The Man Who Makes More Money Showering Than You Do Per Year

How was your 2010? John Paulson's wasn't too bad. The hedge fund manager pulled in a personal payday of $5 billion. This comes after his 2009 pay of $2.3 billion, $2 billion in 2008, and $3.7 billion in 2007.

Average it out, and the guy has made about $100 per second over the past four years. Every second. Of every day. Of every year.

Here's how Paulson's 2010 pay compares to other professions:

Profession

Average Salary (2009)

Time It Took Paulson to Earn This Much in 2010

Biomedical engineers $82,550 9 minutes
Computer hardware engineers $101,410 11 minutes
Elementary school teachers $53,150 6 minutes
Registered nurses $66,530 7 minutes
Surgeons $219,770 23 minutes
Family and general practitioners $168,550 18 minutes
Microbiologists $71,980 8 minutes
Firefighters $47,270 5 minutes
Police and sheriff's patrol officers $55,180 6 minutes
Petroleum engineers $119,960 13 minutes
Education administrators $80,140 8 minutes
Engineering teachers $92,970 10 minutes
Emergency medical technicians and paramedics $33,020 3 minutes
Average Goldman Sachs employee $430,700 45 minutes
President Obama $400,000 42 minutes
Total GDP of the bottom 10 nations in the world $1.4 billion 3.3 Months

Sources: Bureau of Labor Statistics, Reuters, CIA World Factbook, author's calculations.

As is well known, Paulson made his money first by shorting the housing market in 2007, then switching that bet around with huge bets on Citigroup (NYSE: C  ) and Bank of America (NYSE: BAC  ) in 2009. He's also long and strong gold, with big stakes in Kinross Gold (NYSE: KGC  ) and AngloGold Ashanti (NYSE: AU  ) .

I don't think there's anything inherently wrong with Paulson's pay. If he isn't smarter than most people, he's obviously bolder. He's figured out capitalism, and good for him.

Still, I think this comment from Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) vice-chairman Charlie Munger sums the situation up nicely:

A big percentage of Cal-Tech grads are going into finance. I regard this as a regretfully bad outcome. They'll make a lot of money by clobbering customers who aren't as smart as them. It's a mistake. I look at this in terms of losses from the diversion of our best talent going into some money-grubbing exercise.

Paulson deserves whatever money he can make, but there's something tragic about our best and brightest -- the people who should be engineering airplanes and curing cancer -- choosing instead to trade derivatives and short financial bubbles.

What do you think?

Disclosure: The COO of Paulson & Co. is a member of The Motley Fool's board of directors. Fool contributor Morgan Housel owns shares of Berkshire Hathaway and B of A preferred. Berkshire Hathaway is a Motley Fool Inside Value selection. Berkshire Hathaway is a Motley Fool Stock Advisor pick. The Fool owns shares of Bank of America and Berkshire Hathaway. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (33) | Recommend This Article (48)

Comments from our Foolish Readers

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  • Report this Comment On January 31, 2011, at 12:37 PM, brickcityman wrote:

    I find it very funny that you don't mention Paulson's involvement in the fabrication of Synthetic-CDOs for the purpose of shorting them.

    I imagine there are quite a few other people in this world who would do equally as well if given the ability to rig the deck in their favor.

    This is not boldness, or a mastery of capitalism, it's the natural result of unparalleled access to the machinery of wall st.

  • Report this Comment On January 31, 2011, at 1:14 PM, prginww wrote:

    "They'll make a lot of money by clobbering customers who aren't as smart as them. It's a mistake. I look at this in terms of losses from the diversion of our best talent going into some money-grubbing exercise."

    Maybe vice-chairman Charlie Munger should resign his "money-grubbing" position, return to school, enter research and put his talent to work there.

  • Report this Comment On January 31, 2011, at 1:50 PM, XMFShirKi wrote:

    Hey Morgan,

    I absolutely agree. The incentives of a pure capitalist system are skewed. Perhaps the brightest minds in our society should be highly rewarded to go into education - investing in our future minds - including, but not limited to, financial education, so that all those finance grads would have less people to small-f-fool.

    Best,

    -Shiri

  • Report this Comment On January 31, 2011, at 1:53 PM, brickcityman wrote:

    Concur with jimofarabia, it's hard to say... Is Charlie worried about some young whipper-snapper stealing BRKs thunder? Or maybe, on the less-cynical side of things, he's just worried that BRK won't have any US companies left to conglomerate (and we all know what happens when they get tricked into investing elsewhere)? ... Surely he's not advocating that BRK change course and resume operation as a manufacturer.

    Also, and addendum to my earlier comment, I meant to say "nearly unparalleled" not "unparalleled". Buffet and Co. along with a select few should all be recognized as in a position where continued success rests as much on maintaining a pulse as it does any innate ability to pick a winner.

  • Report this Comment On January 31, 2011, at 1:54 PM, TMFHousel wrote:

    "Maybe vice-chairman Charlie Munger should resign his "money-grubbing" position, return to school, enter research and put his talent to work there."

    A colleague and I actually discussed that this morning. In Munger's defense, he didn't join the investment profession until after a long and successful career as a lawyer (although you could call that a money-grubbing exercise as well.)

    -Morgan

  • Report this Comment On January 31, 2011, at 5:30 PM, xetn wrote:

    Hey Morgan: what did you major in? Just curious.

  • Report this Comment On January 31, 2011, at 5:32 PM, TMFHousel wrote:

    Economics.

  • Report this Comment On January 31, 2011, at 5:53 PM, modeltim wrote:

    unbridled capitalism is creative destruction. No man should be allowed to make this kind of money.

    If that makes me a socialist, so be it.

  • Report this Comment On January 31, 2011, at 6:50 PM, Merton123 wrote:

    The article doesn't mention that the majority of the Hedge Funds didn't outperform the S&P 500 index this time around. Is Paulson a statistical outlier (i.e., got lucky) or was there a combination of skill and luck?

  • Report this Comment On January 31, 2011, at 7:16 PM, maccdw wrote:

    Morgan, you ignored the tax loophole which allows Paulson to pay taxes at the 15% Cap gain rate on everything over $1 million. A perfect example of what a total farce our cheese-cloth tax code is.

    Also, as with pro athletes and entertainers, etc. who are paid huge amounts--> We can't fault the individual (though we'd like to). The value system and the pay system which together allow this stuff, are neither reasonable or changeable.

  • Report this Comment On January 31, 2011, at 7:44 PM, beechtree1 wrote:

    I think what Mr Munger is saying is that it is a pity people trained at an educational institution like Cal-Tech do not put their talent into creating something useful but instead lose it making money; a commodity a printing machine can do.

  • Report this Comment On January 31, 2011, at 8:02 PM, JustEconist wrote:

    I want to second the brilliant comments by brickcityman :

    "I imagine there are quite a few other people in this world who would do equally as well if given the ability to rig the deck in their favor.

    This is not boldness, or a mastery of capitalism, it's the natural result of unparalleled access to the machinery of wall st."

    This applies also to warren buffet and many others who have the gold and make the rules and play by their rules and make more gold and so on..

    This has to be corrected before the system breaks down irrevocably.

    Equal access to information about financial markets must be an equal opportunity right added as an amendment to the constitution.

  • Report this Comment On January 31, 2011, at 8:40 PM, BruceHBi wrote:

    For reasons unclear to me, the jobs that produce the most benefit for society [teaching comes to mind] tend to pay less than jobs with somewhat less societal value. I'm a semi-retired lawyer doing a lot of pro bono work to balance out when all I did was make money. And there is nothing wrong with making money.

  • Report this Comment On January 31, 2011, at 9:08 PM, TMFHousel wrote:

    "Morgan, you ignored the tax loophole which allows Paulson to pay taxes at the 15% Cap gain rate on everything over $1 million."

    If this article were about taxes, that'd be a good point. Since it's about income, I don't see how it's relevant.

  • Report this Comment On January 31, 2011, at 10:39 PM, EGTalbot wrote:

    Bruce HBi -

    The reasons shouldn't be unclear - human beings often make choices not in their best long term interests. One of a dozen Econ 101 reasons why free markets fail to be efficient.

  • Report this Comment On January 31, 2011, at 11:11 PM, JamesRottnek wrote:

    Firstly, Paulson pays capital gains tax instead of income tax because he does not get a set amount of money every year. If he did, he would be paying income tax. This means that if he does poorly, he makes very little.

    Secondly, the reason that teachers and firefighters make less than Paulson and pro-athletes and television actors, etc., is because there are fewer people who can perform those tasks as well. Teaching is not an incredibly difficult thing to grasp (at least to the level of most of our teachers, that is, at a low level). Certainly incredible teachers are not nearly so plentiful as other teachers, but the way we pay teachers doesn't take into account their success - which, if we had a for-profit system of education (or at least just got government out of education) would not be the case. While teaching may be considered as more important than, say, Pearl Jam, Pearl Jam makes more money because they have a talent that the vast majority of the world cannot replicate even with massive amounts of practice. Also, I would suggest you keep in mind that successful artists like Pearl Jam, and pro-athletes, etc. tend to have a huge economic benefit. For every concert tour, that means jobs for (beyond just their roadies), the people employed by whatever venue hosts them, it means a bigger increase in revenues for surrounding businesses (especially food businesses), it means construction jobs because there is a reason to build large venues, and many other things you don't readily associate with artists like Pearl Jam. Not to belittle teachers, but Pearl Jam is more economically beneficial than any individual school.

  • Report this Comment On January 31, 2011, at 11:40 PM, Merton123 wrote:

    We actually have a public school system and a private school system (usually religious based) in the many of the communities throughout the United States. The public school teachers on average are paid more then the private school teachers. The private school student scores on average are better then the public school students. There are many areas where compensation and the "perceived" value of the work don't always match up. We live in an imperfect world. However, I noticed that no-one actually explained how John Paulson made so much money in the stock market? Where did he place his bets and can we the readers from Motley Fool learn anything from him?

  • Report this Comment On February 01, 2011, at 12:41 AM, aneraz wrote:

    The man is not smart but warped would be a good word. He sold the derivatives as a good investment and quietly shorted them knowing and engineering the creation and the destruction of the housing bubble. If he has made his billions putting people on the street and is happy about it, then their time would come. Oh I didn't get hurt. I am the smart one. But I bleed for the all those who did and I despair.... My helplessness to help

  • Report this Comment On February 01, 2011, at 12:53 AM, rando101 wrote:

    @Modeltim

    Federal Goverment expenditures for 2010 was $3.552 Trillion.

    Whats really scary is it takes the Federal Government 12 hours to spend 5 Billion dollars.

    an Elementary school teachers salary $53,150 is spent in 1/2 second.

    'The trouble with socialism is that eventually you run out of other people's money' - Margaret Thatcher

  • Report this Comment On February 01, 2011, at 1:02 AM, thisislabor wrote:

    No he has effectively redistributed capital from those who use it poorly (everyone else) to those who use it better (him).

  • Report this Comment On February 01, 2011, at 12:01 PM, ChrisFs wrote:

    Basing how much Paulson made per second or hour is irrevelent of course. He didn't make that money by doing a certain task within a certain period of time. He made that amount of money because he had a huge amount of money to start with. If he only had $1000 to start with in 2010, then all those professions would have beat him several times over.

    He's not much better than many people, he is simply richer, and the richer you are the easier it is to make more money. That is the telling point of capitalism if anything is.

  • Report this Comment On February 01, 2011, at 12:09 PM, ChrisFs wrote:

    Rand101,

    the point you leave out is that it spends it on items and services that benefit everyone everyday. Basic research that drives innovation, Schools and financial aid that provide the next wave of entrepreneurs, support so people don't become homeless worsening their change to add to the economic base. Insuring the safety of private property from theft and terrorist attack. All of this and more paid for with a system that strives to not overburden anyone. Any yet, when the subject for taxes on those making over $250,000 comes up, it's deemed to be an affront and a crime.

  • Report this Comment On February 01, 2011, at 3:53 PM, CJMurph wrote:

    I've thought a bit about teachers' pay being so low. I'm sure there are many factors but I believe one of the most important ones is that there is an intrinsic value to teaching.

    I think of a job as rewarding someone in two ways: 1.) A monetary reward (your pay/benefits, etc.) and 2.) The enjoyment or emotional reward (pride, perhaps) that a person gets out of doing that job. While teachers need to be educated pretty well and their job is in demand, I believe teaching has rewards that go beyond the pay. The emotional reward of seeing students succeed and to a large extent shaping young peoples' lives offers a certain kind of satisfaction. I would put Firefighters, EMT's and Police Officers in this category as well because protecting and aiding the public is very soul-enriching. I know I enjoy teaching young people. These professions offer more than just pay.

    This is of course separate from the amount of training or education required to do a job and the amount and difficulty of the work involved, but just a thought to add.

  • Report this Comment On February 02, 2011, at 12:58 AM, ET69 wrote:

    Funny how so many people keep commenting about "Socialism". I thought "Communism " was dead ...at least to the neocons ?

    The brightest students go into capitalist finance...so you are surprised? Heck why work for money when its so much easier to just exploit the hell out of people?

    Ah the "me generation" ..yes Ronald Reagan's generation have come home to roost. Ever notice how the Chinese and Indians are producing engineers and doctors and their economies are growing. What is the USA doing? Producing creeps like Paulson who would sell his mother into slavery if he could turn a profit.

    And they wonder why they shot the Czar! The recent revolutions in Tunisia and Egypt maybe just a beginning.Whose next? Greece? England? The USA?

  • Report this Comment On February 02, 2011, at 9:42 AM, TMFKris wrote:

    I think our society and our world are incredibly materiatlistic -- gotta have things, things, things. Like a new version of the iSomething every several months. And people expect to own a house when they're 25 and have a nice new car and take big vacations. It takes money to live this way, so people go where the money can be made.

    Kris -- TMF copyeditor

  • Report this Comment On February 02, 2011, at 3:49 PM, Jbay76 wrote:

    @CJMurph, I don't know how many cops or teachers you know, but the many I do know do not maintain your idea #2 past their first year of teaching. In fact, they get stuck in the teaching system where by year 5, they realize they really don't like teaching but they have a lot of seniority and are finally getting good pay (especially if you are bi-lingual), and are guaranteed benefits. Its the benefits that keeps them as teachers, not the youth/gangbangers or their parents (or lack thereof). As for cops, those I know do it becuase they like the physical work and the ability to continuously practice their particular marital arts. In real life, the "emotional reward" is non-existent, the need for a paycheck is.

    As for Paulson, the guys a scum bag who engineered this financial disaster and profitted from ti handsomely. So, I am left wondering if TMF wants to be like this scum bag? Why write an article about this guy after what he has helped create? What about Madoff? Gonna write about him next? What's really the point about this article? Why bother? What direction are you headed towards TMF?

  • Report this Comment On February 03, 2011, at 12:27 AM, linjac wrote:

    Jbay 76:

    AMEN !!!! What about it TMF?

  • Report this Comment On February 03, 2011, at 12:58 AM, whyaduck1128 wrote:

    Let's see. Charlie Munger is a bigwig for a company that makes nothing and creates no new technologies. All BRK does is invest. Now he's mad at smart kids who go into investing (or at least trading). Do I smell the faintly sickening sweet smell of hypocrisy here?

    "I'm going to make millions without adding one bit of intellectual capital to the world. You kids get your butts back to the laboratory bench!"

  • Report this Comment On February 03, 2011, at 8:20 PM, 19Patrick58 wrote:

    Do you think John Paulson is happy? I ask you all this because when I think of heaven and what that might be like, it can be encapsulated in only one word - enough. Enough is heaven, because there have been times in my life where I haven't had enough, and that's hell. That said, I must ask, how much is enough? And why is enough for John so very much more than enough for all the rest of us?

  • Report this Comment On February 05, 2011, at 4:08 AM, firemachine69 wrote:

    So someone, with good connections, who stacks the deck in his favour, is "good" at whatt he does?

    Pardon me, but my ethics are also part of my trading, of which Paulson has none.

  • Report this Comment On February 05, 2011, at 10:56 AM, eanmdphd1 wrote:

    Salaries reward people for what they do, with the implicit understanding that valued behavior / activities will follow the same.

    However, when we reward non-talent, we get the same in return.

    Intelligent people use monies in intelligent ways under the best of circumstances; greedy people use monies in greedy ways; foolish people in foolish ways....

    People do not change just because they have high salaries ... how they got it, will be how they spend it.

  • Report this Comment On February 06, 2011, at 7:37 AM, extremist wrote:

    I don't think there's anything tragic about the "best and brightest" choosing to enrich themselves instead of helping humanity -- that's simply the way the world works. Note that when they do become doctors, scientists, engineers, etc., it's also most often all about wealth and ego, as in recognition and respect by peers and others. Each such person has his own personal preferred ratio of money to fame, and chooses his career path accordingly.

  • Report this Comment On February 06, 2011, at 3:25 PM, mbmusgrove wrote:

    "Paulson deserves whatever money he can make, but there's something tragic about our best and brightest -- the people who should be engineering airplanes and curing cancer -- choosing instead to trade derivatives and short financial bubbles.

    What do you think?"

    Paulson has found his "highest and best" purpose in what he does. Yes, it would be nice if the smartest were equally as good at medicine or aeronautical engineering or anything deemed tangibly better for other humans, but they usually follow the path to what they're interested in and are compensated well for. Paulson is able to make in 23 minutes what an average surgeon makes per year, and that would be if Paulson had decided to spend many more years time in academia and could actually make it as a good doctor. Just because someone is smart doesn't mean they can do everything, and usually the opposite-they are so focused they can't do anything but a few tasks really well.

    Some people want to argue he makes no real positive impact on society, despite his success because of the nature of his business. I would be interested in how much he pays in taxes that benefit our society, and others', the philanthropic giving he has done and will do long after he is dead, and the knowledge he has been able to share with others.

    The tragedy would be if Paulson had ended up as a laborer or cashier.

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