Employment derivatives: Difference between revisions

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 {{a|myth|{{image|Ironmountain1|jpg|}}}}{{d|Employment derivatives|/ɪmˈplɔɪmənt dɪˈrɪvətɪvz/|n|}}Financial instruments designed to manage the risk of employment variability. First developed in the early part of this millennium by derivatives pioneer and perennial boiler of pots, {{author|Hunter Barkley}}.
 ====Genesis====
-{{Drop|W|hen midway through}} midway through his customary annual rant about the meaningless of his life as viewed through the lens of his pay packet, it struck Barkley — an amateur [[fi-fi]] novelist, financial services naturalist and tiresome windbag, not in that order — that just as his own fortunes at work were a material, unhedged contingency in his life having little to do with how good he was at it (his work, or life for that matter), so too were everyone else’s.
+{{Drop|W|hen midway through}} midway through his customary annual rant about the meaningless of his life as viewed through the lens of his pay packet, it struck Barkley — an amateur [[fi-fi]] novelist, financial services naturalist and tiresome windbag, not in that order — that just as his own fortunes at work were a material, unhedged contingency in his life having little to do with how good he was at it (his work, or life for that matter), so too waa everyone else’s.
-This included, at far greater scale, his employer. Barkley believed himself, rightly, to be short an ugly [[option]] to the Man. But by the same token a good-sized bank would have an annual ''variance'' in its total wage bill, even before accounting for ''changes'' in in its staff, in the ''billions'' of dollars.<ref>The maths was like so: assume 40,000 people at an average total compensation of about $300,000, with a ratio of discretionary to fixed of between 20% and 50%</ref>
+This included, at far greater scale, his employer. Barkley believed himself, rightly, to be short an ugly [[option]] to the Man. But by the same, token so too was the Man short an option to crowd hysteria.
-This variance bore little relation to the bank’s own performance, none to its employees, and a lot with ''everyone else’s'' performance. The ''market''. [[Human resources|Human capital management]] trading staff were apt to talk about “benchmarking”, as if there were some indexed rate.
+A good-sized bank would have an annual ''variance'' in its total wage bill, even before accounting for ''changes'' in in its staff, in the ''billions'' of dollars.<ref>The maths was like so: assume 40,000 people at an average total compensation of about $300,000, with a ratio of discretionary to fixed of between 20% and 50%</ref>
-''Perhaps there should be'', reasoned Barkley. It was easy enough to calculate this variance, but ''knowing'' about it was a different thing to ''managing'' it.
+This bore little relation to the bank’s own performance, none to its employees’, and a lot with how ''other'' employers were doing in adjacent sectors.
-Barkley reasoned that different types of firm were “long” or “short” the babbling hysteria drove the employment market.  Barkley called the measure of this “madness” characteristic ''π<ref>From the Greek παράνοια, (''paranoia''). It was also pleasing that it conveyed sentiments of going around in a circle, running on a hamster wheel and so on, all of which Barkley recognised to be fundamental properties of the employment relationship.</ref>''. At its onset, “legacy”, “bricks-and-mortar”, “trad-fi” firms were typically short ''π'' and start-ups long. As the lunacy tailed off and employment relations [[Mean reversion|reverted to mean]], the ''π'' curve would invert. If one could only match off a long and a short firm, they each could hedge changes in π.
+Barkley reasoned that different types of firm were “long” or “short” the babbling hysteria that drove the employment market.  Barkley called the measure of this “madness” characteristic ''π<ref>From the Greek παράνοια, (''paranoia''). It was also pleasing that it conveyed sentiments of going around in a circle, running on a hamster wheel and so on, all of which Barkley recognised to be fundamental properties of the employment relationship.</ref>''. At its onset, “legacy”, “bricks-and-mortar”, “trad-fi” firms were typically short ''π'' and start-ups long. As the lunacy tailed off and employment relations [[Mean reversion|reverted to mean]], the ''π'' curve would invert. If one could only match off a long and a short firm, they each could hedge changes in π.
-Instinctively, Barkley knew there was something in this but could not figure out a way of monetising it. In one of the cruel ironies to whose cadence his unremarkable life kept time, Barkley was laid off shortly afterwards and obliged to seek restaurant work as he worked by night on his novels.
+[[Human resources|Human capital management]] trading staff were apt to talk about “benchmarking”, as if there were some indexed rate.
-==== The first ERS ====
+''Perhaps there should be'', reasoned Barkley. It was easy enough to calculate this variance, but ''knowing'' about it was a different thing to ''managing'' it. Instinctively, he knew there was something in this idea but could not figure out a way of monetising it.
+In one of the cruel ironies to whose cadence his unremarkable life kept time, Barkley was laid off shortly afterwards and obliged to find work wiping tables by night as he worked on his novels and developed his derivative ideas
+==== The first [[employment rate swap]] ====
 {{Drop|B|arkley’s fortunes would}} change following a chance encounter in an upscale cocktail bar in West London. As she neared her [[Schwarzschild radius of alcohol consumption|gin horizon]], [[Wickliffe Hampton Asset Management|Wickliffe Hampton]]’s Chief Operating Officer Anita Dochter bellyached to her former trainee, now [[lexrifyly]]’s CEO, [[Cass Mälstrom]].
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 It was easy enough to quantify Wickliffe Hampton’s presumptive wage bill: it was more or less static. But what about lexrifyly’s fantastical aspirations? How to gauge those in real time? And could not lexrifyly game this very easily, by just pretending its wage bill was lower?
 ====The “LIEBOR” submission process====
 {{Drop|W|hat was needed}}, Barkley reasoned, was an observable, objective measure of startup insanity, ''π''. He had just the means for achieving it. Under the auspices of the British Human Capital Managers’ Association (BHCMA) a committee of fashionable startups would meet each afternoon in a WeWork in Shoreditch for an kombucha martini and to state publicly, in front of a live panel of venture capitalists, how much they would be prepared to pay an underperforming settlements and reconciliations specialist to join them and drive customer engagement.