Welcoming the Wall Street brain drain
Societally speaking, it’s a good thing — as Dan Roth says — that Wall Street is losing its brilliant employees and that hot young university graduates are looking to other sectors instead. All that talent is better used just about anywhere else, largely because on Wall Street innovations are kept secret until the point at which they’re no longer of any use:
Instead of spending their days searching for exotic trades, some of these Wall Street wizards could’ve been creating drugs, imagining software, or solving energy problems. Capital markets need geniuses, too, but it’s hard to cheer such a massive money-chase…
On Wall Street, work in the lab never leaves the building; after all, a trading strategy’s value disappears when it goes mainstream. An innovation might strengthen capital markets, but the possibility of that research benefiting another industry—the kind of cross-pollination that turned Velcro from a NASA oddity into a modern staple—is eliminated.
It’s true that the money made from proprietary trading strategies is sometimes put into pure research, as Jim Simons is doing at Stonybrook or David Shaw is doing at DE Shaw Research. But it’s hard to make the case that Wall Street technology has any track record of making the world a better place. Indeed, quite the opposite; Roth goes so far as to say that “a new flowering of creativity on Wall Street would be a very bad thing”. I suspect he’s right.