gives a stuff where you come from if you do your job make the bank money.
There's plenty of mediocrity but generally not getting the big bucks. Kind of ironical that Jon is lamenting the waste of the talent that goes into finance and you are say there is no talent in finance !

In reply to Postmanpat:


In the sense that comparable ability elsewhere would get no where near the same level of pay.

Nobody gives a stuff where you come from if you do your job make the bank money.

I'll grant you that.


I simply don't believe that. The number of traders who consistently do better than average is ~0 over an extended period (e.g Warren Buffet seems to manage it but not many others). Sure, if you are lucky, you get paid well, but I don't think it has much to do with ability.

In reply to MG:

Doesn't necessarily mean its a cartel. There's no shortage of competitors or recruits.


You're thinking of fund managers, not traders, and given that they are basically competing with each other it's pretty obvious that at least half will always lose! Buffett is unusual partly because he is now playing a different game. He can take long term views and ignore the noise. The average fund manager is trapped by client demand for short term performance which is counter productive.

In reply to Jon Stewart:


But maybe an effect rather than a cause?

In reply to Jon Stewart:


When I was young I had lots of ideas but then found that most of them had been tried. Unsuccessfully.

I'm still open to suggestions for alternatives to regulated capitalism though. Let me know if you come up with anything.

In reply to Postmanpat:

I was thinking of both. Most trades are zero sum ( eg currency) I thought so half must lose. By contrast shares aren't.

In reply to MG:


But traders don't generally publish their numbers.

Against the average then half of fund managers must always "lose". As you know, that doesn't mean that they actually lose money.

Anyway, the asset management industry has reacted by the invention and rapid growth of Index tracker funds which don't even try to "win" and charge much lower fees accordingly. Hence profitability and rewards for active fund managers are under huge pressure and consumers get cheaper funds.

In reply to Postmanpat:


Yes, that always surprised (and delighted...) me...whenever I used to have fee discussions with clients, usually involving 7 or even 8 figure sums, I was always amazed that they didn't start their side of the debate at around 10% of where I was! I couldn't believe there weren't a dozen other firms out there who would be willing to do the same business, for maybe 90% (or sometimes 110%...) the standard for a *lot* less money?!

In reply to Jon Stewart:

I hope you stand for parliament one day, you've got my vote.

In reply to Al Evans:


The numbers are arbitrary, you chose them, I just re-used them. My point stands that if you're doing a job with a reasonable expectation of getting £x in return then getting £x is not a nice bonus, it's what the job pays give or take, nobody seriously expects and few could cope with getting a third or a quarter of that.

In reply to Jon Stewart:

http://www.telegraph.co.uk/news/matt/