It's a big club and you ain't
in it.
~
George Carlin
If you suspect society is
unfair, that there's a different set of rules the rich live by, you're right.
I've had ample chance to
witness first-hand evidence of this in my time working on Wall Street and in
Silicon Valley. Simply put: our highly financialized economy is gamed to enrich
those who run it, at the expense of everybody else.
The
Money River
A recent experience really
drove this home for me.
Having received my MBA from
Stanford in the late 90s, I remain on several alumni discussion groups.
Recently, a former classmate of mine, who now runs her own asset management
firm, circulated her thoughts on how today's graduating students could best
access an on-ramp to the 'money river'.
What's the 'money river'?
Good question.
The money river is the huge
tsunami of investment capital sloshing around the globe, birthed by the
historically-unprecedented money printing conducted by the world's central
banks over the past decade. Since 2008, they've more than tripled their
collective balance sheet:
(Source)
The $13+ trillion in new
thin-air money issued to achieve this is truly staggering. It's so large that
the human brain really can't wrap around it. (For those who haven't seen it,
watch our brief video How Much Is A Trillion? to
better understand this.)
But suffice it to say, all
that money has to go somewhere. And it first goes into the pockets of those
with closest access to it, and of those who direct where it flows.
In the context of MBA
graduates working in finance, accessing the 'money river' often follows this
recipe:
·
Step 1: Get hired by a
buy-side fund (asset management firm, hedge fund, etc)
·
Step 2: Make friends at
other funds by investing part of your portfolio in their offerings
·
Step 3: Leave to create your
own fund, which all your new buddies will invest part of their firms'
portfolios in
·
Step 4: Collect a fat annual
salary of 2% of assets under management (regardless of how your fund performs),
plus 20% of any gains
Let's put a little math
behind this, with real-world numbers based on another classmate of mine who
followed this recipe. After graduating, he went to work for a prestigious
private equity firm, spending nearly a decade there as a fund manager. He then
left to start his own fund.
Read the rest
at:
