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I am just wondering, are these Wall Street traders smarter than an average techie working in Silicon Valley ? Are they so irreplaceable that they are offered so much salary and bonuses ? It just doesn't seem right. I am afraid to even ask for 150k salary in SV for the same amount of cerebral work.
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In my mind it's not so much that they're smarter but rather the value they add is more easily measurable. If the trades they make for a hedge fund creates a 10 millions dollars a year profit then it's easy to demand a million dollar bonus. The value of a startup engineer is much harder to determine in a year by year basis.
I heard some estimate that each software engineer adds $1 million (not necessarily to a start up). But there should be a way to reward based on quantitative performance than evaluation by a manager who have no clue about software development.
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HFTs are not any more a tax on stock transactions than previous market makers. In many settings they actually do lower transaction costs. Just ask other market participants such as L/S hedge funds, systematic traders, mutual funds etc. In particular, HFTs drove many of the old school manual market makers out of business, or at the very least reduced their margins significantly. The non-populist argument these days se…
Any stock trade where the buy vs. sell of a stock is under 3 months is not investment.. In under a day, even more so. It will not be felt by the company in question in any meaningful way, and is simply a newer form of gambling. By taxing any income made from trades where ownership is less than a month at 100% we can create a more honest trading environment, where sane investment becomes a norm. The fact is that would…
Instead of making money by choosing stocks, market makers make money by providing a concrete service to the market: they make it easier to buy and sell for people who are investing. They are more like the merchants or shipping companies of finance, rather than speculators. And there is nothing wrong with this!
In fact, calling it gambling is just wrong: most market makers actually take on very little risk! While their actions are not felt by the company directly, they are felt by people who own the stock and people who either want to buy or sell it. And knowing that it's easy to buy or sell a stock makes people more likely to participate in the markets, which is definitely a good thing.
Also, it's very important to note that even non-trivial investment strategies do not involve buying and holding on to large blobs of stock for months. Instead, you likely want to micro-manage your portfolio following some sort of mathematical model every day to minimize risk and exposure. Again, there is nothing wrong with this! But it does involve quite a bit of buying and selling stock, and the liquidity created by market makers really helps.
Viewing the stock market as solely a means to invest for long periods of time is really missing most of the picture. Your suggestion would actually increase most people's risk, leading to more gambling rather than less--or just significantly less investment over all!
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They had running water and other complex infrastructure in ancient Rome well before derivatives were invented I really doubt we'd be living in a barren wasteland w/o them. There would certainly be an impact if all that stuff went away but it wouldn't be because of it's absence it would be because of the pain of unwinding it all.
Not to nitpick, but I think they had derivatives before that.
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I heard some estimate that each software engineer adds $1 million (not necessarily to a start up). But there should be a way to reward based on quantitative performance than evaluation by a manager who have no clue about software development.
That $1mm/engineer estimate is sometimes used for the valuation of a startup, not a yearly rate.
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Yes, I was sharp, good with numbers. I had marketable talents. But in the end I didn’t really do anything. I was a derivatives trader, and it occurred to me the world would hardly change at all if credit derivatives ceased to exist. Hits the nail on the head for me. In the end these people make incredible amounts of money for doing what amounts to a job that is worthless to the society at large.
If it is "worthless to the society at large" then why do people pay for it? Are they insane? It's popular to beat up on the financial industry, but they do actually do something: finance loans. Without them, good luck getting a mortgage, car loan, or a loan to start a business.
Prior to winning the lottery, Joe worked as a janitor, and provided a valuable and necessary function to society. He made $10 an hour.
Now, certainly there is some qualitative difference in the reasons society valued Joe at $10 an hour before he held the winning lottery ticket and $250 million afterward.
Certainly we can say that there exist a range of reasons that one might benefit from a system, and that "people will pay for it" can be used to justify just about anything.
And the financial industry that people are upset about is not really the banks that provide loans (although there is some blame in the instances when people loan money to others knowing they have no hope of paying the money back). The loans existed already; without the loans there's no CDO to buy and sell.
The reason the CDO's existed was that the traditional way to make a loan and get your money back over time with interest was just too damn slow, and people needed a way to pretend the risk of a group of such loans didn't really exist and that they'd make exponentially more money in perpetuity.
I am just wondering, are these Wall Street traders smarter than an average techie working in Silicon Valley ? Are they so irreplaceable that they are offered so much salary and bonuses ? It just doesn't seem right. I am afraid to even ask for 150k salary in SV for the same amount of cerebral work.
No, they're not. But that's the culture since the floor trading days. Even when most things are automated, traders still rake in huge bonuses. (Worked at a prop firm for 4 years).
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> The desire to make more money, to improve one's "lot in life" and to succeed, this is a Good Thing. One of the key points of this essay is that making more money doesn't necessarily improve one's quality of life. The author clearly talks about at age 25 being financially secure and wealthy, so his pursuit of additional wealth wasn't really about an increase in quality of life. > You can be rich and unhappy, or poor…
That is an interesting question about being a billionaire without exploiting anyone . I'm genuinely curious about that. Not that I think being a Billionaire automatically makes you an asshole. I'm just curious if that is possible just from a logistical standpoint. Somewhere along the line someone gets screwed right?
I am just wondering, are these Wall Street traders smarter than an average techie working in Silicon Valley ? Are they so irreplaceable that they are offered so much salary and bonuses ? It just doesn't seem right. I am afraid to even ask for 150k salary in SV for the same amount of cerebral work.
As a software developer, the value you provide is not quantifiable like that. Everyone works on the product, sure, but everyone is insulated from the actual money being made. Who is to make how much? It's a difficult question, and it also lets companies get away with paying quite a lot less--especially to the top performers. This also makes salaries (and, more importantly, bonuses) far less variable in software.
I am just wondering, are these Wall Street traders smarter than an average techie working in Silicon Valley ? Are they so irreplaceable that they are offered so much salary and bonuses ? It just doesn't seem right. I am afraid to even ask for 150k salary in SV for the same amount of cerebral work.