4 ms·

Why don't we apply Darwinism to the financial world? The fittest survive. If you can make friends with people who have insider info, you should be rewarded with

by dheera 5y ago

Why don't we apply Darwinism to the financial world? The fittest survive. If you can make friends with people who have insider info, you should be rewarded with your networking prowess. It's quite an underrated skill. That's how startup investing works anyway. Separately, announce earnings with some injected noise. Keep announcing corrections in the following several days so that it eventually converges to the correct value. That would be fun! I'd absolutely love to see the Wall Street suit-and-tie hedgehog fund people writhing in anguish while the retail investors don't take a shit.

aeternum 5y ago
Quarterly earnings is pretty antiquated anyway. Perhaps public companies should just report continuous / daily earnings via automated accounting software. This should make it harder to hide accounting fraud and improve transparency and market fairness.
- dheera 5y ago
  Perhaps. But why do we actually care about market fairness? I care that companies get shit done. I want to see electric cars, cancer cures, solar power, and vaccines. I don't care that the markets are fair. If an unfair market means I get those things faster I'm all for it. FWIW I get cheaper strawberries than most people because I'm good at bargaining. Markets aren't supposed to be fair, they're supposed to factor in these kind of soft skills.
  - haswell 5y ago
    > But why do we actually care about market fairness? I'm having a hard time understanding why you believe this is even a question, but I'm trying... Let me ask you a different question: should the CEO of a company who knows about a major upcoming change (positive or negative) be allowed to trade on that information? After all, based on your arguments so far "they should be rewarded for rising the the position of CEO". Do you not see a fundamental issue with a system that guarantees unfairness? If I'm allowed to trade on insider info, and everyone else trading knows that, can you imagine the downstream consequences? e.g. every time I trade, the entire market will now react, because the very fact that I'm trading now might indicate something about the fundamentals of the stock. > Markets aren't supposed to be fair, they're supposed to factor in these kind of soft skills. What makes you believe/conclude this? Fairness in markets doesn't mean we all pay the same price, nor do "soft skills" really play into modern day stock trading. Buying cheap strawberries is a cute analogy, but is an apples/oranges comparison, and one involves a consumable product, while the other involves buying a stake in a company based on information that's supposed to be available to everyone else interested in buying a stake in the company. You may not believe fairness is needed, but that doesn't change that those are the rules we operate under, and most participants in the stock market would fundamentally disagree with you.
  - achillesheels 5y ago
    We need integrity in markets so that our future well-being is secured. I suspect your judgment is a major reason why your ancestry never cultivated sophisticated capital markets. “Without fundamental trust / there is no trust at all.” Tao Te Ching 17
  - foo_barrio 5y ago
    Isn't the argument that fair markets are what allow all that stuff to get done? In other words they are better for the group over the long term. Unfair (via corruption or whatever have you) markets tend to stagnate and are good for the individual in the short term (eg within their own lifetime). Also, who wants to haggle over strawberries every single time you shop? There's a definite time cost to having to "discover" the price on every single transaction.
caymanjim 5y ago
Is that not what happened? These idiots sucked at insider trading and got caught. The more fit insider traders don't get caught. Lying to the public and your investors as some kind of game to "stick it to the man" is not fun, it's obscene (and thankfully criminal). These "retail investors" you defend are morons and gamblers who are leading a flock of other morons into bankruptcy. You should be rooting for them to get screwed, not people who play by the rules.
- dheera 5y ago
  I don't condone lying, but if you have access to inside information why can't you use it? It's not like my brain can differentiate anyway. If I find security bugs in some company's git repo is that insider info? The code was public. I should be rewarded for my ability to read code. Those who can't read code are less fit to be investors. If I overhear company X employees talking trash on a public hiking trail near their office is that insider info? I actually went hiking, I have a higher probability of overhearing insider conversations, I should be rewarded for putting myself out there, doing the legwork, and not sitting in an armchair at home expecting people to feed information to me.
  - Armisael16 5y ago
    Neither of those would be considered insider trading in the US.
    - dheera 5y ago
      Okay so now let's take person A and person B. A is super friendly. B is an asshole. A and B both indepedently go solo hiking to the same park. A ends up making some friends with some company X employees on the trail, hikes with them for part of the trail, and hears inside info, and then they depart ways. B is an asshole and so those people don't want to talk to B. B makes no friends, hikes alone the whole time, and therefore gets no inside info. A should be rewarded by the markets for their people skills, no?
      - 5y ago
umanwizard 5y ago
> If you can make friends with people who have insider info, you should be rewarded with your networking prowess. Why? How does rewarding people for this serve any useful social or economic purpose?
- xwolfi 5y ago
  Darwinist evolution in this person's mind: by rewarding inside networkers and punishing late to the party outsider, you'd reach a state where everyone "cheats" to a point this behavior would be the norm. If we push the wild west theory to its limit, we'd end up in a world where formerly insiders' financial news would cycle and ripple at super fast pace, akin to having a public mic in every trading floor. This is probably what this person think would be the fairest: instead of a hard to enforce artificial safety, we'd have a transparent, free to join jungle. But he fails to see most people arent sharks and therefore electors or noisy public representatives always push to slow things down.
hervature 5y ago
Your other comments show that you don't understand three concepts when it comes to insider: 1) who an insider is 2) what information is privileged and 3) why is it bad. 1) Many jurisdictions have specific people (officers and major owners) designated. The US is fairly unique in that an insider is someone who trade on material non-public information that violates trust. This is what allows for these friends of low level marketing/accounting people to be charged. Overhearing something doesn't put you in a position of trust. Being sent an email accidentally and being notified that you can't trade on it is something else. 2) Material non-public information means information that has not been publicized and that will definitely impact the price of the stock. People "trash talking" their coworkers is not material because you have no way of knowing if that is their sentiment or if the company is actually falling apart. Someone saying "We are getting rid of our entire engineering department because I don't like them. Look here is all the legal paperwork." is something completely different. 3) Insider trading is bad because it erodes the trust of outside investors. As an outsider, you want the confidence that insiders aren't going to get the better end of the deal always. That in the event of something bad happening, the insiders don't get to bail first. Without outside investors, there is no stock market.
- deleted 5y ago
  [deleted]
- dheera 5y ago
  > That in the event of something bad happening, the insiders don't get to bail first. I don't get this. What's wrong with victimized insiders, who are just drones and aren't responsible for the decisions of the company, bailing first? What I think makes much more sense is to not let large shareholders, especially executives with decision-making power, bail first. Small insiders are typically victims, not perpetrators, of bad news, and not rewarded enough for good news. How about a system in which if a low-paid worker of a company (say a warehouse worker, driver, etc. who is having trouble paying their rent) trades 1 share, it goes through in 1ms, giving them an edge over the hedge funds, but if the CEO trades 100000 shares, it takes 3 months before the order goes into the order book and gets executed? In such a system we could allow insider trading, it's just that those trying to bail out of millions of dollars just can't.

by dheera 5y ago

aeternum 5y ago

Quarterly earnings is pretty antiquated anyway. Perhaps public companies should just report continuous / daily earnings via automated accounting software. This should make it harder to hide accounting fraud and improve transparency and market fairness.

dheera 5y ago
Perhaps. But why do we actually care about market fairness? I care that companies get shit done. I want to see electric cars, cancer cures, solar power, and vaccines. I don't care that the markets are fair. If an unfair market means I get those things faster I'm all for it. FWIW I get cheaper strawberries than most people because I'm good at bargaining. Markets aren't supposed to be fair, they're supposed to factor in these kind of soft skills.
- haswell 5y ago
  > But why do we actually care about market fairness? I'm having a hard time understanding why you believe this is even a question, but I'm trying... Let me ask you a different question: should the CEO of a company who knows about a major upcoming change (positive or negative) be allowed to trade on that information? After all, based on your arguments so far "they should be rewarded for rising the the position of CEO". Do you not see a fundamental issue with a system that guarantees unfairness? If I'm allowed to trade on insider info, and everyone else trading knows that, can you imagine the downstream consequences? e.g. every time I trade, the entire market will now react, because the very fact that I'm trading now might indicate something about the fundamentals of the stock. > Markets aren't supposed to be fair, they're supposed to factor in these kind of soft skills. What makes you believe/conclude this? Fairness in markets doesn't mean we all pay the same price, nor do "soft skills" really play into modern day stock trading. Buying cheap strawberries is a cute analogy, but is an apples/oranges comparison, and one involves a consumable product, while the other involves buying a stake in a company based on information that's supposed to be available to everyone else interested in buying a stake in the company. You may not believe fairness is needed, but that doesn't change that those are the rules we operate under, and most participants in the stock market would fundamentally disagree with you.
- achillesheels 5y ago
  We need integrity in markets so that our future well-being is secured. I suspect your judgment is a major reason why your ancestry never cultivated sophisticated capital markets. “Without fundamental trust / there is no trust at all.” Tao Te Ching 17
- foo_barrio 5y ago
  Isn't the argument that fair markets are what allow all that stuff to get done? In other words they are better for the group over the long term. Unfair (via corruption or whatever have you) markets tend to stagnate and are good for the individual in the short term (eg within their own lifetime). Also, who wants to haggle over strawberries every single time you shop? There's a definite time cost to having to "discover" the price on every single transaction.

caymanjim 5y ago

Is that not what happened? These idiots sucked at insider trading and got caught. The more fit insider traders don't get caught. Lying to the public and your investors as some kind of game to "stick it to the man" is not fun, it's obscene (and thankfully criminal). These "retail investors" you defend are morons and gamblers who are leading a flock of other morons into bankruptcy. You should be rooting for them to get screwed, not people who play by the rules.

dheera 5y ago
I don't condone lying, but if you have access to inside information why can't you use it? It's not like my brain can differentiate anyway. If I find security bugs in some company's git repo is that insider info? The code was public. I should be rewarded for my ability to read code. Those who can't read code are less fit to be investors. If I overhear company X employees talking trash on a public hiking trail near their office is that insider info? I actually went hiking, I have a higher probability of overhearing insider conversations, I should be rewarded for putting myself out there, doing the legwork, and not sitting in an armchair at home expecting people to feed information to me.
- Armisael16 5y ago
  Neither of those would be considered insider trading in the US.
  - dheera 5y ago
    Okay so now let's take person A and person B. A is super friendly. B is an asshole. A and B both indepedently go solo hiking to the same park. A ends up making some friends with some company X employees on the trail, hikes with them for part of the trail, and hears inside info, and then they depart ways. B is an asshole and so those people don't want to talk to B. B makes no friends, hikes alone the whole time, and therefore gets no inside info. A should be rewarded by the markets for their people skills, no?
    - 5y ago

umanwizard 5y ago

> If you can make friends with people who have insider info, you should be rewarded with your networking prowess. Why? How does rewarding people for this serve any useful social or economic purpose?

xwolfi 5y ago
Darwinist evolution in this person's mind: by rewarding inside networkers and punishing late to the party outsider, you'd reach a state where everyone "cheats" to a point this behavior would be the norm. If we push the wild west theory to its limit, we'd end up in a world where formerly insiders' financial news would cycle and ripple at super fast pace, akin to having a public mic in every trading floor. This is probably what this person think would be the fairest: instead of a hard to enforce artificial safety, we'd have a transparent, free to join jungle. But he fails to see most people arent sharks and therefore electors or noisy public representatives always push to slow things down.

hervature 5y ago

Your other comments show that you don't understand three concepts when it comes to insider: 1) who an insider is 2) what information is privileged and 3) why is it bad. 1) Many jurisdictions have specific people (officers and major owners) designated. The US is fairly unique in that an insider is someone who trade on material non-public information that violates trust. This is what allows for these friends of low level marketing/accounting people to be charged. Overhearing something doesn't put you in a position of trust. Being sent an email accidentally and being notified that you can't trade on it is something else. 2) Material non-public information means information that has not been publicized and that will definitely impact the price of the stock. People "trash talking" their coworkers is not material because you have no way of knowing if that is their sentiment or if the company is actually falling apart. Someone saying "We are getting rid of our entire engineering department because I don't like them. Look here is all the legal paperwork." is something completely different. 3) Insider trading is bad because it erodes the trust of outside investors. As an outsider, you want the confidence that insiders aren't going to get the better end of the deal always. That in the event of something bad happening, the insiders don't get to bail first. Without outside investors, there is no stock market.

deleted 5y ago
[deleted]
dheera 5y ago
> That in the event of something bad happening, the insiders don't get to bail first. I don't get this. What's wrong with victimized insiders, who are just drones and aren't responsible for the decisions of the company, bailing first? What I think makes much more sense is to not let large shareholders, especially executives with decision-making power, bail first. Small insiders are typically victims, not perpetrators, of bad news, and not rewarded enough for good news. How about a system in which if a low-paid worker of a company (say a warehouse worker, driver, etc. who is having trouble paying their rent) trades 1 share, it goes through in 1ms, giving them an edge over the hedge funds, but if the CEO trades 100000 shares, it takes 3 months before the order goes into the order book and gets executed? In such a system we could allow insider trading, it's just that those trying to bail out of millions of dollars just can't.