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For the Love of Money

nytimes.com

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Re: For the Love of Money

#171

Post by philwelch »

JDulin wrote: post #123
31reasons wrote: post #114

Earlier quoted context omitted.

So it seems you are better off working in a profession with a very clear quantifiable performance metrics. Software development is not one of them unless you work for your own company. I am curious about making a list of professions that have quantifiable performance metrics. 1.Sales and Marketing 2.SEO 3.Bloggers 4 ..

As always, there's an old and insightful pg essay on these economics: http://www.paulgraham.com/wealth.html The trivial conclusion is that starting your own company is how to be accurately rewarded for your work. But that assumes there's no way to better measure employee performance. It seems like measuring it for engineers and programmers is an impossibly hard problem (At least, that's implied from all of the well-r…

We're talking about risk/reward tradeoffs a lot in this thread. Doing a startup vs. working as an employee is one of these tradeoffs. If you do a startup you'll get paid closer to what you're actually worth, but maybe you don't generate any real wealth and go bust and get paid zero. If you're an employee, you get to hedge that risk against taking a small fraction of the wealth you generate.

Re: For the Love of Money

#172

Post by jiaweihli »

bigbang wrote: post #142
joseph_cooney wrote: post #133

Earlier quoted context omitted.

A friend of mine works in a trading company. He said all the traders want to become devs, because it is the only skill that they've seen up close that translates outside of the mad-house of trading, and they (the traders) all know eventually their number will be up.

Perhaps, lack of understanding on my side, but what does "their number will be up" mean? From what I've heard, it's most often the case that developers want to move into trading.

I think he means that they're worried about employment after their stint as traders.

Re: For the Love of Money

#173

Post by dllthomas »

judk wrote: post #151
dllthomas wrote: post #88

Earlier quoted context omitted.

It's not investment, but it may be legitimate market making. If the only people in the market are investors, it is significantly harder for me to liquidate my stock when I need to and significantly harder for me to buy stock when I want to.

Not really. If there aren't investors willing to buy your stock within a few minutes, there won't be any HFTs willing to buy either. HFTs just bridge that gap in time, for a fee.

You said 3 months. Bridging gaps in time is useful and worth a fee, even at amounts of time significantly shorter than 3 months. I made no claim about all HFT being this, I complained about the metric you were using.

Re: For the Love of Money

#174

Post by panarky »

harryh wrote: post #167
panarky wrote: post #129

Earlier quoted context omitted.

Charlie Munger, vice chairman of Berkshire Hathaway, argues that high-frequency trading is "legalized front-running". I think it is very stupid to allow a system to evolve where half the trading is a bunch of short-term people trying to get information one-millionth of a nano-second ahead of somebody else. It’s legalized front-running; I think it’s basically evil and it should never have been able to reach the size t…

Charlie, as a guy who regularly buys and sells large volumes of stock, is just talking his book. It would be great for him if he could make large transactions without the stock price responding quickly to this new information. But it would be bad for everyone he transacted with. To make this concrete: Say Charlie & Warren wake up one day and decide Company X is undervalued and that they want to by 5% of it. They star…

HFT front-running isn't about faster price discovery. It's about getting quote data in advance of the consolidated feed and executing trades a few microseconds ahead of the order flow.

If I'm buying, the HFT buys ahead of me and resells it to me at a higher price. If I'm selling, the HFT shorts ahead of me and buys from me at a lower price.

This isn't about liquidity or efficient markets, it's about gaming the system through preferential access to data and executions. It results in higher prices for buyers and lower prices for sellers.

Re: For the Love of Money

#176

Post by AnthonyMouse »

phillmv wrote: post #23
tkiley wrote: post #16

I was a derivatives trader, and it occurred to me the world would hardly change at all if credit derivatives ceased to exist. Not so nurse practitioners. Is this statement (from the article) true? I'm under the impression that financial innovations throughout history have generally spurred capital investment. Innovations like fractional-reserve lending have made bankers&investors wealthy, but also spurred spending on…

It's sorta up for debate. My understanding, which is tiny and very limited, is that you can think of the role of finance operators as "liquidity providers". They're the grease in the wheels of capitalism; by either providing access to capital (via loans, or investment) or by matching buyers with sellers. A classical example is you're a farmer that wants to hedge the risk that your crop will fail due to random weather…

> The prime example here is that of the collateralized debt obligation in which huge portions of the US mortgage market got sunk into.

The curious thing is that you can do the same thing with your "socially useful instrument" example. Suppose that instead of selling mortgages, Wall St. had used the same tactics to sell crop futures. They had gone to farmers who promised to provide more food than their land could produce in exchange for cash up front, then resold those contracts at a profit to "investors" and walked away.

What would happen? At first food prices would fall, as in the mortgage crisis loan interest rates fell, because the supply of food on paper has increased. This would cause consumption to increase: Lower price, higher demand. The demand would have to be met from current food stocks because you can't eat securities derivatives, so food reserves would begin to deplete. It would also cause future actual supply to be reduced: Lower price, fewer suppliers. The farmers who can't profit at the artificially lower price would go out of business and stop planting.

Then, next season, the contracts would come due. The farmers who promised more food than they could deliver would default on their obligations. Their inability deliver wouldn't be able to be met from food reserves, which had been depleted when the price was low, nor from other farmers, who declined to plant crops last season when they expected doing so to be unprofitable. Instead of the housing crash there would have been a famine.

Re: For the Love of Money

#177

Post by geezer »

31reasons wrote: post #83

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.

I agree with the point that traders can easily quantify their value, but there is a more fundamental reason at play here. First, trading is a very scalable profession. The more you can bet, the more you can win (or lose). The fact is that how much a trader can bet has been increasing in leaps and bounds, especially during the last 30 years. That's owed partly to changing structure of the global economy and partly to changes in rules and regulation.

Consider, for example, the the repeal of Glass-Steagall act. Just by repeal of this one regulation, the bankers were able to bet many times more money, dramatically increasing short-term profits at the expense of making the system more fragile.

Re: For the Love of Money

#178

Post by kamaal »

king_jester wrote: post #54
mindcrime wrote: post #28

Yay, more villifying "Wall Street" and fueling the "Wall Street vs. Main Street" fire, and suggesting that it's somehow noble or good to not want to be rich. I think everybody should want to be rich. I've tried poverty and in my opinion - it sucks. It sucks big, steaming donkey balls. The desire to make more money, to improve one's "lot in life" and to succeed, this is a Good Thing. Because a few assholes go too far…

> 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…

>>One of the key points of this essay is that making more money doesn't necessarily improve one's quality of life.

No, actually the article says addictive preference towards money doesn't improve quality of life. Not having lots of money. Having lots of money nearly undoubtedly increases your quality of life.

>>There are levels of income that are wholly satisfactory for an individual's life that still classify that person as not rich.

Higher the levels go better the things get.

Re: For the Love of Money

#180

Post by kchoudhu »

nilkn wrote: post #162

Do programmers on Wall Street ever see similar bonuses, or is it necessary to work on the trading floor?

No. Not unless you're the techie that makes partner, in which case you're still going to bring in less than the people who are actually swinging pnl.
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