Viveck Wadhwa posted an interesting article today over at Tech Crunch that was linked on slashdot entitled “Friends Don’t Let Geek Friends Work in Finance.” I’d like to take a moment to explain why the article has largely missed the mark. First off in full disclosure, about 4 months ago I started on a project for a financial client at work. However, as a consultant, I am not receiving the huge payout that other engineers who delve into finance see.
The article describes the financial industry as ‘poaching’ top scientists and engineers to work for them rather ‘solving the worlds problems.’ This is ridiculous for a couple of reasons.
Smart People Like to Work on Interesting Problems
The above may seem self evident, but it bears repeating. There are some really interesting problems in finance that most people who are not quants would never know about. Moreover, they are interesting problems that scientists and engineers are familiar with. It is eerie how similar Black-Scholes is to the neutron diffusion equation. It is like an old friend with a lime in it; what a twist!
Additionally, as an academic, if you feel like you can enter a space where you have a competitive advantage than you take that opportunity to make a name for yourself. Finance has a lot of room for tried and true methods from other fields. If you can apply one of these methods you learned during the course of your study and become the thing since securitized bread, you might just do so.
Couple the interesting problem and higher fame above with a higher pay grade and it is not surprising that scientist and engineers want to go into these economics. Far from being poached, I think the mindset makes a lot of sense. Or at least it is understandable. If you ignore that scientists are human, then you have missed a critical point in your analysis.
The Moral Hazard is the Same
This may come as a surprise to many people given the current discourse, but science and engineering are no more ethical as disciplines than finance. Everyday engineers are paid to build and design weapons of mass destruction, or attack drones to kill children in other lands, or missiles to topple governments, or engines to kill the Earth slowly. (For this discussion we will ignore the “Cars are murder!” argument.) Richard Feynman was responsible for the deaths of many people. Alexander Kalashnikov was responsible for far more. In addition to better toaster ovens, these are also the legacy of science and engineering.
This is not to say that science has not improved our lives in a million ways great and small. But in spite of the havoc the finance industry has wrought recently, they also improve our lives in many ways.
One is hard pressed to debate the merits of being able to borrow and loan money. It turns out to be a very useful thing. For centuries it was illegal (see usury). The liberation of trade (within limits, can’t have robber-barons now can we?) has made the past 200-300 years some the most productive ever. Trading in risk (insurance) turns out to be even more useful. Scientists have certainly benefited from this structure more so than most people.
Yes, you can and should debate the relative merits of CDOs, or rating agencies. But keep in mind that time and again, scientists and engineers have shown an extreme amorality towards their work. Moreover, hating bankers for being bankers perpetuates moral arguments outlined in the Bible which have historically been used to justify racism. Instead I urge you to please talk about the specific technical issues at hand.
If more people are going into the finance, and if financial jobs pay better, it is because this work is more valued by our society. If you think that this makes our society morally bankrupt, I’d tend to agree. If you want change society for the better, I am right behind you. Let’s really put science and engineering in its rightful place. Let’s also put banking and corporations in their rightful place as well. The whole system should be designed to improve the lives of people, not to perpetuate abstract hierarchies. Such are the principals our nation was founded on.