We have gotten so used to this little add-on that most of you probably read right past it. It is the ubiquitous capitalist mantra, we need to pay people more to attract and retain top talent. It is considered so self-evident that nobody even pauses and wonders about it. The events of the past eight years however tell a distinctly different story.
For a long time Wall Street has been paying exorbitant amounts of money to its executives. Certainly over the past eight years, we have seen executive compensation skyrocket. Ergo, we can expect that Wall Street did this to attract and retain top talent. And given how much time has passed we can only assume that they were indeed led by top talent.
Would someone explain to me how this top talent, so amply rewarded, was able to mess up the world's financial system so quickly and so thoroughly?
It is obvious these guys were good at something. One has to be very good to make such a profound mess of things in such a short time.
The correlation between very high pay and talent is rather poor. Very high pay is mostly correlated with greed and ego, two rather undesirable characteristics, that have very little to do with talent. I can assure you that overpaid individuals are never as good as those paid a fair wage. Just as ultimate power ultimately corrupts, so ultimate greed clouds judgement and impairs performance.
Executives drunk with compensation, perks, and other rewards, behave no better than addicts looking for an even higher high. Eventually they OD. All of Wall Street OD'd and now we are paying the price for it.
Whatever top talent these executives may have had to get them there, their present situation is not conducive to productivity or performance, even at a marginal level. Much as Mr. Paulson would like to see it the other way, the data cannot be ignored.
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