I thought the Pareto distribution was most famously associated with 80-20? Of course you can change α to get whatever ratio you want but this is the first time I heard of the 50-1 ratio being used.
Seems like Pareto 80/20 law is not too dissimilar from powers of 2.
In binary, most significant(left most) bit is twice the magnitude of the previous bit. So that bit (or person) would contribute and get compensated accordingly.
Would also be similar to segment trees with each leaf node having a value of 1 with parents recursively summing the children?
"Jane Street has 40 “equity unit holders on a full-time basis and in good standing”, with an average tenure of 16 years" - I suspect a large portion of it would come from those 40 but that is purely a guess.
Hedge fund comp is extremely skewed. When I worked at one, in good years my boss made more than 10x what I made, and I made about 10x what my reports made.
Equity holders are probably forever, and the incentive problems are a hard thing to solve. But you won't be a founder or early joiner if you're not allowed to keep your equity anyway.
Fortunately it doesn't take that much to get top talent, because so many other companies underpay. Jane Street only has to pay out a small fraction of their PnL and doesn't even need to have a non-compete.
with a profit margin at 70%, they can afford very high pay.
And the equity holders would get diluted a bit when new employees are offered equity, but looking at the rate of profitability, each new employee more than earn their share in equity, even at the high end. Therefore, it is in fact, in the existing equity holder's interest to get diluted a bit to hire these employees, who would produce way more value (and thus increase the total value) compared to the loss in dilution!
> The real money is at the top. The bond prospectus reveals that Jane Street has 40 “equity unit holders on a full-time basis and in good standing”, with an average tenure of 16 years. Among those there will be at least a handful of billionaires, even if no Jane Streeter appears on any rich lists.
Sounds like any other partnership. A few people at the top are providing the equity and getting a profit share, and the thousands under them are getting salaries.
Typically at such companies you have to be at the very top of the hierarchy to be able to buy in and get a slice of the profits. It is very unlikely that rank and file employees are able to participate, at least at a scale larger than, say, a Google employee buying some extra shares.
> $100k buy in at the hedgefund I know. Its a big figure for most but starting salaries, friends & family, and personal loans will get you there.
Surely this is a HN culture bubble? Very few people can borrow tens of thousands of dollars from family and friends to lend to a hedge fund. Not only would I be refused, I'd damage friendships by exposing the moral vacuum at my core.
It has more to do with the nature of the industry and firm. If your TC yearly is all cash and exceeds 500k, asking 100k of that as buy in is not too different from being granted stock options as an outcome. They could just reduce your TC by 100k one year and replace it with equity in the pool.
Being able to borrow that amount might be a bubble, but depending on the fund I don't think it would damage friendships at all. If you had access to the internal Renaissance fund for example I think your friends would be happy to get in on that.
Big Canadian bank I know had something like a requirement to own $450k of shares to be a board member. But they sliding scale exempted you for your first 5 years and gave you $90k in shares each year, so as long as number go up, there was no actual outlay.
For what it's worth, a friend of mine is a lawyer in a well-known hedge fund and he gets access to their funds too (funds that would not otherwise be accessible without making a substantially larger investment I believe).
I've no idea if they feel they need this or not. But I do know that if you want to buy a significant chunk of JS (which is the context of this) then you'll need to have a lot of money to do so.
They typical reason hedge funds set minimums (aside from regulatory restrictions) is that they don't like dealing with a ton of small investors. It's easier to deal with fewer, larger ones.
In contrast, if you're a prop shop that only accepts employee money, you're already dealing with your employees.
So there's no real reason for JS et al. to set large minimums, in contrast to non-prop hedge funds.
Rentech uses this model too. The equity-to-salary ratio of an employee increases the longer they remain at the firm. It's for incentivizing employees to stick with the firm in the long run such that they don't work for any other firms and become a competitor (especially true in trading given the small population of talents).
How do you quantify, or even loosely, determine that?
What about ancillary workers who might not add any significant value to the (e.g. office janitor or HR) but supposing there’s a serious janitor or HR shortage then the org will still have to pay enough to attract someone, but what they pay is outside of their control and unrelated to the actual value to the company. And even in a worker-owned cooperative there’s still going to be in-groups and out-groups, and the in-group is incentivised to pay the out-group as little as possible as to maximise their own returns.
Plenty of companies are "employee owned" because the founders control the majority of shares. One person or a small group of people – whether they are employees or not – having total decision making power is the opposite of what worker collective means.
Like I said, please provide actual names or organizations with credible authority, such as the OED, and link the source.
EDIT: I'm not going to do this work for you and dig through all the places cited at the bottom to see if there's some source with that credible authority that proposes such a definition.
it's not a collective per se but employees are certainly well paid. because they are highly skilled, are not easily replaced, and could take secrets elsewhere.
commodities trading houses tend to follow this model too though that is changing a bit.
i remember having this discussion with a friend after he sent me a richard wolff video. nothing about our system stops coops from flourishing. one of my favorite retailers, REI, is a member-owned co-op. publix, the beloved florida grocer, is employee-owned.
I know you’re kinda joking but, The problem with socialism isn’t the voluntary organizations that people can join or leave at will, it’s the forced involuntary labor that is always brought about. Capitalism is about voluntary mutually beneficial partnerships which this is.
It also went wrong using only profitability as the only measure. Obviously an unprofitable company isn't long-term sustainable, but a maximally profitable company might not be either, as a company exists within a society and on a planet with limited resources.
> About 80 per cent of the company's capital comes from employee equity, which has swelled to $21.3bn at the end of 2023
o.O