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The financial sector provides the work of analyzing economic need to better allocate capital. It is real work, that adds real value to the economy. The problem

The financial sector provides the work of analyzing economic need to better allocate capital. It is real work, that adds real value to the economy. The problem with the financial sector is that barriers to entry, created to "protect retail investors" and "mitigate systemic risk", result in the vast majority being excluded from the industry and a small elite capturing the majority of profits. Any development that threatens to disrupt the regulated financial sector is dealt with harshly by regulatory agencies, as in the case of the token sale market and the SEC's enforcement actions against token sale organizers.

toomuchtodo 8y ago
> created to "protect retail investors" and "mitigate systemic risk", result in the vast majority being excluded from the industry and a small elite capturing the majority of profits. Most Americans don't make enough to have anything left over to invest in the markets. This isn't a regulatory failing, this is a labor regulation failing.
- CryptoPunk 8y ago
  It shouldn't cost anything to invest in the markets. The markets should be nearly frictionless, with no fixed costs for making an investment, making it possible to invest $2.50 at your local convenience store in a company or product that you like, the same way the poor buy lottery tickets in mass (currently 9% of the income of the poorest households is spent on lottery tickets).
  - toomuchtodo 8y ago
    > It shouldn't cost anything to invest in the markets. Hyperbole. It costs something to maintain the infrastructure (data centers in NY, NJ, and IL) to execute and settle trades. We're just arguing over how much.
    - CryptoPunk 8y ago
      It should cost almost nothing. It's an information technology, as cryptocurrency is demonstrating. The cost per transaction should be extremely low. That it isn't is a result of regulatory overhead.
      - toomuchtodo 8y ago
        https://digiconomist.net/bitcoin-energy-consumption https://digiconomist.net/bitcoin-energy-consumption > Bitcoin's current estimated annual electricity consumption* (TWh) 53.47 > Bitcoin's current minimum annual electricity consumption (TWh) 40.67 > Annualized estimated global mining costs $2,673,731,206 Just for the power.
        CryptoPunk 8y ago
        That's a result of the mining subsidy, that is there to provide security until transaction fees are sufficiently large to secure the network. Actual energy consumption for a network of a few thousand computers to propagate and validate a transaction is minimal: https://gist.github.com/gavinandresen/5044482 https://gist.github.com/gavinandresen/5044482 Without the mining subsidy, and without an artificial 1 MB per 10 minute throughput limit creating scarcity in block space, fees would be extraordinarily low. Also, Ethereum and other blockchains are-moving/have-already-moved to Proof of Stake, which eliminates all of the additional energy consumption that comes from generating proof of work.
        deleted 8y ago
        [deleted]
    - elamje 8y ago
      It costs something, yes. I think Vangaurd demonstrates how efficiently the whole system could run. Investors own the infrastructure, co-op style; Executives running the exchanges could be more like Jack Bogle than Ken Griffin. Both were effectively IT executives doing finance and connecting buyers and sellers. One took a tiny salary, one is worth 9 billion. Of course market making is slightly different but is a middle man just like an exchange. Now that crypto exists, there are many blockchains that are federated and require a fraction of energy as bitcoin and are working very securely. Bitcoin is an exception to energy required and therefor not indicative of the real cost.
- jandrewrogers 8y ago
  > Most Americans don't make enough to have anything left over to invest in the markets. This assertion is not supported by demographic statistics. The median US household has ~$12,000/year in investable cash, after all ordinary expenses. Whether or not they actually invest any of this cash is another matter.
  - toomuchtodo 8y ago
    57 percent of Americans can’t come up with $500 for an emergency expense. Based on that, I disagree with your assertion regarding investable cash.
  - toomuchtodo 8y ago
    The edit timeout on my other comment has expired. Here is also Ray Dalio’s (billionaire hedge fund owner) essay supporting my assertion. https://www.linkedin.com/pulse/why-how-capitalism-needs-reformed-parts-1-2-ray-dalio/?published=t https://www.linkedin.com/pulse/why-how-capitalism-needs-refo...
3dfxiter 8y ago
My "real work" largely consisted of what is sometimes called "chartism" today. Technical analysis is ridiculed by the academic community, but in certain markets it sure as hell works. I don't think, however, that I ever "created value" in anything I did as a commodities trader, in the sense that cancer researchers or teachers create tangible value. If anything, I felt that I was exploiting supply/demand shocks using capital from investors that I was lucky enough to know. The strategies were never that complicated or innovative either. Today its even simpler: constant rebalancing between a couple of high market-cap ETF's.
- CryptoPunk 8y ago
  Technical analysis is exploiting inefficiencies in market behaviour to profit, and in doing so, reducing those inefficiencies. It is not value-less work, no matter how far removed it is from the end-product that people consume. >>If anything, I felt that I was exploiting supply/demand shocks using capital from investors that I was lucky enough to know. This helps with the allocation of physical resources. The faster prices are aligned with supply-demand dynamics, the more efficiently those physical resources will be consumed. When there is a major shortage of a commodity, you want people to start conserving that resource as soon as possible, and that is what an increase in prices brought about by traders like you results in.
  - somethoughts 8y ago
    This thread reminds me of this hacker news post from a few months ago: https://meltingasphalt.com/wealth-the-toxic-byproduct/ https://meltingasphalt.com/wealth-the-toxic-byproduct/ https://news.ycombinator.com/item?id=18825103 https://news.ycombinator.com/item?id=18825103

toomuchtodo 8y ago

> created to "protect retail investors" and "mitigate systemic risk", result in the vast majority being excluded from the industry and a small elite capturing the majority of profits. Most Americans don't make enough to have anything left over to invest in the markets. This isn't a regulatory failing, this is a labor regulation failing.

CryptoPunk 8y ago
It shouldn't cost anything to invest in the markets. The markets should be nearly frictionless, with no fixed costs for making an investment, making it possible to invest $2.50 at your local convenience store in a company or product that you like, the same way the poor buy lottery tickets in mass (currently 9% of the income of the poorest households is spent on lottery tickets).
- toomuchtodo 8y ago
  > It shouldn't cost anything to invest in the markets. Hyperbole. It costs something to maintain the infrastructure (data centers in NY, NJ, and IL) to execute and settle trades. We're just arguing over how much.
  - CryptoPunk 8y ago
    It should cost almost nothing. It's an information technology, as cryptocurrency is demonstrating. The cost per transaction should be extremely low. That it isn't is a result of regulatory overhead.
    - toomuchtodo 8y ago
      https://digiconomist.net/bitcoin-energy-consumption https://digiconomist.net/bitcoin-energy-consumption > Bitcoin's current estimated annual electricity consumption* (TWh) 53.47 > Bitcoin's current minimum annual electricity consumption (TWh) 40.67 > Annualized estimated global mining costs $2,673,731,206 Just for the power.
      - CryptoPunk 8y ago
        That's a result of the mining subsidy, that is there to provide security until transaction fees are sufficiently large to secure the network. Actual energy consumption for a network of a few thousand computers to propagate and validate a transaction is minimal: https://gist.github.com/gavinandresen/5044482 https://gist.github.com/gavinandresen/5044482 Without the mining subsidy, and without an artificial 1 MB per 10 minute throughput limit creating scarcity in block space, fees would be extraordinarily low. Also, Ethereum and other blockchains are-moving/have-already-moved to Proof of Stake, which eliminates all of the additional energy consumption that comes from generating proof of work.
        deleted 8y ago
        [deleted]
  - elamje 8y ago
    It costs something, yes. I think Vangaurd demonstrates how efficiently the whole system could run. Investors own the infrastructure, co-op style; Executives running the exchanges could be more like Jack Bogle than Ken Griffin. Both were effectively IT executives doing finance and connecting buyers and sellers. One took a tiny salary, one is worth 9 billion. Of course market making is slightly different but is a middle man just like an exchange. Now that crypto exists, there are many blockchains that are federated and require a fraction of energy as bitcoin and are working very securely. Bitcoin is an exception to energy required and therefor not indicative of the real cost.
jandrewrogers 8y ago
> Most Americans don't make enough to have anything left over to invest in the markets. This assertion is not supported by demographic statistics. The median US household has ~$12,000/year in investable cash, after all ordinary expenses. Whether or not they actually invest any of this cash is another matter.
- toomuchtodo 8y ago
  57 percent of Americans can’t come up with $500 for an emergency expense. Based on that, I disagree with your assertion regarding investable cash.
- toomuchtodo 8y ago
  The edit timeout on my other comment has expired. Here is also Ray Dalio’s (billionaire hedge fund owner) essay supporting my assertion. https://www.linkedin.com/pulse/why-how-capitalism-needs-reformed-parts-1-2-ray-dalio/?published=t https://www.linkedin.com/pulse/why-how-capitalism-needs-refo...

3dfxiter 8y ago

My "real work" largely consisted of what is sometimes called "chartism" today. Technical analysis is ridiculed by the academic community, but in certain markets it sure as hell works. I don't think, however, that I ever "created value" in anything I did as a commodities trader, in the sense that cancer researchers or teachers create tangible value. If anything, I felt that I was exploiting supply/demand shocks using capital from investors that I was lucky enough to know. The strategies were never that complicated or innovative either. Today its even simpler: constant rebalancing between a couple of high market-cap ETF's.

CryptoPunk 8y ago
Technical analysis is exploiting inefficiencies in market behaviour to profit, and in doing so, reducing those inefficiencies. It is not value-less work, no matter how far removed it is from the end-product that people consume. >>If anything, I felt that I was exploiting supply/demand shocks using capital from investors that I was lucky enough to know. This helps with the allocation of physical resources. The faster prices are aligned with supply-demand dynamics, the more efficiently those physical resources will be consumed. When there is a major shortage of a commodity, you want people to start conserving that resource as soon as possible, and that is what an increase in prices brought about by traders like you results in.
- somethoughts 8y ago
  This thread reminds me of this hacker news post from a few months ago: https://meltingasphalt.com/wealth-the-toxic-byproduct/ https://meltingasphalt.com/wealth-the-toxic-byproduct/ https://news.ycombinator.com/item?id=18825103 https://news.ycombinator.com/item?id=18825103