Thursday, June 12, 2014

You Can't Fix What's Already Fixed and the Complex Under Plunder on Wall Street

It wasn’t until late 2005 that Weird Wally (WW) gave much thought to Wall Street.   But when President Bush announced his intention to privatize Social Security, WW sat up and started paying attention.  And from what little he understood at the time, one thing was obvious: Bush’s idea of a secure and happy retirement for all Americans was for us to each create a private retirement account and send our money off to Wall Street.

Like many of us, in his minds’ eye, WW imagined cigar smoking fat cats sitting in their offices figuring out which corporations were good bets and which ones weren’t.  And like most the rest of us, his minds’ eye had it totally wrong.  Instead of a noisy and chaotic stock exchange floor with masters of the universe, studying charts and screaming into cells at their minions on the floor to either buy or sell, we might now see small rooms with tech folk and programmers working on secret coding and information infrastructures.

What Wall Street has been about for the past several years has to do with complexity and speed.  According to Michael Lewis, in his recent book, “Flash Boys,” Wall Street is all about adding layer upon layer of complexity onto an already complex situation.   And upon each layer of complexity, there exists corporations and people whose only job is to extract wealth, resources and energy from this complexity, without adding of value in return; kind of like a disease.

But at the very bottom of this complexity are the tech guys (mostly men), the guys who write the code and design the infrastructure along which information travels at unbelievable speeds from one point to another.  And although the speed of a blink of the eye is considered slow in this fast paced world, billions of dollars have been made over the information arriving faster than the blink of an eye, at one place, before it arrives elsewhere.

These tech people at the bottom are often graduates of  MIT, Princeton or other high prestige universities.  People who might have otherwise gone into research and added something of value to society, were instead drawn to Wall Street, where they hooked up with MBAs from Harvard, and such, and are now both are making billions a year without having to add value to anything but themselves.  It’s much like a perfect marriage where a brilliant techie meets up with a brilliant sociopath and they both go into business.

Weird Wally is rumored to have found this book in, well, the Business section.  For a more traditional review of, “Flash Boys,” click Wall Street Secrets Revealed.

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