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Physicist, Startup Founder, Blogger, Dad

Friday, September 13, 2013

Some things never change: Michael Lewis

From a recent Businessweek interview with a pessimistic Michael Lewis. Lewis was a bond trader at Salomon after graduating from Princeton in Art History.
Has Silicon Valley replaced Wall Street as the place for bright young people to make their millions?

My sense is that even though the financial crisis has lessened the appeal of the big Wall Street firm, it’s still appealing to kids in school, for the simple reason that unlike Silicon Valley, where you do have to know something to break in, the barriers to entry on Wall Street are quite low once you have the [Ivy League] credentials. If you’re a certain kind of kid who doesn’t actually know anything about anything, Wall Street is still a great place to go.
See also A Reallocation of Human Capital (2006 -- pre-financial crisis).

Thanks to a former theoretical physicist on Wall St. for the pointer.

24 comments:

Shawn said...

On this blog we talk a lot about career choices, wealth, and their intersections. I found this video interesting. I can't say that I agree with the guy, but I cannot say he is not acting rationally either. He is living his life now as opposed to working 80 hours a week in fiance/consulting, etc. with the promise to retire rich in middle age. Also this guy seems attractive to women which is the main reason guys work so hard in the first place. Personally, I disagree with the parasitic nature of what he does (although he is less of a leach than the banks accepted bailout money), but this video reminds me that the starving artist career path is not all that bad. Not that this guy is a starving artist (I consider starving artists people who aren't leaches but who simply work in a low-paid field that they love and have some free time) but he does show that there is a trade-off between heart beats and money. Those give up their 20s and 30s (their prime years) doing what they hate 80 hours a week for the chance at deferred living may be making a mistake. In my case this realization even caused me to quite my 40 hour a week government job which was boring and depressing.

http://www.youtube.com/watch?v=bP_izYhdehY

Shawn said...

*This may be a double post. Sorry if it is. If it is you can delete one of the posts. Thanks.*


On this blog we talk a lot about career choices, wealth, and their intersections. I found this video interesting. I can't say that I agree with the guy, but I cannot say he is not acting rationally either. He is living his life now as opposed to working 80 hours a week in fiance/consulting, etc. with the promise to retire rich in middle age. Also this guy attracts women which is the main reason guys work so hard in the first place. Personally, I disagree with the parasitic nature of what he does (although he is less of a leach than the banks accepted bailout money), but this video reminds me that the starving artist career path is not all that bad. Not that this guy is a starving artist (I consider starving artists people who aren't leaches but who simply work in a low-paid field that they love and have some free time) but he does show that there is a trade-off between heart beats and money. Those give up their 20s and 30s (their prime years) doing what they hate 80 hours a week for the chance at deferred living may be making a mistake. In my case this realization even caused me to quite my 40 hour a week government job which was boring and depressing.

http://www.youtube.com/watch?v=bP_izYhdehY

Diogenes said...

Lewis was recruited in London where he was doing a masters at the LSE. He was recruited through an acquaintance.

But Lewis does say in Liar's Poker that the econ degree has nothing to do with investment banking that it is taken as a test of ability and of other traits.

Diogenes said...

Of course Steve is a professor and therefore perhaps willfully incognizant that even technical degrees may not prepare the technical even a little bit for the technical work they will do.


The bottom line is that formal ed in the us, even for the most useful subjects, is an enormous waste of resources. Real, non shitty countries, like Germany are lousy with apprenticeships.

oregonlocal said...

I applaud this way of life. My only comment is that he would catch a lot more waves if he would hit the beach for dawn patrol surf sessions. Even in crowded SoCal there are no throngs in the lineup early in the morning.

oregonlocal said...

When I graduated I didn't do much work outside of part-time restaurant work and construction till I was 30. It was hippy days of sex, drugs, surfing, skiing, and skating. I then made a pile of money in IT (and set my own hours) while raising another generation of surfers. When I think of all those fellow Asian guys at Cal who went to graduate school and are now pussy-whipped managers with ugly wives who constantly pester them for new Mercedes I just laugh and laugh at their wasted lives of conventional nose to the grindstone wasted opportunity.


I don't think I've ever known an unhappier group of people than graduate students.

Shawn said...

Good comment. I wish I figured this out all earlier. I finally realized that what I was doing wasn't worth it in terms of what I was giving up (freedom, creativity, doing what I like). Even if I was smart enough to work for a hedge or venture fund, I would just do it for a couple years, save money, and get the heck out. At least for my personality and goals and general happiness, it wouldn't be worth it.

LondonYoung said...

There is one type of person unhappier than graduate students, see the lower left panel:
http://thesocietypages.org/socimages/2010/05/22/matt-groening-on-graduate-school/

Diogenes said...

Groenig has made his pile selling fast food and ugly American cars (redundant).

Diogenes said...

Paulson is like Molotov or terre Blanche. Only in 'mer'ca is his type not seen as a Satlinist and bittereinder.


27th in median household wealth. "That's the Chicago way!" Thank you Randroids, Reaganolaters, Friedmaniacs, and ... I mean thank you American South, you did win the war after all.

Diogenes said...

...I then made a pile of money in IT...

So much detail. There must be nothing to hide.

"... and are now pussy-whipped managers with ugly wives who constantly pester them for new Mercedes..."


at least they aren't your wife. they do have that going for them.

Diogenes said...

the problem is what one loves to do usually has no use whatever for one's fellow man.

"...seems attractive to women..."


not the sort you'd touch with a ten foot pole or a ten inch pole or a...

Diogenes said...

Henry Paulson, the man behind the bank bailouts, recently said,
“The root cause of every financial crisis is flawed government
policies.”

If ONLY the Fuhrer KNEW!

And Paulson is a great example of this himself. A football player and Dartmouth English major, he got his position through his religion. Nixon was to Christian Scientists what Hughes was to Mormons. Then HBS for Paulson and the rest is history.


And I'm proud to be a 'mer'can 'cause at least I know I'm stupid...

oregonlocal said...

"at least they aren't your wife. they do have that going for them."

I hear the distinct whine of envy. Sorry to piss you off but stop insulting my wife. And thanks for contributing to my (un-needed) Social Security check. Keep grinding it out.

"So much detail. There must be nothing to hide."

It was pretty straightforward really. Learned Fortran in college as a req for my Econ BA. The only math I took after honors calculus was linear algebra. Hardly used any of it. I spent the better part of 25 years as an independent consultant to Fortune 500 and government agencies. Never had to leave the West Coast. I pulled in $250k per annum for the last 15. and was able to keep extremely flexible hours for vacations and days off for surfing and skiing, and skating when my son got older (when there wasn't the occasional deadline crunch.) There were/are lots of folks like me. Is that enough detail for ya'?

My take on things is that it is much better to be smart than well credentialed. A decade spent in graduate school (and many do take that much time) is a complete waste of time for 95% of those who do it. Community college and adjunct or even associate professors at most state schools don't earn dick.

Even if you make it into academic management (dept. head, dean etc.) you probably will end up having to live in some godforsaken place like Michigan!

oregonlocal said...

Underpaid are we Diogenes?

oregonlocal said...

"the problem is what one loves to do usually has no use whatever to one's fellow man."

I've always prided myself on building systems which eliminate human labor.

oregonlocal said...

American cars are boss!

http://www.webpulp.org/wp-content/uploads/2009/10/corp_06110_01_z_1957_corvette_side.jpg

Cornelius said...

The intellectual barriers to entry are greater on Wall Street than they are for typical Silicon Valley start-ups. It's just that intelligence is more useful in picking the right start-up to work for and more useful for succeeding in start-ups. On Wall Street, the stochastic term dominates so success is only weakly correlated to ability.

oregonlocal said...

"The intellectual barriers to entry are greater on Wall Street than they are for typical Silicon Valley start-ups."


How so? You state that but then make statements that disprove your point.

Hacienda said...

Congrats, you broke the code.


The amount of manufactured schadenfreude in the education business is enormous.
Better to avoid that mess.
10 years of happiness in youth, mixed in with semi-responsible life, responsible raising-
that is not screwing them up. That's a good life lived.

Diogenes said...

no one is underpaid except some engineers. i do agree with capone's gang on that or was that the chicago school of economics? but many are overpaid.


old car lovers are never descended from mayflower passengers or titanic passengers for that matter.


americana = bad taste

Diogenes said...

you called the wives of your classmates ugly whores.

hey hire me i can do all your fortran. not even close to enough detail. i took woodshop, let me build your house.

i agree that smarts are better than credentials given you can get a foot in the door in the first place. IT may be a very recent exception, but in general however smart one is the only way to learn a business is to work in a business. looking at the bios of the very rich this foot in the door is almost never absent. some examples: rockefeller made his first small fortune as a produce wholesaler. he had been apprenticed to such a wholesaler, and his father lent him the capital. vanderbilt started in shipping and saved to buy his first ship; steve jobs knew steve wozniak, etc.

Cornelius said...

None of my statements disproved my point. For a given level of intelligence, it's harder to get into finance than into start-ups. For a given level of intelligence, you're more likely to be successful in start-ups than on Wall Street.

I've known many people who have gone into or come from both Wall Street and start-ups. I'd bet on the Wall Street folks if we were comparing average IQs. If we look at the correlation between IQ and success in both industries, then I'd bet we'd find a stronger correlation at start-ups.

Summary:
Wall Street Mean IQ > Start-Up Mean IQ
Wall Street Correlation Between IQ and Success < Start-Up Correlation Between IQ and Success


I've said nothing about the average IQ of start-up founders. We'd probably agree that start-up founders are much smarter than Wall Street types.

Simon Waters said...

The people I know who made big money in finance were mostly ex-physicists with the knowledge to price a derivative, and code a computer to do it for them. Might be easy to get in, but unless you are there because you have the trust of rich people it was mostly knowledge and hard work that got them their money.

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