So this stems from the "smartest people going to wall street" thread
people arguments essentially said that bankers are far too highly compensated relative to their "value added" to society...
I disagree with this notion--when was the rule written that your total compensation should be relative to the "value" that you add to the society?
theoretically, shouldn't teachers be paid more than ANY CEO or entrepreneur? They mold the minds of children...that's got to add the most value of ANY profession, yet middle and high school teachers are paid quite poorly!
also, all of the people doing all of the minimum wage work create an efficient society...isn't that EXTREMELY valuable? without them, the society could not run! Should they then be millionaires as well because of the value they provide?
just looking for others opinions...
Do you think you're the first person to ever think of this? Or that you are even the 20th or 30th person to make a thread about this on this site?
People in finance are generally given greater importance than they should relative to what they contribute to society, in my opinion. How much someone is paid ought to be a private matter, though with the gov't bailouts and the fleecing of the Treasury by many banks (and therefore taxpayers), I would say that you can make a strong argument for many people in finance being objectively overpaid (minimal to negative value added in many cases with the burden being placed on taxpayers).
Being an elementary school teacher generally doesn't pay because it isn't hard for people to do an 'adequate' job and people have poor priorities. That doesn't make the people in finance necessarily overpaid, but it may show that most people prioritize things differently than you/we may think is appropriate.
Who the fuck are you, me, my neighbor, or your mother to decide who adds what to societal wealth? There are thousands of school districts in the US that suck so hard they have set back progress by at least a few generations. I would love to see a trader cause that much damage.
Compensation, like all markets, is related to supply and demand. Customers (in this case,a banking client or a school) demands services, because the utility provided from those services is greater than holding cash. This is where "value add" comes from. Supply comes from the amount of workers available who have the skills necessary to provide that utility.
Thus, an MD "Adds value" because he or she has developed relationships with clients over the years. Since he has these relationships and others in the available supply pool does not, he differentiates his "product" and is able to charge a higher amount for his services.
With entrepreneurship or investing its a bit different since labor isn't being sold, but instead, risks are being taken with capital in hopes of a return. For example, if I invent NetFlix, I create a service which is distinguishable from other services, and which adds value to the lives of consumers. Consumers create demand for this service because they think that the utility it provides is worth it at a certain price. Thus, I add value by running this service (and thus, my firm makes a profit, and I am compensated for the risk I took in establishing that service).
I think this is an issue of semantics.
Michael Lewis' reaction to his bonus in Liars Poker illustrates this point in 2 lines better than any of us can in multiple paragraphs.
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