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

What value do we create here?

astatespacetraveler.com

Post reply on HN
Print view View original

11–20 of 60 posts

Re: What value do we create here?

#11

Post by billybob »

xxzz wrote: post #2

First of all, I disagree with the entire premise of the question. Why does the intelligent have an obligation to dedicate his or her life to the creation of maximal value for society? Sounds like Nietzsche's slave morality to me. Why does the attractive/tall/healthy not have a similar special moral obligation? Second of all, providing liquidity is very important. Sure, you are only shaving off a few basis points, but…

"Why does the intelligent have an obligation to dedicate his or her life to the creation of maximal value for society?"

What does intelligence have to do with it? Sweeping the streets is an honorable job and makes the world a little nicer. Writing a botnet for spammers isn't and doesn't.

Re: What value do we create here?

#12

Post by shrughes »

albertsun wrote: post #9
lrm242 wrote: post #8

Earlier quoted context omitted.

You're wrong about liquidity. By providing liquidity to a market you are providing immediacy to someone else. Market participants seeking immediacy place a specific value on it and are willing to pay someone for the privilege. As a market participant, if you want to buy or sell at the market, you're directly benefiting from the liquidity being provided by other participants.

Yes, but still no. By providing liquidity you can be directly benefiting someone else but you're still not directly creating value. Liquidity, immediacy or anything else in the financial markets don't have any intrinsic value. The only reason the financial system exists at all is to facilitate the efficient allocation of resources towards the production of things that have real value.

Farm equipment doesn't have any intrinsic value. The only reason farm equipment exists at all is to facilitate the allocation of natural resources towards the production of things that have real value.

Re: What value do we create here?

#13

Post by cwp »

lrm242 wrote: post #8
albertsun wrote: post #7

Earlier quoted context omitted.

The intelligent don't have an obligation to create maximal value. But if you're making money without creating value for society, then what you're doing is rent seeking and "cheating" people who do create value. http://en.wikipedia.org/wiki/Rent_seeking I definitely agree that finance is an exciting field where a lot of interesting topics converge. However, the examples you give are way exaggerated. The full complexit…

You're wrong about liquidity. By providing liquidity to a market you are providing immediacy to someone else. Market participants seeking immediacy place a specific value on it and are willing to pay someone for the privilege. As a market participant, if you want to buy or sell at the market, you're directly benefiting from the liquidity being provided by other participants.

Yeah liquidity is great, but only up to a point. If it takes me six months to sell my house at "market price" that really sucks. I'd welcome a little real estate speculation, and the liquidity it brings. But if bond traders shave 600 milliseconds off the time it takes to sell my bond holdings, so what? People may be willing to pay for that, but society doesn't benefit.

Re: What value do we create here?

#14

Post by lrm242 »

cwp wrote: post #13
lrm242 wrote: post #8

Earlier quoted context omitted.

You're wrong about liquidity. By providing liquidity to a market you are providing immediacy to someone else. Market participants seeking immediacy place a specific value on it and are willing to pay someone for the privilege. As a market participant, if you want to buy or sell at the market, you're directly benefiting from the liquidity being provided by other participants.

Yeah liquidity is great, but only up to a point. If it takes me six months to sell my house at "market price" that really sucks. I'd welcome a little real estate speculation, and the liquidity it brings. But if bond traders shave 600 milliseconds off the time it takes to sell my bond holdings, so what? People may be willing to pay for that, but society doesn't benefit.

Because while they shaved 600ms of your execution time they also lowered your spread by 50 basis points, making it cheaper for you to unload your bond holdings on the market.

Re: What value do we create here?

#15

Post by lrm242 »

albertsun wrote: post #9
lrm242 wrote: post #8

Earlier quoted context omitted.

You're wrong about liquidity. By providing liquidity to a market you are providing immediacy to someone else. Market participants seeking immediacy place a specific value on it and are willing to pay someone for the privilege. As a market participant, if you want to buy or sell at the market, you're directly benefiting from the liquidity being provided by other participants.

Yes, but still no. By providing liquidity you can be directly benefiting someone else but you're still not directly creating value. Liquidity, immediacy or anything else in the financial markets don't have any intrinsic value. The only reason the financial system exists at all is to facilitate the efficient allocation of resources towards the production of things that have real value.

Please define "things that have real value".

Re: What value do we create here?

#16

Post by albertsun »

shrughes wrote: post #12
albertsun wrote: post #9

Earlier quoted context omitted.

Yes, but still no. By providing liquidity you can be directly benefiting someone else but you're still not directly creating value. Liquidity, immediacy or anything else in the financial markets don't have any intrinsic value. The only reason the financial system exists at all is to facilitate the efficient allocation of resources towards the production of things that have real value.

Farm equipment doesn't have any intrinsic value. The only reason farm equipment exists at all is to facilitate the allocation of natural resources towards the production of things that have real value.

Yep.

And the people creating farm equipment fully realize that. When they create new equipment they do so in order to help farmers create food more easily.

In finance, there is a whole lot of effort and innovation, but it's hard to say how much of it is helping people create real value.

Re: What value do we create here?

#17

Post by albertsun »

lrm242 wrote: post #15
albertsun wrote: post #9

Earlier quoted context omitted.

Yes, but still no. By providing liquidity you can be directly benefiting someone else but you're still not directly creating value. Liquidity, immediacy or anything else in the financial markets don't have any intrinsic value. The only reason the financial system exists at all is to facilitate the efficient allocation of resources towards the production of things that have real value.

Please define "things that have real value".

Things people want that aren't a means to get something else.

Burrito? Yes. Clothes? Yes. Art? Yes. Money? No. Liquidity? No.

Re: What value do we create here?

#18

Post by cwp »

lrm242 wrote: post #14
cwp wrote: post #13

Earlier quoted context omitted.

Yeah liquidity is great, but only up to a point. If it takes me six months to sell my house at "market price" that really sucks. I'd welcome a little real estate speculation, and the liquidity it brings. But if bond traders shave 600 milliseconds off the time it takes to sell my bond holdings, so what? People may be willing to pay for that, but society doesn't benefit.

Because while they shaved 600ms of your execution time they also lowered your spread by 50 basis points, making it cheaper for you to unload your bond holdings on the market.

So? That's that's a tiny benefit, even to me, let alone society at large. Our society already has very efficient allocation of resources. Devoting significant resources to increasing that efficiency by tiny amounts is just a waste. I'd prefer Carter devoted his intellect to making it cheaper to put cargo into low-earth orbit, than to making it cheaper to sell bonds.

Re: What value do we create here?

#19

Post by tullius »

lrm242 wrote: post #15
albertsun wrote: post #9

Earlier quoted context omitted.

Yes, but still no. By providing liquidity you can be directly benefiting someone else but you're still not directly creating value. Liquidity, immediacy or anything else in the financial markets don't have any intrinsic value. The only reason the financial system exists at all is to facilitate the efficient allocation of resources towards the production of things that have real value.

Please define "things that have real value".

Good question, sounds like value is being defined way too narrowly here. The value of farm equipment isn't the intrinsic or salvage value of the metal and other raw materials it is made out of, the value is equal to (value of crops yielded with the use of equipment) - (value of crops yielded without use of equipment). Just like the value of liquidity is clearly evident by the liquidity preference in debt markets. An upward sloping yield curve means investors demand higher rates of interest for longer tenor debt http://www.bloomberg.com/markets/rates/index.html Same situation applies to equity markets and is one of the reasons VC investments require higher discount rates than equity investments in public companies.

Re: What value do we create here?

#20

Post by xxzz »

Qz wrote: post #10
xxzz wrote: post #2

First of all, I disagree with the entire premise of the question. Why does the intelligent have an obligation to dedicate his or her life to the creation of maximal value for society? Sounds like Nietzsche's slave morality to me. Why does the attractive/tall/healthy not have a similar special moral obligation? Second of all, providing liquidity is very important. Sure, you are only shaving off a few basis points, but…

Considering how many people in the world are starving, ill, undereducated, and unemployed, I'd say we're doing a piss-poor job of 'efficiently allocating the world's capital'.

* Seems like all the more reason to try harder

* Financial innovation does help here, such as micro-lending, although admittedly not something done by Wall Street

* It's a complicated issue. Maybe the best solution we can hope for at the moment is to not keep funneling resources to corrupt regimes, where the most starving happens to be in. For the record, foreign investment has been a huge part of China and India's recent success.

Post reply on HN