A Canadian on Wall Street

Mutant, one of the very few posters on Metafilter worth reading for in-depth knowledge of the financial and banking industry, has posted another of his detailed collections of links on a theme, this time the expanding markets of hedge funds (perhaps “alternative investors” is more accurate?) He ends with a link to a Financial Times’ article on a more organized take on poker backing, which is something I’ve always found reminded me a lot of investing.

One of the things the article makes clear to me is that poker is perhaps not the best investment at the moment, as by its nature and reputation, it rarely attracts the kind of player that isn’t in some form a gambler (i.e. someone who plays for excitement). Perhaps that will change if this becomes more developed, although I imagine that it would take a lot of the spirit out of the game and is probably antithetical to the reasons most people get into poker. Once you start seeing accredited educational institutions with poker majors, the poker industry would dry up. Or maybe not — the financial trade is bigger than its ever been. All of these changes have come on the back of networks and technology.

One of the more interesting conventions they use in the article, at least in the latter half, is calling the BadBeat poker players “traders”. I find this a little imprecise — one of the main distinctions between poker and finance in my opinion is that there really isn’t a “market” in poker, one where you can take opposite sides of a position.

I occasionally still think I might want to be an analyst at a hedge fund. I have a friend who does this at a small boutique firm in Manhattan, and I think his reasoning for entering the industry drops him easily into the demographic profiled in this article from the New York Times last fall:

Dozens of young people (mostly male) who want to be, or already are, successful traders said in interviews that they relished the challenge of their jobs, in addition to the lofty paychecks.

But they also spoke as if a money-clock were ticking: many said they wanted to make as much money as fast as they could so that they could live in style later in life while doing less lucrative things like running a charity, working for the government, spending time with their families, or inventing new technologies. Some, of course, plan to stay in finance their entire careers, and they, too, are very focused on earning fat bonuses fast.

I know that in my case, too, I imagine I could have my cake and eat it. These young guns seem to believe that it’s possible to spend five to ten years in the fast-paced finance world — just long enough to make that fortune — and come out the other side unscathed, fully stacked and able to pursue anything their hearts’ desire. I suppose this is possible occasionally, as evidenced by the occasional random Google or Microsoft millionaire that has gone on to a pleasant retirement running hobby charities, but has wealth and greed really been decoupled in this way? I think it can, but I think the difficulty is that most people in this position will not be able to achieve great wealth as fast and easily as they think. It’d be interesting to profile these kids in the next few years, or even now, months and a much more unpredictable market later, to see how their hedge funds are doing. This article seems to be “of its time” — in a year or two, it might seem quaint or naive, the way an article about dot-com millionaires does now.

That said, I do applaud the lack of credence in the value of MBAs, at least as far as investing/finance goes. From everything I know and have read, the average MBA (except maybe a Wharton grad) is ill-equipped to just jump into a financial analyst job, or at least not that much more equipped than a smart and savvy person with an above average interest in finance.