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

Re: Friends don't let friends get into finance

#11

Post by warrenwilkinson » Sat, Mar 26, 2011, 7:44 PM UTC

secretasiandan wrote: post #5

erikpukinskis wrote: post #4

Earlier quoted context omitted.

People generally won't use your site unless it helps them in some way. It makes their life easier, it helps them move information around, or they enjoy it. It's debatable whether the specifics represent a net good for humanity ( cough Zynga cough ) but there's at least a decent chance that you're helping folks out. Some financial organizations provide important liquidity. They offer you a loan when you need one. But…

"And it seems like the smarter the employees, the less likely they are to actually be providing any real services to people" I would call this a negotiation that they are winning. Just like startup founders win in their negotiation with employees for equity. "People generally won't use your site unless it helps them in some way." And people generally won't trade with you unless it helps them in some way. Again, how i…

People are forced to trade, here is how: When the government needs a loan to cover its budget, they get it from the Federal Reserve. The Federal Reserve are charged to coin new money to provide the government (see wikipedia Federal Reserve, subheadings: 'Elastic Currency', 'Lender of Last Resort' & 'Central bank'). As the Federal Reserve increases the money supply, the value of the dollars in your pocket/matress/bank account go down.

Since the value of currency evaporates, the only way to maintain your savings is to have it in a non-currency form. Stocks are a pretty liquid asset. This pushes people away from savings and into speculation (the stock market), where many lose their shirts.

Re: Friends don't let friends get into finance

#12

Post by rriepe » Sat, Mar 26, 2011, 8:13 PM UTC

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."

Re: Friends don't let friends get into finance

#13

Post by rbarooah » Sat, Mar 26, 2011, 8:19 PM UTC

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?

It's a problem because unlike other activities finance produces benefits to society only when it well, finances people doing things other than finance. Other activities are valuable in themselves.

Re: Friends don't let friends get into finance

#14

Post by Aetius » Sat, Mar 26, 2011, 8:22 PM UTC

ig1 wrote: post #10

erikpukinskis wrote: post #8

Earlier quoted context omitted.

people generally won't trade with you unless it helps them in some way Not necessarily. People engaged in real trade set up financial institutions, but once these institutions are set up, a game is in place. That game may be beneficial overall to the businesses, but individual players aren't necessarily beneficial... even if they are participating according to the agreed upon rules. It's like cashing in a Groupon dea…

That's like saying someone who listens to a sales pitch and then doesn't buy the product isn't adding value to the economy.

Ok, then, how does stealing sound? You can't really win this argument, man. No matter how you dice it, the FED is stealing from the American public to hand it over to financial institutions who then sell us back our stolen goods.

Re: Friends don't let friends get into finance

#15

Post by rbarooah » Sat, Mar 26, 2011, 8:23 PM UTC

secretasiandan wrote: post #3

the quant finance that takes the best and the brightest (as opposed to the bankers and sales traders), uses informational and computational advantage to make money. How are internet startups any different? Also, even the bankers and sales traders are providing a service that apparently people want. If you can judge them as not creating societal value, why can't I say that the Nth photo sharing website is not creating…

Will the government bail out the photo sharing sites when they fail?

Re: Friends don't let friends get into finance

#16

Post by asanwal » Sat, Mar 26, 2011, 8:23 PM UTC

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 corporate dull) or they take on a lifestyle (nice house, cars etc = high fixed costs) which makes startup life less feasible.

Of course, in startup land, you have your occasional stellar upside scenarios a la Zuckerberg, but if economics is the main motivator, Wall St is a logical, rational choice esp if you work to live (and not live to work).

I say all of this as an NYC startup who feels this pain at times (although I think it is overblown and more of an excuse). I just don't think bellyaching about it achieves much.

Re: Friends don't let friends get into finance

#17

Post by rbarooah » Sat, Mar 26, 2011, 8:24 PM UTC

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?

Re: Friends don't let friends get into finance

#18

Post by cynicalkane » Sat, Mar 26, 2011, 8:27 PM UTC

warrenwilkinson wrote: post #11

secretasiandan wrote: post #5

Earlier quoted context omitted.

"And it seems like the smarter the employees, the less likely they are to actually be providing any real services to people" I would call this a negotiation that they are winning. Just like startup founders win in their negotiation with employees for equity. "People generally won't use your site unless it helps them in some way." And people generally won't trade with you unless it helps them in some way. Again, how i…

People are forced to trade, here is how: When the government needs a loan to cover its budget, they get it from the Federal Reserve. The Federal Reserve are charged to coin new money to provide the government (see wikipedia Federal Reserve, subheadings: 'Elastic Currency', 'Lender of Last Resort' & 'Central bank'). As the Federal Reserve increases the money supply, the value of the dollars in your pocket/matress/bank…

Here's the non sequitur:

1) inflation makes it costly to hold money

2) inflation forces you to make stupid speculative investments and frequent trades

The second doesn't follow from the first.

Re: Friends don't let friends get into finance

#19

Post by Jd » Sat, Mar 26, 2011, 8:29 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…

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.

Re: Friends don't let friends get into finance

#20

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

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 give it 100%