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Businesses Programming The Almighty Buck

High-Frequency Programmers Revolt Over Pay 1018

Posted by kdawson
from the crying-all-the-way dept.
An anonymous reader writes "Programmers who design and code algorithms for investment banking are unhappy with their salaries. Many of them receive a low 6-figure salary whereas their bosses — who manipulate these algorithms and execute the trades — often earn millions. One such anonymous programmer points out that he was paid $150,000 per year, whereas the software he wrote was generating $100,000 per day."
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High-Frequency Programmers Revolt Over Pay

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  • by Shugart (598491) on Friday July 30, 2010 @09:46AM (#33081922)
    It isn't that the programmers earn too little it's that their bosses earn too much.
  • by grasshoppa (657393) <`gro.oc-onpt' `ta' `ydenneks'> on Friday July 30, 2010 @09:46AM (#33081930) Homepage

    I mean, correct me if I'm wrong here, but the programmer in question agreed to the terms BEFORE he wrote the first line of code.

    Shouldn't gripes like these come up before you begin working? Maybe this is part of the problem, non?

  • Yeah, and? (Score:2, Insightful)

    by i_ate_god (899684) on Friday July 30, 2010 @09:47AM (#33081948) Homepage

    I write software that sells for millions and make $80k/yr. Where is my commission?!

  • by Anonymous Coward on Friday July 30, 2010 @09:47AM (#33081956)

    If he's being given the algorithm and codifying it, he deserves a small part of the profits. Put another way, if he said screw it and left, how much would he be able to make? Does he know how to interact with a trading API, or how to actually make good trades?

  • Anonymous Coward (Score:1, Insightful)

    by Anonymous Coward on Friday July 30, 2010 @09:49AM (#33081976)

    dancingmilk has it right...the folks earning the big bucks put more at risk than a little time in front of a computer.

  • by kabloom (755503) on Friday July 30, 2010 @09:50AM (#33081994) Homepage

    RTFA. They are quitting and going somewhere else. The finance sector is going have to deal with this if they don't want to be massively outcompeted by their own ex-programmers.

  • It's (Score:1, Insightful)

    by dimethylxanthine (946092) <mr.fruit@gma[ ]com ['il.' in gap]> on Friday July 30, 2010 @09:51AM (#33082016) Homepage
    NEVER enough, for some people...
  • It's been my experience that pay is not as negotiable as everyone thinks it is.

  • Good news (Score:5, Insightful)

    by sco08y (615665) on Friday July 30, 2010 @09:52AM (#33082038)

    FTFA:

    "Now some programmers feel used and are instigating a revolt.

    They are doing so by striking out on their own or forming profit-sharing arrangements."

    That's hardly "whining," in fact it's precisely what they ought to do.

    The outstanding part is that Forbes is recognizing this. We all know that folks in IT are underpaid in many professions, but the proof is when people actually say "fuck you" and go work elsewhere. That will *force* salaries up to the real market rate. And when publications like Forbes notice this, it's harder for managers to pretend it's not happening.

    Thank you, to the ladies and gentlemen who struck out on their own, and thank you to Forbes for noticing. Both of these will make life a little better for the rest of us.

  • by CaptBubba (696284) on Friday July 30, 2010 @09:52AM (#33082040)

    I think that something really important to remember in all this is they live in NY. You pretty much have to divide their salary by half to get an equivalent salary anywhere else in the US.

    Even with that in mind, I think the real problem isn't that the programmers should make more, it is that the traders should make LESS. Whining about not being able to take advantage of rigging the game to funnel money to yourself like your superiors do shouldn't get you any sympathy.

  • Car analogy (Score:5, Insightful)

    by TwiztidK (1723954) on Friday July 30, 2010 @09:55AM (#33082066)

    "Many of them receive a low 6-figure salary whereas their bosses — who manipulate these algorithms and execute the trades — often earn millions."

    A Nascar Driver's pit crew recieve a low 5-figure salary while their bosses - who use the cars to win races - often earn millions.

    I get why the programmers are disgruntled, the code they write makes a lot of money and they aren't getting a huge cut, but it seems like the algorithm the program is based on would be the most important aspect. Besides, $100,000 a year doesn't seem that bad to me.

  • by asukasoryu (1804858) on Friday July 30, 2010 @09:55AM (#33082074)
    I agree here. Does the algorithm do everything on its own and the programmer's bosses have no input? I'll bet the software is a very small piece of the money-making picture. Was the programmer provided with any resources to write that algorithm? Could the programmer write the algorithm on his own, freelance style, and sell it to the company? I doubt it. Maybe these programmers deserve a raise, and the bosses probably get paid too much, but this is a one-sided story.
  • by fatboy (6851) on Friday July 30, 2010 @09:55AM (#33082082)

    they point out that they get paid only $60,000 a year, whereas the coal

    Fixed it for ya.

  • by Chris Burke (6130) on Friday July 30, 2010 @09:55AM (#33082086) Homepage

    Yeah, really. Six figures for a programming job is fantastic pretty much no matter how you slice it. If it seems like the guy who's making ten times that isn't contributing a commensurate amount over what you do, well, welcome to reality. Especially the reality of trading and finance.

  • That's the point (Score:3, Insightful)

    by bigsexyjoe (581721) on Friday July 30, 2010 @09:56AM (#33082088)
    Everyone is paid less than their worth. That's why people would form unions before they were stupefied by tv and the false hope that they would rise to the exploitative class. The fact that people are now paid less than 1/100th their worth isn't surprising but it is pathetic.
  • Re:Right... (Score:5, Insightful)

    by mcb (5109) on Friday July 30, 2010 @09:57AM (#33082114) Homepage

    Algorithmic trading is not effective if you have to pay commission on your trades. Their software only works if it's used by a corporation with
    1) network connections to stock exchanges
    2) seats on those exchanges, which allows stock to be traded directly instead of through a broker

  • Re:Accountability (Score:1, Insightful)

    by Anonymous Coward on Friday July 30, 2010 @09:57AM (#33082116)

    It doesn't matter, because the feds will just bail them out. Can't have poor innocent institutional traders going out of business, we'll just stiff all the mom & pops with a bigger tax bill.

  • by v1 (525388) on Friday July 30, 2010 @09:59AM (#33082140) Homepage Journal

    just because someone has found a novel way to make a lot of money without a lot of work does not entitle everyone in the production chain an even share.

    The intended theory is that people earn money based on the worth of the goods or services they produce multiplied by the rarity of the skills required. The (relatively) small amount of work being done to earn that $100k/day does not mean the work is worth $100k/day, it just means that there is something to be taken advantage of causing a disproportionally high return.

    If I write code for two days, of relatively equal quality and complexity, and sell each day's code to two different people, and one of them uses it to make $1000 and one of them uses it to make $100,000, it doesn't necessarily mean I should get paid 100x as much for the second job. It means the second guy has found a much more lucrative way to use my code to produce a profit. Now this does usually mean I'll get paid more, but to expect 100x the pay is just unreasonable. That excess money isn't for my brilliance on day 2, it's for the guy that found a way to sell my sand for its weight in gold.

    These people that are crying about their "low pay" would be dancing in the streets if their bosses were actually making less than they were, doing the same thing. It all comes back to basic Greed... "He's getting more money than I am, so I must be entitled to some of it." No, not really.

    Maybe instead of complaining about they pay, you should try to do your employer's job, since that's obviously where the profit margin you're looking for is at? Oh that's right, you can't DO that, can you? So they obviously have a skill you do not. Maybe that's why they're taking home more money than you? See, that's how life works.

  • by prefec2 (875483) on Friday July 30, 2010 @10:00AM (#33082150)

    The best method to stop the bosses earning so much money from immoral transactions, they shouldn't wrote that software. but first agreeing with the system and its concepts and then later whining about it is, well, normal today, but still it is hypocritical. It is like whining about poisonous food and the destruction of agricultural resources and still buying the cheapest food in [your favorite discounter].

    Rule 1: If you find something offending, then stop doing it yourself and stop supporting it.
    Rule 2: Don't run around telling everyone you are better, just because you were able to stop one mistake you made before.

  • by daem0n1x (748565) on Friday July 30, 2010 @10:00AM (#33082164)

    It annoys me like hell that people use this kind of arguments.

    Maybe they are excellent programmers, but bad business men. It doesn't mean they deserve to have their blood sucked from them.

    If you shift all the income from the workers to the managers, everybody will want to make business, and there'll be nobody left to do some work.

  • by pak9rabid (1011935) on Friday July 30, 2010 @10:03AM (#33082204)

    It's been my experience that pay is not as negotiable as everyone thinks it is.

    Yes and no. Simply going to your boss and demanding a raise likely won't get you anywhere.

    However, going to your boss saying "company X made me an offer for $Y" (where $Y > $CURRENT_SALARY), then you have a greater chance of getting that raise (assuming they want to keep you onboard). It's a sad fact, but in this day in age it's pretty much what you have to do.

  • Ripple effect (Score:5, Insightful)

    by Linker3000 (626634) on Friday July 30, 2010 @10:03AM (#33082206) Journal
    Yes, and I am the IT Manager who makes sure that the bankers and analysts have the hardware, software and comms tools to do their jobs. Right down the corridor is Michael's room - he's our maintenance guy - if he didn't empty my bin, keep the area tidy and make sure the lights stay on...
  • by kidcharles (908072) on Friday July 30, 2010 @10:04AM (#33082214)
    Those programmers and those brokers are doing nothing of worth to society. They are just playing games with currency. If our government wasn't in complete collusion with Wall Street, millisecond trading would be illegal. The issue isn't that the programmers aren't making enough money, it's that their jobs and the jobs of their bosses should not even exist.
  • by jgagnon (1663075) on Friday July 30, 2010 @10:04AM (#33082220)

    I disagree. Programmers are a lot easier to find than people willing and able to lead/run a successful financial firm. And it takes more programmers. The problem is that people want the big bucks without the big risks. And since experience is the best (and often harshest) teacher, these guys going off on their own guarantees an education. I'll bet that many of them will go back to their $150k per year jobs after they realize how hard and risky it is to run a business like that.

  • by jeffmeden (135043) on Friday July 30, 2010 @10:05AM (#33082236) Homepage Journal

    Let's see: financial giants, capable of spending hundreds of millions of dollars a year on the servers, all the coders, access to the markets, and not to mention *the assets they trade at a profit*... Vs the guys who made 150k a year and just quit to form a startup. Somehow I doubt they are too worried.

    The only chance these guys stand is to basically create a "better" program they can then sell back to the banks. The problem is, the programs themselves are very simple (the simpler the better, speed is all-important) so it comes down to the equipment they use that dictates the revenue. Unless they come up with a more profitable model than "buy low, sell high" they are probably going to have to beg for their old jobs back before too long.

  • by jason.sweet (1272826) on Friday July 30, 2010 @10:07AM (#33082270)
    Wow! It's amazing what you learn when you actually read the article. I should do it more often.
    These guys are not whining about the situation, they are actively taking measures to fix it.
  • by commodore64_love (1445365) on Friday July 30, 2010 @10:07AM (#33082280) Journal

    >>>the programmer in question agreed to the terms BEFORE he wrote the first line of code.

    This seems to be a universal problem. Buyer Remorse (paid too much) or Seller Remorse (didn't ask for high enough price). You have to learn to set your price upfront and not whine about it later.

  • Re:Boo Effin Hoo (Score:3, Insightful)

    by Americano (920576) on Friday July 30, 2010 @10:09AM (#33082318)

    If he's in New York City - which is very likely - 150k a year isn't exactly champagne wishes and caviar dreams.

  • by Target Drone (546651) on Friday July 30, 2010 @10:10AM (#33082332)
    In a perfect world the programmers could just quit and start their own trading firm. The reality is that there is an unreasonbly high barrier to entry which is more about keeping new players out then about the true cost of entry.
  • by lena_10326 (1100441) on Friday July 30, 2010 @10:11AM (#33082340) Homepage

    Did someone order waaaaaamburgers and french cries?

    And you really think the colleagues using the software were footing the bill? Bullshit. It's about time developers stood up and demanded compensation for their inventions instead of letting idiot stock traders reap the rewards by pushing a few buttons.

  • Indeed.

    People shouldn't be allowed to own parts of a company for intervals of less than a month, at minimum. I'd make an analogy here, except there's nothing in society we let people buy and sell that fast, certainly not giant entities....I'd like to see someone try to buy a house and resell it ten milliseconds later. I'd like to see someone buy a can of soda and resell it ten millisecond later!

    What happens on Wall Street is simply a fancy game of roulette. Which is fine, I've got nothing against gambling, except they're playing roulette with ownership of the economy, and the only place people can actually invest in the economy.

  • by rwven (663186) on Friday July 30, 2010 @10:19AM (#33082446)

    Of course one may want to make sure they have another job before quitting...or "not as much money as I want" could easily turn into "no money at all."

  • by Critical Facilities (850111) on Friday July 30, 2010 @10:23AM (#33082488) Homepage

    I think the real problem isn't that the programmers should make more, it is that the traders should make LESS

    I don't know that I agree. I think this is a very subjective issue. The reality is, the amount of revenue derived partially from these programmers has absolutely nothing to do with what their compensation is or should be. By their rationale, every teller at a bank should have salaries commensurate with that bank's revenue, since they're an element in processing deposits/checks/payments/etc. Hell, the data center I run makes millions every hour, but I don't expect that I should make 7 or 8 figures because of it.

    The lesson here is: negotiate well on the way in. Do your homework, find out what the job entails and what responsibilities/liabilities you will have and determine for yourself if the compensation being offered is worth it. Once you cut the deal, that's it. If you don't like it, you can do as the programmers in the article are doing, go somewhere else and try to negotiate a better deal. It ain't personal, it's business.

  • by teg (97890) on Friday July 30, 2010 @10:23AM (#33082494) Homepage

    I agree here. Does the algorithm do everything on its own and the programmer's bosses have no input? I'll bet the software is a very small piece of the money-making picture. Was the programmer provided with any resources to write that algorithm? Could the programmer write the algorithm on his own, freelance style, and sell it to the company? I doubt it. Maybe these programmers deserve a raise, and the bosses probably get paid too much, but this is a one-sided story

    I doubt someone gave the programmer a task "earn money", and he came up with a novel idea on his own to do that. Much more likely, someone much higher up the food chain identified an opportunity - either himself, or more likely, copying it from someone else doing the same thing. Maybe even tweaking it a little bit. The code would be a little part of the whole picture - the whole picture probably includes things like real-time trade access, working capital and the tweaks/monitoring management do.

    In the big picture, of course Wall Street anything makes way too much. And the rationale for attracting the best brains into what is arguably a zero-sum game most of the time - or recession-inducing madness at other times - can obviously be discussed as well, on the macro level. But I doubt the programmer here added more value than most other normally competent programmers would do. They got a task, and did it. And got a good salary for doing what they're told.

  • by ArcherB (796902) on Friday July 30, 2010 @10:25AM (#33082518) Journal

    Did someone order waaaaaamburgers and french cries?

    And you really think the colleagues using the software were footing the bill? Bullshit. It's about time developers stood up and demanded compensation for their inventions instead of letting idiot stock traders reap the rewards by pushing a few buttons.

    The stock traders make what they do because they know what buttons to push and when. If they push the wrong button at the wrong time, they stand to lose millions for their clients and themselves. These programs have no idea as to when to buy, sell or hold. All they do is retrieve data and analyze it into reports. It's up to the trader to know what to do with it.

    If being an "idiot stock trader" who makes millions is so easy, why aren't you doing it? You can push a few buttons, right?

  • by IICV (652597) on Friday July 30, 2010 @10:27AM (#33082536)

    Can you quantify what "big risks" are involved in running a successful financial firm? That's something I hear a lot, but I've never actually seen a breakdown of what exactly is being risked by upper management vs, say, the programmers. Sure, if the business goes bust upper management loses their jobs, but then so do the programmers.

  • by 246o1 (914193) on Friday July 30, 2010 @10:28AM (#33082556)

    Exactly right. The value doesn't actually come from the algorithms, it comes from the position of the bank which gives it access to information before the rest of the market, allowing the big banks to (illegally? certainly unethically) skim money while essentially creating no new value for the marketplace. There are plenty of people who could write those programs, but only a few people in strategic positions can make sure the banks get the inside track to screw everyone else on earth. Hooray for deregulation!

  • America (Score:5, Insightful)

    by betterunixthanunix (980855) on Friday July 30, 2010 @10:29AM (#33082572)
    Hi, you must be new to America. Here, money is more important than life, ethics, or anything else.
  • by Stargoat (658863) <stargoat@gmail.com> on Friday July 30, 2010 @10:29AM (#33082576) Journal

    You seem to be mistaking a little bit of coding with the work that is actually being done.

    The programmers in this article are not dumb fuck meth addicts building a website and writing a little bit of Flash or C++ or even guys with EE or CS majors, but rather tend to be Economic or Statistic PhDs from Northwestern, UC, and other major programs. From the article, Sergey Aleynikov, according to his LinkedIn pagelike, has at least a masters from Rutgers and likely a PhD.

    The programmers are working with SAS and other powerful statistical software that on their own is easy enough to learn. But these programmers are applying what the learned in their PhD studies to create trading and marketing strategies and then create proof of the trading and marketing strategies. They are making their companies millions and get paid very little because "they are only programmers".

    They have every right to not be particularly happy. The programmers, these economics PhDs, know their worth and it isn't 125k a year.

    Also, there is an increasing tendency in American business culture to undervalue the PhD as a foreigner or nerd degree and require anyone who makes real money to have an MBA.

  • by Dhalka226 (559740) on Friday July 30, 2010 @10:30AM (#33082590)
    Only on Slashdot can a $100,000-$150,000 salary be described as "[having] their blood sucked from them." Wow.
  • Same Old Story (Score:3, Insightful)

    by b4upoo (166390) on Friday July 30, 2010 @10:30AM (#33082598)

    Many years ago I created fancy condenser units. I could easily create four or five a day and they sold for 5K each. I was payed about $10. per hour and creating $25,000 in product each day.
                        My point being that our economic system is slanted in such a way that those that actually create are often not paid much at all whereas those that create nothing often are very well paid. That attitude is beginning to trigger some real negatives. The car mechanic or tradesman now often has little conscience and is likely to cheat and do poor work to whatever degree he can get away with it while charging huge rates for his efforts.

  • Re:Car analogy (Score:4, Insightful)

    by DriedClexler (814907) on Friday July 30, 2010 @10:31AM (#33082602)

    So how do the people in Harlem afford to live there?

  • by daem0n1x (748565) on Friday July 30, 2010 @10:36AM (#33082692)

    Where I live, I make the equivalent of USD 29.000 a year. It looks low, but it's really not bad around here. I have no idea how it is in New York, though. Maybe for a NY standard I'm below the poverty line.

    But if the programmer makes N and his boss makes 10 times that by adding very little value, yes, the programmer is being blood-sucked.

  • by irving47 (73147) on Friday July 30, 2010 @10:38AM (#33082710) Homepage

    the real problem isn't that the programmers should make more, it is that the traders should make LESS.
    Wow. I'm a total stranger, but can I decide what you make? On a whim? Seems you don't have a problem doing it for others.

  • by American AC in Paris (230456) on Friday July 30, 2010 @10:40AM (#33082746) Homepage

    Heh. It isn't risky to run a Fortune 500 company. It doesn't matter how well or how poorly you do; you're guaranteed to make enough money to lead a rather lavish life several times over. Carly Fiorina seems to be doing just fine, despite having driven HP into a brick wall. Tony Hayward may not have much of a future with BP, but you'd better believe that he's already "got his life back." The only risk you run is having to wrestle with the demons you create when your actions destroy the lives of other people, and while I'm sure that's an absolutely miserable thing to have to do, it sure as hell beats being one of those other people whose life is, y'know, destroyed because somebody other than themselves fucked up.

    If you're running a successful financial firm, "risk" simply doesn't exist for you, at a personal level. It's why so many financial firms so royally fucked up; the cost of failure is borne by your clients and your employees. All you need to do is go before a Congressional panel and say how very sorry you are.

    Hell, you don't even need to say that.

  • by Anonymous Coward on Friday July 30, 2010 @10:41AM (#33082768)

    The REAL Option Three: Understand that the managers are capital and you are labor, and start a union, and force a wage scale onto them.

    It says everything I need to know about Slashdot that nobody has said this yet.

    What your comment says to me is that you're a moron.

    You know, those "programmers" all do exactly the same thing, at the same level of expertise, using the same tools, and have the same education.

  • by daem0n1x (748565) on Friday July 30, 2010 @10:42AM (#33082780)

    But I know alot with the same sentiments and effectively migrating to management hoping they'll make their big bucks, often resulting in incompetent management.

    Yeah, I know this perfectly. In my country, if you're not a manager by 30, you're a loser. That results in a lot of people moving into management that shouldn't be there, and would be useful doing other things.

    Also, companies treat engineers like shit and then complain they can't employ good engineers. There aren't any. They're all too busy being bad managers.

  • by thelordx (588477) on Friday July 30, 2010 @10:43AM (#33082796) Homepage
    Maybe you should do some research before you just mouth off about something you obviously have no clue about. Not only have several academic studies proven the value of high-frequency trading to liquidity and improvements in market structure (Smith, Brogaard), but the common misconception that it was HFT that caused the flash crash has been shown to be false. why don't you investigate what spreads were before HFT, and tell me why it's better for people to pay $0.05/share after decimilization, or 12.5 cents/share before it? Or maybe you can just google HFT, and copy and paste the first thing that you find. Oh wait, you already did that.
  • by bluhatter (583867) on Friday July 30, 2010 @10:43AM (#33082806) Homepage Journal
    Unfortunately, employers use the "bad economy" argument to try and justify the rampant abuse. A perceived bad economy is an employer's best friend.
  • by mcvos (645701) on Friday July 30, 2010 @10:44AM (#33082818)

    The stock traders make what they do because they know what buttons to push and when.

    No, they make so much money because they control money. People who control lots of money always make lots of money. They can make sure of that.

  • by john.r.strohm (586791) on Friday July 30, 2010 @10:45AM (#33082836)

    No, they are not "sucking money out of the system". They are CIRCULATING money in the system.

    Economics 101: Money has no intrinsic value. By itself, outside the financial system, it is pretty pieces of colored, printed paper. Inside the system, it is an agreement to exchange goods and services for other goods and services.

    Assume that our uber-bloodsucker takes down a few million and buys a yacht. Guess what? He's paying the salaries for the people who build that yacht, the people who maintain it, the people who crew it, the people who run the marinas. All of them are now working, doing things they (typically) enjoy more than digging ditches on a road crew somewhere, and putting food on THEIR tables.

    Say he takes a vacation trip to, oh, say, Rio. He's paying the salaries for the guys at Boeing, who built the airplane. He's paying the salaries for the ramp rats at JFK. He's paying the salaries for the guys at the oil company who refined the fuel for the airplane. All of them continue to work and put food on their tables.

    They get the big bucks, compared to the Java weenies you see immortalized in thedailywtf.com, because they generate high returns for their employers. Their employers, in turn, get bigger bucks for taking bigger risks than the programmers do. All of them cause money to CIRCULATE in the economy, in the never-ending exchanges of goods and services.

    If you don't like it that someone else is making more money than you are, well, maybe you should have taken the tougher classes in school.

    Also note: part of the price for being a high-frequency programmer is generally living and working in New York City. It ain't all roses.

  • by am 2k (217885) on Friday July 30, 2010 @10:48AM (#33082898) Homepage

    People losing money over your bad programming isn't really a risk for yourself, the question is, would you be held liable in this case?

  • by Shotgun (30919) on Friday July 30, 2010 @10:51AM (#33082954)

    If you're the CEO of an international energy conglomerate, you might end up with a multi-million dollar payout, only a few million a year in salary, and a job in Siberia. Poor Tony.

  • by IndustrialComplex (975015) on Friday July 30, 2010 @10:51AM (#33082960)

    Yeah, but in the end HE is still the one riding on the yacht and taking trips to Rio. While the deckhands are likely paid a pittance for a similar amount of work.

  • by M. Baranczak (726671) on Friday July 30, 2010 @10:53AM (#33082984)

    That seems about right. In this game, the investors are the only ones who "risk" anything. And ironically, they're also the ones with the least amount of power to decide how the money is managed.

  • Big risks? (Score:4, Insightful)

    by saleenS281 (859657) on Friday July 30, 2010 @10:56AM (#33083022) Homepage
    What exactly are the big risks? If you fail, you turn to your buddies doing well for an "angel investment" and start all over again. If you get caught lying/stealing/cheating, you have to give up about 10% of your hundreds of millions in profit to make the SEC go away.

    The people who are investing their money are the only ones taking a risk. If the boss gets greedy and makes a few bad trades, they can kiss a nice chunk of their 401k goodbye. If he does a good job, he'll take 20% of the earnings for himself because he managed to find a couple of sucker programmers willing to write something to do all the work for him.
  • by spiffmastercow (1001386) on Friday July 30, 2010 @10:57AM (#33083032)
    But here's the thing.. The money is circulating for no particular reason. There are not goods and services being exchanged in the frequent trading financial sector. It's a casino with the house skimming off the top. Banks could exist and function perfectly well without Wall Street. They would just have to back to traditional usury rather than bald-faced fraud.
  • by clone53421 (1310749) on Friday July 30, 2010 @10:57AM (#33083038) Journal

    Don’t be absurd. Most model slashdotters just fly off half-cocked. Sometimes it seems like it’s asking too much that they even read the headlines correctly.

  • Re:Car analogy (Score:3, Insightful)

    by A Friendly Troll (1017492) on Friday July 30, 2010 @11:00AM (#33083088)

    Or they could just move to a foreign country and live off $15.000 a year, have 30 vacation days, sick leave that doesn't interfere with that, seven hours of work per day, clean air, and efficient public transportation that doesn't require you to own a car and still be at work in half an hour.

    But I guess they want their huge plasma screens and game consoles and three muscle cars and hookers and cocaine.

    There's more to life than just money alone.

  • by TooMuchToDo (882796) on Friday July 30, 2010 @11:01AM (#33083106)
    Frequency trading could be fixed quickly. The NASDAQ , the NYSE, and the other exchanges could simply say that if you buy a stock you have to hold it for 24 hours. If you think that's too long, I might agree, but I think we can all agree that no value is added by buying/selling a stock in under a second to make a profit. That money is coming from folks who are long-term investors trying to have some sort of retirement.
  • Re:Accountability (Score:3, Insightful)

    by d474 (695126) on Friday July 30, 2010 @11:09AM (#33083226)

    And if said software screws up and costs a few hundred million, or otherwise causes other "bad things" to happen, what's the accountability of the programmer or the manager?

    Nothing. CEO's wreck companies/cause damages all the time, and all that happens to them, personally/financially is NOTHING. Maybe they get fired and then receive a nice golden parachute. Why should it be any different for the programmers who are the architects of the entire groundwork allowing the company to exist in the first place?

  • by Aceticon (140883) on Friday July 30, 2010 @11:19AM (#33083406)

    We're talking about Hedge Funds here, so their bosses are in fact ex-Traders, ex-Sales and ex-Analysts from big investment banks and such.

    - The reason why they are the bosses of the hedge funds is that they had millions of dollars to start their hedge funds, business contacts to get extra founds at low cost and already potential customers lined up from their time with the big banks.
    - The reason they made millions of dollars in the first place is because they got fat bonuses in their previous job.
    - The reason they got their bonuses is because they were lucky: I work in the industry and I know what I see. Also, studies show that the best performing hedge funds in one year are less likelly to be in the top the following years - in other words, hedge funds are not consistent in their performance, which indicates that chance, not skill is what determines most of their it.

    Keep in mind that, most of the money made in Investment Banking is of the rent-seeking variety, such as:
    - Decieve your customers by creating and selling them strange, complex and expensive derivatives to protect them from a certain risk when they could get equivalent protections from buying cheap standard products from the market.
    - Get yourself in the middle of a transaction and take a cut. The transaction would occur anyway if u weren't there but either it would be cheaper for the buyer or more profitable for the seller.
    - Get 20x your core capital in cheap loans (thanks to low interest rates and an implicit government guarantee). Invest those 21x core-capital in safe, low return instruments (say, 5% yield bonds). At the end cash it, repay loan, post more than 100% returns on your core capital (since the 5% return was applied to the 20x loan + 1x core capital), pay traders big bonuses for their "skill".

    Essentially Investment Banking (and Hedge Funds) are the posh version of the Car Mechanic: professionals in the business use their superior knowledge of how finance works to decieve the customers (which are not specialists in that domain) to think that what they really need to "fix the problem" is something a lot more expensive that what is actually needed.

    This would be alright if it wasn't for the fact that some of their customers are the managers of things like pension funds which (mis)manage our money and "invest" it through those guys instead of doing the due dilligence themselves to figure out that the average return after comissions and costs of a hedge fund is lower than the return on major market indexes (which you can get cheaply via ETFs).

    So:
    - Guys that started working in an industry which is mostly parasitic got lucky and made millions in bonuses.
    - They used those millions, plus the contacts they created while working in that industry to setup a company and make money directly from the suckers^H^H^H^H^H^H^Hcustomers instead of via bonuses.
    - They setup systems (i.e. auto-trading) that allow them to insert themselves into and get a cut from other people's trades because their systems are faster reacting to the market than other traders since they're located next to the exchanges and react within milliseconds.
    - Add to this that in many cases, after they left their big bank jobs their old employer lost money on their bets and had to be rescued by the state using our tax money.

    There are plenty of bosses out there that one can respect for having real risks and clawed their way to success by creating companies that provided real products/services to their customers but these guys ain't it.

    These guys are more like pimps that made enough from forcing junkies to prostitute themselves that they could afford to open a brothel.

  • Re:100k in nyc (Score:3, Insightful)

    by jvkjvk (102057) on Friday July 30, 2010 @11:20AM (#33083428)

    well, there. i think you've found at least one line of distinction yourself.

    "lower upper class" is NOT N missed paychecks away from financial ruin
    "upper middle class" IS N missed paychecks away from financial ruin.

    Good start?

    Regards

  • by daem0n1x (748565) on Friday July 30, 2010 @11:20AM (#33083434)

    No, they'll probably transfer most of it to fiscal havens, helping to fund drug lords and terrorists.

    Have you heard about the Broken Window Fallacy? If these guys get money for nothing and recirculate it, the overall economy in the end gains nothing. The money that passes though these guys could have been used to produce useful goods and services instead of feeding the pleasures of fat greedy pigs.

  • by mikael_j (106439) on Friday July 30, 2010 @11:25AM (#33083520)

    Adding insult to injury, the industry big bosses, TV pundits and politicians are always screaming bloody murder about our labour laws, claiming they're the most restrictive in Europe (which is a lie).

    Interestingly the same lies can be heard here in Sweden as well as in Denmark, Norway and France (don't know about other countries but I suspect the same is true there). It's always the same crap as well "our restrictive socialist labour laws are the worst in Europe and are making us fall behind by punishing business owners" and "Our companies being taxed much worse than businesses in any other European country"...

  • by jgagnon (1663075) on Friday July 30, 2010 @11:30AM (#33083636)

    I'm a full-time, professional programmer, so don't get me wrong on this. Running a successful business is a lot of hard work and, frequently enough, some luck. Most of the people here claiming they could run a successful business have no clue what they are talking about. I've contemplated many times over the years of starting my own business, but it all comes down to steady income versus unsteady income and the hope of a bigger payout.

    If you want the big bucks, start a business and make it successful. Then you can hire the grunts at whatever price you want to pay them. Until then, find a place to give you a paycheck and leave all the boring details about how the money gets collected to the "idiots".

  • by Stiletto (12066) on Friday July 30, 2010 @11:33AM (#33083698)

    Show me a former CEO of a fortune 500 company who is living in the poor house today because he fucked up. Now divide that by how many former CEOs of fortune 500 companies out there never have to work again and have children and grandchildren who never have to work.

  • by ArcherB (796902) on Friday July 30, 2010 @11:47AM (#33083958) Journal

    Dude, you are clueless. When these expert traders f up they still get their money. It might take months or years for their bad choices to surface but in the meantime they get their commissions and bonuses. Do you think they pay that money back????

    OK, let's say you have an extra $20 million to invest in the market. Are you going to invest via the broker that f'ed up months or years ago (now that their bad choices have surfaced), or are you going to invest in the guy(s) that have a good track record? Of course, you're not going to go with the guy that has made bad choices. Your $20 million, plus the thousands of other investors with extra cash laying around that will make the same decision you do, mean millions in lost commission from the guy that screwed up, even if he was paid for the original screw up.

    Next, you are a manager at a major financial trading firm. You got a guy in the trenches making decisions that have cost your clients millions or even billions. When your clients lose money, they don't have extra cash to invest in the future, meaning your company loses money and YOU lose money. How long are you going to keep this guy around? Is he going to be one of the guys you give bonuses to, promote and invite to that dinner party your wife holds to keep busy?

    In other words, even if traders make money on bad trades, they will lose money, possibly all of it, in the long run if they make bad trades. It takes several "attaboys" to make up for each "Oh sh*t".

  • by Lumpy (12016) on Friday July 30, 2010 @11:48AM (#33083964) Homepage

    That's the only way to get the superstars... I ALWAYS am the guy looking for the next job. Why? because asshole executives dont promote high skill tech people... they want to keep them where they are at. So I jump ship every 3-5 years to get my own promotion and pay raise. It is the way most sucessful people climb the ladder.

    Honestly only a complete fool is loyal to the company. Because the company is never EVER loyal to you.

  • Re: Same Old Story (Score:4, Insightful)

    by History's Coming To (1059484) on Friday July 30, 2010 @11:57AM (#33084166) Journal
    Devil's Advocate:

    The $25k pays for mining the ore, extracting the metals, drilling kilometres under the sea for the oil, polymerising it, designing the units, injection moulding and, yes, your job putting it all together. I'm guessing you didn't do all of that...but if you did, then yes, you should get a pay rise, or at least a funkier job title ;)
  • by Anonymous Coward on Friday July 30, 2010 @11:58AM (#33084178)

    You clearly have no idea how money works. The Grand Parent is right and took you to task, and you continue with your delusional vision of what money is. Every luxury some rich person buys is produced or provided as a service by someone. That person gets paid. Sucking money out of the system is when a thief steals something without paying for it; while some may argue that the rich do this the lion's share buy their luxuries.

    But even if one of these rich guys took all of their money and put it in "fiscal havens" (which by the way doesn't mean anything, the term you're looking for is Tax Havens, when rich people put their money offshore to avoid paying taxes), money is still useless as cash. The first thing people who understand money learn is that cash does not generate a return and in an ecnomoy with constant inflation; in effect money sitting in account actually loses value. So those rich people with their "fiscal havens" invest their money to generate a return. Those investments provide capital to large corporations in the form of loans (bonds) or equity (stock) which generates a return for the investor, but ALSO provides the company with funding to invest and grow it's business. Or it provides a Government with funding to pay for it's business through Government bonds.

    Seriously, not even Economcis 101, go take Economics 1. Or maybe a class on how the financial markets really work. You are clearly ill informed.

  • by CeruleanDragon (101334) on Friday July 30, 2010 @11:59AM (#33084192) Homepage

    Also, there is an increasing tendency in American business culture to undervalue the PhD as a foreigner or nerd degree and require anyone who makes real money to have an MBA.

    I don't think that's an "increasing tendency", I think that's a solid fact. Without doing much real research (since we all know facts hold far less weight than our own opinions and gut feelings, right?), I'm willing to bet that of the top, say, 500 richest people in the country (who have a degree at all), you'll be lucky to find more than a handful of PhD's, but plenty of MBAs. I've never heard anyone mention Dr. Bill Gates, Dr. Sam Walton, Dr. Warren Buffet, or Dr. Larry Ellison...

    Honorary degrees aside.

  • by kevinNCSU (1531307) on Friday July 30, 2010 @12:09PM (#33084406)
    There are no risks in running a successful financial firm in the same way there are no risks in buying a winning lottery ticket. But if a firm was guaranteed to be successful no matter who was running it either everyone would be running their own or whoever hired that boss wouldn't bother paying them anything.
  • Re: Same Old Story (Score:3, Insightful)

    by kyuubi42 (1424889) on Friday July 30, 2010 @12:10PM (#33084426)

    did you design those condensers? do research on improvements? market them? package/ship them? oversee the entire operation to ensure that they were being sold at approx. the same rate at which they were built, and that you always were supplied with the raw materials / tools necessary to build them? own the building you produced them in? generate all the energy needed to create them?

    but no, you just shit out those $5000 condensers on your own right? no costs to the company but your working wage.

  • by Lion XL (1849898) on Friday July 30, 2010 @12:20PM (#33084604)
    Wake up...this is what the capitalism equates to in current society. UNDERSTAND, I am not a fan of what capitalism has come to mean but it is what it is. Anything else starts to court with a socialist society which will turn out far worse. We as humans have not matured enough in the sociology of living in a truly free society. Free meaning free-thinking where everyone contributes to the community as a whole and the community protects and supports each individual. We still hold onto the value of owning objects as the representation of who we are. A billionaire is no better or worse than a 400-billionaire, yet we glorify the 400-billionaire as being more successful. Greed is a harsh word to use here, but its what our capitalist system seems to have embraced. When I learned about capitalism in economics, I came away believing in the concept that the people should be able to own and control their society equally within the embrace of the government but without the control/ownership of said government. By today's standards it has come to mean control and ownership by individuals, and he who can amass the most wins. essentially, transferring governmental control to the individual with the biggest nuts. Trading in a government for a king. Capitalism, at its best, should mitigate the gray area between socialism and fascism, but fails to do so.
  • by spiffmastercow (1001386) on Friday July 30, 2010 @12:33PM (#33084882)
    Money may be theoretically infinite, but the resources that it represents are not. It's not about the size of your slice of the pie, but of the proportion of that slice. And most of us have tiny little slivers because some greedy assholes came and took more than their share.
  • by Wildclaw (15718) on Friday July 30, 2010 @12:41PM (#33085004)

    No, they are not "sucking money out of the system". They are CIRCULATING money in the system.

    No. They are consuming a greater share of the resources in the system.

    Economics 101: Money has no intrinsic value

    Actually, contrary to popular propagande, money does have intrinsic value as you can use it to pay debts, be it private debt or government taxes.

    Assume that our uber-bloodsucker takes down a few million and buys a yacht. Guess what? He's paying the salaries for the people who build that yacht,

    Broken window fallacy. Seriously, do people actually fall for that kind of flawed reasoning.

  • by Surt (22457) on Friday July 30, 2010 @12:42PM (#33085020) Homepage Journal

    Of course, it can also mean a factory shuts down, and moves production to a country with fewer human rights protections, promoting slavery, but really who minds the little details.

  • Re:Accountability (Score:3, Insightful)

    by QuantumRiff (120817) on Friday July 30, 2010 @12:47PM (#33085104)

    We have people at our office like that.. Come bonus time.. "But I bring in $X every year! and my salary is small % of $X"..

    They kindly forget things like Secretaries, Marketing, office facilities, power, IT, Lower level people actually doing the work, etc...
    I hate people that work in roles that involve Sales....

    You know.. the actual work they are selling has a cost...

  • by Anonymous Coward on Friday July 30, 2010 @01:12PM (#33085550)

    "They get the big bucks, compared to the Java weenies you see immortalized in thedailywtf.com, because they generate high returns for their employers."
    The algorithms generate the data needed to generate high returns.

    "Their employers, in turn, get bigger bucks for taking bigger risks than the programmers do."
    Name one 'bigger risk'. No seriously. What do these guy contribute to the process that justifies their income?

    "No, they are not "sucking money out of the system". They are CIRCULATING money in the system."

    Completely false. High-frequency traders manipulate the monetary system and contribute NOTHING of value. They are skimmers, highly destructive parasites with no redeeming properties. When someone CIRCULATES money, they provide a means for the accumulated capital of one entity to be utilized by another to produce goods and services for a return which can then be utilized to produce more goods and services.
    A parasite, on the other hand, manages to insert itself into that process and manipulate the system to benefit grossly at the expense of or detriment to the other parties. That is high-frequency trading in a nutshell. Neither the stock being sold or the ultimate buyer benefit in any way from the activities of the high-frequency trader.

    The luxury item purchases described in no way justify the damage they do to the economy or the legitimate business activities from which they steal. It is precsiely the same as saying that thieves and embezzelers benefit the economy through the purchases they make with their ill-gotten gains.

  • by Critical Facilities (850111) on Friday July 30, 2010 @01:14PM (#33085562) Homepage

    The programmer who writes the algorithm is, in many of these firms, the main driver of profits

    Incorrect, and this is the reason you (and several others) are missing the point. You are assuming (with no evidence to back up your claim) that these algorithms are essentially the "machine" that makes the money. You're completely overlooking the various infrastructure and investment that it takes to make these things happen. I don't have the energy to list the many, many components that must exist to have a successful brokerage firm, but suffice to say, it's far more than just algorithms, otherwise any programmer worth his/her salt would be making a killing on Wall Street.

    Your logic is like telling Edison he doesn't deserve the bulk of profits from the light bulb

    That's right! Edison wouldn't have inherently deserved the lion's share of any/all revenues derived from various companies making/selling/using his invention "the lightbulb". If he invented it, but Sylvania makes millions of them in their factories, then sells them via Sears, where they are bought by customers who install them in their homes in fixtures made by various light fixture manufacturers, and power then from various electrical utility providers, Edison should not be entitled to a piece of each part of the chain's profits.

    This really isn't that difficult. As others have pointed out, it's a combination of how difficult it would be to replace a person combined with their measurable/demonstrative monetary contributions to a company that determine the salary. The issue with these programmers is that the profits seem high because this is a game of scale, not profit margin. The big brokerage firms are making big bucks on millions and millions of very tiny profit margins. However, they're also taking on all the risk, putting up all the money, and providing all of the other parts of the working machine (employees, facilities, communication, etc).

  • by JoesRagingBileDuct (452917) on Friday July 30, 2010 @01:21PM (#33085664) Homepage

    The problem with this free market fantasy is that its not actually reflective of what reality nor does it come up with an ideal productivity.

    Lets take the 100k/day guy. He makes 3.65 million a year. He's only going to buy 1 yacht with that because he only needs one at a time. Maybe that costs 1M, the rest goes in the bank or into derivatives trading or currency trading or into his bath tub so he can bathe in it. This is all financial masturbation, it doesn't really produce anything. So saying that making that much money ends up circulating it a fallacy because it only ends up circulating amongst the other financial types and not the economy as a whole.

    "But he did end up paying for the boat" you say, "he employed all those people". OK, but lets compare that to what would happen otherwise. Making the yacht gives a few artisans a fairly decent amount of income once in a year. If you take that 3 million and give it to 10k poor or middle class people (in the form of salary for actual work done), they will spend *all* of it. Why? Because they are not flush with cash and have lots of things they could buy including things they have been needing but have been putting off buying because they didn't have the cash. So you have circulated a lot more money to a lot more people, and since the money is going into buying things that are useful to more people (as opposed to yachts) the business that flourish are the ones that actually mean something to society and the economy. And you get bonus points for actually making more stuff that has more value.

    Those people making all the goods also end up buying things to make the goods, so there is a multiplier effect happening. Now you have can compare a smaller base ($1M vs $3.65M) and a smaller multiplier (yachts need wood, paint, canvas and a small number of other parts vs the wide variety of other things that people would buy with the money such as cars, TVs mobile phones, college text books, groceries etc which are lower margin items that require a lot more investment into their production ) and you end up contributing a LOT less to the GDP as Mr. $3.65M than you do if that money was more evenly distributed.

    Not to mention the fact that there is no way that guy deserves to get 100 times the pay. He's not 100 X smarter nor is he 100 X more hard working. Given the recent financial troubles it is rather easy to argue for the reverse. So now you are rewarding the wrong person a disproportionate amount in a way that hurts the economy relative to doing it the right way.

    Congrats.

    People really ought to stop thinking that they are going to become rich one day. It skews their perception of whats happening in the real world and makes applaud the people who are taking advantage of them.

  • by daem0n1x (748565) on Friday July 30, 2010 @01:23PM (#33085692)

    Name me a civilised country where there are no taxes. Nobody likes to pay them, but the truth is this: Societies have administrative costs. These costs have to be financed. So, these costs are financed by taxing the incomes of those who live in those societies and benefit from it. The Scandinavian countries are the ones with the best standard of living, however, taxation there is very high.

    If you feel your money is not being well spent, be a useful member of society and get involved in defining the policies that govern where the money goes. Sitting on your ass whining about how "taxes are stealing" is useless and childish.

    If you really don't want to pay taxes you might as well move to Somalia. They have no government, hence no taxes. But I guess you'll end up paying "protection" money to some local warlord.

  • by UnknownSoldier (67820) on Friday July 30, 2010 @01:29PM (#33085790)

    > There is a finite amount of money at any one time.

    True, however you are forgetting one tiny but import little detail...

    The VALUE of money is _dynamic_ - especially when used to exchange for hard assets.
    i.e.
    The value of gold / silver gooes up/down due to demand/supply, even though the amount of money hasn't changed.

    The _same_ object can have multiple VALUE at the same time by different people.

    So to say that there is only a fixed amount of money is igoring the other half of the equation.

  • Solution (Score:2, Insightful)

    by operagost (62405) on Friday July 30, 2010 @01:55PM (#33086168) Homepage Journal
    And so it says that they did the right thing: they left their crappy, thieving jobs and started their own firms. They're still only making about their old salaries, but they're calling the shots and the sky's the limit. This is why ethical capitalism RULES.
  • by Monchanger (637670) on Friday July 30, 2010 @02:03PM (#33086290) Journal

    You neglect the fact that money hidden for tax evasion isn't necessarily sitting in a zero-interest checking account. That'd be a clever argument if your type didn't love the whole "they invest it and provide for business to grow" argument. Pick whichever of the two wrong yet still contradicting arguments you like.

    More importantly- it isn't being spent and helping the economy. So of course rich people hiding money has nothing to do with those false "rich people spend money on yachts and thus stimulate the economy" arguments. Hiding money in offshore accounts only serves to make obvious the point that compared to poor people, a dollar in the hands of wealthy people is far less likely to be used for purchasing. So if consumer spending is important, tax breaks for the rich are a really stupid idea.

    So much for trying prove you're "people who understand money". If only you had taken knowledge of something other than theoretical economics.

  • by BigSlowTarget (325940) on Friday July 30, 2010 @04:37PM (#33088854) Journal

    This is supported by a significant amount of labor economics research. (At least the pay part). The majority of increase in income comes nearer to the start of the career than the end and from changes in jobs/companies rather than promotion in place.

    As for the behavior of the companies: If something is promised get it in writing. If they don't want to give it to you in writing you were never going to get it in the first place. Corporations are not people and don't have memories outside of what is written down and can be discussed in a courtroom. Any individual who promises you anything can get hit by a truck or replaced with a moron and then promise is gone.

  • by epine (68316) on Friday July 30, 2010 @04:56PM (#33089210)

    Economics 101: Money has no intrinsic value.

    Your Econ-101 course would have been improved by including a copy of Animal Farm. In the lost epilogue, the pigs mint coinage to invest German efficiency into everything they were doing already.

    The principle you seem to be ranting on here is that voluntary transactions create wealth, no matter how the transaction is instrumented (coins, jars of pebbles, jiggling twins).

    Monopoly is the word we use to describe the situation where voluntary rubs noses with indentured servitude. If there's only one place to purchase food, well, no-one is forcing you to chose survival.

    In high speed computing one tends to compute bisection bandwidth: given any way of partitioning the system, what is the maximum bandwidth across the partition boundaries.

    The concept of monopoly is similarly fungible. The banking industry has sliced up the economic system so that one partition (the high velocity insiders) have access to first-mover advantage, and everyone else doesn't. One term in what constitutes voluntary trade has been supremely tilted in favour of a group that isn't working nearly as hard as they ought to relative to the resources they command, even if it does, as you point out, greatly enrich Columbian farmers who would otherwise have to grow vegetables.

    If the glorious concentration of wealth directed equated to aggregate productivity, Russia would be a model economy.

    I will say your recitation of why money in and of itself can't be blamed was superbly rendered.

    On the other hand, somehow you didn't manage to notice that typing the query "apple suicide" into Google no longer brings up a fairy tale: it brings up Foxccon in the "I feel lucky" position.

  • by Wildclaw (15718) on Friday July 30, 2010 @04:56PM (#33089212)

    Broken window fallacy implies lack of choice and/or value in loss.

    Thanks for demonstrating so clearly why people so easily fall for the broken window fallacy. Even if you know what it is about, it is useless if you aren't able to see the loss.

    In the original broken window fallacy, the loss was the time and resources the window maker had to spend, building a window for the shopkeeper, instead of building something more productive for him.

    In the above case, the loss was the time and resources the boat builders had to spend, building a yacht for the leech instead of building something more productive for the original owners of the money before they were leeched.

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