I haven’t read it, but Vanguard wrote about how it loves HFT. A lot of what I know is from Matt Levine, but he is such a fragmentary blogger that he probably doesn’t say much in one place and it’s hard to find any particular thing he’s written.
Your abstractions like “benefit” seem confused to me. Where is money flowing? How?
By the biggest players, I mean investment firms. I thought that the biggest investors are bigger than the exchanges, but maybe they’re only equally big. For example, BATS and Fidelity both have a market cap of $60 billion (NASDAQ $14B, NYSE $6B). HFT firm Virtu has a market cap of $5B. That is, the net present value of the profits Fidelity extracts from its retirement accounts is $60B, while the NPV of the profits BATS extracts from all retirement accounts in the US is about the same. BATS allows (and subsidizes) HFT because it thinks that Fidelity wants it. That’s what BATS says and that’s what Fidelity says. Maybe they’re lying and actually BATS has market power to extract money from Fidelity, but I’ll get to that later. [And why would Fidelity go along with such a lie?]
Transaction costs are way down. This is easily and objectively measured in terms of bid-ask spreads and trading fees. This is money that is not going to the middlemen, neither exchanges nor market makers, but is saved by the investment firms, which is why they love HFT. There is a more subtle argument that market liquidity is an illusion that will go away “when it matters” and produce flash crashes. I think that this is also false, both painting too rosy a view of the past and exaggerating the damage caused by flash crashes, but it is much harder to argue about rare events.
HFT and running exchanges are not terribly lucrative businesses, not by the standards of Wall Street. HFT makes orders of magnitude less money than market makers made (in aggregate) even 20 years ago. Individual HFT firms make a lot of money, but there used to be a huge number of market makers who specialized in very small numbers of stocks. When HFT first appeared and drove out these people, they reduced the aggregate money going to market makers and the small number of HFT firms have continued to compete away their own profit. This is a pretty simple metric that is exactly opposed to many common stories. It’s not that simple because many of the market makers were vertically integrated into firms that did other things, so it’s not that easy to aggregate the market makers. In particular, I claim that’s what Brad K’s old job was (understanding market structure and making money off of the difference between markets, allowing the rest of the firm to think in terms of stocks, not markets). If you buy that, it makes the old market makers look even more bloated and thus the new HFT look even more efficient, but I don’t claim that it is obvious.
But are you saying that Lewis is saying that the exchanges are sucking all the profits out of the HFT? I don’t think that exchanges are very lucrative (see numbers in beginning). Does he give any numbers? I think that there are only about 4 companies running exchanges in the US (including IEX), which doesn’t sound very competitive. But that’s because they keep buying out new exchanges, so it can’t be that hard to enter the market. And they keep the exchanges around, so they do see value in diversity. IEX being the 12th exchange and the 4th company does make the market more diverse and competitive, but they’re probably only fill a small niche. Whereas the dozens of dark pools are already very competitive.
Everything I’ve ever heard attributed to Michael Lewis on this topic was false. Good ideas shouldn’t require lies to sell them. And I can tell it’s false because I carefully read the quoted passages. In particular, you conclude from his claim that “the richest people on Wall Street” are angry that they employ HFT algorithms. But that’s not at all true. HFT is tiny. If the biggest players on Wall Street are angry, it’s because they’d rather trade with HFT than with Brad Katsuyama.*
Is IEX listing a stock a significant milestone? I doubt it. IEX has been selling other stocks for 4 years, first as a dark pool and then for 2 years as an exchange. (But aren’t “dark pools” evil incarnate?) IEX claims to be 2.7% of the total volume. I never looked at that number before today. I’ve previously claimed that IEX was a failure, and I was surprised to see that the number was so high. I welcome experimentation and I’m happy that they’ve found a niche. But if you thought it was a much better product that would quickly win in the marketplace, maybe you should reconsider this, 2-4 years on.** But the future is long. Maybe IEX listing individual stocks will matter, though you should be suspicious if no one can explain why. And it’s hard to rule out the possibility that’s it’s a much better product that will take a long time to win.
* It was probably a bad idea to use Brad K as metonymy, because he plays two roles. I meant the kind of trader he was at the beginning of the book, who was outcompeted by HFT. I don’t mean IEX, the market he now runs. In as much as IEX exists as a place to trade with people like him, it seems like most people wouldn’t want to trade there, either, but it has a lot of room to evolve.
** To put the 2.7% in context, there are 12 exchanges, so I think IEX is the smallest, but I don’t know. There are dozens of dark pools, so the 1.5+% market share IEX had when it transitioned to exchange was pretty big for a dark pool.
Is there no middle ground? You say that Kegan paints it as a binary (“nothing inside the range of what we think of as a normal workplace”). But you suggest that kaizen is an intermediate. Your summary as two phrases suggests that they are separable (“everyone talks about mistakes and improvements, and where the personal/professional boundaries are broken down”).
Also, the negative book is about how things actually work, while the positive book is about the system working as promised. But this could be cherry-picking successes. Is there any reason to believe that DDO is self-correcting? Why shouldn’t we expect the worst of both worlds, implementations with the face of a DDO that actually work as describe in Moral Mazes? (which is probably what people insinuate with the word “cult”) Does the book make an argument, or does it just profile success stories?
Added: Indeed, “The Western Elite from a Chinese Perspective” talks about the discussion of emotion at business school and implies that people are faking it.
To add a little on different terminologies being a feature: if you ultimately want to apply linear algebra, you’ll have to build a bridge from the theory to the particular application that is probably even more difficult than the bridge between two presentations of the theory. So it’s probably good to practice building bridges.
(I’m also suspicious of people who say that the last book that they read on a subject was the best book, because that’s when it clicked. How much did the first books prepare them?)
I don’t know. My claim was based on reasoning from first principles. It was intended as an illustrative example that there could be positive externalities, not to measure them. If you have to triage nets, it’s probably the way to go, but if you’re triaging nets, you’ve probably made a bad decision. I can think of so many reasons to concentrate nets in one village, rather than spreading them out and micro-managing the deployments in the villages. One reason is habit formation. Another is the cost of distribution, which is probably low for marginal nets and high for a new village. A third is that there positive externalities compound, at least if you cross over the threshold of locally wiping out malaria. (Under that threshold, I’m not sure.)
Parasites in general and malaria in particular are pretty specific. For example, humans developed immunity shortly after speciation from chimps and malaria only jumped back 30kya (but probably did so multiple times to produce the several species of malaria). It’s pretty clear that it doesn’t have other hosts in the New World because the strategy of treating all humans in an area for 3 weeks wipes it out. But it’s hard to rule out the possibility that it has other hosts in Africa.
Ewald has written lots of great papers. Here (ungated) is a paper summarizing his career. Mostly it’s about explaining the past, but he goes on to say that we should design interventions to shape the evolution of infectious agents. His main claim about the past is that malaria is debilitating because it can be passed on from someone who can’t move. Thus if we keep the mosquitoes out of beds or out of homes, then malaria will evolve to be less debilitating. But I’m not sure where he says this. Scientific American? TED?
Or you could just look at the weather report, now that you know what to look for.
Between rational and irrational is PD: individually rational, collectively irrational. Lanrian gave two reasons that nets benefit people other than they person paying. One is that they are most valuable for children. The other is that they protect people not using the nets. Probably the most valuable nets are those deployed on people who already have malaria, to prevent it from spreading to mosquitoes, and thus to more people. (See also Paul Ewald.)
If you regularly get sunburn, you should use sunscreen, because sunburn is unpleasant. Death isn’t the only thing that matters. If you haven’t noticed that you get sunburn or haven’t thought about the possibility of using sunscreen or making simple interventions, like buying sunscreen, or putting it near sports gear as a reminder, there are great opportunities for improvement.
Whether to use sunscreen in situations where you won’t get sunburn is controversial. But these situations are intermediate and it’s probably less important to get them right than the extremes.
Added: maybe this sounds like trivial advice, but it’s important to figure out what the typical advice actually means in terms of who it’s aimed at (confer).
SSC’s argument that the dermatologists’ factual claims are wrong are the least of the problems. Even if the dermatologists really are experts at skin cancer, they aren’t expert at the trade-offs.
On the other hand, if SSC is correct, that only eliminates one option that shminux gave. It doesn’t necessarily reject the claim that you should stay out of certain sun conditions.
By “really ancient” you mean bronze age, right?
Classical antiquity definitely has plagues in the modern sense, like the Antonine plague. Indeed, in your paper you endorse the fairly standard claim that it was smallpox. That seems to me worth mentioning here, more than the negative claim about Hippocrates.
Yes, if the game has many opportunities for betting, you should focus on the instrumental use of the money, which is via compounding, thus the instrumental value is geometric, and so you should use the Kelly criterion. In particular, if your edge is small (but can be repeated), the only way you can make a lot of money is by compounding, so you should use the Kelly criterion.
France does this, at least in mathematics. Many people go straight from PhD to a permanent CNRS research position with no responsibilities. Short term postdoctoral funding was only introduced in 2005, but before that a lot of people did foreign postdocs. Alain Connes talks about this here.
But mathematicians are cheap. What can you do in other fields? What does CNRS do?
You seem to believe that people who engage in Tall Poppy Syndrome would engage in anti-social punishment in this game. But they don’t. They engage in the least anti-social punishment and, by a large margin, the most pro-social punishment.
What does this have to do with Tall Poppy Syndrome? Since the people who engage in Tall Poppy Syndrome don’t punish any cooperators in this game, the distinction doesn’t matter. If you expected them to do so in this game, it directly falsifies your expectations and there is something very different to learn from it.
How about you comment on the tension between your beliefs and the evidence at hand?
Why do you bring up tall poppy syndrome? In the formal context of the game, Melbourne had the most pro-social punishment, and the second-least anti-social punishment. Tall poppy syndrome seems to be people who think that they’re doing pro-social punishment, but are excessively suspicious of successful people.
I think it’s fairly common for people who agree with an argument but disagree with its conclusions to title that disagreement “Against X,” but I think it would be better to use something like “Taking X Further,” or “Beyond X,” or, for more hostility, “Taking X Seriously.”
For chili peppers, I, too, prefer the second explanation. I think that is the more popular one, eg, appearing in wikipedia. More specific than digestion, is the theory that it is to avoid the grinding teeth of mammals. I don’t know if the specific case has been studied, but the general topic of how much various fruit-eaters digest seeds has been studied. Presumably there is study of how to select cooperative fruit-eaters over defective fruit-eaters.
I am confused by your first sentence. What are the alternative hypotheses? Protect the seed from what? Fruit are certainly lousy at protecting the seed from yeast. I claim that they protect the seed from specialized seed-eaters by encouraging consumption by specialized fruit-eaters. Yes, the avocado is a pretty weird fruit, but it’s still a soft, wet, easily digestible outer coating around a hard, difficult to digest seed. What light does it shine on the question? Your use of the word “but” suggests that it addresses the first question, but I don’t see it, perhaps because I don’t know what the first question is.
Do you apply this skepticism to all non-blind randomized studies? If people have an opinion on the right thing to do, they don’t join the study. And studies do ask people if they followed the instructions.