Fancy getting a bonus of $300m. You’d think you were really special wouldn’t you? Adam Levinson, who has apparently just been given a stock option package worth just that by his employers, Fortress Investment Group, clearly does. According to the Evening Standard, he has “defended the award”, saying that he spends more than 12 hours a day in the office and takes phone calls even when he is not in the office. “On a good day it’s a couple of calls overnight. On a bad one, it’s seven.” So it’s just like being, say, a midwife, then? Except for the fact that midwives don’t often get to live in loft apartments in Manhattan or have the time to become “regulars on the social scene”, practise “Mysore yoga” every morning and visit the gym every afternoon.
The problem with the I-work-so-hard defence, which is much used in all areas of the City, is that it’s really no defence at all. Think of the one-parent families working two jobs to pay a credit-crunch mortgage, or perhaps of everyone who does 10-12 hours in a formal job and then all their own cooking and housework too (I’m guessing Levinson isn’t one of these). Most people work hard. And lots of people work many more than 12 hours a day. But none of them either get paid millions, or somehow think their long hours make them worth millions. The truth is that the only excuse for being “worth” $300m is being brilliantly clever in a way most people aren’t and can never hope to be.
So is Levinson that clever? He might be, but I rather doubt it. Richard Dawkins, in a documentary screened this week (The Genius of Darwin), interviewed someone who reminded him of how easily the successful confuse skill with luck. Imagine, he said, a huge room full of people tossing coins. Eventually one will get ten heads in a row. Ask him how he did it and he won’t tell you that it was statistically inevitable. No, he’ll tell you about his special timing, secret wrist flick and thumb exercise routine. He might even go on to write a book about it all.
And so it very often is with fund managers. Some of them probably have a better insight into markets than others, but the majority of those considered successful have done well simply by chance, whatever they might like to think. After a while they then mostly start to underperform, just as Levinson has. Despite all the hard work, it seems his special wrist flick isn’t working as well as it was these days: Fortress’s macro fund – for which Levinson is responsible – actually fell 2% in the first half of 2008, says Breakingviews. That’s not bad, given that the Dow Jones was down around 12% over the same period. But it still isn’t exactly the positive absolute return the hedge-fund world likes to tell us it can make regardless of market conditions. And I’m not sure it represents $300m worth of value either.