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Being educated above your intelligence in Finance
How many people in the financial services industry understand how the financial system works?
We've all experienced it, we are dealing with someone who has all sorts of masters degrees, PhD's, and doesn't know the Federal Reserve is a private corporation, and even doesn't know the product their company is selling.
In the spirit of professionalism, we must keep these quotes anonymous, but certainly if you have survived long enough in Finance or read the Financial news regularly, you will not need any references because you've probably heard it before.
"I don't know Math, I know Finance. If I wanted to study Math, I would have been a Scientist"
excuse me?
"I'm having some computer issues, I have to wait for my I.T. guy to fix it." -Trader
"I just invest in companies that I understand. I drink Coke."
"By proposing the development of algorithmic trading systems based on genetic algorithms, you have insulted the Lord Jesus Christ, and I must leave this meeting"
"You may understand the markets, but you know nothing, until you have traded on the floor of the NYSE" (this was in the late 90's)
"I see these documents you have shown me about the Fed being private, but if I accept these facts about the Fed, I would rather die. As far as I'm concerned the Fed is part of the government. Why do you think it's called 'Federal' Reserve?"
"Foreign futures is Forex" -Regulator (who have since changed their wording)
Comparatively, in many other industries, even low level workers have an intimate knowledge of the smallest detail. The car industry is a great example (although there are many others). Many car mechanics can completely disassemble and reassemble most makes and models even from different eras; where parts are different or unavailable, they become innovative. And then there is the final test; does the car start?
Wall Street seems to be at the other end of this comparative spectrum. How many brokers could disassemble and reassemble the entire business with all its working parts? Many top level executives even fail to do this.
But we can say that Finance is one of few industries with highly trained and educated workers. Because of regulatory requirements for education, company policies that extend this education further, nearly all workers are extremely educated. They are trained what to say, what not to say, down to the level that scripts are memorized when speaking by phone, and any deviation from script wording can bring harsh consequences.
Then why does there seem to be so much incompetence on Wall Street?
First, we must realize that Wall Street typically has a top down pyramid structure as an information policy. A few people at the top know everything, and farther down the management chain you go to the bottom dwellers, they know less and less. This is somewhat understandable due to the fact that Finance is largely an information business, and proliferating any trade secrets or divulging info about a trading strategy or investment strategy could impact the strategy.
But there are consequences for such a structure, most obvious in financial frauds, where only a few top executives are aware that the big account in the Caymans is actually a fictitious account, or that the 100m of reg cap at US Bank doesn't exist, and the bank account statement being sent to regulators is a bad Photoshop job.
Another consequence is that if the leaders who have all the info are incompetent or make mistakes, they are left to fend for themselves, and could potentially bring down the whole company.
From a psychological perspective, one can say many in Finance are educated above their intelligence.
People may study Finance and dream of Wall Street for the similar reasons Hollywood attracts young wanna be starlets; they watch too many movies and dream of glory, fame, and money. That's fine, it's a free country, and as many a Communist said "Capitalists will sell the noose to hang themselves." But what type of quality are we left with? To use Wall Street expression "You can't put lipstick on a pig" - nor can you increase the intelligence of a human being. You can educate them; but based on their IQ they have a limit, as we all do. And it's impossible to educate someone (anyone) beyond their limit to understand.
As with any growth industry, and Wall Street has had an 'epoch' of growth (even considering market crashes), new companies form, and people are hired. But do we really need a sea of well educated but yet incompetent workers? How many people does it really take to manage a bank? Certainly not 50,000. With the advent of computing, the only task that cannot be automated is talking to other people (whether by phone or in person). But do we really need this? Oh we do, sorry I forgot about sales. See, our strategy is really a bunch of toxic waste, and we need young ambitious kids on the phone selling this crap. That can't be automated. But look where we would have been if sales didn't exist, there may have been no .com bubble, no real estate bubble, no sub-prime bubble.
The point is, having a sea of workers who are educated above their intelligence in an industry that can collapse the world economy, ruin countries, corporations and families, and cause huge economic devastation, is very dangerous!
But in a society based on lies (marketing) - better lies that are in compliance with regulations, are seen as a sign of strength to the HR department (get more sales) whereas an honest analyst whose warning of a real estate crash in 2005 is laughed at, teased, and maybe even fired.
To make a 'positive' comment from the other side of the spectrum, there are a handful (in percentage terms) who really understand how the financial system works. Some are in Academia (very few!), some in trading, and some from other fields. We see them on the internet, on Zero Hedge, and occasionally on mainstream financial media. But they are far the minority. And many are behind the scenes, people we do not know and may never know.
The problem with this incompetent mass is that since they do not fully understand the system, they do what they know how to do (which is usually not very smart). This is bad for the organization they work for, and it's bad for the financial system as a whole.
The solution is that the stewards of the financial system should not be the "Kings of Wall Street" living in palaces, they should be Philosopher Kings as according to Plato. They should have all resources available to them, but paid only a salary for an average existence (no bonuses!). The entire model of private for profit banks, competing in the free markets with financial products, sitting opposite 'regulators' with Congress in between, is not only a farce, it's a system based on conflict of interest. This design itself is a conflict of interest, when these for profit banks are Washington's largest financial supporters. The rotating door of executives turn regulator ensures that there is no regulation going on.
"Oh we can get an FCM license immediately, we just need to get to XXX XXXX and grease him up a bit" - Anonymous securities attorney
A system based on conflict only breeds conflict, as the saying goes "In a crooked environment, crooks are the most honest people." Is it possible to have an honest financial system? Of course it is! There are hundreds of historical examples of financial systems based on real money (not ever expanding debt based fiat currency). They even exist today, although the dominant system is that controlled by the world's central banks. But the most amazing thing about such an honest system based on real value, banks could still compete in this system for a profit (although it would be more difficult because they would not have a complete monopoly, nor access to create as much free money as they need). But this is far from a socialist idea. In fact, there are hundreds of potential political and economic systems, which have nothing to do with Capitalism or Communism. In fact these 2 words have become so overused in the wrong context, and used for social programming, they are synonymous in the West with good and evil, also a mis-characterization, because you have almost infinite number of types of Capitalism, which is also different in every culture.
For generations we have been programmed to a belief system where only 2 options exist; good and evil, Coke and Pepsi, Republican and Democrat, Capitalism and Communism (or Socialism if you want). This is very deceptive and completely untrue (although they have nearly made it true because everyone believes it so now it is our reality). There are hundreds of economic and political systems that have been used and tested in practice, and countless others that have been researched and theorized.
One example of an economic system that is not very well known is that of Endogenous money.
Endogenous money creation or destruction is the concept that each participant in the economy has their own version of a 'printing press' for money. This concept was explained by Irving Fisher in his treatise on The Theory of Interest (1930) in terms of the value of currency being affected by two (potentially opposing) movements - expected growth in the money supply reducing the real purchasing power of money and expected increases in productivity increasing the real purchasing power of money.
While the concept of each of us having our own central bank seems almost ridiculous, consider how Bitcoin has changed the way we think about money. Bitcoin is not backed by any central bank, and while not the private money of an individual, it was created and designed by private citizens (not central bankers) and is now being used as a payment system and investment by millions around the world. Another interesting example is currency based on barter, or a system that simply tracks economic transactions between participants using a credit system.
A local exchange trading system (also local employment and trading system or local energy transfer system; abbreviated to LETS or LETSystem) is a locally initiated, democratically organised, not-for-profit community enterprise that provides a community information service and record transactions of members exchanging goods and services by using the currency of locally created LETS Credits.
The only way to achieve a new financial system that is sustainable (and more fair), is through financial education and training. If the majority of the public knew what goes on at their financial institution, they probably wouldn't participate. Some have even speculated that Cocaine was the major cause of the financial crisis. More likely it was stupidity, but certainly regular Cocaine use doesn't help you make good financial decisions.
George Bush Sr. was once quoted as saying: "If the American people knew the Damage we have done to their Country, they would hang us from the nearest lamp post."
The real intelligence in a fair and honest financial system is that we wouldn't need regulators, we wouldn't need sales people (they can sell cars, or we can pay them to stay at home and not bother us with their telemarketing) and there wouldn't be an ongoing financial crisis. We have technology today that can manage such a system very efficiently and cheaply. The modern financial system as it is today has it's roots over 500 years ago. It might be time for an update.
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Series 7 Bitches.
At one point in my life, I played a not-so insignificant role in creating the Series 7 exam and questions, as well as three of the other series. I can assure you, first hand, that the people writing the questions and answers do not understand how the system really works.
Never forget this:
And also this: http://en.wikipedia.org/wiki/Peter_Principle
Thought you guys were talking BMWs.
Kings to you. I concur.
College credentials, like "one of the best certificates in nursery school" are given all paying customers. Being educated means being trained to think a "correct" way. To learn is to adapt based on the reality you observe or discover hidden. The intelligent think, the educated regurgitate.
There may be some truth in what you say, but be careful of self delusion.
Last time I checked in she'd been working 3 years for 28k - taxes federal state and social security deductions she will never receive - commuting expenses.
I was making 300+ cash in my pocket every day.
The sad part was her parents mortgaged their house out in the country so they could send her to school in the city. she caught the first job right out of school and was always too afraid ask for a raise.
Things might have smoothed out but she has bills every month and the loans weighted her down. She was the hardest working person i have ever met.
Work smarter, not harder.
I dropped out in grade school. never taught a thing in my life. An ex-gf of mine got a fancy degree form a fancy school. I have made more in 6 months than she has in her career. Plus she's got a quarter mil in student loans.
Where is Bank Guy in Brussels?
Last posted Oct 24. There was a rumor he got the boot.
www.zerohedge.com/news/2014-01-01/marc-faber-congratulates-ben-well-done...
WTF for?
the obvious is only obvious on ZH. for all others the MSM will reinforce the illusion.
Iam fluent in eight languages, but Engish I speak most better. Does not matter how many degrees either--- what is important is how good you are at making money or which firm gives you the platform to make money. To that extent a degree opens doors and contacts. Being honest or righteous
only gets in the way
My Spanish professor had an MBA and related a story about his attempt to get a job in business. He said the interviewer told him he was educated beyond his ability. Those who can, do. those who can't teach.
I know an accountant who took nearly ten years of going from job to job to learn that no one really wants an honest accountant around.
What are the other 7 that you speak least better?
They are subsidized by employment to cover for bankster fraud.
Why should they care the way things work.
"Educated above one's intelligence" ie: educated fools, mostly in gov't. but obviously quite a few in finance, too.
Agree with the premise of the article.
Went to the link for training and it is some LLC in Columbia, SC. Last course registration was Feb 2012, almost 2 years ago. Is this a valid training site or simply a plug/ad by Zero Hedge ???? Kind of points the finger back at the author's premise.
It is a valid training site. We believe the only way to effect real change in a positive manner for the financial system is through training and education. If financial professionals and clients both (average American) understood more about Financial system, there would be less crisis, less volatility, and overall a more stable and sustainable financial system. Few educators in Finance offer objective, unbiased lessons. They are usually trying to sell their methodology. The paradox of education is that until someone completes a course, they don't have a mechanism to judge why they need education. And of course after their portfolio is blown on stocks or real estate it's too late. Good topic for an article 'paradox of education'
get an account at tastytrade.com
their mission is self reliance for individual investors
By allowing a person to have such an account, they have already denied their stated mission.
Having worked in the wonderful world of wanky finance, I can tell you:
1. Most of them are in it for the money, so they do not need to know more than they have to. If the whole scheme were to collapse they'd jsut go and do something different.
2. The people at the top, as the article points out, don't let the real information trickle down the pyramid. If the info did trickle down, the drones at the bottom would look up and see that Senior Managers with double-MBAs and all that were wearing nothing but a G-string.
This book sums it up:
http://www.youtube.com/watch?v=5wh_zTZl8ng
Having worked in the construction industry for the last 16 years, I can tell you that finance is not the only industry that likes to keep people in the dark. Many times, I have only worked out what we were doing after we finished the job. Ask HR, "What are we doing?" They won't tell you. Ask the supervisor. They'll point you towards the foreman. Ask the foreman. He'll give you a small task to do but never explain anything about the overall job.
"Mount that box on the wall." If not for a good apprentice telling me what he had been doing, I never would have realized we had the wrong box. (Even then a fair bit of luck was involved, as I was still hazy on the uses of both boxes).
"Use these parts." Then you get to the job and find out you were given the wrong parts. Can't figure that out myself if no-one has shown me the parts before. (Note to manufacturers / installers of proprietary equipment: Can't use initiative and learn how to install stuff if no-one in your company will talk about it.)
True that. One of the big turnoffs as a UA plumber was the intentional limiting of scope on the job site. There was often a need-to-know protocol that encouraged a head-down mentality. Speculations for why this was included job security for foremen and supers. However, if you were in the right clique it was shared knowledge. Nothing proprietary there, just highly competitive and protective "fraternity". And yeah, I'm a good plumber just wanted to do more constructive (ha) things with this short life.
If someone has to tell you what you need to do your job, and you have 16 years experience, you should have tried harder to learn.
I am guessing you've never been in the trades.
3rd generation Carpenter. It has gotten more demanding in the last decade, but still functional if you can be better than the competition. I have to admit my surprise at the down votes. Damned if you demand hard work and dedication, damned if you want to set up a system that compensates for incompetence.
Have i got job for you in Washington D.C. ...
What you just described will get you elected to a seat in the House of Representatives, or perhaps as a V.P. or CEO of a Fortune 500 Bank or MIC Corp.
Time for that cigar!
If you missed this epic piece on ZH a few weeks ago:
How Bad Bank CEOs Use the Bystander Effect to Dupe Good People Into Working For Them
http://www.zerohedge.com/contributed/2013-09-30/breaking-bad-big-bank-ce...
No one wants to (...) consider the possibility that he or she may even be aiding and abetting a criminal activity or potentially massive crimes that harm humanity.
as one of the Senior Management elite running one of the world's largest financial entities (whose name you would not even recognize -- it's *that* big and secret), I can tell you that there is no way in the world I could trust my underlings with the knowledge of the operation's details.
this is the problem with doing Good Work.
there are not enough of us Good People to carry it out.
most of the underlings are Bad People and they would just fuck it all up if they knew the details.
better to keep them in the dark.
the alternative is to have them breitbarted.
by the way, that is such a lovely jacket you have. wherever did you get it made?