Chinese Students Want To Know: How Do I Get Rich?

I think they think it's going to come back within a year or two or five at most.

I think they are being delusional. For the next twenty years, minimum, bankers in general and investment bankers in particular should come to expect that if anybody's making lots of money, they're going to get scrutinized. Not just by the government and not just by the people, but by the banks themselves. The banks have seen what happens when you pay too much money to those people, and while the upper echelon shall always be handsomely paid, I think the rank and file are going to see a severe and long-term pay cut.

At this point, you tell an investment bank that if they don't pay a lot they aren't going to get the smartest possible people and the reaction is likely to be "Thank god! At least when they make mistakes they won't make really smart mistakes! Those are the worst." Why should they pay someone five million to destroy the company when they can find people for $200,000 who will do quite adequately? (Recall that "beating the market" is very hard and that an index fund is generally an astonishingly good investment, all things considered.)

It will come back, though. It will come back when those who remember how we got here are flushed out of the system and the people of 2040 or 2050 make the same damn mistake and fall into the credit bubble trap again, as the balance of the workforce tilts away from those who are at least 20 today. But that's probably not soon enough for the students of today.

Why is it be surprising? We just witnessed these banks lose hundreds of BILLIONS of dollars, hundreds of billions of dollars of shareholder wealth, probably hundreds of billions of dollars of bondholder wealth... and bonuses fell by half. With incentives like that, anybody would be a fool not to at least consider it.

Edit: and while I hope so, and we'll deserve what we get if we don't take action, it's actually not at all clear that the finance industry will be massively regulated after this, at least not in the right way. Many congresspeople are a combination of incompetent and outright owned by the finance companies and people.

The financial mess sort of reminds me of the space shuttle disasters.

I remember thinking after the Columbia tore apart that space travel would be finished. How could we possibly risk more people in space after such a horrendous event? And that happened twice. There were lots of smart people working on those projects, doing lots of complicated work that few could understand. Did it affect millions of people? Other than emotionally, no. Were there immoral people working for NASA? Probably.

My point is that it took about 3 years after the Challenger disaster, and another 3 years after the Columbia disaster to get things moving again. Many changes were implemented. But rockets still flew.

The science didn't get any easier, and neither did the math. Rocket science and materials science are still chalk-full of tough, unpredictable problems, but that doesn't scare people away from being employed in those industries.

I-banking needs some sweeping changes. Perhaps the compensation will change as a result. At the end of the day though, financial engineering is still needed, and intelligent ethical leaders will be more in demand than ever.

One of the most striking things to me about my two three-year stays in Taiwan (in the '80s and around the turn of the last century) is how much more entrepreneurial I became just by living there. The Taiwanese have a proverb, "Better to be the head of a chicken than the tail of a buffalo," and they strongly value being business owners rather than employees of large organizations. In the 1980s, the development pattern of Taiwan and Korea, otherwise rather comparable countries, was quite different because most Taiwanese worked in small, family-owned enterprises while most Koreans worked in giant industrial conglomerates.

Today, Taiwan's economy is HAMMERED by the worldwide recession, but I think the response will be to find more ways to do more entrepreneurial business formation, and Taiwan will be all right. China is in serious danger of unrest, by contrast,

http://www.iht.com/articles/ap/2009/02/27/business/AS-China-...

http://www.telegraph.co.uk/news/worldnews/asia/china/4862517...

unless some economic transformation happens so that urban college graduates and rural migrant workers can find more employment soon.

Please read my comment again and tell me where I generalized to all Chinese. The article's author claimed that the guys were very "bright", and I was expecting him to write on their entrepreneurial spirit... and, lo and behold, all they wanted was a safe status job that pays well. So predictable. So boring. I said nothing on the other 1+ billion Chinese. I did not comment on the entrepreneuralism (or lack thereof) in China...

PS: Though you guessed right that I am a white male, I must say that I am not American.