Kidz Korner: Where Do Bonuses Come From?

Kidz Korner is a new feature here on The Reformed Broker where I explain complex financial issues to kids from the neighborhood in a simple, straightforward way.

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Little Timmy Johnson: Gee Mister, I sure do hear a lot on TV about all these bonuses people are getting…am I going to get one?

The Reformed Broker: Did you go to an Ivy League school or spend the last 5 years destroying America with exponential degrees of leverage and unquantifiable amounts of risk?

Timmy: No sir, I’m only 11.  I spent the last 5 years eating Fruit Loops and delivering newspapers.

TRB: OK, so you probably won’t be getting a bonus.

Timmy: Aw maaaaaan.  What is a bonus anyway?

TRB: A bonus is something extra you get for doing a really great job.  Like when your daddy takes you for ice cream for bringing home an A+ on a book report, that’s a bonus.

Timmy: I get it.  So these guys everyone is talking about who are gonna get millions of dollars must have done a totally amazing job, right?

TRB: Ummm, no.  Actually, they could not have done a worse job.  They would have to be really trying their hardest to screw everything up more than they actually did.  They literally cracked a hole in the universe with their incompetence and recklessness.

Timmy: Oh.  I don’t get it…so why are they getting a bonus at all, then?

TRB: Because they want one.  They always get a bonus, no matter what, because they are better than the rest of us, so they deserve it, even when they lose a lot of our money and make other people lose their jobs.

Timmy: But I thought you said that bonuses were for people who did really good things.

TRB: That’s how its supposed to work.

Timmy: So how come the other grown-ups don’t stop them?

TRB: Because the other grown-ups are fat, lazy and stupid.  They are too busy trading stocks, sending text messages and suing each other, no one is paying attention or standing up for themselves.

Timmy: That’s messed up.  You’re bumming me out, I’m gonna go finish my homework.

TRB: That’s exactly what you should do.  Finish your homework and study hard so you can get into a fancy school.  Then you can pile up all your degrees, pretend you’re a financial whiz and before you know it, we’ll be giving you bonuses too, no matter how much capital you destroy!

Timmy: That sounds awesome!  Thanks, Mister!

TRB: No problemo.