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Quoting David E. Shaw: "Maybe it was because I was in the financial field. It's a zero sum game. You cannot make money unless someone else is losing money. Tha
by TriinT 17y ago
Quoting David E. Shaw:
"Maybe it was because I was in the financial field. It's a zero sum game. You cannot make money unless someone else is losing money. That's one of the reasons why I like science: it doesn't work that way."
Source: http://www.nature.com/news/2008/080116/full/451240a/box/1.html http://www.nature.com/news/2008/080116/full/451240a/box/1.ht...
- ncarlson 17y ago> It's a zero sum game. That's embarrassingly false.
- TriinT 17y agoMuch of derivatives trading is indeed a zero-sum game. Let us not get into financial discussions, because it has been done before. Joe Smith has saved money for many years, and company X wants to expand their business. Joe Smith invests in company X by buying stocks, company X now has the money to buy some more machines and hire some more people, make more money, and Mr. Smith gets the dividend each year. And they live happily ever after... Thing is, D.E. Shaw was not in the long-term investment business... and I doubt he's that ignorant about Finance. I mean, his hedge fund is quite prestigious...
- ncarlson 17y agoYeah, I misread the context of the quote. I thought he was talking about wealth.
- fauigerzigerk 17y agoIt's still an open question whether short term trading is a contribution to finding the right price for something and thus helping to make the system as a whole more efficient. I don't know whether that's actually the case. It may be in some cases and not in others.
- 10ren 17y agoIt does provide liquidity.
- fauigerzigerk 17y agoIt does, so the reasoning would be that if an asset is actively traded that provides an incentive to invest in it because you know there's a place to sell it if you want to. This seems plausible, but of course, it comes at a cost. Part of that cost is that for smart people it can be more lucrative to trade something than to make something.
- eru 17y agoBut if they can provide more value by trading than by making, why should you value making above trading?
- deleted 17y ago[deleted]
- fauigerzigerk 17y agoI don't. I just questioned whether they actually do provide more value by trading or if it just appears that way during a financial bubble. Don't forget that the sole purpose of trading is to finance making. Trading has no intrinsic value. It's the bureaucracy of capitalism ;-)
- eru 17y agoThat sounds an awful lot like the greek philosophers who did not hold merchants in high regard. Making is ultimatively just pushing atoms (or ideas), too.
- fauigerzigerk 17y agoI'm just making a difference between the goals and the means to achieve those goals. The goal is to produce the goods and services we want. Trading is a means to do that efficiently, similar to computing. Computing, just as trading, has no intrinsic value. It has value only insofar as it achieves its goals. I doubt that trading has been achieving its goals in the most efficient and effective way possible recently. In 2007 the financial industry in the US made 70% of all corporate profits. Obviously, something was out of balance and it's rebalancing now. Part of that rebalancing will no doubt be a shift of labor away from that bloated financial services sector. I don't think this critique should be taken as offensive or disparaging at all.
- acg 17y agoConfusing post, your example is how there is not a zero-sum game. No doubt Shaw was talking about futures/options and his experiences with hedging rather than finance in general.
- known 17y agoTrading = Zero Sum Investing != Zero Sum