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<p>Would that be the same brainpower that drove the finance industry off a cliff, necessitating unprecedented taxpayer intervention lest the entire industry fold? </p>
<p>If nothing else, I hope that the events of the last few years have dispelled all notions that finance firms somehow have more talent than do engineering firms. Indeed, market valuations seem to indicate that the opposite is true: Apple alone has a greater market cap than Goldman, Morgan Stanley, and JP Morgan combined while having far fewer employees. {Indeed, Apple has about the same number of employees as Morgan Stanley does, but enjoys a market cap that is larger by over an order of magnitude). </p>
<p>Given that Apple therefore actually seems to harness better talent than the finance industry has, why does finance continue to pay better? </p>
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<p>Well, I don’t know about that. I don’t think any public firm enjoys announcing losses; Goldman would almost certainly have at least broken even had it simply not paid its employees so highly. Goldman lost about $400 million last quarter, with 35000 employees, that would have meant that a pay reduction of $11k per employee would have meant that Goldman would have broken even. Given the high pay that Goldman employees make, surely they can tolerate a quarterly reduction of $11k. {After all, millions of people in this economy don’t even have jobs at all.} </p>
<p>And it is surely true that no industry - not even the finance industry - enjoys the political repercussions of a taxpayer bailout. Well, the truth is, if they took the giant pay premiums devoted to employees in the 2000’s and instead redirected them towards building capital reserves, they probably wouldn’t have needed bailouts. </p>
<p>So whether the finance industry actually cared whether their employees took sips from their rivers of revenue, they fact is, they should have cared. And they should certainly care now after having learned the hard lessons of 2008. But they nevertheless persist in paying their employees highly.</p>
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<p>I don’t know if this signature was supposed to be ironic or not, but I think it speaks to a core issue at hand: engineering innovation, such as the Droid or the Iphone, produces social value. It’s not clear whether financial innovation produces social value, or is merely a mechanism to line the pockets of bankers while stockpiling hidden risks that the taxpayers will later discover to their displeasure.</p>