4 ms·

the quant finance that takes the best and the brightest (as opposed to the bankers and sales traders), uses informational and computational advantage to make mo

the quant finance that takes the best and the brightest (as opposed to the bankers and sales traders), uses informational and computational advantage to make money. How are internet startups any different? Also, even the bankers and sales traders are providing a service that apparently people want. If you can judge them as not creating societal value, why can't I say that the Nth photo sharing website is not creating value?

erikpukinskis 16y ago
People generally won't use your site unless it helps them in some way. It makes their life easier, it helps them move information around, or they enjoy it. It's debatable whether the specifics represent a net good for humanity (cough Zynga cough) but there's at least a decent chance that you're helping folks out. Some financial organizations provide important liquidity. They offer you a loan when you need one. But many exist only to shuffle around money in a clever way, so that some percentage of that money goes into their coffers. And it seems like the smarter the employees, the less likely they are to actually be providing any real services to people. After all, smart employees are the ones who can make truly spectacular exploits of the game... exploits that are lucrative but pointless. And I don't know anything about the details, but I can't help but wonder... when you write a brilliant algorithm that scrapes money out of the markets... or you set up a clever instrument that lets you capitalize on structural regularities in the market... whose hide does that money come out of? I honestly have no idea, but my instinct is that it's coming from people who are already disenfranchised.
- secretasiandan 16y ago
  "And it seems like the smarter the employees, the less likely they are to actually be providing any real services to people" I would call this a negotiation that they are winning. Just like startup founders win in their negotiation with employees for equity. "People generally won't use your site unless it helps them in some way." And people generally won't trade with you unless it helps them in some way. Again, how is this different?
  - erikpukinskis 16y ago
    people generally won't trade with you unless it helps them in some way Not necessarily. People engaged in real trade set up financial institutions, but once these institutions are set up, a game is in place. That game may be beneficial overall to the businesses, but individual players aren't necessarily beneficial... even if they are participating according to the agreed upon rules. It's like cashing in a Groupon deal and then never returning to that business. The company loses money on you and they only agree to serve you because it works for them at scale. But at the micro scale you are hurting them. People who do so have every right to, but they are not contributing to the economy. They are just making a lot of money by making other peoples' lives more difficult.
    - ig1 16y ago
      That's like saying someone who listens to a sales pitch and then doesn't buy the product isn't adding value to the economy.
      - Aetius 16y ago
        Ok, then, how does stealing sound? You can't really win this argument, man. No matter how you dice it, the FED is stealing from the American public to hand it over to financial institutions who then sell us back our stolen goods.
  - warrenwilkinson 16y ago
    People are forced to trade, here is how: When the government needs a loan to cover its budget, they get it from the Federal Reserve. The Federal Reserve are charged to coin new money to provide the government (see wikipedia Federal Reserve, subheadings: 'Elastic Currency', 'Lender of Last Resort' & 'Central bank'). As the Federal Reserve increases the money supply, the value of the dollars in your pocket/matress/bank account go down. Since the value of currency evaporates, the only way to maintain your savings is to have it in a non-currency form. Stocks are a pretty liquid asset. This pushes people away from savings and into speculation (the stock market), where many lose their shirts.
rbarooah 16y ago
Will the government bail out the photo sharing sites when they fail?
- med555 16y ago
  Photo sharing sites doesn't cripple the entire economy when they fail.
  - rbarooah 16y ago
    So you agree that the financial industry gets to take risks at other people's expense? This makes your other points about the benefits of the financial industry and your defense of them 'not stealing' seem incoherent at best.
- fleitz 16y ago
  If photosharing sites can make enough campaign contributions it should definitely be possible.
richardw 16y ago
Well, we don't transfer our pensions, salaries and every bit of capital and risk through startups. If we did, I'd say we need to watch startups a lot more carefully. The equivalent to today's finance world was the .com boom and crash. When that crashed, the world continued and the S&P500 recovered just fine after a brief hiccup. The .com universe deleveraged and stayed so, but it just didn't affect the rest of the world that much. During the latest crash, the rest of the world went into a huge recession. House prices and new-house sales have just hit multi-year lows again, two years after the event. The job market only looks better because so many have left it so aren't counted as job-seekers anymore! The non-finance world is still paying the bill for the latest recession, even though the big banks have forgotten about it and are paying bigger bonuses than ever. New home sales: http://cr4re.com/charts/charts.html?New-Home#category=New-Home&chart=NHSFeb2011.jpg http://cr4re.com/charts/charts.html?New-Home#category=New-Ho... Unofficial problem bank list is still at or near a record. Good to be a big bank that gets government money: http://www.calculatedriskblog.com/2011/03/unofficial-problem-bank-list-increases_26.html http://www.calculatedriskblog.com/2011/03/unofficial-problem... "The Labor Force Participation Rate declined to 64.3% in December (blue line). This is the lowest level since the early '80s." http://www.calculatedriskblog.com/2011/01/december-employment-report-104000-jobs.html http://www.calculatedriskblog.com/2011/01/december-employmen...

erikpukinskis 16y ago

People generally won't use your site unless it helps them in some way. It makes their life easier, it helps them move information around, or they enjoy it. It's debatable whether the specifics represent a net good for humanity (cough Zynga cough) but there's at least a decent chance that you're helping folks out. Some financial organizations provide important liquidity. They offer you a loan when you need one. But many exist only to shuffle around money in a clever way, so that some percentage of that money goes into their coffers. And it seems like the smarter the employees, the less likely they are to actually be providing any real services to people. After all, smart employees are the ones who can make truly spectacular exploits of the game... exploits that are lucrative but pointless. And I don't know anything about the details, but I can't help but wonder... when you write a brilliant algorithm that scrapes money out of the markets... or you set up a clever instrument that lets you capitalize on structural regularities in the market... whose hide does that money come out of? I honestly have no idea, but my instinct is that it's coming from people who are already disenfranchised.

secretasiandan 16y ago
"And it seems like the smarter the employees, the less likely they are to actually be providing any real services to people" I would call this a negotiation that they are winning. Just like startup founders win in their negotiation with employees for equity. "People generally won't use your site unless it helps them in some way." And people generally won't trade with you unless it helps them in some way. Again, how is this different?
- erikpukinskis 16y ago
  people generally won't trade with you unless it helps them in some way Not necessarily. People engaged in real trade set up financial institutions, but once these institutions are set up, a game is in place. That game may be beneficial overall to the businesses, but individual players aren't necessarily beneficial... even if they are participating according to the agreed upon rules. It's like cashing in a Groupon deal and then never returning to that business. The company loses money on you and they only agree to serve you because it works for them at scale. But at the micro scale you are hurting them. People who do so have every right to, but they are not contributing to the economy. They are just making a lot of money by making other peoples' lives more difficult.
  - ig1 16y ago
    That's like saying someone who listens to a sales pitch and then doesn't buy the product isn't adding value to the economy.
    - Aetius 16y ago
      Ok, then, how does stealing sound? You can't really win this argument, man. No matter how you dice it, the FED is stealing from the American public to hand it over to financial institutions who then sell us back our stolen goods.
- warrenwilkinson 16y ago
  People are forced to trade, here is how: When the government needs a loan to cover its budget, they get it from the Federal Reserve. The Federal Reserve are charged to coin new money to provide the government (see wikipedia Federal Reserve, subheadings: 'Elastic Currency', 'Lender of Last Resort' & 'Central bank'). As the Federal Reserve increases the money supply, the value of the dollars in your pocket/matress/bank account go down. Since the value of currency evaporates, the only way to maintain your savings is to have it in a non-currency form. Stocks are a pretty liquid asset. This pushes people away from savings and into speculation (the stock market), where many lose their shirts.

rbarooah 16y ago

Will the government bail out the photo sharing sites when they fail?

med555 16y ago
Photo sharing sites doesn't cripple the entire economy when they fail.
- rbarooah 16y ago
  So you agree that the financial industry gets to take risks at other people's expense? This makes your other points about the benefits of the financial industry and your defense of them 'not stealing' seem incoherent at best.
fleitz 16y ago
If photosharing sites can make enough campaign contributions it should definitely be possible.

richardw 16y ago

Well, we don't transfer our pensions, salaries and every bit of capital and risk through startups. If we did, I'd say we need to watch startups a lot more carefully. The equivalent to today's finance world was the .com boom and crash. When that crashed, the world continued and the S&P500 recovered just fine after a brief hiccup. The .com universe deleveraged and stayed so, but it just didn't affect the rest of the world that much. During the latest crash, the rest of the world went into a huge recession. House prices and new-house sales have just hit multi-year lows again, two years after the event. The job market only looks better because so many have left it so aren't counted as job-seekers anymore! The non-finance world is still paying the bill for the latest recession, even though the big banks have forgotten about it and are paying bigger bonuses than ever. New home sales: http://cr4re.com/charts/charts.html?New-Home#category=New-Home&chart=NHSFeb2011.jpg http://cr4re.com/charts/charts.html?New-Home#category=New-Ho... Unofficial problem bank list is still at or near a record. Good to be a big bank that gets government money: http://www.calculatedriskblog.com/2011/03/unofficial-problem-bank-list-increases_26.html http://www.calculatedriskblog.com/2011/03/unofficial-problem... "The Labor Force Participation Rate declined to 64.3% in December (blue line). This is the lowest level since the early '80s." http://www.calculatedriskblog.com/2011/01/december-employment-report-104000-jobs.html http://www.calculatedriskblog.com/2011/01/december-employmen...