Twenty years ago, financial industry salaries were a tiny fraction of what they are today. Did lesser people do the work? Did they try less hard? Think smaller thoughts? Of course not. The reasons salaries are high is that the number is a signaling mechanism, a very expensive marketing campaign.

Law firms went through this cycle twenty years ago. The top firms competed with each other to recruit a too-small pool of talent from the top law schools. Unable to muster up even a mite of marketing insight, they chose to compete on only one axis: salary. So, 24 year olds were given jobs at $120,000 a year, when their peers from college were making 20% of that. The firms could have found great people at half the price, except that with only one axis, they had to be at the top if their peers were.nullnull