Previous articles on this site have delved into questions of compensation satisfaction, work/life balance, and job security in the hedge fund industry. These were explored in statistical terms using comprehensive data published in the 2018 Hedge Fund Compensation Report.

However, today’s post will look at this subject from an entirely different perspective…a theoretical perspective, known as hedonic adaption.

The Premise

Proponents of this theory suggest that happiness, whether with one’s compensation, with one’s work/life balance, or with one’s job security, ultimately returns to a baseline level of happiness. The theory acknowledges a surge in happiness when one’s compensation increases, work/life balance improves, or job security is enhanced. Sadly, these new levels of happiness are unsustainable and individuals, sooner or later, return to their baseline level of happiness even though the gains made remain intact.

The Treadmill

This hypothesis came to be known as the hedonic treadmill for exactly this reason. It seems that no matter what level of compensation, security, or balance one achieves, the level of happiness eventually returns to baseline and one must begin running, metaphorically speaking, to reacquire that previous level of happiness.

In short, enough is never enough! The Hedge Fund Compensation Report seems to support the theory. After more than a decade in print, the percentage of those expressing compensation satisfaction, contentment with work/life balance and a blissful lack of concern regarding job security reflects remarkable year-over-year consistency, with the largest swings exhibited in the job security category…understandable in the years following the financial crisis.

Some History

In 1971, two psychologists, Brickman and Campbell, published Hedonic Relativism and Planning the Good Society, which concept was known as hedonic adaption. Twenty years later, Michael Eyseneck coined the term hedonic treadmill, which more accurately reflects the nature of the phenomenon.

Obviously, the concept applies broadly to the human condition, and is not confined to the world of hedge fund professionals. However, one could easily argue that the behavior suggested by the hedonic adaption theory is a net positive for the hedge fund industry. Why? Because it means that hedge fund professionals will not choose to sit on their laurels, but rather they will strive to achieve that elusive happiness engendered by previous successes.

What about Hedge Fund Jobs?

Opportunities for employment in the hedge fund industry remain robust, particularly so for those with advanced degrees in computer science, artificial intelligence, mathematics and machine learning.

According to HFR, hedge fund starts continue to outpace closures in 2018, suggesting that opportunities for mid-level hedge fund professionals remain tepid as outlined in this earlier article.

Following the same logic outlined in the aforementioned article, entry level opportunities in the industry remain strong.

Final Thoughts

If one accepts the premise of the hedonic treadmill hypothesis, one must also accept the theory that any happiness achieved through out-sized earnings, exceptional work/life balance, and enhanced job security, will quickly fade, sharing the same fate as fame, which, we all understand, is fleeting.

The love of investing is a much better reason to pursue a career in the hedge fund industry than is happiness, which, sadly, is short-lived. Love, on the other hand, is eternal.

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Many of those who aspire to a career in the hedge fund industry believe in the necessity of an Ivy League degree. Others believe that an MBA or other advanced degree is a requirement.

While these educational attributes most assuredly enhance a CV, the absence of these attributes does not preclude employment with a hedge fund firm. A recent story written by the proud father of a young man with a Bachelor of Science in math, from a public school, who won a position in a small hedge fund firm, beating out 349 competitors for the position, illustrates this point. Of course, this is not a scenario that will play out for everyone, but there are significant takeaways from this story.

A Strong Desire to Learn

The young man who was the subject of the story, had a thirst for learning. Although he did not attend the best schools, he did manage to earn top marks in the schools he attended. His love for learning was in evidence early in his childhood, having learned to read before the age of 4 and mastering his multiplication tables in first grade.


The hero of the story was competitive…not with others, but rather, with himself, always striving to improve over his prior results.


By competing with himself rather than others, he enjoyed enhanced his opportunities to make friends and form lasting relationships. In short, good social skills.


The subject of this story had a passion in life, a passion that was relevant to the career he was pursuing. In this case, the passion was poker, which taught him to be decisive, solve problems and understand risk.

Is This a Formula for Success?

To an extent…yes. A demonstrated desire to learn, a record of continuous improvement, the ability to get along with coworkers and a passion for what one is doing are traits that any employer would find attractive. However, to suggest that this young man’s story can be replicated in the job market is naive.

The hedge fund industry is monstrously competitive. No one should forgo the opportunity to attend the most prestigious schools, attain an advanced degree and build a network in the financial sector. While all the attributes exhibited by the young man in the story are admirable and will certainly enhance his prospects, he still must compete with those who have had the benefit of the best schools, the most prestigious degrees and that remain competitive yet likable and passionate about what they do.

What about Hedge Fund Jobs?

The good news highlighted in this success story is that job seekers who lack the best of educational credentials still have employment opportunities in the hedge fund industry. Hedge fund managers are, by definition, out of the box thinkers.

The talents and positive attributes that a job seeker might possess, are more likely to be recognized and acted upon by a hedge fund than than they would be by, for example, an investment banking firm.

So…if you didn’t attend the best school or achieve the advanced degree, but have a passion for the industry, you still have the opportunity to achieve that hedge fund job.

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