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I might be a complete failure (after 8 years of work)

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Re: I might be a complete failure (after 8 years of work)

#51

Post by illumin8 »

jeromec wrote: post #40
edw519 wrote: post #19

After eight years, I have nothing concrete to show for my efforts. So sad, so true. This is what happens when you play a zero-sum game. Even if you win, someone has to lose. Here's an idea. For the next 8 years, why don't you do something that helps others by making the pie bigger for everyone instead of just trying to game a bigger piece of a smaller pie for yourself. When you do for others, you always have somethin…

> This is what happens when you play a zero-sum game. Even if you win, someone has to lose. How is it always a zero-sum game to win? Fundamentally, trading stocks is not that at all. If I buy one of the first issued shares of "Tasty Ice Cream" for $1 because I want the company to spread their goodness as well as get a return on my money, no one has lost. If I lose my job the next week and need to sell my share which…

This is only true for long-term investors. Algorithmic traders have no vested interest in whether the underlying business succeeds or fails. They are only there trying to predict where the wind will blow next. They are quickly in and out of any potentially profitable company; quick to buy "puts" in a momentary time of weakness or "calls" in a time of temporary strength.

For algorithmic traders, it is indeed a zero-sum game. For the rest of us "investors", as I like to call it, to distinguish it from trading, there is potential for long-term good.

Re: I might be a complete failure (after 8 years of work)

#52

Post by jeromec »

lowkey wrote: post #49
jeromec wrote: post #40

Earlier quoted context omitted.

> This is what happens when you play a zero-sum game. Even if you win, someone has to lose. How is it always a zero-sum game to win? Fundamentally, trading stocks is not that at all. If I buy one of the first issued shares of "Tasty Ice Cream" for $1 because I want the company to spread their goodness as well as get a return on my money, no one has lost. If I lose my job the next week and need to sell my share which…

I think this is the way capital markets were originally supposed to work; matching companies in need of growth capital with investors seeking to earn a risk-adjusted return on their long-term savings. Unfortunately, the financial markets have morphed over time such that now, traders trade for the sake of trading. Instead of our work being our wealth, trading securities somehow became an end unto itself. What's worse…

For the most part I totally agree. Rampant speculation combined with a fiat currency and too loose regulation is how we got so much money sloshing around, a deformed market, and this economic crisis (and a near collapse of the financial system). We've gotten too far away from fundamentals. We also see this in startups. For example, I totally agree with Mark Cuban who laments that modern founders often look at valuations, and indeed raise lots of capital, for possible IPOs without even discovering how to profit a single dollar.

Re: I might be a complete failure (after 8 years of work)

#53

Post by nandemo »

edw519 wrote: post #19

After eight years, I have nothing concrete to show for my efforts. So sad, so true. This is what happens when you play a zero-sum game. Even if you win, someone has to lose. Here's an idea. For the next 8 years, why don't you do something that helps others by making the pie bigger for everyone instead of just trying to game a bigger piece of a smaller pie for yourself. When you do for others, you always have somethin…

So sad, so true. This is what happens when you play a zero-sum game. Even if you win, someone has to lose.

When you play football too, if you win someone has to lose. And yet there are positive externalities, to wit millions of people watching the World Cup.

In trading, the externalities might not be so obvious but they do exist.

Re: I might be a complete failure (after 8 years of work)

#54

Post by [deleted] »

nandemo wrote: post #53
edw519 wrote: post #19

After eight years, I have nothing concrete to show for my efforts. So sad, so true. This is what happens when you play a zero-sum game. Even if you win, someone has to lose. Here's an idea. For the next 8 years, why don't you do something that helps others by making the pie bigger for everyone instead of just trying to game a bigger piece of a smaller pie for yourself. When you do for others, you always have somethin…

So sad, so true. This is what happens when you play a zero-sum game. Even if you win, someone has to lose. When you play football too, if you win someone has to lose. And yet there are positive externalities, to wit millions of people watching the World Cup. In trading, the externalities might not be so obvious but they do exist.

[deleted]

Re: I might be a complete failure (after 8 years of work)

#55

Post by xenophanes »

wangwei wrote: post #41

Even people with very high level math knowledge fails to predict the market (remember the two noble prize scientists who failed?).Since you're out of school when you were 17, I doubt you'll able develop complex schemes (unless you are a very very rare genius).

Obviously he has the aptitude to learn things on his own. Sounds like he can learn better/faster on his own time than the large majority of students do at a school. So no need to hound him with pessimism for having an unconventional but pleasant lifestyle.

Re: I might be a complete failure (after 8 years of work)

#56

Post by chc »

jeromec wrote: post #48
dmfdmf wrote: post #36

Earlier quoted context omitted.

I agree. Disparaging speculation as "zero-sum" and therefore inherently bad is non-sense. In almost all mature industries such as grocery stores, auto sales, lumber, appliances, etc., any individual seller's gain is some other seller's loss. So what? They are providing a valuable service and if profitable in the long-run are doing so at lowest cost, highest value to their customers. Financial speculation has a long h…

> Speculation is a zero-sum activity between speculators I agree. > any individual seller's gain is some other seller's loss I disagree. A farmer can sell to a grocer and both can gain.

I think you don't disagree. The grocer is not in a seller in the same ecosystem as the farmer. The grocer is one of the external people who benefits from the zero-sum game the farmers are playing.

Re: I might be a complete failure (after 8 years of work)

#57

Post by tptacek »

kiba wrote: post #43
olliesaunders wrote: post #35

Earlier quoted context omitted.

This is what happens when you play a zero-sum game. Even if you win, someone has to lose. I don't see the causality. He has yet to succeed because it's an incredibly difficult problem domain. There are problem domains of similar difficulty that benefit people that he could have chosen and still be in this position.

Some problems just can't be solved with the current toolkit. Sometime you need a different toolkit. For example, ESR derives a development methodology for open source software using Austrian economics.

He did? What does that mean?

Re: I might be a complete failure (after 8 years of work)

#58

Post by chasingsparks »

gvb wrote: post #47
noonespecial wrote: post #44

Look on the bright side. Many people dedicated their lives to the search for a process to turn lead to gold. This seemingly fruitless search lead to all kinds of neat discoveries. You've learned lots of valuable things that you wouldn't have learned otherwise as well. Keep searching if you must but start benefiting from that knowledge. The real secret about turning lead to gold is that it is possible, but by the time…

Alchemy and transmutation of lead to gold is a pretty apt analogy for John Nelson's quest to turn his model of the market into gold. a) The alchemical belief in transmutation was based on a thoroughly wrong understanding of the underlying processes. John's (and other's) lack of success indicates a faulty model. b) Ironically, it transpired that, under true nuclear transmutation, it is far easier to turn gold into lea…

If you look at the first sentence of the article, it is linked to the subheading of a blog post that explained my intellectual evolution -- the subtitle of which was "The Contemporary Philosopher’s Stone" which is how I refer to this problem. (http://en.wikipedia.org/wiki/Philosophers_stone) You're not the only one drawing the comparison ;)

Re: I might be a complete failure (after 8 years of work)

#59

Post by jey »

HSO wrote: post #21
jey wrote: post #14

Seems like it'd be a better bet to apply all your skills to creating value (wealth) instead of just trying to push it around a smidge more efficiently. In other words: find a real problem and solve it, increasing global wealth in the process, and collect the economic reward.

Hm, I accidentally upvoted this so I may as well leave a comment. The dichotomy between "creating" wealth and "pushing it around" is false, in my opinion. Lots of people make it and it's intuitive, I know, but figuring out the proper value of things, trying to make forecasts about the future, even profiting from differences that shouldn't be there, all this is part of the capitalist meta-system called financial marke…

I fully agree that finance is useful because it increases market efficiency. The problem is that like most fields, most of it is uncreative legwork that doesn't provide much leverage to get rich from. So a smart creative person should consider whether they're falling into the cognitive trap of "I want to make money, finance deals with piles of money, so I should apply my creativity to finance".

It's just a crapshoot unless you have some real information asymmetry[1] you can exploit to make money. This could be in the form of noticing some sort of systematic inefficiency, having a unique and effective strategy of gaining market information to identify mispricings, etc. Otherwise you'd be better off finding some unmet need to creatively address and avoiding the cognitive trap that leads from "I want money" to "I should go into finance".

1. http://en.wikipedia.org/wiki/Information_asymmetry

Re: I might be a complete failure (after 8 years of work)

#60

Post by barrkel »

rue wrote: post #34
mbateman wrote: post #28

A lot of people are leaving comments critical of his goal of beating the market as playing a zero-sum game, just pushing wealth around, having no value for society, etc. This strikes me as dubious and high-handed, to say the least. First, as to the value of the endeavor. He is trying to, in his words, "come up with an algorithm that finds pockets of profitability in a cloud of probable randomness." If he could really…

All this is only undermined by the fact that the financial sector and the stock market in particular involves mostly fictitious money. There is no problem that it solves that could not also be solved by saying "here, I conjured you a million dollars out of thin air, act as if you had it". The market is, as it were, a MUSH. There are certainly plenty of talented people working in finance. That talent is just completel…

All money is fictional, in that it only has value to the degree that people agree and believe it has value. This is no less true for the US dollar than it is for gold, silver, oil, cattle, etc.
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