I made a lot of money on Wall Street. But believe it or not, I was underpaid.

Let me start from the beginning. I was very loyal to Lehman Brothers. They were, after all, the one firm that took a chance on a poor kid from the swampy part of Connecticut when no other bank would. And Lehman took a chance on me yet again when it promoted me to the head of ETF trading. Both of those risks paid off big for the firm: Over the course of seven years, I made about $300 million for the mothership.

I was paid a small percentage of that, which is not unusual in and of itself. But relative to other ETF traders on the street, I made significantly less. And relative to other people in equity derivatives at the firm, I made a lot less. Sometimes it felt like the firm knew I was loyal and exploited that loyalty. Which is also not unusual: You should pay someone the exact amount that gets them to stay.

Salespeople at Lehman made a lot of money. I heard some stories. When I think about the level of technical sophistication it took to do my job, and the level of technical sophistication it takes to be a sales trader, there was clearly a mismatch. But what was I going to do about it?

I toyed with the idea of jumping ship at various points during my tenure. Sometime around 2007, a couple of characters from Bear Stearns reached out and invited me to drinks at the W hotel. It was the head of derivatives and an index derivatives trader. These guys were a couple of jokers. And I had heard some stories about Bear, how the firm was known for not giving people the technology and resources they needed to do their jobs. I passed on the offer and went back to being underpaid.

Overpaid or Underpaid

Is it better to be overpaid or underpaid? The knee-jerk reaction from most people is that it’s better to be overpaid. But when you are overpaid, a couple of things happen.

First, it becomes difficult to walk away. It’s hard to walk away from all that money. So, it traps you.

Second, you become a big cost center for the firm, and the incentives change. Instead of being incentivized to keep you, the firm becomes incentivized to get rid of you.

Still, more money is… better. If I had a million extra dollars from my Lehman days, compounded over time, it would add up to something significant today. And I could use that money.

If you are underpaid, you provide a lot of value to the firm—they know they’re getting a great deal, and they’ll do anything they can to keep you. But the only way to demonstrate your value to the firm is to…

…hold up the bank.

This is when you get a firm job offer at another bank, with a guaranteed level of pay, for a set amount of time. You take that offer, go back to your boss, and threaten to leave unless your firm matches or exceeds that offer.

This is high-stakes negotiation. It’s scary. Because if your intention is to stay and simply get paid more, it might backfire. The firm might decide you are simply not worth the money and let you go.

Now, you’re in the hell of guarantee-land. Sure, you’re getting paid a lot of money, but you’re hopping from bank to bank every two years. And after you get a little older, you get spit out the bottom of the banking industry and end up at some third-tier shop. I’ve seen this a million times. But… you got more money.

Long-Term Greedy

Like a lot of things in life, it is the difference between being long-term greedy and short-term greedy. But it’s hard to be long-term greedy when you’re watching your peers get paid multiples of what you are getting paid.

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Wall Street is a curious place, but there are parallels to other industries. If you are truly undervalued, the only way to find out is to… threaten to leave.

I am fond of saying that nobody is indispensable. Good organizations have contingency plans in case a key employee leaves. I ended up leaving in 2008 for no money, and it blew a big hole in the organization—my old partner on the desk was trading like a one-legged man in an ass-kicking contest for about a year.

But if you truly are indispensable, and you are woefully underpaid, the only way to get paid more is to threaten to leave—or to actually leave. It takes a great deal of courage; courage that I never had. And it takes some skill at negotiation. But the key is to recognize your value to the firm. And if you miscalculate, they will let you go.

I never had the stomach for this sort of stuff. Maybe you do. I was a company man, and I bled Lehman green. And there were other factors—the firm took such good care of me when I was going through a tough time that holding up the bank would have been an act of disloyalty.

Some things, after all, are more important than money.

Jared Dillian


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