My Time at Lehman
"Which, it turns out, is a trader’s field day. What this meant, in its simplest form, is that these traders (or salespeople) could buy bonds at the "market" price from intelligent hedge fund managers in NYC and sell this same crap at much higher levels to unsophisticated (but legally considered "sophisticated") pension funds and insurance companies in middle America. What I discovered, quite starkly, is that the part of Wall Street that I worked in was simply transferring wealth from the less sophisticated investors often teachers’ pension funds and factory workers’ retirement accounts, to the more sophisticated investors...""'We are important providers of liquidity that create stable financial markets. We’re a crucial part of a system. And besides, if we don’t do it, someone else will.' These are the lies that people tell themselves so that they can buy larger homes."Both of these things are completely true, and that's why American public policy is having such a hard time grappling with Wall Street. We try to rationalize the state of affairs by pointing out all the ways that Wall Street has an "unfair advantage" but the fact of the matter is that: what do you expect in a free market system that rewards every marginal advantage other than wealth to flow from less sophisticated people to more sophisticated ones? We like the idea of letting everyone transact freely, but we are uncomfortable with the "winner take all" implication of that policy.Wall Street:
1) Hires some of the brighest people in the country (e.g. 40% of the author's class at Yale);
2) Aggressively weeds out that impressive pool by forcing out all but the most promising people within a few years;
3) Trains them rigorously and maintains a level of institutional knowledge transfer that tech companies can only dream of.Why are we surprised that they disproportionately get the better end of every transaction?