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Businesses Math The Almighty Buck Science

Friends Don't Let Geek Friends Work In Finance 732

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?"
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Friends Don't Let Geek Friends Work In Finance

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  • by dennis_k85 ( 828582 ) on Sunday March 27, 2011 @11:16AM (#35629884) Homepage
    Mama don't let your sons grow up to be bankers........
    • Re:Mama don't..... (Score:5, Insightful)

      by Technician ( 215283 ) on Sunday March 27, 2011 @11:37AM (#35630064)

      Momma might actually like to get him out of the basement.. ;-)

  • by Tyler Durden ( 136036 ) on Sunday March 27, 2011 @11:19AM (#35629906)

    If Vivek Wadhwa remade Pinocchio, instead of The Coachman luring naughty boys to Pleasure Island to engage in mischievous behavior...


  • by Securityemo ( 1407943 ) on Sunday March 27, 2011 @11:22AM (#35629922) Journal
    Heavier taxes on finance income, or some sort of legal restructuring or limitation of finance itself. If you can't get money for nothing... you can't get money for nothing. The wealth gap in the US is absurd. And don't talk about ability, unless I'm completely mistaken these people are not taking any more risks or putting in any more effort than any of the other MIT grads that continue to work as productive engineers.
  • keeping engineers (Score:5, Interesting)

    by simoncpu was here ( 1601629 ) on Sunday March 27, 2011 @11:23AM (#35629932)

    ...but how 'ya gonna keep 'em down on the Engineering farm after they've seen Wall Street?

    Give them the opportunity to change the world.

    • Re: (Score:3, Insightful)

      Here's a thought. Why not add a stick to that carrot? When Wall Street screws the rest of us, find the people responsible, throw them in prison, and seize their assets to pay back the taxpayers. If current law doesn't allow this, then the law should be changed. This will have 2 outcomes. Fewer people will go after the really lucrative positions (those that involve stealing from the rest of us) if there is an actual real risk of punishment. Second, possibly we might see a Wall Street evolve that actually do
  • Silver.. (Score:4, Interesting)

    by anonieuweling ( 536832 ) on Sunday March 27, 2011 @11:23AM (#35629934)
    If all Engineers just buy some silver, we can get back at the banksters.
  • Oversight (Score:5, Insightful)

    by currently_awake ( 1248758 ) on Sunday March 27, 2011 @11:28AM (#35629986)
    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.
    • Wrong.

      Finance, just like any other good, needs competition to provide people with useful products.

      Government on the other hand, destroyed competition in that sector (just like in many others), created various moral hazards, gave out various bail outs and stimulus and interest free money, created laws to guard large companies in that sector from failing, while creating other laws to prevent any sort of competition to take place.

      Did you know that FINRA prevents financial advisers from publicizing their histor

  • The work itself (Score:3, Insightful)

    by ImABanker ( 1439821 ) on Sunday March 27, 2011 @11:29AM (#35629992)
    As a nerd that has a passion for finance, one thing worth considering is that the work of finance itself is tremendously fulfilling (outside of the demonizing that happens from some ill-informed quarters). The problems that you are presented with are fascinating, you are surrounded with motivated people of incredible ability, and have unbelievable responsibility at a young age - where else would I get to advise the CEO of a company on his strategy at age 25? If you have never helped a desperate company raise capital to avoid going bust by working consecutive 100 hour weeks, I suppose I can't really explain the feeling. Most of all, the work is just interesting. Or maybe I'm the devil.
    • No, that is productive work in my (ill-informed) eyes. The implied Devilishness is bright young people being snatched up to manipulate Finance and The Market (through magic or whatever, realize that finance is as foreign to me as ancient Greek) to get ridiculous profit for "normal" work. Then the question becomes, does this occur?
    • Re:The work itself (Score:5, Insightful)

      by Skreems ( 598317 ) on Sunday March 27, 2011 @12:06PM (#35630296) Homepage
      Yes, but there's fascinating work elsewhere too. And when you're done, you've built a system that does something, as opposed to shuffling money around. I realize that everything comes back to money if you're going to get paid, but most other places have a layer of "actual product" in between their work and the money it generates, and that product has some intrinsic value in itself. My sincere feeling is that working in Finance, you miss out on creating a tangible product that's useful to people outside your 20-person company.
    • Re:The work itself (Score:4, Insightful)

      by artor3 ( 1344997 ) on Sunday March 27, 2011 @12:07PM (#35630310)

      I'm sure bank robbers (not you, the types with guns) get the same thrill.

      The demonizing isn't coming from ill-informed quarters. It's coming from the people who know what you do, know where you get your money from. The cash you get from HFT isn't just magically appearing from no where. It's being stolen from legitimate investors. You're all a bunch of thieves, skimming money off the top of every transaction, and using every loophole you find so that you don't even pay taxes on it. You've drained the country of its lifeblood, and in a few decades will leave it a rotting husk while you move on to another nation to loot. If telling yourself that I'm just "ill-informed" is what lets you sleep at night, then go ahead. Keep lying to yourself. But when your middle-class friends and family (do you even have any?) are suffering, know that it's because you helped your company loot their savings and run their employers out of business.

    • by spinkham ( 56603 )

      That sounds like investment work, and not what people dislike about finance.

      The market players work in two basic ways: Investment and gambling.

      Investment grows the economy, but high speed trading and the like are nothing more then gambling, redistributing wealth instead of creating it..

      Obviously there's a fine line between investment and gambling, which is why it's a hard thing to regulate.

    • Re:The work itself (Score:5, Insightful)

      by IICV ( 652597 ) on Sunday March 27, 2011 @12:55PM (#35630698)

      If you have never helped a desperate company raise capital to avoid going bust by working consecutive 100 hour weeks, I suppose I can't really explain the feeling.

      Whoa, really? Sounds like it's been explained already. [wikipedia.org]

      No company is worth 100 hour work weeks, much less consecutive ones.

    • Re:The work itself (Score:5, Insightful)

      by nbauman ( 624611 ) on Sunday March 27, 2011 @01:43PM (#35631104) Homepage Journal

      OK, I accept that, especially the part about working 100 hours a week to help a company raise enough capital to avoid going bankrupt.


      It depends on what the company is doing. If they're developing a new drug to alleviate suffering, fine. But if they're patent trolls who are gaming the system to figure out a way to sell needed drugs for 100 times their cost http://www.arthritistoday.org/news/colchicine-gout-drug-price053.php [arthritistoday.org] not so fine.

      What percentage of the companies financed by Wall Street are actually producing something socially productive, and what percentage are just manipulating the system and grabbing a percentage for themselves? I honestly don't know, but sometimes the percentage of manipulators seems to be awfully high.

      And the more you get into financial instruments and stuff, the less I can follow it. I do know about mortgage default swaps. Sometimes it seems that the more socially harmful it is, the more profitable it is.

      Put all the little investment projects together and you get a system that may or may not be doing good for society in the long run.

      And of course, the industry protects itself from government oversight and regulation, and even criticism, by huge campaign contributions to politicians. Hell, many of them are ex-politicians.

  • The problem (Score:5, Interesting)

    by Anonymous Coward on Sunday March 27, 2011 @11:38AM (#35630078)

    Five years out of school and working as an engineer, I make a mid five figure salary. Friends I went to school with who now work in finance make low six figures.

    America is not interested in keeping its innovative edge.

  • by rwyoder ( 759998 ) on Sunday March 27, 2011 @11:41AM (#35630098)

    1. RollingStone: "Why Isn't Wall Street in Jail?": http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216 [rollingstone.com]

    2. "Inside Job"(2010): http://www.imdb.com/title/tt1645089/ [imdb.com]

    After reading/watching these, I found myself wondering why I spent all those years accomplishing nothing in IT, when I could have been robbing banks from the inside with no worries about being prosecuted.

    • by artor3 ( 1344997 ) on Sunday March 27, 2011 @01:04PM (#35630776)

      While you're at it, read this: In Prison for Taking a Liar Loan [nytimes.com].

      Summary, since no one RTFA's:
      Guy takes out "liar" loan from bank, after much encouragement from Countrywide (now BoA)
      Guy defaults on loan, like so many others, losing his home. Bankers make millions.
      Guy runs a marathon for charity across the Sahara Desert
      Federal agent sees marathon coverage, thinks "How can some working stiff afford to do that? He should be keeping his head down like the rest of the slaves!"
      Feds send hot undercover agent to flirt with the guy, extract a confession
      Guy sent to jail, ordered to pay a quarter million dollars restitution to Bank of America

      In short, while you're robbing the banks from within, not only do you have no worries about being prosecuted -- the people you're robbing can be prosecuted and forced to pay you even more!

  • by Foofoobar ( 318279 ) on Sunday March 27, 2011 @11:57AM (#35630226)
    I just finished working for a Hedge Fund management company that 'merged' with a larger company in Denver. They were all Windows with 10 engineers (sys admin and developers) and we were LAMP and I was doing everything. At first, theirs was a typical response to that stack reacting like a deer in headlights and not wanting to touch it but then they decided that it was important to integrate the systems and get rid of the redundant IT (IE me). But since I ran everything and got tremendous results (employee of the month and such) their only option was to try and make me look bad so they tried to say it was my attitude and my emotional response to which I let them know I was bipolar and on medication and seeing a counselor regularly for several years and high stress situation (like mergers) made the condition worse and I was trying to correct for that but they needed to be accepting of a condition that is seen as a disability.

    Long story short, both HR and upper management then colluded, ignored my requests and I documented everything and they were investigated by federal agencies. A year later, we settled through federal mediators for a years salary.

    In the end, I found out that they were just a good old boys network and one person would protect the other to protect the other to protect the other. Lies upon lies upon lies to cover their asses. In talking to others, this is typical in finance. If this is something that you want and like in your employers, I say go for it. Otherwise stay far away.
  • by DavidR1991 ( 1047748 ) on Sunday March 27, 2011 @12:12PM (#35630346) Homepage

    (here in the UK, at least) ...is that actually, the ones who get sucked in by the finance sector easily are the ones who talk a good talk (and seem to do plenty of ass licking) but aren't any good at the technical skills.

    I'm not just saying this because of sour grapes or anything like that - it does seem to be a trend that the jerks who everyone dislikes (or the jerks that are awful at working in a team) get picked up by financial firms. So to be honest, 'nothing of value was lost' springs to mind

  • by Anonymous Coward on Sunday March 27, 2011 @12:20PM (#35630404)

    We go through early life focusing on personal achievement, and one has to in order to succeed in the highly competitive application process to make it to MIT. You go through a intense regimine of MIT, where despite a number of classes where Teamwork is necessary you are still judged on your individual accomplishment aka Grades.

    Is it so wrong then when an MIT graduate looks at the job opportunities arrayed in front of them, that they see 3 possibilities:

    1) Start a new company/work at a startup, try to create something that will change the world. Payoff potentially astronomical, chance of success relatively slim. Ability for individual success to translate to financial success, medium.

    2) Work for a big corporation, more than likely creating something which addresses the corporations needs, which may or may not help society. Payoff potential medium, chance of success high, ability for individual success to translate into financial success, low.

    3) Enter the world of finance. Payoff potential high, chance of success mediuam, ability for individual success to translate into financial success, Very High.

    Finance remains one of the few industries, where a contributer is able to directly monitor their value added and thus demand/receive incentives to match said value. What upside is there for me to go work for a GE, where even if some radical new design i create revolutionizes their jet engines and makes the company billions over the next 15 years, I'll get a decent paycheck, maybe some stock or options but in reality there is no real upside for my success.

    Until society/companies puts emphasis on engineers and inventors in terms dollars, people will be less inclined to create/invent.

    - An MIT '05 who works in finance.

    • by wkurzius ( 1014229 ) on Sunday March 27, 2011 @03:16PM (#35631728)

      Since you obviously value money more than anything else, let's rewrite those choices for those that are bit more progressive.

      1) Start something great

      2) Be part of something great

      3) Fuck doing anything great and become a parasite

  • by Fractal Dice ( 696349 ) on Sunday March 27, 2011 @12:23PM (#35630434) Journal

    Friends don't let friends have principles. Once you turn down an opportunity for any reason other than greed, the spiral towards the gutter has begun.

  • by SecurityGuy ( 217807 ) on Sunday March 27, 2011 @12:29PM (#35630486)

    The idea is fine. Roll together a bunch of mortgages (debt obligations) backed by property (collateralized) and you have a security. It's actually a useful idea because it gives banks another market to sell these to. It gives people with money to invest another place to invest it.

    The problem was basically fraud. Wrapping steaming piles of dog crap together and claiming they weren't risky was an outright lie. CDOs plus outrageous lies were the problem. I still remember well just being amazed at things like low-doc and no-doc loans. I remember applying for a loan from my bank and they offered me more than double what I could actually afford.

    We want to blame the finance guys, but the problem was banks giving loans to people they knew couldn't repay them because they could just sell the loan to someone else and not care. The problem was the liars who falsely represented those CDOs that were composed of crap as being safer than they were. The problem was investors not doing due diligence, seeing anybody with a pulse getting $100k+ in money to buy a house, even if they didn't have a job and NOT being damn sure those types of loans weren't in the CDOs they were buying. The problem was investors not seeing a massive streak of systemic risk running through adjustable mortgage rate backed securities. When rates go up, defaults go up on ALL of them. Systemic risk, which is exactly what bundling things together is supposed to mitigate.

    People, the very same issue would exist if this happened with savings accounts. There's nothing wrong with savings accounts, but if a chain of people did stupid things with the money in them causing it all to be lost, would we be up in arms that savings accounts are bad, or would we be up in arms about the criminals who misused them? I hope the latter.

    • by itsdapead ( 734413 ) on Sunday March 27, 2011 @01:38PM (#35631072)

      When rates go up, defaults go up on ALL of them. Systemic risk, which is exactly what bundling things together is supposed to mitigate.

      ...it's worse than that, because when rates go up and defaults go up, the value of property - which is hugely influenced by the price and availability of mortgages - goes down. Oh, and if banks rely on the profit from selling CDOs to enable then to offer cheap mortgages, any glitch with CDOs will put up the price of mortgages which...

      ...and it gets worse still! Suddenly, instead of offering long-term mortgages at competitive rates, banks were offering "bargain" discount or fixed-rate deals for 2 years, after which customers were forced to either re-mortgage or have their payments revert to an exorbitant "standard" rate. Nothing to do with banks making more money trading CDOs and suchlike every time someone re-mortgaged than they would by retaining long-term customers, I'm sure. Of course, this makes the property market even more volatile because anybody who, for whatever reason, is unable to re-mortgage is up shit creek when their bargain deal runs out.

      Ergo, CDO's are a pretty dumb idea prone to catastrophic, self-accelerating failure with all sorts of unintended consequences. If you wanted security, you'd bundle mortgages with gold, oil, cheap vodka futures or something else that tend to go up when the credit market tanks. Even if they don't require outright fraud they make it easier, and tempting.

    • they knew couldn't repay them because they could just sell the loan to someone else and not care

      And who enabled them to make that sale?

      The finance guys.

      It takes two to tango.

  • by couchslug ( 175151 ) on Sunday March 27, 2011 @03:03PM (#35631622)

    display that with MONEY. Anything else is shit. If you value what a person does you pay them. End of story.

    If society doesn't value engineering, there is no reason to be martyred for a bunch of Fox News-watching oafs. There is, if you can get away with it, every reason to break one off in the collective public arse and get rich doing it.

    Someone has to say it:
    Society breeds sociopaths because it genuinely fucking deserves them.

  • Unlike some of the posters, I do not have a clear opinion or understanding of exactly finance does for us, especially the part of finance that is done by MIT graduates. I have heard two opposing claims which I put into two opposing categories.

    Is it:

    * Finance is a fraudulent game designed to fleece others out of their money using complex financial instruments that cannot be understood by those who have the responsibility to prevent fraudulent activities in our financial institutions.


    * Finance more efficiently distributes money into investments in our economy so that our resources are more efficiently organized to maximize productivity. Complex financial instruments are used to distribute risk and allow creators of goods and services to protect themselves against risks which would otherwise potentially destroy their ability to provide those goods and services.

    The problem is that I believe each of the above statements are true at least to some extent. What I don't know is the percentage to assign to each category or to some new category in between these two polar opposites of categories of results. In particular, I do not how mathematical financial engineering is distributed among these categories in terms of effective output.

    If the best and brightest are being hired merely to create profit for the few and have no positive impact on the wealth of the many, then I believe that is wrong and I cannot see justification for this as a moral good. I cannot see any essential difference between this and successful recruitment efforts by the Mafia for new well paid enforcers. An enforcers job might be fun, have good comradeship, work with the "best", and be well paid, but it still does not make it a morally acceptable choice of occupation.

    So for me, the key question is whether the mathematically complex part of finance is actually performing in the way capitalism is intended to perform or are the complex algorithms used to better enable parasites to enrich themselves at the expense of the larger body politic. Factual information on this is actually somewhat hard to come by. Certainly I have seen a lot of claims about CDOs, risky mortgages, investment pools, arbitrage and the root causes of recent failures. But when I try to dig a little further, real information based on real data is quite hard to find.

    I'll give an example. One typical trick for extracting unfair money from others is to design an investment that pays better than average as long as a seemingly unlikely event does not occur. You get others to put money into the investment by lying or disguising the true risks about whether the event will occur. You then take a portion of the money that investment as your own (as a "fee") and then create a complex derivative to bet against the investment by buying "insurance that pays off if the event occurs". How much of the profit made by financial companies is made from tricks of this sort?

    In particular, what percentage of the recent instability was caused by CDOs that packaged risky mortgages and how well did some of the principal players understand the true nature of the risk? Again, I can get vociferously stated opinions on this but I am finding it hard to find real fact. However, in defense of the financial industry, it seems very few were aware of the true risks of the mortgages and many of them lost considerable money (maybe not as much as they should have) after the crisis. But there were some who knew what was going on and many (even though ignorant about what was truly going on) who profited while the times were good who did not suffer proportionally when things went bad (the "private profit" and "socialized risk" that a couple of posters alluded to).

    I do have one more thing to say. There is an old saying, "Democracy is the very worst form of government with the exception of all others". I have a similar opinion about capitalism. Capitalism is prone to "bubbles" that grow and burst and this seems to be inherent in its nature. When seen this w

When you are working hard, get up and retch every so often.