81–90 of 198 posts
What I was surprised by in the bank is how many people think that the money make other people respsect them. They forget though, that most billionaires are respected for the things they created, not money they made. Money is just the by-product.
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It's vastly testable, there are thousands of different markets with different sets of regulations. But your talking about two different issues, the liquidity issue mainly applies to exchange traded assets while more complex instruments tend to be OTC (i.e. custom agreements). With liquidity you can be a sophisticated buyer and still be willing to pay for it. For example look at when MtGox was lagging by 600 seconds w…
Ok - but, here's where I get lost... Some of these people are high-net-worth individuals. I sometimes ask them why, instead of trading, they don't take that money and invest it in new research or technology or product development or services. At least then, there would be jobs created, technological progress, more money exchanging hands. But, to them, it doesn't make sense to do that; they make much higher returns, m…
Let's talk fundamentals: if we didn't have an equity/bond market it'd be much much harder for companies to raise money for growth and investment. If we didn't have an IPO market you wouldn't have company exits - the most common forms of company exits are IPO or sale to a listed company. Without exits it wouldn't be economical for VCs to invest in startups.
All of these things are interconnected, having liquid public markets play a huge part in economic growth by both directly and indirectly financing the growth-makers.
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If you're investing over the long term and can afford to ride out the shocks then historically speaking stocks have always out performed bonds. That's not gambling. It's not a zero sum game between you & Goldman. In a growing economy everyone can win by investing.
Goldman sure acts like they think it's a zero sum game.
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> "We like the idea of letting everyone transact freely, but we are uncomfortable with the "winner take all" implication of that policy." I don't agree with this fully. Your statement implies that "Freely" means "with complete abandon to any sort of soundly regulated and protected system designed to prevent fraud, corruption, exploitation... " -- Also, acquiescing to the "well the system is fucked by design, why are…
But it's not just fraud, corruption, and exploitation. It's probably not even mostly that. It's about being able to just run the numbers a little bit better, aggregated over millions of repeat transactions. That's part of the narrative I'm talking about. We tell ourselves: "It's only because of fraud, corruption, and exploitation" that all this money is flowing from main street to wall street.
There's a popular saying on Wall Street: YBGIBG. It means "you'll be gone, I'll be gone"... by the time the scam gets exposed, the folks who perpetuated will have received their bonuses and be long gone.
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Have you ever read an eula? Have you ever heard of someone winning a lawsuit against a software vendor? Have you even heard of someone getting any kind of monetary compensation for mishaps caused by software bugs? The suing part is purely fictional.
It's not about the lawsuits, but it is very much about risk reduction. This applies to all consultancies, not just Oracle. If you hand-roll your own solution for (almost) free using open source components, you're the one who gets fired when it goes down. If you buy an enterprise-level solution from Vendor XYZ, with a requisite expensive support contract, they fucked up when it goes down, and you are safe because good…
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It's vastly testable, there are thousands of different markets with different sets of regulations. But your talking about two different issues, the liquidity issue mainly applies to exchange traded assets while more complex instruments tend to be OTC (i.e. custom agreements). With liquidity you can be a sophisticated buyer and still be willing to pay for it. For example look at when MtGox was lagging by 600 seconds w…
Ok - but, here's where I get lost... Some of these people are high-net-worth individuals. I sometimes ask them why, instead of trading, they don't take that money and invest it in new research or technology or product development or services. At least then, there would be jobs created, technological progress, more money exchanging hands. But, to them, it doesn't make sense to do that; they make much higher returns, m…
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I think you're misinterpreting my comment. The statement was that "We like the idea of letting everyone transact freely, but we are uncomfortable with the "winner take all" implication of that policy" But this is not true. We are not uncomfortable with free transactions resulting in winning - we are uncomfortable with "free" being the state of the system whereby the winner is able to do so because there is no oversig…
Is having superior information and data not consistent with a level playing field? What about hiring up a significant portion of all the top college graduates and having them work around the clock to give you every possible advantage? Is that consistent with a level playing field? My point is that there are a lot of things short of fraud that we consider "meritocracy" (and having superior information and superior ana…
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When do we blame the pension fund managers for taking on risks they don't understand?
Well you need to ask why don't pension funds hire more talented people ? It's because those people are expensive and that means having to charge a higher management fee. And what do consumers tend to base investment choices on ? - management fees. High management fees mean that consumers won't pick that fund. Consumers can't tell how sophisticated their pension fund managers are so they'll just pick a cheap upfront c…
This is also why state pensions like to jam money into alternative investments like hedge funds and venture. They're chasing yield.
"Which, it turns out, is a trader’s field day. What this meant, in its simplest form, is that these traders (or salespeople) could buy bonds at the "market" price from intelligent hedge fund managers in NYC and sell this same crap at much higher levels to unsophisticated (but legally considered "sophisticated") pension funds and insurance companies in middle America. What I discovered, quite starkly, is that the part…
I know several people who make a lot of money in trading, and I hear the liquidity argument constantly as the justification for their behavior. They describe the millions that they make as payment for all the 'value' that they've given to everyone; But, as an ignorant, I can't see how those millions could have come from anywhere than other (less informed) peoples' pockets. To me, the worst part (again, as an ignorant…
Trading is a legitimately socially useful business, but it's winner-take-all. Yes, they provide liquidity and, in doing so, capture proportionately small amounts of money that other principals don't care about. If you need to move $25 million, are you going to notice a difference of a few hundred dollars that an arbitrageur collects (by taking the other side of a bid he judged to be 0.37 cents high? No. You want your trade to go off. Principals would lose money to the bid-ask spread no matter who's in the market; arbitrageurs narrow it by competing against each other.
So why do traders make so much money? Because they're better or more useful than software engineers? No. Because they steal it? No, not that either. Software engineers are seen by the business as cost centers, even in 90+ percent of startups and even at Google (closed allocation).
For traders, it's a different story. If Bob is a little better than Mark, Bob will get 100% of the business and Mark will get nothing. At this point, to do arbitrage you need to be thinking about microseconds. If Bob can execute in 75 mcs and Mark takes 100 mcs, then Bob is going to get all the trades. Trading shops must be meritocracies because they have no other option. If they can't hire good traders, then there's no reason to keep working.
Because trading is winner-take-all, trading houses put a lot of money back into compensation: 40 to 50 percent profit sharing (in a way that, outside of direct P&L roles, is subject to politically fucked-up performance just like everything else) is the norm. That'd be like a typical software company paying $250k-500k bonuses.
If we, as software engineers, want to make trading money (not the 5-10m outliers, but 250-1M, then we need to think about profit sharing-- http://michaelochurch.wordpress.com/2013/03/26/gervais-macle... -- instead of this startup equity that pays off in the distance future, and is subject to horrible terms). I believe that we, as a group, could be making what we're actually worth, but we'd have to convince businesses that we're as essential to their operations as traders are to trading houses and, thus far, we haven't done so.
For example, Groupon was basically taking advantage of unsophisticated small businesses. How much brain power in SV is devoted to tricking people to click on ads, "covert users" or become addicted to Zynga-style games? How many things are sold only because that company has the strongest name-brand even though better versions exist? Could you have sold the product for less than the customer paid and still make a profit?
You are almost always taking advantage of a customer in some ways but still providing a service or product that the customer ultimately wants. WS is just easy to pick on because they are the most blatant about this practice while at the same time protected by the government.