Employment derivatives: Difference between revisions

{{Drop|W|hen yet another}} junior customer services manager quit for a crypto startup, Hunter Barkley had an epiphany. His own salary, he knew, was an unhedged contingency apt to rain disappointment across his meagre aspirations. However much he liked his job — it had its fleeting moments of passable distraction — and however good he was at it, he had little practical control over how much he was paid to do it. He was, in the argot, structurally long an option to the market, though one that was stubbornly, deeply, out of the money. In a time of expansion or innovation, when demand was high, his salary ''should'' ratchet up in pleasing annual notches. In times of recession it would not. The record of his own payslips reflected a great preponderance of stagnation.  

This dispiriting experience, he supposed, was common to the great, dreary sweep of humankind as it clambered blearily across the clanking gears of industry. There was only one way to medicate, and that was catch one of the waves of hysteria that periodically swept the market, and quit. Barkley was no surfer.

Firms — particularly boring ones — were ''short'' what their servants were ''long'', only at far greater scale. As the hype-cycle crested and troughed, unglamorous firms bobbed ineptly upon Hysterion’s fickle ebb and flow.

One who deploys a turgid multitude to turn its tiresome wheels — a good-sized bank, say — is locked in constant struggle with the tide of batty expectation just to save its personnel from being washed to sea.   

Stemming this outward stampede could cost a bank ''billions'' of dollars. Then, as inflated expectations foundered, the tide would turn. Throngs of good workers would be suddenly available on the cheap. Firms could of course rebalance by tactical redundancy, but that was expensive and tended to dent morale somewhat.

In any case, this “employment cost volatility” bore little relation to the bank’s own performance and none at all to its employees’. It was a simple measure of that background market euphoria.  

{{drop|H|unter Barkley was}} a junior [[interest rate swap]]s trader. His experience gave him an idea. ''Why not hedge away this volatility?'' Different sectors were “long” or “short” this babbling hysteria, which he labelled ''[[π]]'', at different points in the cycle. (“[[Π]]” came from the Greek παράνοια, (''paranoia''), and conveyed the pleasing idea of not just madness but circularity, running on a hamster wheel and so on — all fundamental properties of the employment relationship.)  

At its onset, “[[Trad fi|trad-fi]]” firms are [[Short|''short'']], and delusional start-ups, [[Long|''long'']] ''[[π]]''. Eventually the lunacy levels off, reality sets in and employment relations [[Mean regression|regress to mean]], whereupon the ''[[π]]'' curve flattens and then inverts.  

If one could only match off long and short exposures across the cycle, Barkley realised, firms on either side of the bid could hedge their exposure to [[π]].   

In one of those cruel ironies to whose martial cadence life keeps time, before he could monetise his idea, Hunter Barkley was laid off and, shortly afterwards, imprisoned for manipulating [[LIBOR]].

Indeed, Mälstrom herself was one: not three months earlier she had been bid away from a [[workstream lead]] role in the firm’s client money compliance change management programme. She was now [[Co-head|Co-deputy CIO]] of [[legaltech]] darling [[lexrifyly]].

[[lexrifyly]] was flush with stupid amounts of cash and a great elevator pitch but had no product to speak of, no business model, no customers and no obvious plan beyond maintaining a healthy burn rate. Poaching ex-colleagues turned out to be Mälstrom’s sole function.

Dochter was livid. “We ''need'' our people, Cass. They do productive things. You know, [[MIS]] reports. [[Steerco]] [[deck]]s. Operational [[deep dive]]s. [[Netting]] audits. Who will lead the client money remediation programme workstream? Who will manage the [[risk taxonomy]]? Unless we pay ''your'' stupid rates, which we cannot afford to do —” at this point, she fell off her stool briefly — “and give everyone free fruit, safe spaces and a soft play area, they won’t stay with us. But, ''you'',” she hissed, clambering back up and jabbing [[Cass Mälstrom|Mälstrom]] on the lapel, “right now, ''you'' don’t need ''any'' staff. You just need to show your investors you are on point doing fashionably insane things. That does not take actual staff. So stop taking ours.”

As luck would have it Hunter Barkley, fresh out of gaol and making ends meet waiting tables, was rostered on at ''[[Chez Guevara]]'' that evening. Presenting them with the check and some after-dinner mints, he cleared his throat.

“Forgive me, but I couldn’t help overhearing. If you don’t want to lose staff —