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I will eternally find it sad how much talent is wasted on trading. So much money, so much intelligence, so much time and effort, all the provide almost no tangi
by Workaccount2 2y ago
I will eternally find it sad how much talent is wasted on trading. So much money, so much intelligence, so much time and effort, all the provide almost no tangible value to society.
- keyle 2y agoI take the silver lining. Smart people getting rich is better than dumb people getting rich. Hopefully some day they'll do something good with that money.
- jwr 2y agoThe problem is that smart people are the ones being employed, not the ones getting rich.
- twoodfin 2y agoI am pretty sure anyone who sticks around Jane Street for a while is getting “rich” by any popularly accepted measure.
- Mistletoe 2y agoSam Bankman-Fried and Caroline Ellison did for a while…
- godelski 2y agoI'm pretty sure the parent is implying that there is quite a disproportionate distribution.
- twoodfin 2y agoSorry, implying what? That Jane Street quants aren’t getting rich enough?
- godelski 2y agoRead the comment again > The problem is that smart people are the ones being employed, not the ones getting rich. Employed is a key word. Generalize the point beyond Jane Street if you're still having difficulties. Such general understanding will be necessary if you want to work somewhere like Jane Street.
- memonkey 2y agoI would prefer good people get rich and bad people don't.
- Nursie 2y agoI’m not sure that’s true either. See for example “effective altruism”, which turns out to have been neither, but more of a self-deluded justification for insane greed, coupled with a god complex.
- in3d 2y agoRidiculous, uninformed comment. There is no question that Effective Altruism has done tremendous good overall by saving many, many lives. I say this as someone who disagrees with important aspects, such as valuing distant lives equally to local ones. They have also been more correct than anyone else about AI, pandemics, etc.
- Nursie 2y agoIt’s also been used as a self-justification by the likes of Sam Bankman-Fried, who exemplifies the qualities I mentioned above. It’s clearly a very flexible philosophy that “smart people” can use to justify pretty much whatever, and given the presence of such people as SBF and cronies, certainly doesn’t support the notion that it’s a great thing for “smart people” to get rich, or really that we should expect that to be any more than neutral. “Smart People” can be scumbags, and some prominent EA folks were, all the while shouting about how good they were.
- LeroyRaz 2y agoI agree, how dull and uninspired. I'm very much with Paul Graham, who believes in the creation of wealth (as opposed to the extraction of money).
- anonym29 2y agoCan you codify the difference? I seem to be fundamentally misunderstanding the difference between wealth creation and wealth extraction if voluntary market activity constitutes extraction. I'd definitionally describe all voluntary transactions free of coercion to imply the buyer values the utility of what they're buying (i.e. true wealth - piles of currency are not true wealth, they're what you exchange for true wealth) more than the currency they're trading for it, no? Involuntary transactions featuring coercion on the other hand, like the government demanding you pay taxes under threat of imprisonment (enforced at gunpoint, if necessary) are clearly extractive, by my definition.
- LeroyRaz 2y agoMoney Extraction: fighting over a slice of pie. Wealth Creation: creating new pie. In practice, a lot of things that look extractive (e.g., designing better high frequency trading algorithms) potentially have some marginal utility (e.g., creating market liquidity), but the money high performing people make is likely larger than the utility they add to the system (because most of the money in having the best high frequency trading algorithm comes from beating other people's high frequency trading algorithms).
- foobar10000 2y agoWhile there's many definitions, I'd concentrate on zero-sum vs non-zero-sum games. Lots of games in trading are effectively zero-sum games - if I make 100USD, you lose 100USD (there's details about transaction costs going to exchanges that make this more nuanced, but the principle applies). A chunk of financial engineering games are not : for example risk pooling games. A big part of finance for example is liquidity provisioning games - which kindof boil down to risk pooling games in the limit. But unfortunately - a _very_ big chunk of the financial markets is zero-sum. Even in a purely digital world - most of the economy is not zero sum - i.e., it _creates_ wealth. I pay you 100USD for 1 million LLM tokens - a purely digital transaction - the net result of this is the 1 million tokes that I can consume and use - net of the transaction.
- anonym29 2y agoAre you proposing a universal hierarchy of value where the goals individuals set for themselves are inherently worth less than the goals you want to set for them, if the goal they want for themselves is prosperity? Who elected you Supreme Leader?
- dgfitz 2y agoSmart people who grew up poor making their own way, isn’t that the idea? Or do we just assume they’re all rich, privileged folks?
- heavymetalpoizn 2y ago[dead]
- twoodfin 2y agoIf it didn’t provide value, nobody would pay for it. The alternative to highly technical, agile quantitative trading is fat middle men, wide spreads, and capital sitting in 8%* stupider places than it would otherwise. That’s a pretty big deal even if the observable effects are extremely diffuse. * Made up number, but if we woke up on Monday with nothing but the tech we used to trade in 1984 it would probably hit much worse.
- godelski 2y agoLots of things provide no value that people pay for. The inverse is true too: lots of things provide value that no one pays for. I find it shocking that anyone that programs would think this way considering how widespread and common open source tooling is. I don't know how you can get through your day without using OSS or even free websites like stack overflow.
- twoodfin 2y agoOf course the inverse is true, and you don’t have to stick to software. Raising children produces value despite no one exchanging currency. But generally nobody pays quants to lose money. They expect value over the other opportunities they have to use that same money. Is this really controversial?
- TeaBrain 2y ago>But generally nobody pays quants to lose money. They expect value over the other opportunities they have to use that same money. Is this really controversial? As with your other comment, this has nothing to do with what the original parent comment was remarking on. They didn't claim, nor did anyone else, that proprietary trading firms weren't making money and that people weren't well compensated due to helping firms make money. Their remark was that the value these firms are providing to society is questionable and that the highly intelligent employees could likely be providing greater value to society elsewhere.
- philosopher1234 2y ago
- bblcla 2y agoTyler Cowen did an 'ask me anything' at Jane Street when I interned in 2016. One of the interns asked him exactly this: "What do you think of the fact that we all work here instead of, I don't know, curing cancer?" He replied with, roughly, "Those of you who work here probably couldn't do anything else other than perhaps math research. Arguably, working here is the economically efficient use of your time." I think about whenever I see a comment like this. Quant firms select for a very specific set of skills. In particular, I've found that many traders/software engineers in quant are very smart but not very self-directed. Places like Jane Street work well for people who can excel, but only when given a lot of structure and direction. I think this is not unrelated to why so many people 'accidentally' end up as traders after going to an Ivy League school!
- Barrin92 2y agoGeneral intelligence is overstated sometimes, but it is a thing. Someone who is smart enough to work for Jane Street probably could at least be an intelligence analyst or software developer at the NSA contributing to national security. (Jim Simmons literally was a code breaker during the Vietnam War) I don't think there's a gene for playing esoteric minigames on the options market while you literally suck at everything else
- pinkmuffinere 2y agoYa, I’m very surprised by the argument “you’re some of the best at numerical analysis and high frequency trading, and you’d be bad at anything else”, lol. That said, I think there are better reasons to work at such a place. Providing liquidity to the market is a good thing, and has real world value, it’s just hard for us to connect it to concrete outcomes. But as a simplified “toy” example, when they orchestrate a trade for/with a retirement fund, they help the fund improve its holdings at very low cost. That benefits everyone impacted by the retirement fund
- Nursie 2y agoI think the amount of money that is creamed off for this service is disproportionate, and the amount of benefit to wider society a case of diminishing returns. Allocation of capital, market liquidity etc are useful, but the size of the financial sector and the rewards it gives out for this shuffling of money are insane.
- tikhonj 2y agoEh, hard to say that when the main alternative (math, physics or CS research) requires jumping through a lot of selective hoops, barely has positions available, and absolutely no trouble filling all the positions they do have.
- xrisk 2y agoAt least it’s arguably better than working for giant ad engines.
- czk 2y agoThis reminds me of Renaissance Technologies (Jim Simons, PhD in math from uc berkeley). He started the company in 1982 after he left academia for finance and leveraged quant models for training, they mostly hire PhD mathematicians, physicists and scientists, working on algorithms. They have a fund called Medallion that is closed off from outsiders (you have to be an employee I believe), and it averages 66% annual gross returns (39% net after fees). Generated hundreds of billions in profits.
- whiplash451 2y agoWell. Read about him all the way to the end, then.
- __cxa_throw 2y agoTheres large portions of the tech industry that are pretty useless to society too while paying incredibly high salaries random examples include: - facebook/google ads teams - various SaaSLOP companies Lots of smart engineers that work on making buttons pretty and A/B testing crap rather than pushing the boundaries of science.
- achierius 2y agoThis is also bad. Huge amounts of our human capital are invested in fundamentally anti social enterprises. This sort of market failure seems to be endemic to our system as it stands today, and the only answers I've seen are "well, but that other bunch are even less useful!"
- madars 2y agoWhy would it be wasted? I like apples and I like being able to buy them any day of year, even out of season. The only reason I can do so is because there is an entire industry of people who manage the inventory, distribution, try to predict supply and demand, and take on a risk doing that. The principal reason why I can buy and sell equities at very small spreads any day of the year is similar: traders are competing to take the other side of the bet. I also encourage everyone to read CFTC response to the Vatican's (!) Congregation for the Doctrine of the Faith https://www.cftc.gov/PressRoom/SpeechesTestimony/giancarloresponsetobollettino072118 https://www.cftc.gov/PressRoom/SpeechesTestimony/giancarlore... It talks about about the social utility of derivatives and refutes the narrative that they are basically tools of "speculation." Traders take on risks others can't bear, creating massive economic value that ripples through the entire system.
- thrance 2y agoOk, but what do high frequency trading bots possibly do to help me eat apples in winter (a deeply unecological mode of consumption, btw)?
- eadmund 2y agoI believe that they provide liquidity. That’s a fancy way of saying that they ensure that any time someone wants to sell he can find a buyer, and every time someone wants to buy he can find a seller. That in turn means that folks are more confident of their ability to enter and exit a position, which means that they are more likely to enter and exit positions, which makes the market more efficient at finding prices. And of course prices are hugely valuable: the market is a conversation about the relative value of everything, and the language it speaks is prices. So by enabling liquidity, high-frequency traders are enabling efficient allocation of resources towards those things which mankind most dearly needs and desires.
- achierius 2y agoEveryone understands that there's a pricing utility to markets and market speculation. But consider that, like in all things, the free market has its 'biases': wouldn't you expect that something like trading, which directly produces profit with very little overhead and maximal ability to hedge against rush, would draw an inordinate amount of capital -- in the same way that things like infrastructure, sans government intervention, naturally repel it? We have far, far too much of our economy sunk into a sector that fundamentally produces nothing of value, one that only shuffles value around and chooses to whom it will be allocated (coincidentally, often the people doing the allocating!). Compare our economy and its woes to China. Do they spend nearly as much of their human capital figuring out how to get an extra bp on some statistical arb? Thethe origins of DeepSeek are illustrative in this regard.
- objektif 2y agoWould you rather people spend their time on centering divs? Or come up more ways to make people click on ads. I see this type of view often on HN from big tech employees. Get off your high horses people.
- abenga 2y agoAre those the only other options to being a quant? That's a false dichotomy if I ever saw one.
- philosopher1234 2y agoYou haven’t contested the substance of the argument at all. It’s as though you agree.
- objektif 2y agoThere is nothing to contest here. This is HN forum and there is wide held belief that capital markets tech work is somehow below what the folks are doing in SV.
- Workaccount2 2y agoFunny enough I don't work in tech, but rather manufacturing.
- lend000 2y agoFrom a technical challenge standpoint, trading is extremely difficult. But it provides high upside which only starting a business can exceed. However, starting a business has all the other uncertainty (regulatory, accounting, insurance, licensing, taxes, customers, branding, sales, product-market-fit), making it far more psychologically challenging overall. Startup founders need to learn and juggle a lot of things instead of hyper-fixating on markets. Basically, if you know you are sufficiently intelligent and talented as an engineer, your expected return is likely much higher in trading (especially via a big quant firm), with much lower risk. If we want more talented traders to become founders building economic value (which we should all agree on), we need to make it less onerous to start a business.
- thrance 2y agoI'd argue it provides negative value even. The goal of these people is to extract money from the markets, without actually producing anything. In biology, we'd call that parasitism.
- EGreg 2y agoIt's a zero-sum game. People don't understand this: https://community.intercoin.app/t/intercoin-compared-to-the-wider-tech-sector-since-2017/2761 https://community.intercoin.app/t/intercoin-compared-to-the-... I guess advertising is too, in the limit. So a lot of the business model on the web is also not much value to society.
- deleted 2y ago[deleted]
- TacticalCoder 2y ago[dead]
- laughingcurve 2y agoSociety has the problem, not the individuals.
- logicchains 2y agoPlease share what industry you work in? And if it's social media/ad tech or military, get off your high horse you smug hypocrite.
- vismit2000 2y agoThis sentiment is also covered in 'Zero to One' by Peter Thiel.
- deleted 2y ago[deleted]
- whiplash451 2y agoI recommend you read the life of Jim Simons (through The Man who Solved the Market) as well as a recent HN thread on DeepSeek showing how their trading arm finances the whole company. There is much more nuance in this world than your post implies.