Friends don't let friends get into finance • Hacker News Board

Re: Friends don't let friends get into finance

#21

Post by ulugbek » Sat, Mar 26, 2011, 8:31 PM UTC

orijing wrote: post #6

ulugbek wrote: post #2

Only way you compete with Wall Street is you increase the utility of expected payoffs, not just the wage. People who are going to WS have different risk profiles than entrepreneurs. You can have low participation in entrepreneurship as long as participating ones are competitive and innovative. It is better use of talent and time if those who would have failed anyways (because they don't have the guts, etc) go and mak…

I think you have it backwards. It's not about max_a U(E(a)), but of max_a E[U(a)]. Otherwise insurance wouldn't work. Let's illustrate with an example. Suppose you buy theft-insurance, there's 10% chance of being robbed and the cost of robbery is $100000. Then, E[a] = 0.1 * -100000 = -10,000. So you'd be maximizing U(-10000). This is different from maximizing E[U(a)] because in this case it's 0.1 * U(-100000) + 0.9 *…

You are right

Re: Friends don't let friends get into finance

#22

Post by asanwal » Sat, Mar 26, 2011, 8:34 PM UTC

Jd wrote: post #19

asanwal wrote: post #16

Article is totally absent of any substantive suggestions to "fix the problem". The real issue is that if you look at the risk-adjusted reward of doing or working at a startup, it doesn't compare well with working on Wall Street. And then there are those who say, let me do a few years on Wall St and then I'll pursue the startup thing. What happens during that time is they lose their entrepreneurial edge (they become c…

The title is a suggestion. Discourage your friends from putting their energies into creating financial products of dubious value and instead encourage them to engage in substantive work that makes a clearly positive contribution. Yes, yes, I know you want a secure source of income. Well, try think about ethics first, if not only.

These generalizations about finance being unethical are misguided and misinformed.

A bank/VC that gives a loan/investment to small business/startup. That's finance. Hardly unethical.

Allowing people to get a car today while paying for it over time (instead of paying upfront). Hardly unethical.

Yes, there are bad actors in finance as there are in every space. Don't the Zyngas and others of the world via their offers engage in "ethically questionable" tactics?

Re: Friends don't let friends get into finance

#23

Post by richcollins » Sat, Mar 26, 2011, 8:35 PM UTC

asanwal wrote: post #16

Article is totally absent of any substantive suggestions to "fix the problem". The real issue is that if you look at the risk-adjusted reward of doing or working at a startup, it doesn't compare well with working on Wall Street. And then there are those who say, let me do a few years on Wall St and then I'll pursue the startup thing. What happens during that time is they lose their entrepreneurial edge (they become c…

It's easy to fix the problem. Stop the government from stealing money and giving it to the banks.

Re: Friends don't let friends get into finance

#24

Post by med555 » Sat, Mar 26, 2011, 8:37 PM UTC

rriepe wrote: post #12

tedunangst wrote: post #7

"They note that the finance sector today produces a greater percentage of GDP than at any time in history." This is not an effective argument. The computer software industry is also producing a larger than ever percentage of GDP. In other news, the building wooden ships sector is not responsible for much of the GDP in recent years. Is that a problem?

They follow up with why it's noteworthy in the very next paragraph: "Historians will tell you that empires collapse when they become too dependent on finance, but I’m not so pessimistic."

...and economists will tell you something completely different. His points are awful and rely on no empirical evidence.

Re: Friends don't let friends get into finance

#25

Post by med555 » Sat, Mar 26, 2011, 8:40 PM UTC

rbarooah wrote: post #17

ig1 wrote: post #9

The report was produced by the Kauffman foundation, a foundation dedicate to improve entrepreneurship. It's not exactly an unbiased piece of research. Attacking finance is the popular theme of the days, but finance has done a huge amount in supporting global economic growth. From providing debt and capital financing to reducing foreign exchange costs.

Presumably this growth that the finance has supported is happening somewhere other than in the US?

Ummm, growth is still happening in the U.S., and has continuously happened aside from a few quarters here and there. The point is not if we're growing, but how much faster we can grow. This is very basic economics.

Re: Friends don't let friends get into finance

#26

Post by fabjan » Sat, Mar 26, 2011, 8:44 PM UTC

med555 wrote: post #24

rriepe wrote: post #12

Earlier quoted context omitted.

They follow up with why it's noteworthy in the very next paragraph: "Historians will tell you that empires collapse when they become too dependent on finance, but I’m not so pessimistic."

...and economists will tell you something completely different. His points are awful and rely on no empirical evidence.

The difference being historians have facts to go by, and economists have dreams.

Re: Friends don't let friends get into finance

#27

Post by rbarooah » Sat, Mar 26, 2011, 8:44 PM UTC

med555 wrote: post #25

rbarooah wrote: post #17

Earlier quoted context omitted.

Presumably this growth that the finance has supported is happening somewhere other than in the US?

Ummm, growth is still happening in the U.S., and has continuously happened aside from a few quarters here and there. The point is not if we're growing, but how much faster we can grow. This is very basic economics.

The growth has been primarily in the financial industry.

Oh - I get it now - the finance industry has provided support for itself to grow.

Re: Friends don't let friends get into finance

#28

Post by mousa » Sat, Mar 26, 2011, 8:44 PM UTC

asanwal wrote: post #22

Jd wrote: post #19

Earlier quoted context omitted.

The title is a suggestion. Discourage your friends from putting their energies into creating financial products of dubious value and instead encourage them to engage in substantive work that makes a clearly positive contribution. Yes, yes, I know you want a secure source of income. Well, try think about ethics first, if not only.

These generalizations about finance being unethical are misguided and misinformed. A bank/VC that gives a loan/investment to small business/startup. That's finance. Hardly unethical. Allowing people to get a car today while paying for it over time (instead of paying upfront). Hardly unethical. Yes, there are bad actors in finance as there are in every space. Don't the Zyngas and others of the world via their offers e…

A lot of the financial industry though today works so many layers above actual loans it's hard to see how they contribute and even harder to see why they make so much more money than everyone else. I'm not an expert, I'm sure there is some justification, but it's not obvious to most people and that's why, sometimes, we the laypeople wonder.

Re: Friends don't let friends get into finance

#29

Post by Jd » Sat, Mar 26, 2011, 8:44 PM UTC

I'm of the opinion this understates the problem.

First, it is an ethical problem. The idea of producing things is not taught in elite colleges, nor is the idea that it is possible to make a positive contribution to society (e.g. rms) without becoming superrich (no offense to those for whom this is their primary motivation).

Second, a lot of the products of which the GDP percentage is based upon simply involve repackaging and selling debt. (e.g. http://ow.ly/1sf8Rp ). In other words, a lot of the economy is based upon accounting tricks.

Re: Friends don't let friends get into finance

#30

Post by med555 » Sat, Mar 26, 2011, 8:45 PM UTC

rbarooah wrote: post #20

Finance firms put 100% of their time and energy into finding ways of making money out of existing money without producing any other value. Entrepreneurs do a little of this too, but foolishly allow themselves to be distracted by an irrational desire to also make novel and valuable contributions to society. Eventually the entrepreneurs will learn that a part time effort won't cut it and they can't beat the guys who gi…

Google. Zynga. Facebook. Intel. eBay. Apple. etc.

All needed bankers to get them access to capital and grow faster, helping them hire more employees and contribute to our economy's growth and standard of living. I'd highly recommend you rely your points on empirical evidence over populist talking points.