I bet you’re really good at your job.
Maybe you’re super productive and everyone likes you… but your boss hasn’t given you a raise in a while.
It’s a common predicament—I’d say 99% of people think they’re underpaid. So today I’m going to share my favorite Wall Street story, because it’s a great lesson in how to negotiate a raise.
Years ago, when I was working at Lehman Brothers, there was a young kid over in the bond division. We’ll call him “Jay Knight.”
Jay was 24 years old, he went to Harvard, and he was apprenticing under an old bond salesman. The old bond salesman taught him everything he knew and gave him all his accounts. So he had a lot of responsibility for a 24-year-old.
One day, Jay raises his hand and says he wants to trade. So the higher-ups let him trade two-year Treasury notes.
Now, the most you could make for the firm doing that was maybe $4 million. Nevertheless, one year later, Jay had made $20 million.
So he goes in to ask for a bonus, and the bosses say, “How in the world did you make 20 million bucks?”
Jay answers, “Well, I was doing some other trades on the side.”
And the bosses say, “We don’t want you to do that anymore. We just want you to trade the two-year note.”
So Jay quits. He walks out.
And they chase after him! “Oh, wait a minute. Let’s figure this out.”
Jay says he wants to trade full time—basically proprietary trading. They don’t want to let him because he’s only 24. But they give him a supervisor and let him do his thing.
The next year Jay comes back, and he’s made $60 million for the firm. The bosses say, “Good job, Jay.”
And he says, “Okay. I want to trade in Miami.”
The bosses don’t like the idea. “That’s preposterous. We can’t let you trade in Miami. Nobody’s done that before.”
So he quits—again. And once again they chase after him. “Wait a minute! We can work something out.”
Jay says, “Okay, I want to move to Miami, and I want 15% of the profits.” So he moves down to Miami, and the next year he makes $80 million for the firm.
He comes back to New York every once in a while, walking around the office in a Don Johnson-style white suit. No socks, smoking and joking with people.
At this point he’s 27 years old. He’s single, living in Miami, and making $12 million a year—his 15% take on $80 million.
Fast forward to 2008, and he’s making somewhere in the neighborhood of $500 million a year for the firm, so $80 million a year for himself on that 15% deal.
Then he basically retires for a decade.
Obviously, Jay was a very gifted trader. But his real genius was that, at age 24, he was confident enough to walk out.
He didn’t just threaten to do it. He actually walked out. That was his negotiating tactic. It’s what got him to Miami and got him the 15% deal, which is unheard of on Wall Street.
Yes, he made a ton of money. But his ability to negotiate was the really incredible part.
If you want to make more money, start by asking for a raise.
We’ve talked about this before. If you’re doing a good job and the money is there, you’ll probably get it. But you have to be direct and ask. Sometimes it really is that simple.
And sometimes it’s not.
If your boss blows you off or the raise is too small, I suggest applying for a different, higher-paying job. Then go back to your boss and say, “Look, I really like working here, but so-and-so offered me a better position and 20% more money. It’s a really attractive offer, so my last day will be on the 25th.”
If they want to keep you, they’ll say something like, “Oh, that’s too bad. Is there anything we could do to change your mind?”
At that point, spell out what you want. Maybe you say, “Actually, I’d like $20,000 more and the option to work from home on Wednesday afternoons.”
Or, “Yes, I’d like to head up my own team and pass off most of my admin work to an assistant. I’d also like a 25% raise.”
Make a list of everything you’d get in a perfect world. More money, more vacation, access to a company car, dry cleaning reimbursement, better flexibility—whatever matters to you. Then ask for two or three of the most important items on your list. (One should be more money.)
If they don’t agree, you move on to the new job.
Of course, don’t be a jerk about it. But remember, this only works if you’re prepared to follow through and leave.
A lot of people won’t negotiate on their own behalf because it’s scary.
I get it—it is scary to walk away. Because it’s not just the job. It’s the community. It’s all your friends. A lot of people aren’t willing to blow all that up for more money.
But if you want more money… well, I just showed you one way to get it.