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Wow. The section beginning from ”If I had to name the single epistemic feat...” and ending at ”...on modern-day Earth.” might be the most riveting description o

by dsacco 9y ago

Wow. The section beginning from ”If I had to name the single epistemic feat...” and ending at ”...on modern-day Earth.” might be the most riveting description of finance I’ve read in recent memory. If that series of bullet points doesn’t grab someone’s interest and make them want to engage in the robust hyper-competition of modern capitalism, I’m not sure anything will. Really, that entire example of price discovery as a demonstrable core competency and focus of humanity is very interesting to think about. This is a great (and cynical) observation, though it’s much more powerfully delivered in the context of the article: ”Our civilization cares about whether Microsoft stock will be priced at $37.70 or $37.75 tomorrow afternoon.”

robotresearcher 9y ago
> make them want to engage in the robust hyper-competition of modern capitalism But the message of that section is exactly that doing so is irrational, given that enormous resources are already deployed on that problem.
- dsacco 9y ago
  I guess I should rephrase: my point is that Eliezer made what I would consider one of the most compelling pitches I’ve seen for entering finance if you’re looking for high stakes, intellectually gratifying work.
- tgb 9y ago
  Well no, the conclusion was that the available inefficiencies should be just about enough to pay the salary of an average person working in that field. Since salaries in that field tend to be really quite good, it's going to far to say that the argument suggests that this is irrational. Instead, it suggests it would be irrational to expect to be able revolutionize the field or otherwise contribute substantially more than those already practicing.
  - robotresearcher 9y ago
    That's true, and a better statement than mine.
peteretep 9y ago
If you've not seen it, you might like this: https://www.ted.com/talks/kevin_slavin_how_algorithms_shape_our_world https://www.ted.com/talks/kevin_slavin_how_algorithms_shape_... Which talks about literally bulldozing mountains for the markets.
s_kilk 9y ago
> ”Our civilization cares about whether Microsoft stock will be priced at $37.70 or $37.75 tomorrow afternoon.” This is not a good thing. Vastly more effort is being poured into this than is being dedicated to averting climate catastrophe. In the future, this era will be looked back on as the pinnacle of the grotesque irrationality and chaos of Capitalism, if there's anyone even left to have such thoughts.
- gravy 9y ago
  Don't companies participating in hyper-competition only compete for the best products/services/etc. in the eyes of their customers? I mean, companies only get money (investments) if there is promise or results that their product can make money (sales) in a ratio beneficial to the investors. So doesn't everyone win in this case? Not accounting for practices that can arise out of monopolistic tendencies of companies like Amazon or something -- but even then, if competition always exists, isn't the onus on the company to provide the best product for the consumer?
- eru 9y ago
  Somewhat ironically, if you want less societal resources to be spend on price discovery, you have to make price discovery easier. Ie unleash the full powers of the market via unlimited short selling, exotic derivatives, elimination of the sub penny rule (https://www.chrisstucchio.com/blog/2012/hft_whats_broken.html https://www.chrisstucchio.com/blog/2012/hft_whats_broken.htm...) etc. If less effort can discover prices quicker, there will be less money to be made total, and thus in equilibrium those bright PhDs will rather go and help eg Google sell more ads.
  - skybrian 9y ago
    Not sure it's necessary? The trend towards index funds will do it. There's an argument that a lot of money is made by correcting other investor's mistakes. As below-average investors switch to index funds, competition gets tougher among the remainder who are smarter on average.
    - 9y ago
jasode 9y ago
>If that series of bullet points doesn’t grab someone’s interest and make them want to engage in the robust hyper-competition of modern capitalism, I’m not sure anything will. In that vein, I'm not a stock analyst so when I was young, I didn't "grok" what made investors tick. The stock market seemed incredibly boring. Yes, it could make people millions but as an outsider, the idea of looking at numbers all day to get those millions seemed like a hell on earth existence. The 1993 book "Market Wizards" by Jack Schwager[1] changed all that and completely opened my eyes. It was the first time I had seen the word "thesis" in regards to picking stocks -- as used in the phrase "investment thesis" by interviewees. It immediately let me map it to physicists playing with equations to see which ones correspond better to reality. Just as discovering explanatory equations is intellectually satisfying, the same nirvana happens when investors discover a flaw in an asset price and get proven correct when they exploit it. Stock investing is sort of like The Ultimate Game of Cunningham's Law[2] and the XKCD cartoon[3]. The insatiable human urge to "correct" other humans results in millions for investors. If we on HN/reddit see a person claim that "Apple has a smartphone monopoly", we'd would correct the false statement with "No, Apple only has 17% share and Android has 83%". The reward for our correction is invisible internet points that you can't even buy a stick of gum with. On the other hand, an investor like Michael Burry[4] will notice that other entities are mispricing mortgage backed securities. His analysis shows that they will default. That's his investment thesis. It contradicts statements from smart people like Alan Greenspan and Ben Bernanke -- both who have PhD in Economics. It contradicts smart guys from Bear Stearns and Lehman Brothers. Even his own limited partners in his hedge fund lose faith and withdraw their investments. The 2008 housing crash proves his thesis was correct and he got $100 million in profit. Yes, it must be incredibly intellectually satisfying to prove everyone else wrong especially when they have the same information he does. He just crunched the numbers differently based on different assumptions. Stock picking is not "boring" to people like them; it's a fun intellectual game. I wish had the disposition to play it. [1] https://www.amazon.com/Jack-D.-Schwager/e/B000AR7ZM4/ https://www.amazon.com/Jack-D.-Schwager/e/B000AR7ZM4/ [2] https://en.wikipedia.org/wiki/Ward_Cunningham#Cunningham.27s_Law https://en.wikipedia.org/wiki/Ward_Cunningham#Cunningham.27s... [3] https://xkcd.com/386/ https://xkcd.com/386/ [4] https://en.wikipedia.org/wiki/Michael_Burry#Investment_career https://en.wikipedia.org/wiki/Michael_Burry#Investment_caree...
mcguire 9y ago
How much money was made by people specifically selling shiney new financial instruments prior to 2008? How much did the subsequent collapse cost the majority of (first world) humanity? Explain to me again how powerful and intellectually satisfying the hyper-competition of modern capitalism is, please.
- dsacco 9y ago
  It appears you took my praise of Eliezer’s writing for some endorsement of laissez faire capitalism; allow me to sidestep that argument by reiterating my point more concisely for you. Of the pitches you can make for a career in finance, Eliezer’s is one of the more compelling ones, for people who like intellectual challenges. I neither endorsed nor condemned a career in finance, nor the ideology of capitalism itself, nor its failings. Please grind your axe elsewhere.
sigstoat 9y ago
> ”Our civilization cares about whether Microsoft stock will be priced at $37.70 or $37.75 tomorrow afternoon.” i think it is worth noting that MSFT has about 7.72 billion shares outstanding; that $0.05 difference represents $386,000,000 in value. and that total market cap moving around is what matters. the stock could recombine tomorrow so the same $386M movement turned into a $100 swing in stock price, or split so that it became a $0.001 swing.

by dsacco 9y ago

robotresearcher 9y ago

> make them want to engage in the robust hyper-competition of modern capitalism But the message of that section is exactly that doing so is irrational, given that enormous resources are already deployed on that problem.

dsacco 9y ago
I guess I should rephrase: my point is that Eliezer made what I would consider one of the most compelling pitches I’ve seen for entering finance if you’re looking for high stakes, intellectually gratifying work.
tgb 9y ago
Well no, the conclusion was that the available inefficiencies should be just about enough to pay the salary of an average person working in that field. Since salaries in that field tend to be really quite good, it's going to far to say that the argument suggests that this is irrational. Instead, it suggests it would be irrational to expect to be able revolutionize the field or otherwise contribute substantially more than those already practicing.
- robotresearcher 9y ago
  That's true, and a better statement than mine.

peteretep 9y ago

If you've not seen it, you might like this: https://www.ted.com/talks/kevin_slavin_how_algorithms_shape_our_world https://www.ted.com/talks/kevin_slavin_how_algorithms_shape_... Which talks about literally bulldozing mountains for the markets.

s_kilk 9y ago

> ”Our civilization cares about whether Microsoft stock will be priced at $37.70 or $37.75 tomorrow afternoon.” This is not a good thing. Vastly more effort is being poured into this than is being dedicated to averting climate catastrophe. In the future, this era will be looked back on as the pinnacle of the grotesque irrationality and chaos of Capitalism, if there's anyone even left to have such thoughts.

gravy 9y ago
Don't companies participating in hyper-competition only compete for the best products/services/etc. in the eyes of their customers? I mean, companies only get money (investments) if there is promise or results that their product can make money (sales) in a ratio beneficial to the investors. So doesn't everyone win in this case? Not accounting for practices that can arise out of monopolistic tendencies of companies like Amazon or something -- but even then, if competition always exists, isn't the onus on the company to provide the best product for the consumer?
eru 9y ago
Somewhat ironically, if you want less societal resources to be spend on price discovery, you have to make price discovery easier. Ie unleash the full powers of the market via unlimited short selling, exotic derivatives, elimination of the sub penny rule (https://www.chrisstucchio.com/blog/2012/hft_whats_broken.html https://www.chrisstucchio.com/blog/2012/hft_whats_broken.htm...) etc. If less effort can discover prices quicker, there will be less money to be made total, and thus in equilibrium those bright PhDs will rather go and help eg Google sell more ads.
- skybrian 9y ago
  Not sure it's necessary? The trend towards index funds will do it. There's an argument that a lot of money is made by correcting other investor's mistakes. As below-average investors switch to index funds, competition gets tougher among the remainder who are smarter on average.
  - 9y ago

jasode 9y ago

>If that series of bullet points doesn’t grab someone’s interest and make them want to engage in the robust hyper-competition of modern capitalism, I’m not sure anything will. In that vein, I'm not a stock analyst so when I was young, I didn't "grok" what made investors tick. The stock market seemed incredibly boring. Yes, it could make people millions but as an outsider, the idea of looking at numbers all day to get those millions seemed like a hell on earth existence. The 1993 book "Market Wizards" by Jack Schwager[1] changed all that and completely opened my eyes. It was the first time I had seen the word "thesis" in regards to picking stocks -- as used in the phrase "investment thesis" by interviewees. It immediately let me map it to physicists playing with equations to see which ones correspond better to reality. Just as discovering explanatory equations is intellectually satisfying, the same nirvana happens when investors discover a flaw in an asset price and get proven correct when they exploit it. Stock investing is sort of like The Ultimate Game of Cunningham's Law[2] and the XKCD cartoon[3]. The insatiable human urge to "correct" other humans results in millions for investors. If we on HN/reddit see a person claim that "Apple has a smartphone monopoly", we'd would correct the false statement with "No, Apple only has 17% share and Android has 83%". The reward for our correction is invisible internet points that you can't even buy a stick of gum with. On the other hand, an investor like Michael Burry[4] will notice that other entities are mispricing mortgage backed securities. His analysis shows that they will default. That's his investment thesis. It contradicts statements from smart people like Alan Greenspan and Ben Bernanke -- both who have PhD in Economics. It contradicts smart guys from Bear Stearns and Lehman Brothers. Even his own limited partners in his hedge fund lose faith and withdraw their investments. The 2008 housing crash proves his thesis was correct and he got $100 million in profit. Yes, it must be incredibly intellectually satisfying to prove everyone else wrong especially when they have the same information he does. He just crunched the numbers differently based on different assumptions. Stock picking is not "boring" to people like them; it's a fun intellectual game. I wish had the disposition to play it. [1] https://www.amazon.com/Jack-D.-Schwager/e/B000AR7ZM4/ https://www.amazon.com/Jack-D.-Schwager/e/B000AR7ZM4/ [2] https://en.wikipedia.org/wiki/Ward_Cunningham#Cunningham.27s_Law https://en.wikipedia.org/wiki/Ward_Cunningham#Cunningham.27s... [3] https://xkcd.com/386/ https://xkcd.com/386/ [4] https://en.wikipedia.org/wiki/Michael_Burry#Investment_career https://en.wikipedia.org/wiki/Michael_Burry#Investment_caree...

mcguire 9y ago

How much money was made by people specifically selling shiney new financial instruments prior to 2008? How much did the subsequent collapse cost the majority of (first world) humanity? Explain to me again how powerful and intellectually satisfying the hyper-competition of modern capitalism is, please.

dsacco 9y ago
It appears you took my praise of Eliezer’s writing for some endorsement of laissez faire capitalism; allow me to sidestep that argument by reiterating my point more concisely for you. Of the pitches you can make for a career in finance, Eliezer’s is one of the more compelling ones, for people who like intellectual challenges. I neither endorsed nor condemned a career in finance, nor the ideology of capitalism itself, nor its failings. Please grind your axe elsewhere.

sigstoat 9y ago

> ”Our civilization cares about whether Microsoft stock will be priced at $37.70 or $37.75 tomorrow afternoon.” i think it is worth noting that MSFT has about 7.72 billion shares outstanding; that $0.05 difference represents $386,000,000 in value. and that total market cap moving around is what matters. the stock could recombine tomorrow so the same $386M movement turned into a $100 swing in stock price, or split so that it became a $0.001 swing.