5 ms·
A lot of people are leaving comments critical of his goal of beating the market as playing a zero-sum game, just pushing wealth around, having no value for soci
by mbateman 16y ago
A lot of people are leaving comments critical of his goal of beating the market as playing a zero-sum game, just pushing wealth around, having no value for society, etc.
This strikes me as dubious and high-handed, to say the least.
First, as to the value of the endeavor. He is trying to, in his words, "come up with an algorithm that finds pockets of profitability in a cloud of probable randomness." If he could really do this, it would create capital flow, the ability to borrow, and so on, for people that could turn it into wealth that would not otherwise have access to that wealth. Financial markets serve a real function, and beating the efficient market hypothesis would improve their ability to fulfill that function.
Second of all, he's extremely interested in the problem. He's obsessed with modeling complex systems and sees this as a sort of holy grail. Surely the fact that he's interested in it and values it counts for a lot, especially if you grant the above point, that there is a value to what he's doing. He has his reasons for being interested in it, and it's a productive endeavor.
I think it's false that his lack of progress, or the reasons that he's frustrated at his lack of progress, have to do with these aspects of his goal. It's more that he's working on an extremely hard (arguably insoluble) problem where it's hard to see incremental gains. This is a problem that ambitious people in many different fields face.
- rue 16y agoAll this is only undermined by the fact that the financial sector and the stock market in particular involves mostly fictitious money. There is no problem that it solves that could not also be solved by saying "here, I conjured you a million dollars out of thin air, act as if you had it". The market is, as it were, a MUSH. There are certainly plenty of talented people working in finance. That talent is just completely wasted.
- barrkel 16y agoAll money is fictional, in that it only has value to the degree that people agree and believe it has value. This is no less true for the US dollar than it is for gold, silver, oil, cattle, etc.
- mistermann 16y agoNot entirely true....not all forms of money are the same. Some can be conjured essentially from thin air (US dollar and all fiat currencies) while all others have supplies limited by nature (gold, silver, oil, cattle, etc.) Now, this isn't to say that paper money shouldn't exist, but with its benefits come some serious risks and responsibilities.
- barrkel 16y agoFiat currency production is limited by political capital; specie money, on the other hand, is susceptible to random booms (mineral deposit discoveries) and deflation (when economies grow faster than the growth of money supply). And it's not like mineral prices are predictable enough to be an entirely safe store of value.
- dmfdmf 16y agoI agree. Disparaging speculation as "zero-sum" and therefore inherently bad is non-sense. In almost all mature industries such as grocery stores, auto sales, lumber, appliances, etc., any individual seller's gain is some other seller's loss. So what? They are providing a valuable service and if profitable in the long-run are doing so at lowest cost, highest value to their customers. Financial speculation has a long history of being disparaged by various anti-capitalist demagogues. Speculation is a zero-sum activity between speculators but, from an economy-wide perspective, speculators nevertheless perform a valuable function in the dissemination of new information and the formation of prices. This latter function is why it is so hard -- the identification of an arbitrage opportunity and acting in the markets to make profits means that price differentials fade away and thus the potential for profits. A speculator has to continually find new opportunities in order to make money over the long term.
- jeromec 16y ago> Speculation is a zero-sum activity between speculators I agree. > any individual seller's gain is some other seller's loss I disagree. A farmer can sell to a grocer and both can gain.
- chc 16y agoI think you don't disagree. The grocer is not in a seller in the same ecosystem as the farmer. The grocer is one of the external people who benefits from the zero-sum game the farmers are playing.