Financial Armageddon or Revenge of the Nerds?

Whatever happened to all the evil scientists who used to be paid big money to plan the end of the world? The designers of nuclear destruction. The actuaries of armageddon who calculated how many people could be killed how quickly for how much money and how more could be killed with less damage to property, and then had dinner and watched TV and went to bed. Whatever happened to them when the cold war ended?

A lot of them turned their mathematical brilliance to devising clever methods (tricks, games) for private financial companies. Methods, it turned out, as diabolical and destructive as the weapons they devised for the military.

Here's a 2009 article from the New York Times.

This blog post from 2007 describes the new brains behind the hedge funds as a cheerful revenge of the nerds. It's all a fun, profitable game. No social sense required. What does that imply?

Calvin Trillin wrote a humorous piece a couple of years ago about how much safer our economy was in the hands of the dumber members of the WASP aristocracy who were either too lazy or too dim to cause much trouble. (I found the relevant passage in this essay on the New Republic's website.)

'“The financial system nearly collapsed,” [said Trillin's barroom friend], “because smart guys had started working on Wall Street.” '...

'I reflected on my own college class, of roughly the same era. The top student had been appointed a federal appeals court judge — earning, by Wall Street standards, tip money. A lot of the people with similarly impressive academic records became professors. I could picture the future titans of Wall Street dozing in the back rows of some gut course like Geology 101, popularly known as Rocks for Jocks. ...'

'“Two things happened. One is that the amount of money that could be made on Wall Street with hedge fund and private equity operations became just mind-blowing. At the same time, college was getting so expensive that people from reasonably prosperous families were graduating with huge debts. So even the smart guys went to Wall Street, maybe telling themselves that in a few years they’d have so much money they could then become professors or legal-services lawyers or whatever they’d wanted to be in the first place. That’s when you started reading stories about the percentage of the graduating class of Harvard College who planned to go into the financial industry or go to business school so they could then go into the financial industry. That’s when you started reading about these geniuses from M.I.T. and Caltech who instead of going to graduate school in physics went to Wall Street to calculate arbitrage odds.”'

Here's an article from a blog out of Columbia University about math and physics geniuses working at hedge funds.

Here's an article referenced in the above article, from ALPHA, a magazine for hedge fund whizzes. Imagine a magazine for hedge fund thinkers... "What the Well-Dressed Quant is Wearing" is about miniskirts, I think. (Sorry. An obscure reference to the inventor of the miniskirt.)

Whether you're a nuclear physicist or a hedge fund mathematician, the small dots on the map or the diagram aren't people with lives and families and houses and livelihoods and dreams about the future, they are only abstractions, they are little bits in your calculations.

I'm reminded of a famous soliloquy from the Third Man, spoken from the top of a ferris wheel:

"Victims? Don't be melodramatic. Look down there. Would you really feel any pity if one of those dots stopped moving forever? If I offered you 20,000 pounds for every dot that stopped, would you really, old man, tell me to keep my money? Or would you calculate how many dots you could afford to spare? Free of income tax, old man, free of income tax. The only way you can save money nowadays."

So what's a superior brainbox to do these days? Build bridges or cure diseases or sort out complex societal issues? No, it's much less stressful and more lucrative to go work at a secluded campus in leafy Connecticut and figure out ways to game the financial system. Here's a roadmap for your little genius who's considering where to go after high school. Courtesy of a prof at the University of Illinois. If your child is employed blowing up the global economy he might be able to keep his immediate family safe. You can hope. Or you can run a risk analysis of it.

Invisible Protesters Occupy Wall Street

Keith Olberman featured this invisible phenomenon the other night, and then again with Michael Moore the next night.

Nobody is covering the protests on Wall Street that have been going on for a week.

Meanwhile five people show up in colonial costumes with signs saying Obama is a Nazi and it's on all four network news programs and the front page of every newspaper.

Is it because most American side with Wall Street?

Or does Wall Street own the public conversation?

Billions With the Push of a Button

I read an interesting article about the machinery the wizards of Wall Street use to make their money. There is no heavy lifting involved, but a lot of advantages in liquidity and access are leveraged to the limit. These tricks aren't something you and I can benefit from. The other question is, are these systems being used to secure markets or game them? To safeguard stability or exploit instability? I don't need to tell you which impulse I think is dominant.

It augments the argument I've already put to you that there is a Rule of Accumulated Advantage* by which each advantage leverages other advantages, and by which all advantages accrue upward unless balanced by a different power (government) operating for the broader good, the public good.

Playing fields in America have never been so tilted.

*I'd love to collect more informed and expert opinion about this Rule of Accumulated Advantage. I'd be interested in your thoughts. It's something I've been writing and thinking about for some time, but it's difficult to gain expert insight on it. Partly because insight and expertise in these matters are proprietary, even to the extent of academics belonging to sponsoring corporations. Most economists who understand this arcane field belong to the corporations who pay them. But I also have the distinct disadvantage of not being an economist myself. I'm a writer and illustrator of complex ideas.