The absurd delusion of bankers
Contrary to what those involved would have us believe, investment banking is not actually that difficult a job. Certainly when compared with being a successful surgeon, nuclear physicist or civil engineer; the skill set required by banking is neither extensive nor terribly difficult to acquire.
Which isn’t to say “anyone could do it”. Along with the necessary skills, there are certain personality traits without which, a person would find investment banking extremely arduous. There’s a lot of politics involved, probably more than most jobs, and a person needs to be adept at navigating an upwards trajectory in a cut-throat environment. Also required is a willingness to work more hours than many people are comfortable with. Those tend to be difficult characteristics to acquire. Crucially however, those who already have them are far from being a rare breed.
So the reason successful bankers are paid enormous wages and even more enormous bonuses is entirely down to the nature of the industry they work in, rather than any inherent “star quality” they may possess as individuals. It isn’t due to the hard work of modern investment bankers… humble beginnings investing their pocket money in local community projects when they were twelve, and a few decades later finding their activities have grown into a multi-billion dollar bank. It’s because they got a job in the money industry and were successful at it.
Investment banking deals with huge sums of money. In fact, pretty much the entire purpose of the industry is to move large sums of money around. So when the bank takes a percentage profit on a given transaction, it’s a percentage of a large sum. And this needs to be stressed. They don’t earn huge amounts of money because what they do is extremely difficult (or even all that useful… but that’s a discussion for another day), but because there happen to be more zeroes on their Excel spreadsheets than on the spreadsheets of a bakery or a pub.
Which is why I find the outrage and arrogance of London’s investment bankers, when confronted with a windfall tax on their bonuses, to be so hilarious. They talk about how such a move will force “the stars” of the banking world to leave London for places without such “punitive tax rates”. The implication being that this will deal a serious blow to London’s — and by extension, Britain’s — economy.
I’m forced to wonder if this is just posturing on their part, or do they honestly believe such twaddle? It appears that earning huge salaries for several years has the ability to convince highly ambitious, semi-skilled sharks that they are indispensible. When the truth is that there’s a mass of similar people more than willing to do the same job for 50% of the cash (bearing in mind that 50% of Bob Diamond’s cumulative £20million bonus is more than enough to motivate most people).
I’m also wondering, given that this latest windfall tax will target the bonus payments of “tens of thousands of bankers”, exactly where they all intend to go? Are there really places in the world looking to hire tens of thousands of foreign bankers and pay them huge lightly-taxed bonuses? Is there truly a major lack of experienced investment bankers in New York, Frankfurt or Tokyo?
And even if a handful of banking “stars” do find work elsewhere, the idea that they are taking a unique skill set with them, and that nobody in London is capable of stepping into their shoes, is deluded beyond belief.
Is that really true though? To be a successful investment banker, you need to not only be intelligent, personable and numerate, and not only willing to sacrifice everything about your personal life to get rich, and to play some of the most horrible office-and-industry politics around, but also to not care about the fact that – instead of building a business, or creating and popularising an invention, or creating cool things, or all the other ‘changing the world’ reasons that intelligent, personable and numerate people go through life-sacrifice and infinite sucking-up to build businesses – there’s nothing to your job other than the money.
I reckon that requires a degree of disattachment-bordering-on-sociopathy that most people smart enough to achieve the other job components would struggle with (note that the bright and non-sociopathic people in the industry I know – the Chris Dillows and Dsquareds – tend to be analysts and economists and quants who get paid well but not even the same order of magnitude as the traders and salesmen, in exchange for doing a much more interesting and less soul-destroying job). After all, i-banking jobs these days are applied for and won on a largely fair basis: in the sense of having batteries of tests and interviews, rather than old-school ties and Daddy’s friends, to narrow down the enormous numbers of applicants.
(none of that suggests they morally deserve the money, of course – but I’m not sure you can make the case on a straight supply-and-demand level)
December 8th, 2009 | 10:31pm
by john b
I reckon that requires a degree of disattachment-bordering-on-sociopathy that most people smart enough to achieve the other job components would struggle with…
I’m clearly less charitable towards the human race than are you, as I firmly believe there are thousands of willingly detached borderline sociopaths in the wings, ready to take the place of any i-banker who flees London for the hypothetical tax-havens-with-a-shortage-of-bankers.
Obviously there’s no way to actually quantify this though, so we may as well be discussing the choreography of angels on the head of a pin. But that’s the kind of thing that accounts for roughly 70% of all blogging, of course.
December 8th, 2009 | 11:15pm
by Jim Bliss
Incidentally, it was this quote, from Robert Tressell’s The Ragged Trousered Philanthropists over at Paul’s blog which — in conjunction with the news reports about the bonus tax — sparked this blogpost…
December 8th, 2009 | 11:23pm
by Jim Bliss