Jul 19 2006
In Praise of Trading
Published by Ivan Groznii at 9:05 am under Reflections |
My girlfriend is a regular reader of my blog, in spite of it being so heavy on technology commentary it seems like a Hymnbook to Geekdom. Furthermore, she is not a technology boffin; to state what she does for a living as obscurely as possible, so no one can track her down, she trades a commodity for a living.
That said, I don’t think she feels particularly good about it. We were discussing one of my posts last night, and she said something that particularly caught my attention:
“You do something practical…I just gamble with other people’s money.”
I felt my heart sink a touch at those words. It’s not nice to feel that you don’t contribute to society through the work you do. She is also one of the very few people whose discomfort I don’t enjoy.
So dear, as you’ll likely be reading this, let me clarify something for you. What you do is immensely practical, and it is very important.
When we go into a store to buy anything, we forget that the price of what we buy is part of an enormously complex set of calculations. Take your 40 pence Mars bar, for example. A large part of its price is dependent upon the costs of the sugar, cocoa beans (assuming there are any in today’s Mars bar) and other ingredients in the bar. These commodities are traded by people like my girlfriend, who have to figure out what these commodities are worth, and how much for which they should be sold.
Important stuff. Much of it is taking a guess, an educated guess, mind you, but a guess nonetheless. If she was trading in cocoa beans (she isn’t), she’d have to guage what is going on in the market: is Cadbury’s going to at last do the right thing and actually put more cocoa in their chocolate or are they going to continue to put candle wax in their bars? If it’s the former, the cocoa bean supply will be tighter. If the latter, things will remain as they are. She has to consistently get this calculation right, and make profitable deals for both buyer and seller.
Yes, there is an element of gambling in what she does. But it also requires a skill which very few people possess - an insight into market movements. Traders are like herd animals, and it’s part of her job to guess which way the herd is moving, whether it is in orderly formation or in a stampede.
It is true a lot of people do this job in the City of London. Semi-educated wankers destroy economies and markets on a daily basis because they get it wrong. These are the sort of people I used to insult during my London days when they got smashed at my local pub and started playing air guitar.
In contrast, my girlfriend is one of the few who consistently gets it right. It is people like her that mean we have a more or less rational set of prices for what it is we buy and sell. It is people like her that keep the wheels of capitalism turning, whereas I’m just trying to throw a monkey wrench into the gears of the Microsoft machine.
She is changing jobs this year, and her new profession, which again has to do with her preferred commodity, will be just as important. However, she will no longer be working in trading; in some ways this is too bad, as it may increase the power of the semi-educated wanker air guitarists in the market. I suggest we’ll be just that bit poorer because of it.
One Response to “In Praise of Trading”
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I suppose that it does have a certain degree of importance in the world, and if we (the traders) weren’t here the economy would certainly have died a long time ago. I guess that every line of business has its troubles - in mine it is the air guitar types that you mention, the extreme example of which is the infamous Nick Leeson who was indulging in some highly leveraged short taking - antics that were enough to bring down a bank.
Sadly, this is the type that characterises the trader, and my commodity is not short of that type. He, and as the stereotype goes it is always a he, can usually be found in a bar late at night, drunk and drawling about the delivery of his thirf Ferrari (I have a specific “person” in mind here!).
The ones that are missed are the quiet ones, and there are a few. They’re not generally to be found out every night downing ten different types of tequila, but God help you if you come upon them in the market and you haven’t done your homework. I hope that I fall into the latter category, and oddly enough, all of those who I would place there from my corner of the market are the ladies.
Before I start sounding like a feminist (shoot me if I ever do), let me clarify that these are not the types who whinge about discrimination. They’ve seen a way to succeed and in a lot of cases, beat the guys, not with sticks, but with their own merits. I am not the best of them, there are some awesome ladies in the market, I can name one who is a Financial Engineer by training and who is speaks ten languages, seven of which she is fluent in.
The mind boggles!
As I seem to be in danger of highjacking your blog with extended wafflings of my own so I’ll shut up.