In 1998, I was riding in a taxicab in New York City with a friend named Eric, a Managing Director in Investment Banking. Although we were both in our early thirties, he was significantly more experienced in the business because he joined immediately following college, and I had spent ten years in the Army and pursuing my MBA.
At some point in the conversation, he leaned over and told me about his buddy at a competing firm who was disappointed with his annual bonus pay.
“Man, my friend just got screwed…they only paid him $675,000 this year. He is not happy, and thinking about leaving.”
I almost choked on the bottled water that I was sipping on.
“What did you say? $675,000! That is a lot of money. Eric, are you demented?”
He broke out in laughter that must have continued for five to ten minutes.
I couldn’t believe that someone who was fortunate to make that kind of loot could be considered “screwed”, because I was still thinking about compensation from the perspective of an Army soldier.
The top ranked officer in the U.S. Military in 1998, The Chairman of The Joint Chiefs of Staff General John Shalikashvili, was making less than $300,000, if I remember correctly.
Once he gathered himself, he shared the underlying logic of his shocking statement.
“My buddy generated tens of millions of dollars in revenue for his bank this year, so he deserves to be rewarded commensurate with his production…and that is why he is unhappy with his annual compensation.”
Eric’s analysis was correct, because the value of a business is based primarily on the earnings. If the earnings of the business can be clearly attributed to individual revenue generators, then they will likely be compensated accordingly.
If you want to make a lot of money, you must find a way to generate a lot of income for a business, and over time, you should get paid.
This simple concept, pay for performance, can be applied to any endeavor driven by profits.
However, in many career fields without clear financial metrics, excellent performance is not rewarded with high financial compensation regardless of the work’s importance to individuals, society, or humanity.
It is not unusual for employees, or outside observers, to become frustrated with the significantly lower pay in non-revenue generating professions, or the unfair distribution of pay within an organization between the front and back-office workers.
Excellent teachers, loving caregivers, wise guidance counselors, disciplined soldiers and involved community organizers contribute tremendous value to our society.
Many believe that their pay should be based on the good that they do, and on the number of lives that they positively affect. A moral comparison of this group is often made against highly paid athletes, bankers and movie stars, with the implication that the pay should be more “equal”. I disagree with the premise, based on the need to have a wide range of rewards, beyond money, to motivate individuals with widely different life priorities.
In truth, most people in non-revenue generating professions don’t view high financial compensation as their dominant objective. I didn’t when I served the nation in the U.S. Army. If they did, they would likely not have chosen the life path.
Instead, they feel a sense of purpose and importance based on their desire to serve others, and make the community a better place. This applies to religious leaders, community volunteers, neighborhood firefighters, and many other non-profit based influencers in society.
The decision to pursue life endeavors consistent with a passion to serve others, and not motivated by money, often yields valuable rewards more durable than money.
The key is to identify your life’s purpose, strengths and interests, and then accept the rewards consistent with that life path, without expectation of unrealistic outcomes. If you determine that your ideal job will not provide large financial compensation, it may be wise to simply keep your expenses low and embrace a mindset that your happiness does not require financial wealth.
Once basic needs are met, more money may actually result in additional stress and less happiness.
“Mo’ Money, Mo’ Problems”. Biggie Smalls
Yes, having money provides us with the financial security that satisfies basic needs and creates a stable environment that enables the pursuit of happiness. However, without discipline, the increasing income often does not keep up with the rise in expenses that are necessary to fund our increasing “wants”.
More money lets us demonstrate benevolence, and contribute to worthy causes, as discussed in “The Notorious “One-Percenters”, And The Good That They Do”. Of course, the contributions instead could be deployed in the form of political lobbying for harmful causes, bribes and other non-productive causes.
More money affords exciting opportunities to travel, explore and learn about interesting subjects. However, it also makes it affordable and possible to engage in physically, mentally and emotionally destructive activities.
More money allows us to buy special gifts for loved ones, triggering the joy of giving. But it also may result in unnecessary and excessive gifts to family members that may dull their sense of reality or appreciation.
The point is that discretionary money, above the amount required for food, shelter and security, is simply a mechanism to do things, productive or destructive. The more money you possess, the greater the range of options, so most people naturally seek to earn more money.
Money’s ability to deliver personal happiness is relative to the comparison group selected.
Of course, compared to the global population, the banker who was paid $675,000 was excessively compensated. Compared to the United States population, the banker was easily in the top 1% of earners. He had no reasonable justification to feel unsatisfied with his pay relative to the overall population.
However, relative to his peer group of high revenue generators in global corporations, he was underpaid, and therefore dissatisfied with the outcome.
Consider the success story of Ursula Burns, Xerox’s recently retired CEO and Chairwoman, who grew up in a housing project on Manhattan’s Lower East Side.
Burns was raised by her single mother in a housing project. Her mother ran a daycare center out of her home and ironed shirts so that she could afford to send Ursula to Catholic school. She went to NYU, and from there became an intern at Xerox, and began her impressive ascent to the top.
Compared to her former Lower East Side residents, Catholic schoolmates and 99%+ of the global population, Ursula Burns’ 2015 compensation of $15 million is extraordinary. However, in the club of Fortune 200 CEOs, she was compensated in the bottom quartile.
I believe it is helpful to use a broad comparison groups when it comes to compensation, and as a result, you avoid the myopia that leads to the unnecessary “keeping up with the Jones” behavior.
There are unhappy, frustrated and envious people in all socio-economic classes.
I believe that wealth has very little to do with happiness (after the basic necessities are met). More so, happiness is correlated to the identification and pursuit of intriguing and worthy goals.
Many of America’s most famous people are happy and wealthy because their daily endeavors are consistent with their natural interests, passions and strengths.
Bill Gates, and his lifetime fascination with technology.
Elon Musk, and his insatiable appetite for advanced knowledge.
Warren Buffett, and his love of financial analysis and company valuation.
Oprah Winfrey, and her passion to help people, which carried from her goal to be a teacher to TV fame.
All are engaged and interested in their passions, regardless of the money.
On the other hand, people who choose to pursue opportunities just to “make lots of money” at any cost, without regard to their interests and purpose, often experience a hollowness, regret and unwanted outcomes in their middle-age years. Enter Walter White in “Breaking Bad”…
More importantly, this strategy is often unsuccessful, because the person cannot sustain the work required and time necessary to distinguish themselves to the level of high compensation.
Money matters, but not without the “finer things in life”.
The exclusive pursuit of money, without a genuine interest, is a “fool’s errand”. The lack of interest will be exposed, and the ability to compete against people who are truly interested in the job, will be difficult.
Even if the person “fakes it until he makes it”, the high compensation may not paper over the bankruptcy of the spirit, and regret may set it.
There are many rewards and blessings in life, and money is simply one of them. It is important to note that out of all the potential rewards in life, money may be the most volatile and transitory.
Money can be made or lost quickly, and should be viewed simply as a mechanism to enable your life plan. The rewards gained from a life pursing your purpose, focused on excellence, progress, service, mentorship and benevolence, will be solid and everlasting.
So…”Does Money Make You Happy?”