8 ms·

Matt Levine is a great writer and he often brings insights into finance, about what the rules are exactly, and why they are that way (even though they go agains

by Tinyyy 10y ago

Matt Levine is a great writer and he often brings insights into finance, about what the rules are exactly, and why they are that way (even though they go against our intuitive judgement). I hope that people here would read 'Money Stuff' so we can avoid the inevitable morality bashing whenever a finance article is posted. The whole point of finance is maximizing profits; I think that people need to understand and accept this for us to have a meaningful discussion.

csydas 10y ago
Well, I would imagine people do understand and accept that the point of financing is profit, but that doesn't free investors or financiera from legal and moral judgement, even when the goals of both act destructively towards one another. You don't get to eschew law/judgement because it's inconvenient to your goals. I don't know enough about finance to comment on the article itself but the idea of "that's it's purpose so you can't judge it that way" rings hollow for me. Scrutiny applies regardless of purpose. The article itself even suggests there are ways the story could play out where Cooperman is guilty, it's just not clear at the moment.
wpietri 10y ago
> The whole point of finance is maximizing profits; I think that people need to understand and accept this for us to have a meaningful discussion. Former finance person here. I understand but don't accept. The individual's point may be maximizing profits. The societal point of what we reward, permit, hinder, or ban? That is definitely not maximizing profits. One way to look at it is to compare it with video games. An individual player's proximate goal might be to maximize points scored. But the game designer's goal is broader. The society's goal is broader still. One could even look at the evolutionary purpose of play itself. For those interested in this sort of distinction, I strongly recommend James Carse's "Finite and Infinite Games": https://www.amazon.com/dp/B004W3FM4A/ https://www.amazon.com/dp/B004W3FM4A/
- jacquesm 10y ago
  A game designers goal is (most of the time) to maximize his own profits.
  - simonh 10y ago
    But society's goal of maximizing the benefit (profit) to society from the Finance industry is not the same as a Finance company's goal of maximizing profit for themselves. In both cases the goals are complimentary in some ways but conflict in others and one is purely monetary while the other might be progress towards many different societal goals.
    - gaius 10y ago
      But society's goal of maximizing the benefit (profit) to society from the Finance industry is not the same as a Finance company's goal of maximizing profit for themselves. Well it is if you tax those profits, obv closing loopholes. Societies work when all the participants interests are aligned. If farmers can get rich growing crops, there will never be a famine.
      - coriny 10y ago
        > If farmers can get rich growing crops, there will never be a famine. You're not considering that food has a limited shelf life, seasonal, difficult to distribute efficiently and the customers have highly variable purchasing powers. Also local production is incredibly sensitive to local environmental variation. We already produce enough food to feed nearly twice the global population, and yet plenty of people are malnourished. I would personally suggest that the best way to prevent famines is to improve food storage and distribution methods, and have robust systems for environmental or conflict induced local famines. Though the unbalanced nature of consumer wealth is also important - it makes sense to waste 50% of your crop selling it in Europe if you can sell it for 3x as much than locally. So maybe the best thing is simply to raise the wealth of poorest people in the world?
        gaius 10y ago
blowski 10y ago
I believe the problem comes when finance does unethical things to maximise profits. Outside of finance for example, I'm fine with everyone trying to get the highest salary they can. But if you do it by telling lies about your colleagues then you don't deserve it. You earn a payrise by adding value to the production line, not by elbowing people out of the way so you take more than your fair share. This applies to finance. If you're adding value to the system, you deserve your millions. If you're just exploiting loopholes and golf-buddy connections to move money into your bank account, then you deserve all the vitriol that comes your way.
- untilHellbanned 10y ago
  Please give an example of a finance guy adding value to the system.
  - lucozade 10y ago
    > Please give an example of a finance guy adding value to the system Finance guys lend money to relatively impoverished inventors to bring their inventions to fruition. Finance guys make deals with corporations to remove financial risks e.g. foreign exchange, interest rate, corporate default, that the corporation doesn't have the expertise to be exposed to. Finance guys insure me against certain catastrophic events that would bankrupt my family should they occur uninsured. I've also heard that finance guys keep the white, fluffy cat and secret volcano residence franchises afloat but that may be apocryphal.
    - untilHellbanned 10y ago
      https://news.ycombinator.com/item?id=12577405 https://news.ycombinator.com/item?id=12577405
yodsanklai 10y ago
> The whole point of finance is maximizing profits; I think that people need to understand and accept this for us to have a meaningful discussion. If we don't agree with your axiom, we're not worth joining the discussion? Everybody agrees that regulations are an extremely important and unavoidable part of finance, even when they go against profit maximization.
- Godel_unicode 10y ago
  Those regulations are intended to maximize profits globally at the expense of decreasing them locally.
  - aninhumer 10y ago
    No, they're intended to maximise utility. Profits may or may not correspond to utility, depending on the nature of the market. And indeed, many regulations are intended to work by improving that correspondence (by internalising externalities).
Tinyyy 10y ago
I’m going to elaborate here because I can’t edit my comment anymore. I’m not arguing about whether there should or should not be regulation, but about the purpose of regulation - it’s rarely about ‘ethics’. If you look at the SEC enforcements, most of them are about fraud or about a breach of duty. Fraud - you’re not allowed to lie, that is pretty self explanatory. Breach of duty - someone else places trust in you to act in their best interests, and you violate that trust. This is broad and can be applied in variety of ways, but a duty has to be established. Other than these two and some other exceptions, you’re free to do whatever you want - and that’s to maximise your profits. Financial regulation is not and has never been about ethics. It’s about providing a market for exchange, without fear of being lied to, or worry about your agents[0] not acting in your interests. If you’re looking for equity or want to solve problems with corporations, you need to do it somewhere else. [0] https://en.wikipedia.org/wiki/Principal–agent_problem https://en.wikipedia.org/wiki/Principal–agent_problem
- the_other 10y ago
  You wrote this: > but about the purpose of regulation - it’s rarely about ‘ethics’. And then: > ... SEC enforcements, most of them are about fraud or about a breach of duty. Fraud - you’re not allowed to lie, that is pretty self explanatory. Breach of duty - someone else places trust in you to act in their best interests, and you violate that trust. Fraud and duty identify ways of operating with other people, in other words "ethics". I'd argue laws codify community agreed ethics or create a common language for debating these agreements. I think the specific argument would be better framed in terms of the standards or levels of ethics being applied, rather trying to hide a weak application of ethics behind a poorly defined role for the scope of law.
  - lallysingh 10y ago
    I interpreted that to mean that ethics is a much larger problem to solve than just avoiding fraud or breach of duty. Which is a fair argument - the law doesn't (and shouldn't) require you to be a good person, just not hurt others.
  - rayiner 10y ago
ethanbond 10y ago
Lame attitude. The purpose of war is to kill people, yet nearly everyone agrees there are some particularly bad ways to do such - some of those ways are bad solely by their shear effectiveness. The whole point of finance is maximizing profits, sure. The whole point of not "accepting" that as-is and thus regulating is because there are some particularly awful ways to make profits.
- daemin 10y ago
  The purpose of war is to get the other side to give you what you want. Killing people is just a side-effect or method to accomplish your goals.
  - TheOtherHobbes 10y ago
    In the widest sense the purpose of war is profit.
    - simonh 10y ago
      Only for largely uselessly overblown interpretations of the term profit to mean any perceived gain or advantage, or incremental progress towards any goal whatsoever.
    - daemin 10y ago
      Wars were fought for honour, various slights or (diplomatic or personal) insults, lots of reasons, not all of them profitable. In general war is not profitable to the entities that wage them.
- forgetsusername 10y ago
  >yet nearly everyone agrees there are some particularly bad ways to do such Do they, really? Ethics and rules in war are a luxury, and usually imposed by the rich and dominant. When things are truly desperate it all flies out the window. I think history (and its multitude of atrocities, including by the US) supports this view.
neximo64 10y ago
> The whole point of finance is maximizing profits; I think that people need to understand and accept this for us to have a meaningful discussion. You haven't factored in your thought that there are no monopolies in the financial world, unless they're state backed. Competition is everywhere. Competition decides the profit, not the firm.

by Tinyyy 10y ago

csydas 10y ago

Well, I would imagine people do understand and accept that the point of financing is profit, but that doesn't free investors or financiera from legal and moral judgement, even when the goals of both act destructively towards one another. You don't get to eschew law/judgement because it's inconvenient to your goals. I don't know enough about finance to comment on the article itself but the idea of "that's it's purpose so you can't judge it that way" rings hollow for me. Scrutiny applies regardless of purpose. The article itself even suggests there are ways the story could play out where Cooperman is guilty, it's just not clear at the moment.

wpietri 10y ago

> The whole point of finance is maximizing profits; I think that people need to understand and accept this for us to have a meaningful discussion. Former finance person here. I understand but don't accept. The individual's point may be maximizing profits. The societal point of what we reward, permit, hinder, or ban? That is definitely not maximizing profits. One way to look at it is to compare it with video games. An individual player's proximate goal might be to maximize points scored. But the game designer's goal is broader. The society's goal is broader still. One could even look at the evolutionary purpose of play itself. For those interested in this sort of distinction, I strongly recommend James Carse's "Finite and Infinite Games": https://www.amazon.com/dp/B004W3FM4A/ https://www.amazon.com/dp/B004W3FM4A/

jacquesm 10y ago
A game designers goal is (most of the time) to maximize his own profits.
- simonh 10y ago
  But society's goal of maximizing the benefit (profit) to society from the Finance industry is not the same as a Finance company's goal of maximizing profit for themselves. In both cases the goals are complimentary in some ways but conflict in others and one is purely monetary while the other might be progress towards many different societal goals.
  - gaius 10y ago
    But society's goal of maximizing the benefit (profit) to society from the Finance industry is not the same as a Finance company's goal of maximizing profit for themselves. Well it is if you tax those profits, obv closing loopholes. Societies work when all the participants interests are aligned. If farmers can get rich growing crops, there will never be a famine.
    - coriny 10y ago
      > If farmers can get rich growing crops, there will never be a famine. You're not considering that food has a limited shelf life, seasonal, difficult to distribute efficiently and the customers have highly variable purchasing powers. Also local production is incredibly sensitive to local environmental variation. We already produce enough food to feed nearly twice the global population, and yet plenty of people are malnourished. I would personally suggest that the best way to prevent famines is to improve food storage and distribution methods, and have robust systems for environmental or conflict induced local famines. Though the unbalanced nature of consumer wealth is also important - it makes sense to waste 50% of your crop selling it in Europe if you can sell it for 3x as much than locally. So maybe the best thing is simply to raise the wealth of poorest people in the world?
      - gaius 10y ago

blowski 10y ago

I believe the problem comes when finance does unethical things to maximise profits. Outside of finance for example, I'm fine with everyone trying to get the highest salary they can. But if you do it by telling lies about your colleagues then you don't deserve it. You earn a payrise by adding value to the production line, not by elbowing people out of the way so you take more than your fair share. This applies to finance. If you're adding value to the system, you deserve your millions. If you're just exploiting loopholes and golf-buddy connections to move money into your bank account, then you deserve all the vitriol that comes your way.

untilHellbanned 10y ago
Please give an example of a finance guy adding value to the system.
- lucozade 10y ago
  > Please give an example of a finance guy adding value to the system Finance guys lend money to relatively impoverished inventors to bring their inventions to fruition. Finance guys make deals with corporations to remove financial risks e.g. foreign exchange, interest rate, corporate default, that the corporation doesn't have the expertise to be exposed to. Finance guys insure me against certain catastrophic events that would bankrupt my family should they occur uninsured. I've also heard that finance guys keep the white, fluffy cat and secret volcano residence franchises afloat but that may be apocryphal.
  - untilHellbanned 10y ago
    https://news.ycombinator.com/item?id=12577405 https://news.ycombinator.com/item?id=12577405

yodsanklai 10y ago

> The whole point of finance is maximizing profits; I think that people need to understand and accept this for us to have a meaningful discussion. If we don't agree with your axiom, we're not worth joining the discussion? Everybody agrees that regulations are an extremely important and unavoidable part of finance, even when they go against profit maximization.

Godel_unicode 10y ago
Those regulations are intended to maximize profits globally at the expense of decreasing them locally.
- aninhumer 10y ago
  No, they're intended to maximise utility. Profits may or may not correspond to utility, depending on the nature of the market. And indeed, many regulations are intended to work by improving that correspondence (by internalising externalities).

Tinyyy 10y ago

I’m going to elaborate here because I can’t edit my comment anymore. I’m not arguing about whether there should or should not be regulation, but about the purpose of regulation - it’s rarely about ‘ethics’. If you look at the SEC enforcements, most of them are about fraud or about a breach of duty. Fraud - you’re not allowed to lie, that is pretty self explanatory. Breach of duty - someone else places trust in you to act in their best interests, and you violate that trust. This is broad and can be applied in variety of ways, but a duty has to be established. Other than these two and some other exceptions, you’re free to do whatever you want - and that’s to maximise your profits. Financial regulation is not and has never been about ethics. It’s about providing a market for exchange, without fear of being lied to, or worry about your agents[0] not acting in your interests. If you’re looking for equity or want to solve problems with corporations, you need to do it somewhere else. [0] https://en.wikipedia.org/wiki/Principal–agent_problem https://en.wikipedia.org/wiki/Principal–agent_problem

the_other 10y ago
You wrote this: > but about the purpose of regulation - it’s rarely about ‘ethics’. And then: > ... SEC enforcements, most of them are about fraud or about a breach of duty. Fraud - you’re not allowed to lie, that is pretty self explanatory. Breach of duty - someone else places trust in you to act in their best interests, and you violate that trust. Fraud and duty identify ways of operating with other people, in other words "ethics". I'd argue laws codify community agreed ethics or create a common language for debating these agreements. I think the specific argument would be better framed in terms of the standards or levels of ethics being applied, rather trying to hide a weak application of ethics behind a poorly defined role for the scope of law.
- lallysingh 10y ago
  I interpreted that to mean that ethics is a much larger problem to solve than just avoiding fraud or breach of duty. Which is a fair argument - the law doesn't (and shouldn't) require you to be a good person, just not hurt others.
- rayiner 10y ago

ethanbond 10y ago

Lame attitude. The purpose of war is to kill people, yet nearly everyone agrees there are some particularly bad ways to do such - some of those ways are bad solely by their shear effectiveness. The whole point of finance is maximizing profits, sure. The whole point of not "accepting" that as-is and thus regulating is because there are some particularly awful ways to make profits.

daemin 10y ago
The purpose of war is to get the other side to give you what you want. Killing people is just a side-effect or method to accomplish your goals.
- TheOtherHobbes 10y ago
  In the widest sense the purpose of war is profit.
  - simonh 10y ago
    Only for largely uselessly overblown interpretations of the term profit to mean any perceived gain or advantage, or incremental progress towards any goal whatsoever.
  - daemin 10y ago
    Wars were fought for honour, various slights or (diplomatic or personal) insults, lots of reasons, not all of them profitable. In general war is not profitable to the entities that wage them.
forgetsusername 10y ago
>yet nearly everyone agrees there are some particularly bad ways to do such Do they, really? Ethics and rules in war are a luxury, and usually imposed by the rich and dominant. When things are truly desperate it all flies out the window. I think history (and its multitude of atrocities, including by the US) supports this view.

neximo64 10y ago

> The whole point of finance is maximizing profits; I think that people need to understand and accept this for us to have a meaningful discussion. You haven't factored in your thought that there are no monopolies in the financial world, unless they're state backed. Competition is everywhere. Competition decides the profit, not the firm.