Best Email Ever

OK,

I've used "Best Email Ever" way too many times for that headline to be credible. But really, this is pretty good stuff.  Here's a snipet from a post on The Big Picture (Barry Ritholtz's blog) (link):

“The old pay system (era of John Whitehead): you work at an investment bank for 30 years, have a reasonable draw and cash bonus, build up stock in the firm as most of your bonus, and when you decide to retire you request of the partners their permission to go limited. If they assent, you get to withdraw your money over five years, all the while continuing to expose the balance to the risks of the enterprise.

The new pay system post-Donald Lufkin Jenrette’s original I.P.O.: you’re a young 29-year-old punk playing with OPM (Other People’s Money), taking huge risks for which you get huge bonuses, while the outsiders shoulder the losses on your bets. You make all the money you’ll ever need in three years, stay around 15 years to pile up five times as much as you need, and then you retire with your cash hoard, buy a winery in Napa/Sonoma or a huge farm in Connecticut, living above the fray for the rest of your life.

Which system, do you think, makes people consider the downside of their actions?”

That explains a ton.  Really, it doesn't much insight into human behavior to see how badly the incentives line up here.  It wasn't just a housing crisis that brought us to the brink in 2008.