Thursday, April 09, 2009

Back to me

I know more about the hedge fund business now that friend and former student Chris Clair, who works for Hedge World, the industry newsletter, has explain how the funds work.

For a review of my original post, which inspired Chris, go here. For his response go here, here ,here and here.

Silly fellow that I am, I still maintain that when one person "earns" $2.8 billion (with a "b") in one year, something is amiss. With that amount, you could meet the salaries every wage earner in Beaverton and Gresham.

You could feed entire impoverished populations for a year. Children would not starve.

You could save thousands of lives.

But $2.8 billion is what one mortal man, hedge fund manager James Simons, took in last year. Others in the industry, if that is what it is, merely made hundreds of millions.

At its heart, my issue is not a financial one but a moral one.

In his conclusion, Chris maintains that the question of "how much" these guys should be paid (and they are guys) is "settled by supply and demand" and "this annoyingly elusive concept of 'quality.'"

Supply and demand? The world has only one Chris Clair and Rick Seifert. We are in short supply. A mere one of each of us. We do good work. We are in demand. We are paid adequately. We are paid enough and should be thankful for it and the skills we have to make us "worth" as much.

Where's the short supply and pressing demand for hedge fund managers that justifies nine- and 10-digit payments?

No, these guys pay themselves these amounts because they can and because they love money. They live and breathe money. No doubt they are pleasant enough people. They tuck their kids into bed at night, kissing them lovingly on their foreheads. Most are ,no doubt, gracious, kind, engaging.

But they must be blind to the world we live in.

This is not a matter of "supply and demand;" this is a matter of blinding greed.

I'm not inclined to quote Scripture, but these men would do well to ponder the passage from Matthew:
For where your treasure is, there your heart will be also.
As for quality, how can you measure quality when the job description is satisfying greed? As Chris suggests, "quality" is a big topic. It is also amoral. I'm sure there are quality child molesters, hit men, embezzlers, terrorists and torturers. Should society reward them for their quality work?

As far as I can tell from reading Chris' account, hedge fund managers are skilled gamblers who stake other people's money (and sometimes their own) and rake off their mind-boggling cuts. Oh, and they manage to do this at the lowest possible tax rate. You and I make up the difference.

While the world runs on the labor of farmers, truck drivers, teachers, nurses, cops, carpenters, secretaries, the editors of industry newsletters etc. Simons receives $2,800,000,000 for clever gambling.

What's wrong with this picture?

Or is it, as Chris has said, simply "hogwash" to question the "worth" of this "industry," and its lavish individual compensations?

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