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Geeks trump alpha males on Wall Street

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Re: Geeks trump alpha males on Wall Street

#81

Post by protez »

redcap wrote: post #2

Sure they're making money particularly from being smart, but would someone be able to explain to me how making money from money contributes to something worthwhile to society? Is it just that they're being that much quicker in smoothing out prices of stuff on the stock market? I'm not being snarky, would just like to know. Another slightly different topic: the trend during the Bush boom years is that the so-called 's…

The essence of capitalism is free market. What is free market? It's a price mechanism that simply works far better than any other alternatives. There's no mathematical proof, but it's a matter of consensual observation. Maybe, it's worse than others in some special kinds of markets such as healthcare, but it works far better in most cases.

Then why is that? Why free market beats any other forms? Because it computes prices better than any single intelligence known in this universe and it's possible by massive interaction not just between real demand and supply sides but all the participants who care about price. The group of people who care price the most is traders. Traders are the participants whose job is all about pricing, or balancing between demand and supply. Whether or not it's profitable, it's enormous contribution to the price mechanism of free market.

Actually, all the producers in any kind of markets are essentially traders. Whether it's manufacturing, mining, or agriculture, the profit can be made only from meeting price right, not just from hard working oblivion to real demand and supply. If you broaden the concept of trading in this way, you will realize traders are everywhere and they're important as much as any other kind of physical labors. An Internet start-up is also a trader. It can succeed only in the market where it can make successful trades between its product and the cost of what it produces. That's the essence of trading and we all do it every single day.

Re: Geeks trump alpha males on Wall Street

#82

Post by cturner »

ubernostrum wrote: post #77
cturner wrote: post #75

Earlier quoted context omitted.

Price discovery is not 'artificial inflation' - it contributes to efficiency. In effect, they will have decided that the natural supply/demand situation is unsuitable to them and manipulated the market to create an artificial scarcity. No - the situation where artificial scarcity occurs is where people who buy the tickets are prevented from onselling them. In this case the venue has an advantage that contributes to e…

In this case the venue has an advantage that contributes to economic inefficiency. The same total sum of goods and services is available with scalpers buying up the supply, but those goods and services are now provided at higher total cost than otherwise. This is, so far as I'm aware, the definition of inefficiency and consists solely of artificial inflation of prices.

OK, thanks. I see that now. In the scenario discussed above in the thread this is the case. This provides an example of where scalpers have a negative effect on the market, something I indicated I couldn't see earlier.

Although this isn't the universal case, because scalpers can compete against the hosue at a later point in the market, and offset attempts by the house to segment the market, and can lose out at times causing sale at a loss to themselves.

Re: Geeks trump alpha males on Wall Street

#83

Post by dasil003 »

anamax wrote: post #34
dasil003 wrote: post #16

Earlier quoted context omitted.

I don't think they're evil unless the taxpayers happen to be bankrolling their downside.

> I don't think they're evil unless the taxpayers happen to be bankrolling their downside. The taxpayers made that decision, so it's unclear why you think that the recipients are evil. I think that the taxpayers made the wrong decision, but ....

The evil ones are the ones who happened to be advising the representatives of the taxpayers claiming—with unfathomable conflict of interest—that multiple major banks failing would be a doomsday scenario to be avoided at all costs.

Re: Geeks trump alpha males on Wall Street

#84

Post by Retric »

cturner wrote: post #74
Retric wrote: post #72

Earlier quoted context omitted.

The ticket seller might want a specific audience for demographic reasons, and or a sellout crowd for reputation reasons. Scalpers destroy this without giving a kickback to the ticket seller. They also increase the cost to the ticket buyers thus reducing market efficiency.

> The ticket seller might want But that's unrelated to market efficiency. People in this thread are trying to define "seller not getting what they want" or "particular type of consumer not getting what they want" into market inefficiency, and it doesn't work like that. I'm not an economist. Perhaps I'm wrong, but in this case please make the case in terms of a definition you can cite. (In practical terms, they seller…

Transactions can involve more than just a single flow of cash in exchange for stuff. Economists can and do look at satisfaction as part of market efficiency which explains why people pay for status symbols. Someone buying a diamond for above resale price is not necessarily simply wasting money for zero gain.

PS: Consider rather than a ticket scalper you had a group of bandits charging a toll to cross a bridge. They are not adding value to the experience of crossing a bridge and they are not helping the people who made the bride. So while arguably they increase GDP it's not a net gain for society.

Re: Geeks trump alpha males on Wall Street

#85

Post by lanstein »

redcap wrote: post #2

Sure they're making money particularly from being smart, but would someone be able to explain to me how making money from money contributes to something worthwhile to society? Is it just that they're being that much quicker in smoothing out prices of stuff on the stock market? I'm not being snarky, would just like to know. Another slightly different topic: the trend during the Bush boom years is that the so-called 's…

To me, the point of being rich is to be able to give the money away as you see fit. It's a lot easier to complain that such-and-such symphony orchestra is going bankrupt than it is to figure out how to become successful and then help that same orchestra. If you have a look at the patron list of the SF Ballet, you'll likely recognize a name or three.

Re: Geeks trump alpha males on Wall Street

#86

Post by codexon »

yummyfajitas wrote: post #59
codexon wrote: post #44

Earlier quoted context omitted.

The customer has a choice on whether or not it's worth the purchase. To the customer who values the item (Wii/Sporting Event/whatever) over the (inflated) cost, it is a net gain, not a loss. That is too short sighted of an analysis. Too much value is being lost by unnecessary overhead. Have you noticed how overhead is something to be eliminated by every company except the middleman's themselves? With your reasoning,…

House scalpers didn't force legitimate buyers to take out huge mortgages. The "legitimate buyers" (I assume you mean people who wish to consume housing) could have continued to rent. Most of the people who bought houses are also scalpers; they bought a house in the hopes that it would be worth more later. "Real estate never goes down!"

"House scalpers didn't force legitimate buyers to take out huge mortgages. The "legitimate buyers" (I assume you mean people who wish to consume housing) could have continued to rent."

The cost of renting went up along with the boom and unsurprisingly went down with the bust. Everyone was forced to pay more except for those who already owned a home.

Where do you think the leasers got their homes? Do you think that they wouldn't raise their prices when other options were priced much higher?

"Most of the people who bought houses are also scalpers; they bought a house in the hopes that it would be worth more later. "Real estate never goes down!""

Hindsight is 20/20. During those economic conditions, you could either rent overpriced accommodations, or you could take out a mortgage with a lower % interest than how much homes were appreciating yearly. This was a ponzi scheme where the timing of the bubble was controlled by the financial giants' tolerance for risk.

If you did not join in this fiasco, you risked losing purchasing power compared to everyone else. This is equivalent to you putting your money in a 0% interest account while everyone else puts it in a 5% interest account. I am willing to bet that the majority of the people here did not know when the bubble was going to burst, including most of you who are now saying that "those dumb speculators shouldn't have bought a home back then" (see how this is bad for liquidity if you can't buy a home for 3-4 years?).

Scalping is also theoretically bad for the market. The market is not optimal when buyers are paying the maximum amount. In such a condition, you have decreased liquidity as buyers are forced to buy less since everything costs most of their money. You might just buy food and shelter, and try to be self sufficient on everything else. This is not conducive to a vibrant economy.

The market is optimal when sellers are selling at their minimum amount. The ideal market thrives on competition. Liquidity is increased and you have incentives to use the extra money to drive other sectors of the industry.

Take for example text messaging. It doesn't even cost 10 cents per message, and people would even pay 20 cents per message. But does that mean a text message is truly worth that much? Absolutely not! The phone company has lost that much interest into improving their existing services rather than trying to extract as much as they can from their consumers. Artificial scarcity only helps businesses/scalpers take advantage of the consumers.

Re: Geeks trump alpha males on Wall Street

#87

Post by cturner »

Retric wrote: post #84
cturner wrote: post #74

Earlier quoted context omitted.

> The ticket seller might want But that's unrelated to market efficiency. People in this thread are trying to define "seller not getting what they want" or "particular type of consumer not getting what they want" into market inefficiency, and it doesn't work like that. I'm not an economist. Perhaps I'm wrong, but in this case please make the case in terms of a definition you can cite. (In practical terms, they seller…

Transactions can involve more than just a single flow of cash in exchange for stuff. Economists can and do look at satisfaction as part of market efficiency which explains why people pay for status symbols. Someone buying a diamond for above resale price is not necessarily simply wasting money for zero gain. PS: Consider rather than a ticket scalper you had a group of bandits charging a toll to cross a bridge. They a…

The bridge crossing example doesn't contain a factor equivalent to the risk that the scalpers take on when they buy the tickets, or the fee they pay to the people running the event.

Re: Geeks trump alpha males on Wall Street

#88

Post by yummyfajitas »

codexon wrote: post #86
yummyfajitas wrote: post #59

Earlier quoted context omitted.

House scalpers didn't force legitimate buyers to take out huge mortgages. The "legitimate buyers" (I assume you mean people who wish to consume housing) could have continued to rent. Most of the people who bought houses are also scalpers; they bought a house in the hopes that it would be worth more later. "Real estate never goes down!"

"House scalpers didn't force legitimate buyers to take out huge mortgages. The "legitimate buyers" (I assume you mean people who wish to consume housing) could have continued to rent." The cost of renting went up along with the boom and unsurprisingly went down with the bust. Everyone was forced to pay more except for those who already owned a home. Where do you think the leasers got their homes? Do you think that th…

The cost of renting did not go up correspondingly with cost to own. That's how we know it was a bubble.

http://bigpicture.typepad.com/photos/uncategorized/2008/05/1...

If you did not join in this fiasco, you risked losing purchasing power compared to everyone else. This is equivalent to you putting your money in a 0% interest account while everyone else puts it in a 5% interest account.

Yes, I would have lost if housing turned out to be a good investment. This does not change the fact that your "legitimate buyers" were speculating.

Also, if you are comparing scalping to text message prices, that analogy would only make sense if a single scalper (or a small number of scalpers) holds a monopoly over the market (either in tickets or houses). That's obviously wrong.

Re: Geeks trump alpha males on Wall Street

#89

Post by anamax »

dasil003 wrote: post #83
anamax wrote: post #34

Earlier quoted context omitted.

> I don't think they're evil unless the taxpayers happen to be bankrolling their downside. The taxpayers made that decision, so it's unclear why you think that the recipients are evil. I think that the taxpayers made the wrong decision, but ....

The evil ones are the ones who happened to be advising the representatives of the taxpayers claiming—with unfathomable conflict of interest—that multiple major banks failing would be a doomsday scenario to be avoided at all costs.

> The evil ones are the ones who happened to be advising the representatives of the taxpayers

The advisors weren't significantly different from the representatives. Does that make the representatives more or less evil than the advisors? Does it matter?

Given that this is how things are going to be if we have this sort of regulation, are we really benefitting from this sort of regulation?

I think that we should always evaluate based on realized benefits and incurred costs, not desired benefits and promised costs. However, our actual policies show that most people disagree with me.

Re: Geeks trump alpha males on Wall Street

#90

Post by codexon »

yummyfajitas wrote: post #88
codexon wrote: post #86

Earlier quoted context omitted.

"House scalpers didn't force legitimate buyers to take out huge mortgages. The "legitimate buyers" (I assume you mean people who wish to consume housing) could have continued to rent." The cost of renting went up along with the boom and unsurprisingly went down with the bust. Everyone was forced to pay more except for those who already owned a home. Where do you think the leasers got their homes? Do you think that th…

The cost of renting did not go up correspondingly with cost to own. That's how we know it was a bubble. http://bigpicture.typepad.com/photos/uncategorized/2008/05/1... If you did not join in this fiasco, you risked losing purchasing power compared to everyone else. This is equivalent to you putting your money in a 0% interest account while everyone else puts it in a 5% interest account. Yes, I would have lost if hous…

Ok here we go.

First of all, just because the ratio went up doesn't mean that rentals didn't go up as well.

Second, what are the units are that graph? 25? That's definately not 25x unless you've normalized it to the 1900s or so which is silly. That graph has an exaggerated axis.

Third, the metric for price-rent ratio is rather arbitrary. How is a rental for 12 months ever equal to the cost of a house? A house is not entirely equivalent to an apartment to be compared in this manner, and the number of houses for rent is inversely related to the market price.

Yes, I would have lost if housing turned out to be a good investment. This does not change the fact that your "legitimate buyers" were speculating.

The point is the people who were scalping first forced an artificial panic on the system. If they did not have the power to do this, people wouldn't have been highly compelled to follow them. Therefore scalpers are bad for the market. This is equivalent to a "pump and dump" scheme which is illegal when trading equities.

Also, if you are comparing scalping to text message prices, that analogy would only make sense if a single scalper (or a small number of scalpers) holds a monopoly over the market (either in tickets or houses). That's obviously wrong.

No you are completely missing the point. Scalpers have at least a regional monopoly. Is text messaging a regional monopoly? Yes. Did housing speculators buy up whole plots of real estate in certain areas? Yes. Did wii buyers hold a monopoly on wiis when they bought out the limited supply in stores and put them up on ebay? Yes. That's the entire point of scalping, to create an artificial lack of demand through a monopoly.

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