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The mystique of Goldman Sachs

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Re: The mystique of Goldman Sachs

#51
post #6

Earlier quoted context omitted.

It's disgusting to me that that much brainpower was/is dedicated to stock trading. All that programming and the only thing we get for it is that we can correctly value a company.

Its insane that you think this is the case. The markets are an incredibly important part of the economy and this technology does not only simply value a company.

Honestly, there's still a point there.

Having a well-priced, liquid stock market is obviously important. Mises even set it as his threshold for socialism - a country that has an independent stock market is not socialist.

But that's not the same as appreciating the current state of stock trading. Sinking millions into millisecond improvements does not improve pricing. Identifying large trades and running pump-and-dump just before they clear doesn't improve liquidity. Running years-long fraud to get early leaks of Fed decisions helps no one.

A lot of what happens in high speed trading today is actually harmful to the market as a pricing and liquidity tool. Insider leaks from the Fed weaken market confidence for everyone. Flash crashes are a new horror born entirely of algorithmic trading. The list goes on.

I think it's entirely reasonable to appreciate free markets, even libertarian economic policies, and still consider the start of trading today alarming and detrimental to the economy.

Re: The mystique of Goldman Sachs

#52
post #6
post #4

One thing HN might care about: 3 years ago, 25% of Goldman employees worked in the IT division. They probably had more developers than Facebook and LinkedIn combined. http://www.businessinsider.com/goldman-sachs-has-more-engine...

It's disgusting to me that that much brainpower was/is dedicated to stock trading. All that programming and the only thing we get for it is that we can correctly value a company.

I agree it's disgusting to think of people working for a company like Goldman, but not sure I agree with the rest. Also some people are just trying to put food on the table, and they could compromise, but they don't and it's not proper for me to judge them even though I am.

Firstly, Goldman can't correctly value a company - no one so far can. The best Goldman can do is use their position of power to effectively tell the market what the value is, but they can do that practically by creating magic numbers from the sky. Indeed, go and do an old school valuation on many companies and you'll get vastly different results. I have a degree in Finance along with various computer and math degrees. One of the big takeaways is that financial valuations are entirely subjective just like stats studies are, so it is the justification, evidence, techniques, and so on that matter. Your job is to convince someone, and Goldman exploits its position as a large player by doing just that.

If Goldman could actually set prices or guess them exactly to the millisecond, they would never have any losing bets and they could manipulate the market 100% to their will. One could say that in this sense, you are right as they do indeed manipulate things to some degree. They are so large that their actions influence the rest of the market and their failures and successes change the market, ironically screwing themselves up quite often.

Many principles though say that valuing a company is hard to impossible (just ask Black and Scholes). Random Walk and some of the associated studies like throwing darts at the financial pages (darts beat top Wall Street investors more than 50% of the time usually) demonstrates that there are elements we do not understand in terms of valuations and predictions, and that moreover people don't act rationally depending on your point of view. Given this reality, trying to build better models is a very interesting and wide open computing topic.

Another important factor is that valuations and other financial market indicators change over time. That means your models both need to account for time and be extremely fast at reacting to changes. In computing, this touches a lot of interesting topics from performance to network architecture to low-level protocols to CPU caching to distributed computing to machine learning and on and on. Outside academia, there are few companies that are focused and yet touch so many different computing topics and actually apply them to their business in production.

Personally, I would never work for a company like Goldman. My moralistic view point has cost me at times financially but I am OK with that given my internal priorities. For some people, it's all about money. Goldman might be evil to many like me, but many popular tech companies aren't much better if you take off the geek glasses.

It is not a popular sentiment around here, but I wouldn't necessarily put people at a lot of popular SV companies like Facebook, LinkedIn, Google, Uber, and so on above the Goldman people or on some higher pedestal/plane of existence. Surely some are doing interesting or altruistic things even, but most are just grinding out the day trying to keep the business afloat or make it rich.

Many of these companies on some level are still tightly tied to people like Goldman, have similar motivations, and arguably a lot of the work they are doing is intellectually less stimulating, valuable, academic, and challenging. Moreover, a lot of the "work" and "tech" that these SV companies think they are inventing has already been around the financial sector (or even tech sector itself, not to mention academia) a long time and exists in better, faster, more powerful forms with the caveats usually of being expensive or exclusive to a single company. Not many people realize what tech people at a company like Goldman are doing, and the people that work there often are bound by legal agreements not to share. That makes companies like Goldman very adversarial, anti-open source, and anti-employee. To that end, I think they are pretty disgusting, but I've experienced nearly as bad working at game companies and tech giants.

Very few companies are doing anything worthwhile with brainpower. Even academia where brainpower should be tantamount has often become more about stats like amount of papers published, grant money, or other financial results rather the brainpower. As a whole, computer science is a field that constantly reinvents wheels poorly, wastes tremendous amounts of brainpower, and is far from altruistic or progressive at times. We could say that about almost any field, so take it for what it is and remember that most of us (a select few make a smaller scale difference) aren't saving the world, even when that literally might be the company "mission." Most of us are wasting our brainpower most of the time and it's up to us to do better; working for a company is almost never the answer for maximizing your brain.

Re: The mystique of Goldman Sachs

#53

> To keep reading, please enter your email address. Thanks, but no thanks.

I agree. It's annoying how often HN links to paywalls. Luckily, they aren't hard to get around, more of an announce than anything. Just clear your cookies for the site and try again.

Re: The mystique of Goldman Sachs

#54

If the market is so efficient why are so many people working in it? The answer is it's parasitic. They don't allocate capital efficiently, progress has slowed dramatically in the west and a culture of rent seeking has taken over. It's a huge misallocation of resources but of course people simply point to the fact that they are "making money" as a sign of success. And yes, they are indeed "making money". That is the p…

> It's a huge misallocation of resources These resources are self "allocated". No one was forced or coerced into joining Goldman Sachs. Did you ever think that maybe those people enjoy their job? Or that Goldman Sachs isn't the net negative harbinger of the apocalypse you claim it to be? One could even argue that the success of "the west" is due to availability of capital, of which GS has played a role.

Nope, they are abusing their monopoly on credit creation and access to markets / lobbying.

The west has been struggling big time since the 1970s. Yes we have "growth" but that is just counted in fiat. We now have families with both parents working all the time for the same home their parents had. Because of the banks issuing credit ahead of the rate of increase of wealth creation.

It's been a total disaster.

Re: The mystique of Goldman Sachs

#55
post #6

Earlier quoted context omitted.

It's disgusting to me that that much brainpower was/is dedicated to stock trading. All that programming and the only thing we get for it is that we can correctly value a company.

Its insane that you think this is the case. The markets are an incredibly important part of the economy and this technology does not only simply value a company.

Indeed it is, and indeed getting it all wrong because on is chasing 5 basis points on a quote from LIBOR, and creating synthetic upon synthetic based on this quote.

The quote being a single analyst calling up a trading desk for a market rate, sometimes getting a reply, sometimes not, if getting a rate often from not the stated markets contact, and if not getting any response just inputting the rate from the day before. Organisation setting LIBOR was doing no wrong, those playing it were, but those depending on it diverting any accountability to a black box of interest rates which was clearly not a black box. Absconding selves of responsibility.

Markets are indeed allocations of capital. But only when markets dont' get wound up in local optimals. As LIBOR. And bring havoc to everyone.

Re: The mystique of Goldman Sachs

#56
post #6

Earlier quoted context omitted.

It's disgusting to me that that much brainpower was/is dedicated to stock trading. All that programming and the only thing we get for it is that we can correctly value a company.

> It's disgusting to me that that much brainpower was/is dedicated to stock trading. Is it more or less disgusting to you to spend brainpower on banner ads, or social media exchange of cat memes, or something? I'm honestly curious.

For one individual to make their own decision to do those things, no issue.

But when a group of wealthy elite make it their mission goal to vacuum up money from everyone below, that's disgusting. The executive team at GS decided that they wanted to hire programmers to handle investing, instead of hiring programmers to handle nobler tasks.

At least when Google develops banner ads, they are providing value to the millions of people who need to advertise. When GS develops a better trading algorithm, you can count the number of people on one hand who benefit.

Re: The mystique of Goldman Sachs

#57
post #38

Earlier quoted context omitted.

Its insane that you think this is the case. The markets are an incredibly important part of the economy and this technology does not only simply value a company.

Though even if all it did was value companies, a 1% improvement in accuracy on the NYSE would correctly allocate $200 Billion dollars of miss-allocated capital to do more work for the economy. And that's just in the US. Globally it could route half a trillion dollars into more deserving companies, creating new jobs, services and products and pushing down unnecessarily high prices. This is why a well functioning finan…

> a well functioning finance industry

I'm fully prepared to argue we don't have that, though. Traders are throwing many millions of dollars at projects without even a pretense of improving market accuracy, or adding meaningful liquidity.

Algorithmic trading hasn't been especially good for accuracy - we suddenly have flash crashes with markets dropping 30% and recovering, based on no change in fundamentals. High speed trading hasn't been much good for it - paying to move your trading servers slightly closer to a T1 backbone doesn't improve liquidity meaningfully, or accuracy at all. And we already have serious, systematic fraud: was the money Goldman Sachs spent buying insider leaks from the Fed really good for the industry?

I take your point, and I don't begrudge finance its enormous economic role. But suggesting that the industry's growth in the last ~decade is about improving accuracy seems pretty questionable.

Re: The mystique of Goldman Sachs

#58

> To keep reading, please enter your email address. Thanks, but no thanks.

I agree. It's annoying how often HN links to paywalls. Luckily, they aren't hard to get around, more of an announce than anything. Just clear your cookies for the site and try again.

Paywalls with workarounds are allowed here. We all agree that it's annoying, but doing without NYT, Economics, New Yorker, WSJ, and (et tu now?) WaPo articles would make be worse.

This is in the FAQ: https://news.ycombinator.com/newsfaq.html and (suitably, for a FAQ) has been discussed countless times, e.g. https://news.ycombinator.com/item?id=10178989.

Re: The mystique of Goldman Sachs

#59
post #27
post #6

Earlier quoted context omitted.

It's disgusting to me that that much brainpower was/is dedicated to stock trading. All that programming and the only thing we get for it is that we can correctly value a company.

> It's disgusting to me that that much brainpower was/is dedicated to stock trading. s/stock trading/advertising.

[deleted]

Re: The mystique of Goldman Sachs

#60
post #16
post #6

Earlier quoted context omitted.

It's disgusting to me that that much brainpower was/is dedicated to stock trading. All that programming and the only thing we get for it is that we can correctly value a company.

Why do people always say this? It's such an thoughtless thing to say. You know what's a real waste of brainpower? 3.5 million truck drivers. People driving cabs. Fast food workers. We can, and should, train more software developers. It's the one job that might be useful in 30 years. At the very least, people will hopefully have enough education to move to another field.

Based on my experiences over the past year, the real shortage seems to be in competent contractors, plumbers, and electricians--at least in areas with growth.
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