14 ms·

How to earn your macroeconomics and finance white belt as a software developer

307 points by andrenth 8y ago

vonseel 8y ago
Ha! I was an accounting undergrad and graduate finance/banking student before transitioning to software many years ago. I skimmed the article and still have many of the mentioned books and authors on my bookshelf. So, he's probably got a pretty good guide here. Although, I'm not sure why someone would want to learn all of this - it isn't a particularly stimulating subject - and probably overkill for managing personal investments. I personally wouldn't advise option-trading as part of any personal investment strategy, unless you're doing it with a limited amount of money strictly as a hobby / educational gamble. It's just too complex a topic to risk money on without serious research - and that cost time (money) too.
- vonseel 8y ago
  Additionally, after spending most of the 2010s in software development and learning several languages and software engineering practices, I can't say I remember much of what I learned from any of those books or courses I took in my past life. My brain has been saturated by technology and other interests. I guess you have to continue reading and staying up-to-date on any topic in order to keep it fresh in your mind.
scott_s 8y ago
In most modern martial art discipline rankings I'm aware of, white belt is your rank when you step on the mat with no experience, so you don't really "earn" it. I think the metaphor would be whatever color the rank above white is, but that varies widely across disciplines.
- glangdale 8y ago
  You usually have to cut your nails and buy a uniform, but yes - I found this headline confusing too. "Yellow belt" is pretty standard, but not universally so. BJJ goes straight to blue, but after much longer than Karate/Judo takes to get to yellow. The most prolific borrower of martial arts terminology in tech, the "six sigma" folks, call their second level "yellow belt" too.
- unbalancedparen 8y ago
  I am the author. Thanks for the comment, I have just changed the title from white to yellow.
  - benj111 8y ago
    But now I'm searching the comments wondering why the titles don't match. To someone who doesn't do martial arts, white belt means something to me (inexperienced), as does black belt, all other colours are unknown points in between. In conclusion. The HN crowd are pedantic and argumentative, so stay away from metaphors. :)
mushufasa 8y ago
If you are wont to read all of this, you might buy the Volume 1 of the CFA exam books instead. After having been through an economics degree beforehand, I was impressed at comprehensiveness and conciseness. They're written to be read, unlike a lot of academic textbooks that are written to be references for lectures. There are several thousands of pages in Volume I, but that's because they cover so much ground. If you're looking for a holistic understanding, and would otherwise pick up a dozen different paperbacks from some online blog list, you might do well instead to pick up the official introduction for finance by and for the financial industry. For a general understanding of macroeconomics, I'd recommend just Cassidy's 'How Markets Fail' and you're set.
- lbotos 8y ago
  > Volume 1 of the CFA exam books I'm seeing a couple of Google results that are different publishers. Do you have a link you'd mind sharing so I look at the right ones?
  - revel 8y ago
    If you don't care about the designation then the most cost effective thing to do is just get the books from a previous year from somewhere like Craigslist or ebay. The official syllabus is published by the CFA Institute. Schweser have a cliff notes-style abbreviated version of the syllabus. It's faster and more direct but it doesn't go into as much detail. Level 1 is roughly equivalent to a bachelors in finance. After level 2 you'll roughly have the same level of understanding of finance, econ and accounting that an MBA would give you. Level 3 is more esoteric and deals more with portfolio management than other fields.
    - mushufasa 8y ago
      I agree with this. Here's the official link though: https://www.cfainstitute.org/programs/cfa/curriculum/print-version https://www.cfainstitute.org/programs/cfa/curriculum/print-v...
dnprock 8y ago
The surprising thing about economics for me: it is not a science. What you learn is a perspective. But people sell their version hard. It gets dogmatic.
- mathieutd 8y ago
  Economics professor here. I disagree. We formulate theories that we test using data. Same as physics except that economics is much more messy. Another difficulty is that in many cases (macroeconomics for instance) we cannot do experiments to test theories. This makes it much harder to learn from the data.
  - arman_ashrafian 8y ago
    Isn't science based on experimentation? I think economics is a science in the same way psychology is a science.
    - keithnz 8y ago
      it can be based on observation, like we do with space..... we don't usually smash suns into each other, we observe what happens and how well that fits our models of what we think should happen.
      - ivalm 8y ago
        Except in astro we also make predictions and theories are accepted when predictions turn out to be right (famously with GR, for example). The problem with macroeconomics is that economists are not capable of meaningfully predicting future macroeconomic indicators (GDP, inflation, whatever). This is why it's not an actual science.
        barry-cotter 8y ago
        If you can make successful macroeconomic predictions you can get very rich so there are many, many people working on doing so. But you don’t just need to be right, you need to be right first because people with a good model acquire more and more resources from their own growth and from acquiring more outside investment until they reach the limits of the strategy they are using. Astronomy is not the study of things that resist being predicted and self-modify to be unpredictable upon being successfully predicted. All that said here are some things we know in macroeconomics; In the long run inflation is caused by an increase in the money supply; If you unexpectedly increase inflation you will have an economic boom as people are fooled by the short run disequilibrium between their expectations of the real value of money and what their nominal money now buys, likewise an unexpected fall in inflation will lead to a recession; You can have at most two of control of inflation, control of the interest rate and a floating exchange rate. If interest rates go up you will attract investment and your currency will appreciate unless you have capital controls. If you want to maintain the value of your currency you have to keep your domestic real interest rate very close to the global real interest rate, unless you have capital controls. If you choose to forego capital controls and have a floating currency you can control interest rates and inflation but you may have large inflows and outflows of capital; If you contract the money supply like the Federal Reserve did after the 1929 stock market crash (30% decline in monetary base, 30%!) you will have a recession.
jackcosgrove 8y ago
I have been an on again off again student of economics since college. The most important things to know, in my opinion, are: 1) The historical inflation rate is 2-3% per year in the US. 2) In most times and places in the US real estate appreciates slightly more than the rate of inflation at 3-4% nominally. So real estate grows much more slowly than most expect. A primary residence should be seen as the cost of shelter, not an investment, because... 3) US stocks have appreciated at an inflation-adjusted rate of 6-7% per year (8-10% nominal) even accounting for booms and busts. Speaking of... 4) No one can reliably predict the business cycle let alone individual stock performance absent inside information. Stock picking is a losing game. 5) The best way to invest in stocks for the vast majority of people is to buy the market in an index fund and minimize fees. So to distill this down to three life lessons: 1) Don't plan on renting your whole life because inflation will catch up with you. 2) Buy the most inexpensive house you can tolerate. 3) Put everything else in index funds every paycheck, and only check your balance every now and then. Let time be on your side.
- savanaly 8y ago
  I agree with everything up until life lesson #1. How does that follow from the preceding? Nowhere did you say you had learned that inflation in renting prices is greater than inflation in wages which is what would be necessary for "inflation to catch up to you". Maybe I misunderstood?
  - jdblair 8y ago
    You miss something important: If you finance a house on a fixed rate mortgage you lock in your monthly cost. Market rents will continue to rise, the value of your property will continue rise, but your cost will not change (modulo increases in maintenance cost, insurance and property tax).
    - liamcardenas 8y ago
      Sure, but you are also forgoing the addtional rent that you could be earning if you did not live there.
pedro1976 8y ago
Economics is a branch of social science. They always try to sell it as some kind of natural science, based on mathematical models, but in the end its just social dynamics.
- hirundo 8y ago
  > They always try to sell it as some kind of natural science, based on mathematical models, but in the end its just social dynamics. How is the study of social dynamics something other than a natural science? How is the use of mathematical models incompatible with the study of social dynamics? It doesn't seem to me that other social scientists feel that that they're studying something unnatural, or that mathematical models aren't useful in understanding it. Do you know of social scientists that believe otherwise?
- bitxbitxbitcoin 8y ago
  What about microeconomics? Specifically, if there were just one human left on earth managing his time and resources and society were to be gone, would economics in the end be just social dynamics?
- splintercell 8y ago
  That's a bit of an exaggeration. You can't say that it's all just social dynamics. Take for instance, there is no social dynamics rule you can state like the rule of supply and demand, or the principle of time preference (that ceritas paribus, people prefer things sooner than later). These are not just 'social dynamics'.
  - AnimalMuppet 8y ago
    Well, it's human nature. That may not be "social dynamics", but it's not physics, either.
    - splintercell 8y ago
      It's not human nature either. I highly recommend that you don't brush it off that quickly. There are two kinds of 'body movements' by humans, 'involuntary' or 'non-rational', like sneezing, or tripping, vs voluntary or rational, like you choosing to brush your teeth, or driving a car or negotiating a contract. If a human says that he doesn't want to divorce his wife but he can't feel the same passion towards her, or if someone is trying to lose weight but is unable to stop eating, then trying to understand that action is psychology. However, if we just stop to the fact that if you perform an action, irrespective of your 'stated' reasoning behind it, it does demonstrate something. When we look at these actions which are pertinent to monetary aspects of those rational or voluntary actions, we find out that we can build a whole system of science (or logic, if you don't like saying it's a kind of science), which leads us to other conclusions. For instance if you say that you would love to spend the spring break in France, but then when the time comes, you find out that tickets are cheaper for Mexico, and instead you spend it in Mexico, then that means that your demonstrated preference was to have that extra money and do other things with it in Mexico, instead to have less money in France (irrespective of what you said). What this means is that if prices of Mexico tickets were changed and it becomes as expensive as tickets to France, then you will change your decision also (though you don't have to, in which case we will learn that you actually didn't care about going to France anyways). Either way, when you build a system of all the logical inferences, like in Mathematics, smaller concepts and axioms can lead you to build other complex mathematical conclusions, you have the same thing in economics (which leads you to the concepts of interest rates, prices, supply and demand, autistic intervention, binary intervention, triangular intervention etc).
ravieira 8y ago
My two cents are: 1. Do not buy an expensive car; 2. Do not buy a car unless really necessary (of course not feasible/practical in many parts/cities of the world); 3. Avoid all kinds of subscriptions you can. Anything that consistently affects your income; 4. If you're making good income, don't act like it's going to be like this for ever; 5. Try to stay ahead in your career so that you're eligible for the upper end salaries;
- SirLJ 8y ago
  C’mon, you live only once...
  - pm90 8y ago
    Exactly. You have only one life to enjoy everything except buying that fancy car that will cost you a ton of time, money and worry. Is that how you want to spend your one lifetime? Centered on Vehicles? Really?
    - SirLJ 8y ago
      The vehicles are just an example, even though I actually have 2 and will upgrade one or both soon... also have a big house with all the extras and I am enjoying every day in the large heated pool... The point is, live for today, because you might not be here tomorrow... don't be miserable... if you need more money, just make some more... Frugality is the mother of all misery in my book...
      - astura 8y ago
        Frugality gets a bad rap because most people, like the person you're replying to, advocate depriving themselves of as much as possible for the sake of not spending money - like dying with the highest score is the goal. Frugality, to me at least, should instead be working on how your money can make you the most secure and the most happy, both now and in the future.
        8y ago
ucaetano 8y ago
> Learn basic finance to invest your own money > The next step on your journey should be to get some practical experience. The best way to do this is to open a brokerage account to invest some of your own money. Wow, I can't believe someone would suggest doing this as a way to learn finance, when ALL finance literature reaches exactly the same conclusion: that is a terrible idea. The author clearly doesn't understand finance and financial markets... But hey, follow his advice anyone, someone has to make really bad investing decisions so that us making the solid investment decisions can beat the average.
- chucksmash 8y ago
  I took "some of your own money" to mean "an amount you can afford to lose" Few things teach as well as the "...and it's gone" moment when you're dealing with money you worked for. Better to learn the lesson with a couple hundred dollars in play when you're young than with a couple hundred thousand when you're forty and you think your expertise in <whatever> gives you an edge in <unrelated investing thing>.
  - ucaetano 8y ago
    The problem is that it isn't "amount you can afford to lose": you'll lose. It is a guaranteed way to lose money on average. It is just like gambling: if you want to do it for fun, and count the loss on your budget, fine. But don't fool yourself into thinking that it is a sensible investment or that you're doing it because "you know finance". Just don't. It is a bad idea and particularly a symptom of overconfident people who think that "they are smart and can read trends and predict the market". Nope.
    - chucksmash 8y ago
      You're interpreting what I'm saying (and what I believe the author is saying) as "amount you won't mind losing, so just go for it bro, you might hit it big!" Maybe I'm reading too much into the original text, but when I said, "amount you can afford to lose," I intended an implicit "because you will lose it and then you will learn" that I think the author is also implying. If you do a 9 week fake money stock pick'em exercise (say in a FINA class), people will follow it for exactly 9 weeks, some will lose, some will win, and everybody who doesn't win will take away "gee I should have picked better, that was obvious in retrospect" which obviously isn't the point. With real money, I feel like you're more likely to learn the intended lesson. If it works out for nine weeks, you'll keep at it because it's actual money. You'll learn eventually.
SirLJ 8y ago
More Money Than God: Hedge Funds and the Making of A New Elite by Mallaby does just that. A quote from the book: Although Weymar looked to his teachers for help in refining his mathematical and computing skills, he was unimpressed by their efficient-market theories. “I thought random walk was bullshit,” he said later. “The whole idea that an individual can’t make serious money with a competitive edge over the rest of the market is wacko.”
rb808 8y ago
The problem I have with this advice is that its all based on the last 50 years which have been absolutely incredible returns for investors. You should also read more history of what happened to Japanese property investors in the 90s, Argentinian investors in the 70s and Russian/Chinese/Cambodian capitalists before their communist takeovers.
- facundo_olano 8y ago
  I read a few of the books mentioned in the article (Random Walk, Common Sense, Global Value and Asset Allocation) and they certainly dedicate a lot of space to study the history: bubbles, how returns fluctuated over the decades, etc. Most importantly, the key takeaway of those introductory books is to diversify your portfolio, which, if you do, should limit your losses in events such as those you mention.
Mikeb85 8y ago
> Andrew Lo, an MIT economist, said that while physics has three laws that explain 99% of the phenomena, finance has 99 laws that explain only 3%. Not only do we not fully understand how the economy works but also there is an endless debate on how it should function. Everyone has values and an ideology even if they don’t tell you. Except we do understand how the economy functions. Maybe not well enough to predict everything with 99% certainty, but as well as we can understand any complex phenomenon. He's right however that everyone has a different opinion and their ideology leaks into their economic analysis. Also, this article is more about finance than economics. Want to understand economics? Learn about supply/demand and game theory. Want to learn about macroeconomics? Study models like the IS/LM model. Want to attempt to make money with some sort of investment? This article is an OK intro. But always keep in mind that lots of very smart people with very specific schooling and tons of experience are trying to do the same thing, and they'll always beat you to the punch, because you studied CS and they studied finance.
rubyn00bie 8y ago
Sigh goodbye Karma, but... I think this is horseshit. The reason being: most of what you read online will be heavily modified to support the ideology of the author... which quite frankly, outside of neuroscience, is the biggest problem Economics faces: politics and ideology. Economics is not finance, nor is finance economics. Economics is about resource management, and both micro/macro are just that at different levels. The real holy grail of Econ is how merge them, what I think lies I the effects of agglomeration... If you want to get your white belt in economics: go read something historical, not mathematical. Ricardo, Keynes, Friedman, Smith, Galbraith, Veblen, Marx, Krugman... the math and statistics come easily and intuitively if you understand the theory. Rates of change themselves don’t make you fluent in economics, showing why the fuck you even need that rate of change is economics.
- unbalancedparen 8y ago
  Hi rubyn00bie. I am the author. I agree with what you wrote. It is really important to understand the history of economic political thought. Nowadays most economic careers, specially in the developed world, are way too focused on mathematics. That is why I wrote: "Not only do we not fully understand how the economy works but also there is an endless debate on how it should function. Everyone has values and an ideology even if they don’t tell you. You should keep that in mind while studying economics. In this roadmap I try to recommend the tools easily available and that are a part of the current economic thought."
aj7 8y ago
Until you actually risk money, you know little about investing, no matter how many books you read. In this way, investing is much, much different than economics, or physics, where you can learn a lot from books. But thank you for the bibliography.
- unbalancedparen 8y ago
  I agree. It is really important to have practical experience. It is like programming. You can read a lot of books but if you don't code, you don't really learn.
bedobi 8y ago
This isn't serious macroeconomics or finance. People like Taleb are psuedointellectual quacks, not actual economists. For anyone who's interested, https://reddit.com/r/badeconomics https://reddit.com/r/badeconomics is a great resource for takedowns of this kind of garbage.
- unbalancedparen 8y ago
  Taleb is not an economist, he is a trader. I never recommended him to learn about economy.
  - ThirdFoundation 8y ago
    And I think he's useful at least as a voice that challenges some conventional mental models for looking at things in math, finance, and decision making. He's not an infallible visionary and should not be taken as gospel, but I don't think we should disqualify all of his ideas and opinions. I've enjoyed reading a lot of his books. However, as you said, he's not a good introduction into the economy and probably isn't accessible for many beginners.
westurner 8y ago
Thanks for the wealth of resources in this post. Here are a few more: "Python for Finance: Analyze Big Financial Data" (2014, 2018) https://g.co/kgs/qkY8J6 https://g.co/kgs/qkY8J6 ... https://pyalgo.tpq.io https://pyalgo.tpq.io also includes the "Finance with Python" course and this book as a PDF and Jupyter notebooks. Quantopian put out a call for the best Value Investing algos (implemented in quantopian/zipline) awhile back. This post links to those and other value investing resources: https://westurner.github.io/hnlog/#comment-19181453 https://westurner.github.io/hnlog/#comment-19181453 (Ctrl-F "econo") "Lectures in Quantitative Economics as Python and Julia Notebooks" https://news.ycombinator.com/item?id=19083479 https://news.ycombinator.com/item?id=19083479 links to these excellent lectures and a number of tools for working with actual data from FRED, ECB, Eurostat, ILO, IMF, OECD, UNSD, UNESCO, World Bank, Quandl. One thing that many finance majors, courses, and resources often fail to identify is the role that startup and small businesses play in economic growth and actual value creation: jobs, GDP, return on direct capital investment. Most do not succeed, but it is possible to do better than index funds and have far more impact in terms of sustainable investment than as an owner of a nearly-sure-bet index fund that owns some shares and takes a hands-off approach to business management, research, product development, and operations. Is it possible to possess a comprehensive understanding of finance and economics but still not have personal finance down? Personal finance: r/personalfinance/wiki, "Consumer science (a.k.a. home economics) as a college major" https://news.ycombinator.com/item?id=17894632 https://news.ycombinator.com/item?id=17894632
gregknicholson 8y ago
The article doesn't seem to explain why this subject is important — why should I want to learn about this?
Proven 8y ago
Glanced over it and saw a recommendation to read the Economist. Stay away from that junk. There are tons of free high quality economics books at mises.org
cath64 8y ago
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icedchocolate 8y ago
Most important thing to know about economics, from Mankiw & studying economics both at school and uni: (1) Resources are limited, but our desire is unlimited. The function of the market is to find the equilibrium amount of each thing to produce, at a certain price. Also, there is always a market, even if money is totally removed. We will always have things to divide up between us. (2) The demand/supply curve. It honestly is unbelievably important and you won’t understand the fundamentals until you understand this, imo. Marx didn’t understand the economy because he didn’t understand this, he only understood the supply part of the equation (a friend who took the history of economic thought & passed his notes onto me taught me this). Practice using this to understand a government policy that impacts the market, think through what it does to prices, volumes, and the curves themselves. Basic accounting concepts and terminology is also quite useful, as another commenter said. Then the function of the central banks, why they do what they do, and how. I do recommend, to understand the GFC, Reading “Financial Accounting Theory”, by William R. Scott, pages 9-15 (section 1.3). If you want to understand dodgy accounting, this is also a good book. Aside from Mankiw’s principles of Microeconomics, Bernanke’s Principles of Macroeconomics is also good.
icedchocolate 8y ago
To add to the resources in this thread, the book sitting on my bookshelf that I used for Derivatives at uni (options & futures, hedging, swaps, etc.) is Fundamentals of Futures and Options Markets, but John C. Hull
fauigerzigerk 8y ago
I have two tips to share: 1) Learn some accounting first. I see a ton of truly weird debates about economics and taxes that are based completely false ideas of basic accounting concepts. 2) If you use DEGIRO as a broker, make sure you understand the tax implications of their cash handling. They keep customer "cash" in a money market fund, not in a bank account. This is especially relevant if you hold foreign currency in your account. It's also relevant if the amount of disposals in each tax year has consequences for your tax return (such as the £45000 threshold for submitting a CGT return in the UK).
- iM8t 8y ago
  Would you please care to elaborate on point 2 or provide additional information to learn about this? BTW - I'm from the EU.
  - fauigerzigerk 8y ago
    I'm going to reply tonight. Unfortunately I'm in a huge rush right now.
    - sulZ 8y ago
      If you find that you have time, I'm also curious.
  - fauigerzigerk 8y ago
    So what DEGIRO does is that they buy shares in a money market fund (MMF) with any cash balance that's left in your account at the end of each day. This is done on your behalf like an standing order. For instance, if you transfer money into your DEGIRO account or you sell stocks and don't use (or transfer) that money on the same day, DEGIRO will move your money into the MMF. So you are effectively buying MMF shares. When you use your money at a later date to buy securities or because you want to transfer money out of the DEGIRO account, they will automatically sell MMF shares on your behalf to cover the cost. In some tax jurisdictions this disposal of MMF shares may be subject to capital gains tax (or other taxes). The exact tax treatment depends on the tax status of the MMF in the country where you pay taxes (usually where you live). You may also have to pay taxes on any interest you receive from your MMF shares. Now, if the base currency of your DEGIRO account is the same as the currency in which you owe taxes and you're using Auto-FX (that is you're not holding other currencies in your account), this whole structure is unlikely to affect the amount of tax you owe. The price of the MMF hardly changes at all, so there will not be any taxable gains or losses in the fund currency. But if you pay taxes in a currency other than the base currency of your DEGIRO account or you don't use Auto-FX, then any change in exchange rates may cause taxable gains or losses on disposal. You may also have to report the number of disposals, the total proceeds from disposals and/or each individual disposal in your tax return, even if no gains or losses have resulted from those disposals. That's why it's important to know what the tax treatment of those money market funds is in your jurisdiction and if you have to include the MMF disposals in your tax return or not. Are the MMFs registered in your country at all? If not, you may have to pay higher taxes on any gains. Are they transparent for income tax? There are many questions. It's easy to think of DEGIRO's strange structure as an internal affair for them. But that is not necessarily the case depending on the tax laws of your country and the tax status of these particular money market funds in your country. DEGIRO is a Dutch company. They report all disposal proceeds as well as any interest income to the Dutch authorities who will then pass that information on to the tax authorities of your country of residence under CRS (Common Reporting Standard) rules. Obviously, the information the tax authorities receive from DEGIRO should be consistent with what you report in your tax return. It's all the more important to understand the tax implications of DEGIRO's cash funds as mistakes you make in an offshore brokerage account may incur far higher penalties than the same happening in a domestic account. I asked DEGIRO about the tax treatment of their money market funds. Their reply: "We don't give tax advice".
yogeshp 8y ago
CFA Institute has made their resources for Claritas Certification (Investent Foundations) freely available online [1]. It covers ample material on economics and finance for people from non-finance background. Material is not as rigorous as CFA level 1 but is sufficient for Software Engineers. Link: [1] https://www.cfainstitute.org/en/programs/investment-foundations/curriculum/download https://www.cfainstitute.org/en/programs/investment-foundati...

307 points by andrenth 8y ago

Ha! I was an accounting undergrad and graduate finance/banking student before transitioning to software many years ago. I skimmed the article and still have many of the mentioned books and authors on my bookshelf. So, he's probably got a pretty good guide here. Although, I'm not sure why someone would want to learn all of this - it isn't a particularly stimulating subject - and probably overkill for managing personal investments. I personally wouldn't advise option-trading as part of any personal investment strategy, unless you're doing it with a limited amount of money strictly as a hobby / educational gamble. It's just too complex a topic to risk money on without serious research - and that cost time (money) too.

vonseel 8y ago
Additionally, after spending most of the 2010s in software development and learning several languages and software engineering practices, I can't say I remember much of what I learned from any of those books or courses I took in my past life. My brain has been saturated by technology and other interests. I guess you have to continue reading and staying up-to-date on any topic in order to keep it fresh in your mind.

scott_s 8y ago

In most modern martial art discipline rankings I'm aware of, white belt is your rank when you step on the mat with no experience, so you don't really "earn" it. I think the metaphor would be whatever color the rank above white is, but that varies widely across disciplines.

glangdale 8y ago
You usually have to cut your nails and buy a uniform, but yes - I found this headline confusing too. "Yellow belt" is pretty standard, but not universally so. BJJ goes straight to blue, but after much longer than Karate/Judo takes to get to yellow. The most prolific borrower of martial arts terminology in tech, the "six sigma" folks, call their second level "yellow belt" too.
unbalancedparen 8y ago
I am the author. Thanks for the comment, I have just changed the title from white to yellow.
- benj111 8y ago
  But now I'm searching the comments wondering why the titles don't match. To someone who doesn't do martial arts, white belt means something to me (inexperienced), as does black belt, all other colours are unknown points in between. In conclusion. The HN crowd are pedantic and argumentative, so stay away from metaphors. :)

mushufasa 8y ago

If you are wont to read all of this, you might buy the Volume 1 of the CFA exam books instead. After having been through an economics degree beforehand, I was impressed at comprehensiveness and conciseness. They're written to be read, unlike a lot of academic textbooks that are written to be references for lectures. There are several thousands of pages in Volume I, but that's because they cover so much ground. If you're looking for a holistic understanding, and would otherwise pick up a dozen different paperbacks from some online blog list, you might do well instead to pick up the official introduction for finance by and for the financial industry. For a general understanding of macroeconomics, I'd recommend just Cassidy's 'How Markets Fail' and you're set.

lbotos 8y ago
> Volume 1 of the CFA exam books I'm seeing a couple of Google results that are different publishers. Do you have a link you'd mind sharing so I look at the right ones?
- revel 8y ago
  If you don't care about the designation then the most cost effective thing to do is just get the books from a previous year from somewhere like Craigslist or ebay. The official syllabus is published by the CFA Institute. Schweser have a cliff notes-style abbreviated version of the syllabus. It's faster and more direct but it doesn't go into as much detail. Level 1 is roughly equivalent to a bachelors in finance. After level 2 you'll roughly have the same level of understanding of finance, econ and accounting that an MBA would give you. Level 3 is more esoteric and deals more with portfolio management than other fields.
  - mushufasa 8y ago
    I agree with this. Here's the official link though: https://www.cfainstitute.org/programs/cfa/curriculum/print-version https://www.cfainstitute.org/programs/cfa/curriculum/print-v...

dnprock 8y ago

The surprising thing about economics for me: it is not a science. What you learn is a perspective. But people sell their version hard. It gets dogmatic.

mathieutd 8y ago
Economics professor here. I disagree. We formulate theories that we test using data. Same as physics except that economics is much more messy. Another difficulty is that in many cases (macroeconomics for instance) we cannot do experiments to test theories. This makes it much harder to learn from the data.
- arman_ashrafian 8y ago
  Isn't science based on experimentation? I think economics is a science in the same way psychology is a science.
  - keithnz 8y ago
    it can be based on observation, like we do with space..... we don't usually smash suns into each other, we observe what happens and how well that fits our models of what we think should happen.
    - ivalm 8y ago
      Except in astro we also make predictions and theories are accepted when predictions turn out to be right (famously with GR, for example). The problem with macroeconomics is that economists are not capable of meaningfully predicting future macroeconomic indicators (GDP, inflation, whatever). This is why it's not an actual science.
      - barry-cotter 8y ago
        If you can make successful macroeconomic predictions you can get very rich so there are many, many people working on doing so. But you don’t just need to be right, you need to be right first because people with a good model acquire more and more resources from their own growth and from acquiring more outside investment until they reach the limits of the strategy they are using. Astronomy is not the study of things that resist being predicted and self-modify to be unpredictable upon being successfully predicted. All that said here are some things we know in macroeconomics; In the long run inflation is caused by an increase in the money supply; If you unexpectedly increase inflation you will have an economic boom as people are fooled by the short run disequilibrium between their expectations of the real value of money and what their nominal money now buys, likewise an unexpected fall in inflation will lead to a recession; You can have at most two of control of inflation, control of the interest rate and a floating exchange rate. If interest rates go up you will attract investment and your currency will appreciate unless you have capital controls. If you want to maintain the value of your currency you have to keep your domestic real interest rate very close to the global real interest rate, unless you have capital controls. If you choose to forego capital controls and have a floating currency you can control interest rates and inflation but you may have large inflows and outflows of capital; If you contract the money supply like the Federal Reserve did after the 1929 stock market crash (30% decline in monetary base, 30%!) you will have a recession.

jackcosgrove 8y ago

I have been an on again off again student of economics since college. The most important things to know, in my opinion, are: 1) The historical inflation rate is 2-3% per year in the US. 2) In most times and places in the US real estate appreciates slightly more than the rate of inflation at 3-4% nominally. So real estate grows much more slowly than most expect. A primary residence should be seen as the cost of shelter, not an investment, because... 3) US stocks have appreciated at an inflation-adjusted rate of 6-7% per year (8-10% nominal) even accounting for booms and busts. Speaking of... 4) No one can reliably predict the business cycle let alone individual stock performance absent inside information. Stock picking is a losing game. 5) The best way to invest in stocks for the vast majority of people is to buy the market in an index fund and minimize fees. So to distill this down to three life lessons: 1) Don't plan on renting your whole life because inflation will catch up with you. 2) Buy the most inexpensive house you can tolerate. 3) Put everything else in index funds every paycheck, and only check your balance every now and then. Let time be on your side.

savanaly 8y ago
I agree with everything up until life lesson #1. How does that follow from the preceding? Nowhere did you say you had learned that inflation in renting prices is greater than inflation in wages which is what would be necessary for "inflation to catch up to you". Maybe I misunderstood?
- jdblair 8y ago
  You miss something important: If you finance a house on a fixed rate mortgage you lock in your monthly cost. Market rents will continue to rise, the value of your property will continue rise, but your cost will not change (modulo increases in maintenance cost, insurance and property tax).
  - liamcardenas 8y ago
    Sure, but you are also forgoing the addtional rent that you could be earning if you did not live there.

pedro1976 8y ago

Economics is a branch of social science. They always try to sell it as some kind of natural science, based on mathematical models, but in the end its just social dynamics.

hirundo 8y ago
> They always try to sell it as some kind of natural science, based on mathematical models, but in the end its just social dynamics. How is the study of social dynamics something other than a natural science? How is the use of mathematical models incompatible with the study of social dynamics? It doesn't seem to me that other social scientists feel that that they're studying something unnatural, or that mathematical models aren't useful in understanding it. Do you know of social scientists that believe otherwise?
bitxbitxbitcoin 8y ago
What about microeconomics? Specifically, if there were just one human left on earth managing his time and resources and society were to be gone, would economics in the end be just social dynamics?
splintercell 8y ago
That's a bit of an exaggeration. You can't say that it's all just social dynamics. Take for instance, there is no social dynamics rule you can state like the rule of supply and demand, or the principle of time preference (that ceritas paribus, people prefer things sooner than later). These are not just 'social dynamics'.
- AnimalMuppet 8y ago
  Well, it's human nature. That may not be "social dynamics", but it's not physics, either.
  - splintercell 8y ago
    It's not human nature either. I highly recommend that you don't brush it off that quickly. There are two kinds of 'body movements' by humans, 'involuntary' or 'non-rational', like sneezing, or tripping, vs voluntary or rational, like you choosing to brush your teeth, or driving a car or negotiating a contract. If a human says that he doesn't want to divorce his wife but he can't feel the same passion towards her, or if someone is trying to lose weight but is unable to stop eating, then trying to understand that action is psychology. However, if we just stop to the fact that if you perform an action, irrespective of your 'stated' reasoning behind it, it does demonstrate something. When we look at these actions which are pertinent to monetary aspects of those rational or voluntary actions, we find out that we can build a whole system of science (or logic, if you don't like saying it's a kind of science), which leads us to other conclusions. For instance if you say that you would love to spend the spring break in France, but then when the time comes, you find out that tickets are cheaper for Mexico, and instead you spend it in Mexico, then that means that your demonstrated preference was to have that extra money and do other things with it in Mexico, instead to have less money in France (irrespective of what you said). What this means is that if prices of Mexico tickets were changed and it becomes as expensive as tickets to France, then you will change your decision also (though you don't have to, in which case we will learn that you actually didn't care about going to France anyways). Either way, when you build a system of all the logical inferences, like in Mathematics, smaller concepts and axioms can lead you to build other complex mathematical conclusions, you have the same thing in economics (which leads you to the concepts of interest rates, prices, supply and demand, autistic intervention, binary intervention, triangular intervention etc).

ravieira 8y ago

My two cents are: 1. Do not buy an expensive car; 2. Do not buy a car unless really necessary (of course not feasible/practical in many parts/cities of the world); 3. Avoid all kinds of subscriptions you can. Anything that consistently affects your income; 4. If you're making good income, don't act like it's going to be like this for ever; 5. Try to stay ahead in your career so that you're eligible for the upper end salaries;

SirLJ 8y ago
C’mon, you live only once...
- pm90 8y ago
  Exactly. You have only one life to enjoy everything except buying that fancy car that will cost you a ton of time, money and worry. Is that how you want to spend your one lifetime? Centered on Vehicles? Really?
  - SirLJ 8y ago
    The vehicles are just an example, even though I actually have 2 and will upgrade one or both soon... also have a big house with all the extras and I am enjoying every day in the large heated pool... The point is, live for today, because you might not be here tomorrow... don't be miserable... if you need more money, just make some more... Frugality is the mother of all misery in my book...
    - astura 8y ago
      Frugality gets a bad rap because most people, like the person you're replying to, advocate depriving themselves of as much as possible for the sake of not spending money - like dying with the highest score is the goal. Frugality, to me at least, should instead be working on how your money can make you the most secure and the most happy, both now and in the future.
      - 8y ago

ucaetano 8y ago

> Learn basic finance to invest your own money > The next step on your journey should be to get some practical experience. The best way to do this is to open a brokerage account to invest some of your own money. Wow, I can't believe someone would suggest doing this as a way to learn finance, when ALL finance literature reaches exactly the same conclusion: that is a terrible idea. The author clearly doesn't understand finance and financial markets... But hey, follow his advice anyone, someone has to make really bad investing decisions so that us making the solid investment decisions can beat the average.

chucksmash 8y ago
I took "some of your own money" to mean "an amount you can afford to lose" Few things teach as well as the "...and it's gone" moment when you're dealing with money you worked for. Better to learn the lesson with a couple hundred dollars in play when you're young than with a couple hundred thousand when you're forty and you think your expertise in <whatever> gives you an edge in <unrelated investing thing>.
- ucaetano 8y ago
  The problem is that it isn't "amount you can afford to lose": you'll lose. It is a guaranteed way to lose money on average. It is just like gambling: if you want to do it for fun, and count the loss on your budget, fine. But don't fool yourself into thinking that it is a sensible investment or that you're doing it because "you know finance". Just don't. It is a bad idea and particularly a symptom of overconfident people who think that "they are smart and can read trends and predict the market". Nope.
  - chucksmash 8y ago
    You're interpreting what I'm saying (and what I believe the author is saying) as "amount you won't mind losing, so just go for it bro, you might hit it big!" Maybe I'm reading too much into the original text, but when I said, "amount you can afford to lose," I intended an implicit "because you will lose it and then you will learn" that I think the author is also implying. If you do a 9 week fake money stock pick'em exercise (say in a FINA class), people will follow it for exactly 9 weeks, some will lose, some will win, and everybody who doesn't win will take away "gee I should have picked better, that was obvious in retrospect" which obviously isn't the point. With real money, I feel like you're more likely to learn the intended lesson. If it works out for nine weeks, you'll keep at it because it's actual money. You'll learn eventually.

SirLJ 8y ago

More Money Than God: Hedge Funds and the Making of A New Elite by Mallaby does just that. A quote from the book: Although Weymar looked to his teachers for help in refining his mathematical and computing skills, he was unimpressed by their efficient-market theories. “I thought random walk was bullshit,” he said later. “The whole idea that an individual can’t make serious money with a competitive edge over the rest of the market is wacko.”

rb808 8y ago

The problem I have with this advice is that its all based on the last 50 years which have been absolutely incredible returns for investors. You should also read more history of what happened to Japanese property investors in the 90s, Argentinian investors in the 70s and Russian/Chinese/Cambodian capitalists before their communist takeovers.

facundo_olano 8y ago
I read a few of the books mentioned in the article (Random Walk, Common Sense, Global Value and Asset Allocation) and they certainly dedicate a lot of space to study the history: bubbles, how returns fluctuated over the decades, etc. Most importantly, the key takeaway of those introductory books is to diversify your portfolio, which, if you do, should limit your losses in events such as those you mention.

Mikeb85 8y ago

> Andrew Lo, an MIT economist, said that while physics has three laws that explain 99% of the phenomena, finance has 99 laws that explain only 3%. Not only do we not fully understand how the economy works but also there is an endless debate on how it should function. Everyone has values and an ideology even if they don’t tell you. Except we do understand how the economy functions. Maybe not well enough to predict everything with 99% certainty, but as well as we can understand any complex phenomenon. He's right however that everyone has a different opinion and their ideology leaks into their economic analysis. Also, this article is more about finance than economics. Want to understand economics? Learn about supply/demand and game theory. Want to learn about macroeconomics? Study models like the IS/LM model. Want to attempt to make money with some sort of investment? This article is an OK intro. But always keep in mind that lots of very smart people with very specific schooling and tons of experience are trying to do the same thing, and they'll always beat you to the punch, because you studied CS and they studied finance.

rubyn00bie 8y ago

Sigh goodbye Karma, but... I think this is horseshit. The reason being: most of what you read online will be heavily modified to support the ideology of the author... which quite frankly, outside of neuroscience, is the biggest problem Economics faces: politics and ideology. Economics is not finance, nor is finance economics. Economics is about resource management, and both micro/macro are just that at different levels. The real holy grail of Econ is how merge them, what I think lies I the effects of agglomeration... If you want to get your white belt in economics: go read something historical, not mathematical. Ricardo, Keynes, Friedman, Smith, Galbraith, Veblen, Marx, Krugman... the math and statistics come easily and intuitively if you understand the theory. Rates of change themselves don’t make you fluent in economics, showing why the fuck you even need that rate of change is economics.

unbalancedparen 8y ago
Hi rubyn00bie. I am the author. I agree with what you wrote. It is really important to understand the history of economic political thought. Nowadays most economic careers, specially in the developed world, are way too focused on mathematics. That is why I wrote: "Not only do we not fully understand how the economy works but also there is an endless debate on how it should function. Everyone has values and an ideology even if they don’t tell you. You should keep that in mind while studying economics. In this roadmap I try to recommend the tools easily available and that are a part of the current economic thought."

aj7 8y ago

Until you actually risk money, you know little about investing, no matter how many books you read. In this way, investing is much, much different than economics, or physics, where you can learn a lot from books. But thank you for the bibliography.

unbalancedparen 8y ago
I agree. It is really important to have practical experience. It is like programming. You can read a lot of books but if you don't code, you don't really learn.

bedobi 8y ago

This isn't serious macroeconomics or finance. People like Taleb are psuedointellectual quacks, not actual economists. For anyone who's interested, https://reddit.com/r/badeconomics https://reddit.com/r/badeconomics is a great resource for takedowns of this kind of garbage.

unbalancedparen 8y ago
Taleb is not an economist, he is a trader. I never recommended him to learn about economy.
- ThirdFoundation 8y ago
  And I think he's useful at least as a voice that challenges some conventional mental models for looking at things in math, finance, and decision making. He's not an infallible visionary and should not be taken as gospel, but I don't think we should disqualify all of his ideas and opinions. I've enjoyed reading a lot of his books. However, as you said, he's not a good introduction into the economy and probably isn't accessible for many beginners.

westurner 8y ago

Thanks for the wealth of resources in this post. Here are a few more: "Python for Finance: Analyze Big Financial Data" (2014, 2018) https://g.co/kgs/qkY8J6 https://g.co/kgs/qkY8J6 ... https://pyalgo.tpq.io https://pyalgo.tpq.io also includes the "Finance with Python" course and this book as a PDF and Jupyter notebooks. Quantopian put out a call for the best Value Investing algos (implemented in quantopian/zipline) awhile back. This post links to those and other value investing resources: https://westurner.github.io/hnlog/#comment-19181453 https://westurner.github.io/hnlog/#comment-19181453 (Ctrl-F "econo") "Lectures in Quantitative Economics as Python and Julia Notebooks" https://news.ycombinator.com/item?id=19083479 https://news.ycombinator.com/item?id=19083479 links to these excellent lectures and a number of tools for working with actual data from FRED, ECB, Eurostat, ILO, IMF, OECD, UNSD, UNESCO, World Bank, Quandl. One thing that many finance majors, courses, and resources often fail to identify is the role that startup and small businesses play in economic growth and actual value creation: jobs, GDP, return on direct capital investment. Most do not succeed, but it is possible to do better than index funds and have far more impact in terms of sustainable investment than as an owner of a nearly-sure-bet index fund that owns some shares and takes a hands-off approach to business management, research, product development, and operations. Is it possible to possess a comprehensive understanding of finance and economics but still not have personal finance down? Personal finance: r/personalfinance/wiki, "Consumer science (a.k.a. home economics) as a college major" https://news.ycombinator.com/item?id=17894632 https://news.ycombinator.com/item?id=17894632

gregknicholson 8y ago

The article doesn't seem to explain why this subject is important — why should I want to learn about this?

Proven 8y ago

Glanced over it and saw a recommendation to read the Economist. Stay away from that junk. There are tons of free high quality economics books at mises.org

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icedchocolate 8y ago

Most important thing to know about economics, from Mankiw & studying economics both at school and uni: (1) Resources are limited, but our desire is unlimited. The function of the market is to find the equilibrium amount of each thing to produce, at a certain price. Also, there is always a market, even if money is totally removed. We will always have things to divide up between us. (2) The demand/supply curve. It honestly is unbelievably important and you won’t understand the fundamentals until you understand this, imo. Marx didn’t understand the economy because he didn’t understand this, he only understood the supply part of the equation (a friend who took the history of economic thought & passed his notes onto me taught me this). Practice using this to understand a government policy that impacts the market, think through what it does to prices, volumes, and the curves themselves. Basic accounting concepts and terminology is also quite useful, as another commenter said. Then the function of the central banks, why they do what they do, and how. I do recommend, to understand the GFC, Reading “Financial Accounting Theory”, by William R. Scott, pages 9-15 (section 1.3). If you want to understand dodgy accounting, this is also a good book. Aside from Mankiw’s principles of Microeconomics, Bernanke’s Principles of Macroeconomics is also good.

icedchocolate 8y ago

To add to the resources in this thread, the book sitting on my bookshelf that I used for Derivatives at uni (options & futures, hedging, swaps, etc.) is Fundamentals of Futures and Options Markets, but John C. Hull

fauigerzigerk 8y ago

I have two tips to share: 1) Learn some accounting first. I see a ton of truly weird debates about economics and taxes that are based completely false ideas of basic accounting concepts. 2) If you use DEGIRO as a broker, make sure you understand the tax implications of their cash handling. They keep customer "cash" in a money market fund, not in a bank account. This is especially relevant if you hold foreign currency in your account. It's also relevant if the amount of disposals in each tax year has consequences for your tax return (such as the £45000 threshold for submitting a CGT return in the UK).

iM8t 8y ago
Would you please care to elaborate on point 2 or provide additional information to learn about this? BTW - I'm from the EU.
- fauigerzigerk 8y ago
  I'm going to reply tonight. Unfortunately I'm in a huge rush right now.
  - sulZ 8y ago
    If you find that you have time, I'm also curious.
- fauigerzigerk 8y ago
  So what DEGIRO does is that they buy shares in a money market fund (MMF) with any cash balance that's left in your account at the end of each day. This is done on your behalf like an standing order. For instance, if you transfer money into your DEGIRO account or you sell stocks and don't use (or transfer) that money on the same day, DEGIRO will move your money into the MMF. So you are effectively buying MMF shares. When you use your money at a later date to buy securities or because you want to transfer money out of the DEGIRO account, they will automatically sell MMF shares on your behalf to cover the cost. In some tax jurisdictions this disposal of MMF shares may be subject to capital gains tax (or other taxes). The exact tax treatment depends on the tax status of the MMF in the country where you pay taxes (usually where you live). You may also have to pay taxes on any interest you receive from your MMF shares. Now, if the base currency of your DEGIRO account is the same as the currency in which you owe taxes and you're using Auto-FX (that is you're not holding other currencies in your account), this whole structure is unlikely to affect the amount of tax you owe. The price of the MMF hardly changes at all, so there will not be any taxable gains or losses in the fund currency. But if you pay taxes in a currency other than the base currency of your DEGIRO account or you don't use Auto-FX, then any change in exchange rates may cause taxable gains or losses on disposal. You may also have to report the number of disposals, the total proceeds from disposals and/or each individual disposal in your tax return, even if no gains or losses have resulted from those disposals. That's why it's important to know what the tax treatment of those money market funds is in your jurisdiction and if you have to include the MMF disposals in your tax return or not. Are the MMFs registered in your country at all? If not, you may have to pay higher taxes on any gains. Are they transparent for income tax? There are many questions. It's easy to think of DEGIRO's strange structure as an internal affair for them. But that is not necessarily the case depending on the tax laws of your country and the tax status of these particular money market funds in your country. DEGIRO is a Dutch company. They report all disposal proceeds as well as any interest income to the Dutch authorities who will then pass that information on to the tax authorities of your country of residence under CRS (Common Reporting Standard) rules. Obviously, the information the tax authorities receive from DEGIRO should be consistent with what you report in your tax return. It's all the more important to understand the tax implications of DEGIRO's cash funds as mistakes you make in an offshore brokerage account may incur far higher penalties than the same happening in a domestic account. I asked DEGIRO about the tax treatment of their money market funds. Their reply: "We don't give tax advice".

yogeshp 8y ago

CFA Institute has made their resources for Claritas Certification (Investent Foundations) freely available online [1]. It covers ample material on economics and finance for people from non-finance background. Material is not as rigorous as CFA level 1 but is sufficient for Software Engineers. Link: [1] https://www.cfainstitute.org/en/programs/investment-foundations/curriculum/download https://www.cfainstitute.org/en/programs/investment-foundati...