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High-Frequency Programmers Revolt Over Pay

Posted by kdawson on from the crying-all-the-way dept.

An anonymous reader writes "Programmers who design and code algorithms for investment banking are unhappy with their salaries. Many of them receive a low 6-figure salary whereas their bosses — who manipulate these algorithms and execute the trades — often earn millions. One such anonymous programmer points out that he was paid $150,000 per year, whereas the software he wrote was generating $100,000 per day."

20 of 1,018 comments (clear)

  1. Bosses earn too much by Shugart · · Score: 5, Insightful

    It isn't that the programmers earn too little it's that their bosses earn too much.

    --
    History is so yesterday!
    1. Re:Bosses earn too much by Chris+Burke · · Score: 5, Insightful

      Yeah, really. Six figures for a programming job is fantastic pretty much no matter how you slice it. If it seems like the guy who's making ten times that isn't contributing a commensurate amount over what you do, well, welcome to reality. Especially the reality of trading and finance.

      --

      The enemies of Democracy are
    2. Re:Bosses earn too much by American+AC+in+Paris · · Score: 5, Insightful

      Heh. It isn't risky to run a Fortune 500 company. It doesn't matter how well or how poorly you do; you're guaranteed to make enough money to lead a rather lavish life several times over. Carly Fiorina seems to be doing just fine, despite having driven HP into a brick wall. Tony Hayward may not have much of a future with BP, but you'd better believe that he's already "got his life back." The only risk you run is having to wrestle with the demons you create when your actions destroy the lives of other people, and while I'm sure that's an absolutely miserable thing to have to do, it sure as hell beats being one of those other people whose life is, y'know, destroyed because somebody other than themselves fucked up.

      If you're running a successful financial firm, "risk" simply doesn't exist for you, at a personal level. It's why so many financial firms so royally fucked up; the cost of failure is borne by your clients and your employees. All you need to do is go before a Congressional panel and say how very sorry you are.

      Hell, you don't even need to say that.

      --

      Obliteracy: Words with explosions

    3. Re:Bosses earn too much by john.r.strohm · · Score: 5, Insightful

      No, they are not "sucking money out of the system". They are CIRCULATING money in the system.

      Economics 101: Money has no intrinsic value. By itself, outside the financial system, it is pretty pieces of colored, printed paper. Inside the system, it is an agreement to exchange goods and services for other goods and services.

      Assume that our uber-bloodsucker takes down a few million and buys a yacht. Guess what? He's paying the salaries for the people who build that yacht, the people who maintain it, the people who crew it, the people who run the marinas. All of them are now working, doing things they (typically) enjoy more than digging ditches on a road crew somewhere, and putting food on THEIR tables.

      Say he takes a vacation trip to, oh, say, Rio. He's paying the salaries for the guys at Boeing, who built the airplane. He's paying the salaries for the ramp rats at JFK. He's paying the salaries for the guys at the oil company who refined the fuel for the airplane. All of them continue to work and put food on their tables.

      They get the big bucks, compared to the Java weenies you see immortalized in thedailywtf.com, because they generate high returns for their employers. Their employers, in turn, get bigger bucks for taking bigger risks than the programmers do. All of them cause money to CIRCULATE in the economy, in the never-ending exchanges of goods and services.

      If you don't like it that someone else is making more money than you are, well, maybe you should have taken the tougher classes in school.

      Also note: part of the price for being a high-frequency programmer is generally living and working in New York City. It ain't all roses.

    4. Re:Bosses earn too much by spiffmastercow · · Score: 5, Insightful

      But here's the thing.. The money is circulating for no particular reason. There are not goods and services being exchanged in the frequent trading financial sector. It's a casino with the house skimming off the top. Banks could exist and function perfectly well without Wall Street. They would just have to back to traditional usury rather than bald-faced fraud.

    5. Re:Bosses earn too much by Aceticon · · Score: 5, Insightful

      We're talking about Hedge Funds here, so their bosses are in fact ex-Traders, ex-Sales and ex-Analysts from big investment banks and such.

      - The reason why they are the bosses of the hedge funds is that they had millions of dollars to start their hedge funds, business contacts to get extra founds at low cost and already potential customers lined up from their time with the big banks.
      - The reason they made millions of dollars in the first place is because they got fat bonuses in their previous job.
      - The reason they got their bonuses is because they were lucky: I work in the industry and I know what I see. Also, studies show that the best performing hedge funds in one year are less likelly to be in the top the following years - in other words, hedge funds are not consistent in their performance, which indicates that chance, not skill is what determines most of their it.

      Keep in mind that, most of the money made in Investment Banking is of the rent-seeking variety, such as:
      - Decieve your customers by creating and selling them strange, complex and expensive derivatives to protect them from a certain risk when they could get equivalent protections from buying cheap standard products from the market.
      - Get yourself in the middle of a transaction and take a cut. The transaction would occur anyway if u weren't there but either it would be cheaper for the buyer or more profitable for the seller.
      - Get 20x your core capital in cheap loans (thanks to low interest rates and an implicit government guarantee). Invest those 21x core-capital in safe, low return instruments (say, 5% yield bonds). At the end cash it, repay loan, post more than 100% returns on your core capital (since the 5% return was applied to the 20x loan + 1x core capital), pay traders big bonuses for their "skill".

      Essentially Investment Banking (and Hedge Funds) are the posh version of the Car Mechanic: professionals in the business use their superior knowledge of how finance works to decieve the customers (which are not specialists in that domain) to think that what they really need to "fix the problem" is something a lot more expensive that what is actually needed.

      This would be alright if it wasn't for the fact that some of their customers are the managers of things like pension funds which (mis)manage our money and "invest" it through those guys instead of doing the due dilligence themselves to figure out that the average return after comissions and costs of a hedge fund is lower than the return on major market indexes (which you can get cheaply via ETFs).

      So:
      - Guys that started working in an industry which is mostly parasitic got lucky and made millions in bonuses.
      - They used those millions, plus the contacts they created while working in that industry to setup a company and make money directly from the suckers^H^H^H^H^H^H^Hcustomers instead of via bonuses.
      - They setup systems (i.e. auto-trading) that allow them to insert themselves into and get a cut from other people's trades because their systems are faster reacting to the market than other traders since they're located next to the exchanges and react within milliseconds.
      - Add to this that in many cases, after they left their big bank jobs their old employer lost money on their bets and had to be rescued by the state using our tax money.

      There are plenty of bosses out there that one can respect for having real risks and clawed their way to success by creating companies that provided real products/services to their customers but these guys ain't it.

      These guys are more like pimps that made enough from forcing junkies to prostitute themselves that they could afford to open a brothel.

    6. Re:Bosses earn too much by daem0n1x · · Score: 5, Insightful

      No, they'll probably transfer most of it to fiscal havens, helping to fund drug lords and terrorists.

      Have you heard about the Broken Window Fallacy? If these guys get money for nothing and recirculate it, the overall economy in the end gains nothing. The money that passes though these guys could have been used to produce useful goods and services instead of feeding the pleasures of fat greedy pigs.

    7. Re:Bosses earn too much by JoesRagingBileDuct · · Score: 5, Insightful

      The problem with this free market fantasy is that its not actually reflective of what reality nor does it come up with an ideal productivity.

      Lets take the 100k/day guy. He makes 3.65 million a year. He's only going to buy 1 yacht with that because he only needs one at a time. Maybe that costs 1M, the rest goes in the bank or into derivatives trading or currency trading or into his bath tub so he can bathe in it. This is all financial masturbation, it doesn't really produce anything. So saying that making that much money ends up circulating it a fallacy because it only ends up circulating amongst the other financial types and not the economy as a whole.

      "But he did end up paying for the boat" you say, "he employed all those people". OK, but lets compare that to what would happen otherwise. Making the yacht gives a few artisans a fairly decent amount of income once in a year. If you take that 3 million and give it to 10k poor or middle class people (in the form of salary for actual work done), they will spend *all* of it. Why? Because they are not flush with cash and have lots of things they could buy including things they have been needing but have been putting off buying because they didn't have the cash. So you have circulated a lot more money to a lot more people, and since the money is going into buying things that are useful to more people (as opposed to yachts) the business that flourish are the ones that actually mean something to society and the economy. And you get bonus points for actually making more stuff that has more value.

      Those people making all the goods also end up buying things to make the goods, so there is a multiplier effect happening. Now you have can compare a smaller base ($1M vs $3.65M) and a smaller multiplier (yachts need wood, paint, canvas and a small number of other parts vs the wide variety of other things that people would buy with the money such as cars, TVs mobile phones, college text books, groceries etc which are lower margin items that require a lot more investment into their production ) and you end up contributing a LOT less to the GDP as Mr. $3.65M than you do if that money was more evenly distributed.

      Not to mention the fact that there is no way that guy deserves to get 100 times the pay. He's not 100 X smarter nor is he 100 X more hard working. Given the recent financial troubles it is rather easy to argue for the reverse. So now you are rewarding the wrong person a disproportionate amount in a way that hurts the economy relative to doing it the right way.

      Congrats.

      People really ought to stop thinking that they are going to become rich one day. It skews their perception of whats happening in the real world and makes applaud the people who are taking advantage of them.

  2. Re:Yet...he agreed to it right? by DarkKnightRadick · · Score: 5, Insightful

    It's been my experience that pay is not as negotiable as everyone thinks it is.

    --
    "There is a way that seems right to a man, but its end is the way of death." Proverbs 16:25 (NKJV)
  3. Good news by sco08y · · Score: 5, Insightful

    FTFA:

    "Now some programmers feel used and are instigating a revolt.

    They are doing so by striking out on their own or forming profit-sharing arrangements."

    That's hardly "whining," in fact it's precisely what they ought to do.

    The outstanding part is that Forbes is recognizing this. We all know that folks in IT are underpaid in many professions, but the proof is when people actually say "fuck you" and go work elsewhere. That will *force* salaries up to the real market rate. And when publications like Forbes notice this, it's harder for managers to pretend it's not happening.

    Thank you, to the ladies and gentlemen who struck out on their own, and thank you to Forbes for noticing. Both of these will make life a little better for the rest of us.

  4. Re:it depends on where the value is by asukasoryu · · Score: 5, Insightful

    I agree here. Does the algorithm do everything on its own and the programmer's bosses have no input? I'll bet the software is a very small piece of the money-making picture. Was the programmer provided with any resources to write that algorithm? Could the programmer write the algorithm on his own, freelance style, and sell it to the company? I doubt it. Maybe these programmers deserve a raise, and the bosses probably get paid too much, but this is a one-sided story.

    --
    There are more things in heaven and earth than are dreamt of in your philosophy.
  5. Re:Right... by mcb · · Score: 5, Insightful

    Algorithmic trading is not effective if you have to pay commission on your trades. Their software only works if it's used by a corporation with
    1) network connections to stock exchanges
    2) seats on those exchanges, which allows stock to be traded directly instead of through a broker

  6. Re:Somebody call the waaaambulance by daem0n1x · · Score: 5, Insightful

    It annoys me like hell that people use this kind of arguments.

    Maybe they are excellent programmers, but bad business men. It doesn't mean they deserve to have their blood sucked from them.

    If you shift all the income from the workers to the managers, everybody will want to make business, and there'll be nobody left to do some work.

  7. None of them should be making any money by kidcharles · · Score: 5, Insightful

    Those programmers and those brokers are doing nothing of worth to society. They are just playing games with currency. If our government wasn't in complete collusion with Wall Street, millisecond trading would be illegal. The issue isn't that the programmers aren't making enough money, it's that their jobs and the jobs of their bosses should not even exist.

    --
    Ceci n'est pas une sig.
    1. Re:None of them should be making any money by DavidTC · · Score: 5, Insightful

      Indeed.

      People shouldn't be allowed to own parts of a company for intervals of less than a month, at minimum. I'd make an analogy here, except there's nothing in society we let people buy and sell that fast, certainly not giant entities....I'd like to see someone try to buy a house and resell it ten milliseconds later. I'd like to see someone buy a can of soda and resell it ten millisecond later!

      What happens on Wall Street is simply a fancy game of roulette. Which is fine, I've got nothing against gambling, except they're playing roulette with ownership of the economy, and the only place people can actually invest in the economy.

      --
      If corporations are people, aren't stockholders guilty of slavery?
  8. Re:Somebody call the waaaambulance by jason.sweet · · Score: 5, Insightful

    Wow! It's amazing what you learn when you actually read the article. I should do it more often.
    These guys are not whining about the situation, they are actively taking measures to fix it.

  9. Re:Somebody call the waaaambulance by ArcherB · · Score: 5, Insightful

    Did someone order waaaaaamburgers and french cries?

    And you really think the colleagues using the software were footing the bill? Bullshit. It's about time developers stood up and demanded compensation for their inventions instead of letting idiot stock traders reap the rewards by pushing a few buttons.

    The stock traders make what they do because they know what buttons to push and when. If they push the wrong button at the wrong time, they stand to lose millions for their clients and themselves. These programs have no idea as to when to buy, sell or hold. All they do is retrieve data and analyze it into reports. It's up to the trader to know what to do with it.

    If being an "idiot stock trader" who makes millions is so easy, why aren't you doing it? You can push a few buttons, right?

    --
    There is no "I disagree" mod for a reason. Flamebait, Troll, and Overrated are not substitutes.
  10. America by betterunixthanunix · · Score: 5, Insightful

    Hi, you must be new to America. Here, money is more important than life, ethics, or anything else.

    --
    Palm trees and 8
  11. Re:waaaaaaambulance by Stargoat · · Score: 5, Insightful

    You seem to be mistaking a little bit of coding with the work that is actually being done.

    The programmers in this article are not dumb fuck meth addicts building a website and writing a little bit of Flash or C++ or even guys with EE or CS majors, but rather tend to be Economic or Statistic PhDs from Northwestern, UC, and other major programs. From the article, Sergey Aleynikov, according to his LinkedIn pagelike, has at least a masters from Rutgers and likely a PhD.

    The programmers are working with SAS and other powerful statistical software that on their own is easy enough to learn. But these programmers are applying what the learned in their PhD studies to create trading and marketing strategies and then create proof of the trading and marketing strategies. They are making their companies millions and get paid very little because "they are only programmers".

    They have every right to not be particularly happy. The programmers, these economics PhDs, know their worth and it isn't 125k a year.

    Also, there is an increasing tendency in American business culture to undervalue the PhD as a foreigner or nerd degree and require anyone who makes real money to have an MBA.

    --
    Hoist Number One and Number Six.
  12. Re:Somebody call the waaaambulance by Dhalka226 · · Score: 5, Insightful

    Only on Slashdot can a $100,000-$150,000 salary be described as "[having] their blood sucked from them." Wow.