Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Geeks trump alpha males on Wall Street

reuters.com

Post reply on HN
Print view View original

41–50 of 90 posts

Re: Geeks trump alpha males on Wall Street

#41

Post by leelin »

codexon wrote: post #32
leelin wrote: post #23

Earlier quoted context omitted.

True, but as much as we HATE those guys who line up for the first Xbox360 / Wii / Playstaion 3 trying for the ebay flip, they are technically not doing evil. The ebay flippers allow MSFT / Nintendo / PS3 to charge $1000 on launch day so that demand == supply, but the game companies won't do it for social / PR reasons.

The ebay flippers allow MSFT / Nintendo / PS3 to charge $1000 on launch day so that demand == supply The only winner here is the scalper though. The customer Microsoft, Nintendo and Sony are put in a lose/lose position. The scalpers have the highest profit margin while the real fans who buy the extra games have $500+ less to support the companies that are bringing real value to the market.

  The only winner here is the scalper though.
Even if true, we only say that after the fact when all the risk in the trade is gone and the profits banked. The trade could have gone badly and wasted the scalpers' time and money.

If I remember correctly, there WAS a console flip fiasco in Boston (PS3 I think), where the scalpers who waited in line all night didn't wind up profiting.

Edit: first link I found, probably many others... (http://kotaku.com/gaming/ps3/some-scalpers-give-up-return-ps...)

Re: Geeks trump alpha males on Wall Street

#42

Post by adamsmith »

redcap wrote: post #2

Sure they're making money particularly from being smart, but would someone be able to explain to me how making money from money contributes to something worthwhile to society? Is it just that they're being that much quicker in smoothing out prices of stuff on the stock market? I'm not being snarky, would just like to know. Another slightly different topic: the trend during the Bush boom years is that the so-called 's…

> how [does] making money from money contributes to something worthwhile to society?

I don't have any formal training for credentials, but here's how I've come to think about it...

The markets (of which the stock market is one, but the venture capital and private equity markets also count) are capital allocation machines.

This is easier to see in venture capital. The market for startups makes it possible for promising startups to raise capital. It also "encourages" "bad" startups to die.

It's capital allocation.

Same thing for the public markets. They give companies access to capital (either through debt or equity) at a cost that's proportional to how valuable the company is, or is likely to become.

So society, through the open markets, gives Apple and GE the opportunity to raise capital.

Dying public companies, on the other hand, have a really high cost of capital.

And my favorite way to think of capital is man-hours.

So if you were king, and you were responsible for allocating man-hours to different projects, this is the same problem as capital allocation, and it's the same problem that securities markets solve.

They also provide liquidity and at scale the operational overhead goes to zero.

They also provide opportunities for investors to hedge against inflation, participate in society's long term growth, etc.

But the most important function from a societal standpoint IMO is very efficient capital allocation.

Re: Geeks trump alpha males on Wall Street

#44

Post by codexon »

chops wrote: post #38
codexon wrote: post #32

Earlier quoted context omitted.

The ebay flippers allow MSFT / Nintendo / PS3 to charge $1000 on launch day so that demand == supply The only winner here is the scalper though. The customer Microsoft, Nintendo and Sony are put in a lose/lose position. The scalpers have the highest profit margin while the real fans who buy the extra games have $500+ less to support the companies that are bringing real value to the market.

The only winner here is the scalper though. The customer Microsoft, Nintendo and Sony are put in a lose/lose position. The customer has a choice on whether or not it's worth the purchase. To the customer who values the item (Wii/Sporting Event/whatever) over the (inflated) cost, it is a net gain, not a loss. To the person who doesn't value it above the asking price, they don't have to pay, and they don't have to get…

The customer has a choice on whether or not it's worth the purchase. To the customer who values the item (Wii/Sporting Event/whatever) over the (inflated) cost, it is a net gain, not a loss.

That is too short sighted of an analysis. Too much value is being lost by unnecessary overhead. Have you noticed how overhead is something to be eliminated by every company except the middleman's themselves?

With your reasoning, would it be a "net gain" for someone pay more for oxygen than you if some scalper managed to monopolize all the oxygen? There are probably plenty of people richer than you that would pay for the "true" (sarcasm) value of oxygen. Would it be a "net gain" for someone to buy up all the land and charge a million euros per square acre? Somehow, I think your answer to this question will still be yes, but I hope I've managed to convince everyone else.

Furthermore, scalpers who wait in line for hours to buy tickets/game systems, and then flip it for profit are essentially providing a paid service to those who are too impatient, late, or otherwise incapable of buying said items when they go on sale, knowing that there is a limited supply that will not meet all the demand.

There are plenty of people who were willing to buy it for the initial price instead of the inflated amount.

The problem here is that you are using the broken window fallacy. Just because someone artificially jacked up the "demand" of an item doesn't mean that the item is really worth more.

Take for example the recent housing bubble. People scalping houses forced the legitimate buyers to take out huge mortgages that they eventually couldn't pay off. If you think there was value added there, I don't know what will convince you.

Re: Geeks trump alpha males on Wall Street

#45

Post by leelin »

dtby wrote: post #24
leelin wrote: post #7

Earlier quoted context omitted.

I won't defend all of finance / trading, but maybe this analogy will satisfy you. Think of sports tickets. There is massive inefficiency in the primary market, meaning tickets you buy directly from the arena or on TicketMaster. One inefficiency comes from all the season ticket holders who skip the majority of the games and only go to the ones they actually want to see. We can fix this inefficiency on a secondary mark…

scalper can buy all the tickets to a popular game and sell them all at 10x the price How is this a problem, especially one requiring regulation? Nothing has changed from your original formulation, except apparently that he's now making 'too much money.'

Can't edit my orig post anymore:

http://en.wikipedia.org/wiki/Deadweight_loss

Deadweight loss from monopoly pricing power.

Re: Geeks trump alpha males on Wall Street

#46

Post by vixen99 »

redcap wrote: post #2

Sure they're making money particularly from being smart, but would someone be able to explain to me how making money from money contributes to something worthwhile to society? Is it just that they're being that much quicker in smoothing out prices of stuff on the stock market? I'm not being snarky, would just like to know. Another slightly different topic: the trend during the Bush boom years is that the so-called 's…

They are part of society and it's worthwhile to them. What they do with their wealth is up to them as indeed it is for you. Who knows what is necessarily good for 'society'? Politicians are constantly telling us what's good for society and they get it wrong most of the time IMHO.

Re: Geeks trump alpha males on Wall Street

#47

Post by tsally »

dzlobin wrote: post #25

As a soon to be graduate, how do I go about getting my foot in the door of a high frequency trading shop?

A very successful quant did an AMA (ask me anything) on Reddit a while back. There's a lot of content there, but totally worth the read. If I remember right his background was a masters in math from MIT.

http://www.reddit.com/r/IAmA/comments/991kc/my_2009_adjusted...

Re: Geeks trump alpha males on Wall Street

#49

Post by tlrobinson »

pwnstigator wrote: post #12
jsm386 wrote: post #9

A bit off topic, but I find what the 'geeks' are producing to be the most interesting part of this article. When the next financial mega-crisis erupts (note - financial , not economic - that part comes next), perhaps this will be the reason: John Malitzis, vice president of market surveillance at the New York Stock Exchange's oversight body, told a conference in September that he has seen examples, both in U.S. marke…

I don't think there's more risk of "algos gone wild" than there is of manipulation and malevolence, as there has been forever. Software bugs combined with human error are a source of danger though, such as in the infamous Japanese trading disaster (someone transposed the size-- 1-- and price-- ~600000 yen-- on a short-sell of an IPO, effectively giving away more shares than existed). The fail was not so much that the…

For those who are curious:

http://en.wikipedia.org/wiki/Mizuho_Securities

http://www.physorg.com/news8901.html

But I thought exchanges could retroactively cancel trades in some cases?

Re: Geeks trump alpha males on Wall Street

#50

Post by tybris »

Hooray stereotypes. I've never met a computer science PhD who went to star wars conventions. Most of them are very intelligent, social people who do not obsess over anything. The only thing they all have in common is that they like to climb mountains,
Post reply on HN