4 ms·

If 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 capit

If 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 ago
Lots 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 ago
  Of 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
    Money and value are different things.
  - deleted 2y ago
    [deleted]
  - godelski 2y ago
    Your comment comes off as "people pay, therefore it has value." Which the inverse would need to be true in that case. But you are conflating money and value. As you stated, raising children produces value, and as you imply, this is not generating revenue. Which you are also conflating exchanging money with generating value. Sure, liquidity can generate value but don't confuse these things. People seem to be forgetting that money is a proxy and that a proxy is not the same as the thing you are proxying.
- deleted 2y ago
  [deleted]
TeaBrain 2y ago
>The alternative to highly technical, agile quantitative trading is fat middle men, wide spreads No, this would be the alternative to securities and derivatives markets being electronic. >If it didn’t provide value, nobody would pay for it. The parent was remarking on the value provided to society, not the value provided to the firms.
zknow 2y ago
they make the mistake of paying for it unlike those who know what to do https://www.investopedia.com/articles/investing/030916/buffetts-bet-hedge-funds-year-eight-brka-brkb.asp https://www.investopedia.com/articles/investing/030916/buffe...
Workaccount2 2y ago
My actual gripe is with where that value comes from, and what it's true cost to society is. I'd argue that pulling these people out of moving society forward is just another form of externalized cost. The stanford guy who figured out how to halve the cost of solar in 2012 never got to realize it because $750k/yr to do stochastic modeling of cattle feed to (secretly) overcharge farmers for futures contracts was just too enticing.
- TheAlchemist 2y ago
  The way I see HFT, is that previously this money was going to brokers and banks. Now, most of this money is going to HFT shops, but you could also make an argument that some of it stays with the investors, since spreads are much smaller now. There is 0 cost to society, maybe even a small gain. As for moving society forward, I don't know. If not in finance, most of these guys would work for big tech companies trying to actively make kids and adults addicted to screens.
  - thijson 2y ago
    One benefit I've seen is that commission free trades wouldn't be possible without payment for order flow. I remember the old days when it cost a lot to do a trade. Also the stock price tick increments used to be higher. That's been steadily eroded.
  - Workaccount2 2y ago
    These are just first order effects. I'm talking about second and third order effects that I would argue make the value prop of tighter spreads enormously negative to society on the whole. Liken it to the government deciding to spend 40% of the budget on roads. Suddenly the roads quickly get pot holes filled, the lines are seemingly always freshly painted, cracks are all filled, and even mildly uneven roads gets freshly paved. The first order effects of this would all be positive. The transportation dept. could talk all day about benefits to everyone. Everyone would love the great roads. But spending 40% of the budget on roads is insane, and the second and third order effects would be disastrous to that society.

godelski 2y ago

Lots 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 ago
Of 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
  Money and value are different things.
- deleted 2y ago
  [deleted]
- godelski 2y ago
  Your comment comes off as "people pay, therefore it has value." Which the inverse would need to be true in that case. But you are conflating money and value. As you stated, raising children produces value, and as you imply, this is not generating revenue. Which you are also conflating exchanging money with generating value. Sure, liquidity can generate value but don't confuse these things. People seem to be forgetting that money is a proxy and that a proxy is not the same as the thing you are proxying.
deleted 2y ago
[deleted]

TeaBrain 2y ago

>The alternative to highly technical, agile quantitative trading is fat middle men, wide spreads No, this would be the alternative to securities and derivatives markets being electronic. >If it didn’t provide value, nobody would pay for it. The parent was remarking on the value provided to society, not the value provided to the firms.

zknow 2y ago

they make the mistake of paying for it unlike those who know what to do https://www.investopedia.com/articles/investing/030916/buffetts-bet-hedge-funds-year-eight-brka-brkb.asp https://www.investopedia.com/articles/investing/030916/buffe...

Workaccount2 2y ago

My actual gripe is with where that value comes from, and what it's true cost to society is. I'd argue that pulling these people out of moving society forward is just another form of externalized cost. The stanford guy who figured out how to halve the cost of solar in 2012 never got to realize it because $750k/yr to do stochastic modeling of cattle feed to (secretly) overcharge farmers for futures contracts was just too enticing.

TheAlchemist 2y ago
The way I see HFT, is that previously this money was going to brokers and banks. Now, most of this money is going to HFT shops, but you could also make an argument that some of it stays with the investors, since spreads are much smaller now. There is 0 cost to society, maybe even a small gain. As for moving society forward, I don't know. If not in finance, most of these guys would work for big tech companies trying to actively make kids and adults addicted to screens.
- thijson 2y ago
  One benefit I've seen is that commission free trades wouldn't be possible without payment for order flow. I remember the old days when it cost a lot to do a trade. Also the stock price tick increments used to be higher. That's been steadily eroded.
- Workaccount2 2y ago
  These are just first order effects. I'm talking about second and third order effects that I would argue make the value prop of tighter spreads enormously negative to society on the whole. Liken it to the government deciding to spend 40% of the budget on roads. Suddenly the roads quickly get pot holes filled, the lines are seemingly always freshly painted, cracks are all filled, and even mildly uneven roads gets freshly paved. The first order effects of this would all be positive. The transportation dept. could talk all day about benefits to everyone. Everyone would love the great roads. But spending 40% of the budget on roads is insane, and the second and third order effects would be disastrous to that society.