James Stewart in "
writes:
"Mathew Martoma, a former SAC trader who was accused last month of using secret informationto help SAC gain profits, was paid a $9.4 million bonus in 2008, when he was just 34. At the same time, the cost of failure can be catastrophic. When he failed to replicate that kind of information, he was fired a little more than a year later. (Mr. Martoma pleaded not guilty to the charge, and, through his lawyer, has denied any wrongdoing.)"
In a New Era of Insider Trading, It’s Risk vs. Reward Squared"
Stewart thinks this outcome is "catastrophic?" On what planet. Catastrophic might be having to pay back 18.8 million. Or going to prison for a long time. But just losing your job and keeping the 9.4 million made under suspicious circumstances? This is a catastrophe?
Stewart needs to read the final chapter of
Antifragile: Things That Gain from Disorder by
by Nassim Nicholas Taleb
that chapter is titled "Skin in the game" and in it Taleb shows that in economics and ethics, systems where people have no 'skin in the game' are extremely fragile, those where they have "soul" in the game are antifragile. Mathew Martoma had no skin in the game - he was trading SAC's money not his own and was not bound by any contract or law to make up for his losses. It was a classic "heads I win, tails you lose" situation.
To think that the prospect of losing ones job is "catastrophic" in this kind of circumstance takes, well a profound *lack* of common sense. If a 43 year old auto worker in Michigan making $65,00 loses his job when the plant closes down and he has a mortgage and 3 kids, *that* is pretty catastrophic. If someone at age 34 makes 9.4 million as a trader in year X then loses his job, he can literally live off that money for the rest of his life. Or start a business. Or get another job as a trader somewhere else. Or go back to school and get another degree. Or travel the world...or..or...or. It really takes a profound lack of common sense to think this outcome is "catastrophic".
As I said above, "catastrophic" in this instance would be jail or being forced to pay back any ill-begotten gains with damages.
Stewart needs to read the last chapter of "Antifragile" and get some common sense!
