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Finding Signal in the Noise: Machine Learning and the Markets (Jane Street)

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Re: Finding Signal in the Noise: Machine Learning and the Markets (Jane Street)

#101

Post by kjrfghslkdjfl »

Barrin92 wrote: post #24
bblcla wrote: post #16

Earlier quoted context omitted.

Tyler Cowen did an 'ask me anything' at Jane Street when I interned in 2016. One of the interns asked him exactly this: "What do you think of the fact that we all work here instead of, I don't know, curing cancer?" He replied with, roughly, "Those of you who work here probably couldn't do anything else other than perhaps math research. Arguably, working here is the economically efficient use of your time." I think ab…

General intelligence is overstated sometimes, but it is a thing. Someone who is smart enough to work for Jane Street probably could at least be an intelligence analyst or software developer at the NSA contributing to national security. (Jim Simmons literally was a code breaker during the Vietnam War) I don't think there's a gene for playing esoteric minigames on the options market while you literally suck at everythi…

[dead]

Re: Finding Signal in the Noise: Machine Learning and the Markets (Jane Street)

#102

Post by lotsofpulp »

Workaccount2 wrote: post #73
Infernal wrote: post #60

Earlier quoted context omitted.

And yet if there was so much gold dust lying on the sidewalk that you could pay 15 Harvard med surgeons enough to pick it up and still have some left over, would you just not?

That is the issue. The amount of gold recovered by them as a function of the entire global gold market is a minuscule rounding error. A loss so small that when distributed across every market participant (as it would be if left alone on the ground), would amount to no practical discernible difference in anyone's life. But having 15 less top notch surgeons not doing surgery? There stands to be many practical discernib…

Gold is not analogous to trading.

If you subscribe to the theory that markets allocating capital based on supply and demand is beneficial for society (even if detrimental sometimes in the short term), then traders provide the utility of contributing to the proper allocation of resources in society (which is constantly in flux).

The fact that smart people opt to go into trading (or selling advertising) rather than research is a consequence of government underpaying scientists (or the volatility is too high, or the path to quality of life at work is too low).

Either way, if the situation is that society needs more scientists or doctors or whatever, then the government should be paying more to incentivize those choices.

Re: Finding Signal in the Noise: Machine Learning and the Markets (Jane Street)

#103

Post by lotsofpulp »

FridgeSeal wrote: post #94
Infernal wrote: post #60

Earlier quoted context omitted.

And yet if there was so much gold dust lying on the sidewalk that you could pay 15 Harvard med surgeons enough to pick it up and still have some left over, would you just not?

I think I’d rather have the surgeons saving peoples lives tbh.

Then make it so one does not have to sacrifice their 20s and harm their health to become one.

Expand the number of medical schools, the number of residency positions, etc. Reduce tuition or pay graduates and residents more. Reduce unnecessary learning requirements so that one can expect to have a life and become a surgeon. Reform tort law.

None of these are under the purview of trading firms or the people that work there.

Re: Finding Signal in the Noise: Machine Learning and the Markets (Jane Street)

#104

Post by pasc1878 »

jfim wrote: post #43
madars wrote: post #31

Earlier quoted context omitted.

Why would it be wasted? I like apples and I like being able to buy them any day of year, even out of season. The only reason I can do so is because there is an entire industry of people who manage the inventory, distribution, try to predict supply and demand, and take on a risk doing that. The principal reason why I can buy and sell equities at very small spreads any day of the year is similar: traders are competing…

> I like apples and I like being able to buy them any day of year, even out of season. The only reason I can do so is because there is an entire industry of people who manage the inventory, distribution, try to predict supply and demand, and take on a risk doing that. In practice, if the availability of the apples you're eating is dependent on finance people, they're commodity grade, not specialty varieties. I don't…

How do you get to the farmers market? Walk? If not then how was your vehicle produced and powered and how were its components got to you?

Re: Finding Signal in the Noise: Machine Learning and the Markets (Jane Street)

#105

Post by ustad »

MichaelRo wrote: post #85
madars wrote: post #31

Earlier quoted context omitted.

Why would it be wasted? I like apples and I like being able to buy them any day of year, even out of season. The only reason I can do so is because there is an entire industry of people who manage the inventory, distribution, try to predict supply and demand, and take on a risk doing that. The principal reason why I can buy and sell equities at very small spreads any day of the year is similar: traders are competing…

It's fun to see how every time a finance topic pops up, discussion steers towards lamenting on how "talent is wasted" by doing this and not that. See, if you're a fishmonger and someone comes to you and say "why don't you trade flowers instead", you ignore them because they are not your customer. They won't trade fish with you, and in fact they wouldn't trade flowers either. They're just useless relative to your trad…

At the end of the day, it’s fine to ignore the critics or people who don’t understand your work, but dismissing the conversation entirely without considering the underlying point might close off an opportunity for meaningful reflection. Just my two cents.

Re: Finding Signal in the Noise: Machine Learning and the Markets (Jane Street)

#107

Post by ustad »

madars wrote: post #31
Workaccount2 wrote: post #4

I will eternally find it sad how much talent is wasted on trading. So much money, so much intelligence, so much time and effort, all the provide almost no tangible value to society.

Why would it be wasted? I like apples and I like being able to buy them any day of year, even out of season. The only reason I can do so is because there is an entire industry of people who manage the inventory, distribution, try to predict supply and demand, and take on a risk doing that. The principal reason why I can buy and sell equities at very small spreads any day of the year is similar: traders are competing…

While it’s true that trading and financial markets provide value, the conversation around “wasted talent” isn’t necessarily about denying the value of these industries. It’s more about the broader context - are all forms of financial activity contributing to the greater good, or are some activities just enriching a small group of people without providing societal benefits?

Re: Finding Signal in the Noise: Machine Learning and the Markets (Jane Street)

#108

Post by eadmund »

Workaccount2 wrote: post #46
madars wrote: post #31

Earlier quoted context omitted.

Why would it be wasted? I like apples and I like being able to buy them any day of year, even out of season. The only reason I can do so is because there is an entire industry of people who manage the inventory, distribution, try to predict supply and demand, and take on a risk doing that. The principal reason why I can buy and sell equities at very small spreads any day of the year is similar: traders are competing…

There is an extreme case of diminishing returns at play here, and unfortunately the amount of money that flows through these markets is so incredible that it becomes worth it (more than worth it) to commission the top minds of society to push the limit as close to 1 as absolutely possible. Derivatives have great value to industry. Derivatives that require the fuel of 15 math Phds to lock in fractions of a percentage…

> Derivatives that require the fuel of 15 math Phds to lock in fractions of a percentage pricing inefficiencies so their firm can pocket the difference do not have much value at all.

They have at least as much value as the total compensation of 15 math PhDs, otherwise that work would not be done.

Re: Finding Signal in the Noise: Machine Learning and the Markets (Jane Street)

#109

Post by eadmund »

thrance wrote: post #44
madars wrote: post #31

Earlier quoted context omitted.

Why would it be wasted? I like apples and I like being able to buy them any day of year, even out of season. The only reason I can do so is because there is an entire industry of people who manage the inventory, distribution, try to predict supply and demand, and take on a risk doing that. The principal reason why I can buy and sell equities at very small spreads any day of the year is similar: traders are competing…

Ok, but what do high frequency trading bots possibly do to help me eat apples in winter (a deeply unecological mode of consumption, btw)?

I believe that they provide liquidity. That’s a fancy way of saying that they ensure that any time someone wants to sell he can find a buyer, and every time someone wants to buy he can find a seller. That in turn means that folks are more confident of their ability to enter and exit a position, which means that they are more likely to enter and exit positions, which makes the market more efficient at finding prices.

And of course prices are hugely valuable: the market is a conversation about the relative value of everything, and the language it speaks is prices. So by enabling liquidity, high-frequency traders are enabling efficient allocation of resources towards those things which mankind most dearly needs and desires.

Re: Finding Signal in the Noise: Machine Learning and the Markets (Jane Street)

#110

Post by jampekka »

rtpg wrote: post #65
Barrin92 wrote: post #24

Earlier quoted context omitted.

General intelligence is overstated sometimes, but it is a thing. Someone who is smart enough to work for Jane Street probably could at least be an intelligence analyst or software developer at the NSA contributing to national security. (Jim Simmons literally was a code breaker during the Vietnam War) I don't think there's a gene for playing esoteric minigames on the options market while you literally suck at everythi…

While I’m sympathetic to the “people working hard to build out ad markets instead of cancer research” argument, I only believe in a weak version of this. Why? I have met many “smart with computers” people. Many of them have terrible people skills, don’t show up to things on time, are unable to keep their workspace clean, don’t know how to explain anything, and cry about how they can absolutely never ever be interrupt…

> People who can barely deal with the tyranny of daily standups probably would struggle a lot in a world where you need to write grant proposals continuously to justify your existence.

I'm continuously writing grant proposals to justify my existence, and have been quite successful (lucky) in it. But I do bitch about the pointless grant game and about the pointless meetings.

Perhaps the problem is that to survive in academia you have to be able and willing to waste your time on all the bullshit that is not research. And it selects for people who are good and willing at the grantwriting and politics game, which is not the same as being good at research.

Maybe there's some point in bitching about the tyranny. Having tech people to do sales and marketing on the side like researchers have to do probably isn't an ideal division of labor.

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