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Friends Don't Let Geek Friends Work In Finance
theodp writes "If Vivek Wadhwa remade Pinocchio, instead of The Coachman luring naughty boys to Pleasure Island to engage in mischievous behavior and be transformed into donkeys, you might find Goldman Sachs CEO Lloyd C. Blankfein luring bright engineering grads to Wall Street to engage in mischievous behavior and be transformed into, well, asses. While the practice of poaching engineering talent slowed after the economy tanked in 2008, Wadhwa is dismayed to report that thanks to hundred-billion-dollar taxpayer bailouts, investment banks have recovered and gone back to their old, greedy ways, snagging engineering grads who might otherwise solve the world's problems, making them financial offers they can't refuse, and morphing them into quants, investment bankers and management consultants. 'Not only are the investment banks siphoning off hundreds of billions of dollars from our economy with financial gimmicks like CDOs,' writes Wadhwa, 'they are using our best engineering graduates [25% of MIT grads in '06] to help them do it. This is the talent that our country has invested so much resource in producing.' He concludes: 'Let's save the world by keeping our engineers out of finance. We need them to, instead, develop new types of medical devices, renewable energy sources, and ways for sustaining the environment and purifying water, and to start companies that help America keep its innovative edge.' Amen, but how 'ya gonna keep 'em down on the Engineering farm after they've seen Wall Street?"
Finance needs effective oversight, they need watching. If you solve that problem then your engineers won't be getting the offers they can't refuse.
I'd upgrade that to
As long as the government views the biggest firms as untouchables, and pick one or two as examples/targets, this will continue on for some time....
Letting a few of them fail in the last debacle would have been better for the economy
Or perhaps because many of these businesses can only afford to pay these people so much because they corrupted the government and got bailouts and handouts? I also don't begrudge sports salaries because I don't make that much, I begrudge them because they can only exist due to the hundreds of millions of dollars corrupted government officials dole out to them to build their stadiums (in some cases, after referendums specifically on the funding were voted down). Take away the corruption, takes away the billions of dollars in unnecessary handouts to these companies, and suddenly the playing field becomes much closer to level for more productive professions.
If you want more engineers, make the field more attractive. If the industry sucks people are going to avoid it no matter how badly we need it.
And I took exception with the statement "This is the talent that our country has invested so much resource in producing." That makes it sound like we gave them loads of valuable training for free and then they wandered off and left us holding the bag. What a crock. Most of them graduated with smothering debt in order to get that education...so it seems that the greater part of the investment was their own. That debt just further drives them to an industry that will pay big.
Lately I have really been lamenting the fact that I chose to program computers for a living. I see how much money people in the finance industry make. They are in a higher income bracket, and yet they don't seem to be in a higher talent or workload bracket. Why shouldn't I be envious, and why shouldn't I leave my boss high and dry for a different job that pays twice as much?
It is not completely ridiculous.
While investment banks and the like do make important contributions, their industry just recently had a negative effect on the WORLD economy due to their shady practices. Then when it hit the fan, they used their influence to socialize the risk/losses while still keeping the profits. So the taxpayers lose, and they still win, even when it was their poor decisions that caused the mess.
Some would say that because of the above, any benefit they provide comes at too steep a cost. I certainly understand that not all participants in the finance industry should be painted with this same brush. But none of this has to do with "communistic ideals". And you don't have to find money distasteful to find it distasteful when taxpayers are footing the bill for the mistakes of others.
I'm not saying that I agree with the article (I haven't read it yet). But I would hope that it is not that hard to understand why the finance industry is not very popular...when you put everyone on the planet at risk, that is the kind of blowback you can expect.
WTF?
Look, it's ok. You feel guilty of having sold out, but really, it's alright: we are all free. There is nothing reprehensible in deciding that you need money to support your family/loves/drug habits (bar useless mentions).
However.
Money for research overwhelmingly comes from government and industries. Not the financial sector. And the point of research is that all of Humanity benefits: ideas created/crafted/refined there benefit all. Only in theory is the investment baking industry responsible for better investment. Because as it happens, they are way too much into short-term (crazy short) benefits for that. And they sustain themselves through fees, meaning that they have a strong incentive for the creation of opaque products no-one really knows how to price (but the fees are charged anyway :) ).
If Nash had been a quant, a couple billions would have been added to the bottom line of some Wall Street firm, and the Nash equilibrium would have been called the Smith (or Jones) equilibrium. And been invented later. And game theory would have lost a couple decades. And the whole of Humanity would be a couple decades back in that respect.
This is precisely why it is particularly bad that the financial industry hires the brightest: if they were into banking for the love of it, chances are, they would be indeed be interested in better investment strategies. But most of them hate their jobs, and compensate by loving their lifestyles and trying to be extra-clever for the sake of their egos. Thus the mess we are in.
Did you know? Monetary incentives prevent people from lateral thinking and seeing the big picture. Doesn't it explain a lot?
I take strong exception to everyone in the financial sector being labeled a thief. I've worked for some excellent financial firms that have helped people to manage their finances and invest for the future. That there are amoral scumbags in the world is no shock, but just as most of the lawyers I've known are good people who try to do good in the world through their work (while their profession is tainted by the loudest minority), bankers and other fiduciaries provide an essential service which all too often does not receive the respect it deserves.
You're describing the financial sector as it existed in the 70s. Back then, it really was about helping businesses grow and finding the next big idea. These days, the pigs on top have discovered that they can get WAY more money by playing around with "creative" instruments. Like bundle a bunch of bad loans, sell them claiming their good loans, and then bet money that they'll fail. Or buy a healthy company, make them layoff of a bunch of their workers so that their stock price jumps, and then sell. Shit like that doesn't create wealth; it just steals it.
Investment banking is less and less about investment which is good for the economy, and more and more about arbitrage and pumping transactions to make a fee, ...
So when was it different? There have been many explanations that a great part of the recent worldwide financial disaster wasn't because the finance industry wanted to commit the shady deals that caused it all; it was because the government's financial regulators (and the judicial system) has for several decades been looking the other way. This gave the financial industry permission to do the things that they've wanted to do, but knew they couldn't get away with.
In a sane world, the people who committed the shady financial deals would have been prosecuted and jailed. This has happened to a few, true, but very few. Most have been rewarded, including at taxpayer expense.
The saying "Bad money drives out good" is rather old, and should be recalled at times like this. As long as the crooks in the finance industry know they can get away with it, they will.
Those who do study history are doomed to stand helplessly by while everyone else repeats it.