Not adding any value..
When you attend industry body meets you come away feeling that there are too many bull shit jobs going around in the country. Just too many. If we shut down 2 banks every year for the next 10 years, the country will not be poorer. Do so many bankers (broad enough to include insurance and mutual funds and brokers) add much value? It is not easy to convince yourself (and your children) that you are adding value to someone somewhere to deserve the kind of money that you are making.
It goes without saying that people in some industries are terribly (terribly) overpaid for just moving money from one place to another. When you see doctors, engineers, NURSES, garbage men, domestic help, drivers, – I am sure they go home feeling that they did deliver something of value. If a few banks, insurance companies, mutual funds, brokerage houses just shut down, most of us will not even notice. Try shutting down a school, college, hospital, restaurant, airports, airlines, garbage collection, domestic help, vegetable suppliers….and the world will suffocate.
One way of seeing who is doing an important job for society is to see “what will happen if we shut down THIS service”. Well bankers will not be missed. Yes maybe central clearing or cash management may suffer (In fact it will)…but the salesmen, …etc. will not be missed. It requires tremendous talent and skill to do a bullshit job all your life and come out of life feeling you have achieved something. Well, most of us get paid to move money from one place to another. Sure, we tell the world that we are making it a more efficient place – but most of it is bullshit. We have over qualified bankers creating mutual funds which buy shares of companies without realising how badly companies are run. Why do they buy? Old schoolboy net work.
Companies are today run for the dominant promoter (usually) and a coterie of big powerful employees. When in your life did you expect to find EMPLOYEES with a net worth exceeding Rs. 1000 crores? well when I was doing my CA turnover of companies would be in 2 or 3 digit crores. I do not know of an EMPLOYEE doctor who has a Rs. 1000 crores, but I know bankers.
Obviously we have awesome talent. The world believes that we bankers create wealth. We are paid for creating wealth. Actually spreading it around. And when our wealth creating process is even as much questioned we scream, fret, fume, unionize, create forums to talk about how we are more important for the world than brain surgeons. Or garbage men. Or school teachers. How society should pay us not just one time, but on a yearly basis because we did some work for you in 1922. The last 2 innovations in the banking industry are the ATM and the credit card. Most of the other things (perhaps even these 2!) are just application of technology to banking. Instead of improving the quality of life for the people at the bottom of the pyramid we are busy creating BILLIONAIRES who created a different payment system. OMG we are thrilled about it for sure! When you go to an IIM and you find more students interested in setting up a hedge fund instead of a primary school network, you question your role as a “lecturer” and the kinda role models that we have created. Or a design student who wants to create an even better mobile phone.
We have also ensured that some “higher” schools of learning (nicely subsidized by the tax paying taxi-driver and garbage men) where tenured professors create students who become bankers. And since some of these professors need to work ONLY about 10 hours a week, they too moonlight as bankers! why some ‘holy men’ charge more than half a million Indian rupees to ‘address’ bankers annual summits. Sure, they talk about satisfaction, gratitude, ……………etc. Fair enough I guess, bankers need to be reminded.
ONLY one person in the value chain told me “I think I am paid too much because I earn more money than my sister and brother in law, both academic toppers and surgeons”. I guess it takes guts to ADMIT that one is over-paid. I have heard Rajnikant say that in an interview. Not too many of us will ever, ever admit it. In fact some of us get paid to simplify things. In our earlier avataar we got paid for creating the complexity. Lucky me. I am at the end of my working life, hence this rant.
Inspired by this:
Krish
I don’t know why PSU banks need to conduct PO exams to recruit management staff. They conduct such a complicated exam and select very brilliant guys academically. All these brilliant guys can’t simplify the matters. Seems they teach everything except customer service during training. All these
P
First a disclaimer- I below to the industry that you are ranting about. So expect me to be slightly biased.
Before I even start, let me say that I accept that finance professionals are better paid generally. But i just want to correct the exaggerations while accepting part of your complaints as true.
When you are talking about these people, you are looking at people who are country’s best in the field of finance. I am not talking about salesmen, but CIOs, treasury heads, PE guys, i-banking hotshots etc. many of these guys have a long and successful history of outperformance and their decisions can create big gain/loss to the companies/investors. When dealing in huge money, would an organisation want to risk that for some extra salary?
Secondly, you feel unhappy because these numbers are reported openly. There are many doctors, coaching centre owners and the like who earn hundreds of crores. Think about the iit and medical coaching centres of Kota, most famous surgeons etc as reference. Do they still earn meagre money?
Thirdly, you are comparing the outlier of finance to the average of normal professions. Is that correct?
Fourth, on your rant of subsidised education funded by taxi driver, how much tax do these taxis drivers etc really pay? Few thousand maybe. Vs. how much tax do these finance professionals pay? In crores i am sure. And what extra facilities are they getting from the govt. for that compared to a poor guy? Sure, they are rich n can afford to pay more. We should be fine with that. But to denounce their contribution altogether, is that fair? If you have to crib about tax-payer subsidised things, at least crib about people who are evading taxes while earning crores, even ‘000s of crores. Businessmen, traders, diamond industry, real estate industry, politicians, bureaucrats, fake agriculturists, entertainment industry and the like.
Fifth, skewness in success and pay works everywhere. Do you think a small fund manager can claim the same salary as PJ. Additionally, will u still allocate your money to those funds if PJ is replaced with some random fund manager? Doesn’t that determine the importance being ascribed to a good professional. Doesn’t Aamir Khan or Sachin/Dhoni have a net worth in hundreds, maybe thousands of crores even when a Irrfan khan/ nawazuddin Siddiqui or R Ashwin earn far lesser despite being very good?
With that, I rest my case.
P.S.- this is just me trying to add some more perspective to your points even while accepting part of your post as true. I usually enjoy reading your straightforward posts.
subra
read carefully. I am fine with businessmen earning more money. So if UK earns more money, I am fine with that. I am talking of salaries. I have not heard of a salaried doctor with a net worth of Rs. 1000 crores. I know bankers – salaried – which means ZERO capital at risk – with a nw of rs. 1000 crores.
I am not comparing the outliers. I am comparing the “Poor” average top level banker earning a salary of Rs. 2.5 crores to the HIGHEST paid doctor with a salary of Rs. 2.5 crores. The best paid doc earns 1/40th of the best paid banker. Yes here I am talking of the outlier and I am talking of TOTAL COMPENSATION – including esop.
there are 17L taxi drivers engaged with Ola / Uber and ALL OF THEM ARE NOW PAYING iNCOME TAX. That is a big number.
time and again you have compared the SALARIED risk free banker to Dhoni, Ashwin,…etc. THEY HAVE TAKEN RISK. Look at Amol Muzumdar – he did not make a test debut. Or a Vinod Kambli or a M. Kaif. Take the summary of all their earnings. You want to compare a Sachin, compare him to Deepak Parekh or Uday Kotak, Not to a Milind Barve or PJ. It is not fair.
Busienssmen take risk – you hear about the successful ones and the others go away unseen, unheard. An EX Snr Vee Pee earning Rs. 5 crores and with a net worth of Rs. 300 crores is not unheard of right?
P
Well, when you r getting esops, you r acting as part-business owner. And while it is certainly a lower risk than a full-fledged businessman, it still is a risk. Isn’t it similar to doctors or star teachers seeking profit sharing from their organisations? PJ has the option of launching his own PMS like Kenneth did and he can definitely attract money whether in his PMS or at hdfc. Choosing to retain him is a choice for hdfc which has its costs. Look at so many star professionals opening their own boutique investment management firms, PMS, i banking outfits etc. Esops is a way to prevent them from leaving by sharing the upside given the extremely people-dependent nature of the the industry.
There are fund managers/ ceos who have been forced out of the industry rendering them jobless at 40-45 years because their performance could not match expectations or because they underperformed for a few years whereas doctors/ coaching centre teachers can continue to work even at 70. That’s risk of career longevity.
Just last week, i met a ortho surgeon who has done over 5000 knee surgeries in his life. At an estimate of 1 lakh earning for him (each knee replacement costs 2.5 lakhs under him in his pvt hospital, much more like 3.5 lakhs if he does it in the bigger hospitals), it means 50 crs just from knee surgery. All other types of surgeries, OPDs (He must have seen at least 100 patients in the 5 hrs I was there waiting meaning almost 1 lakh in just 5 hrs of opd ) and other treatments, it will mean hundreds of crores.
Most of the finance professionals earn only normal salaries. Looks at most of the bank employees in branches, even HO, most of the insurance n MF staff except few key ppl. ESOP skews the game for the successful ones even while most of the esops with far lesser payouts or even expiring worthless go unnoticed. But for the few very successful ones, the earnings are outsized. But that is true for equity anyways. Imagine holding a big part of your capital (human capital in case of esops) in one small/mid cap stock and holding it over for years stuck in an illiquid stock. At the end, in both these cases, the return could range from paltry to outsized.
Hemant
“ESOPs with Salary means Capital at Risk” .
If someone can infer this, then there is no pint of continuing the argument
P
RBL was a bank with very small balance sheet 9 years back. Absolutely sleepy bank n nothing good going on. Top executives of Bank of America, ICICI n other top bankers went there taking career risks from their cushy jobs probably taking lower salaries but getting compensated through esops. If the venture had flopped, would not some of them have struggled to find a similarly good job again. Would the esops not have been worthless. How is that not a risk taken on human capital. Now 9 years later, because the bank has become much bigger n far more significant, those esops have made good money for them. Would you have put a big chunk of your money on rbl bank when it was meaningless size n not even listed? The success of esops came from growing well, avoiding mistakes, grabbing market share n a supportive equity market. Look at how Dhanlaxmi flopped around the same time after initial euphoria.