So I have been working on my concept that greed is good which the few that read my blog have seen. I will continue posting more on my opinion and ideas of greed but found an interesting article that many of you will enjoy and is very different from my opinions. So here is the link to the article, http://www.linkedin.com/today/post/article/20121009105715-5506908-what-if-doing-good-was-good-for-profits.
This article is very interesting due to the fact that it highlights how companies can do good in CSR (Corporate Social Responsibility) and make a profit from being good. My spin on this thought is that again companies are using greed disguised as good. Yes companies can do good and make a profit, but if they are being good because of the profits then I would consider them greedy which is a good and natural thing.
Besides greed, I do agree that customers choose to purchase products from companies that have a good image. For example I love Starbucks due to their coffee, customer service, atmosphere, a long list of other reasons, and the fact that they do good. (SIDE Story: I had a bad experience at a Starbucks in Ann Arbor and complained to the head quarters. The company apologized and sent me a voucher for a free coupon. I know many companies could care less but this experience made me a stronger customer, especially since I found out Barnes and Noble Starbucks aren't ran by them which is easily noticed.) Anyways back to CSR, Starbucks has an image that they help small farmers and care about the planet which makes people choose them over other companies. After Googling to see if they have any articles of CSR I found a web page on their site which explains in lots of details why they are good (http://www.starbucks.com/responsibility/learn-more/goals-and-progress).
Overall I agree with the article What if doing good was good for profits? in that companies should be doing good to attract customers since business is all about making customers happy and people love to feel like they are good.
As a king of Thailand (Bhumibol Adulyadej) once said, "A good person can make another person good; it means that goodness will elicit goodness in the society; other persons will also be good."
This blog is a personal market research blog and does not attest to the accuracy of the financial information posted on this blog. I am not a broker and do not advise anyone.
Tuesday, October 9, 2012
Thursday, June 21, 2012
Greed 1.1
Everyone I have talked to agrees
that greed is bad but I would strongly disagree. To me greed is a natural law
and cannot be broken as gravity is a natural law that can also not be broken.
We can fly planes which seem as if they are breaking the natural law of gravity
but in reality they are using other natural laws to create this allusion that
gravity is broken. This example of gravity is similar to greed in the fact that
people think they can overcome greed but in reality are just delusional and
have not overcome greed but are just playing into greed unknowingly. Greed
comes in five degrees and matches Maslow’s Hierarchy.
The first level of greed is
physiological needs. Every living thing has a desire to live and therefore seeks
to obtain food, shelter, and/or the basic needs to live. If one was selfless
they would just give away all the food and shelter they found leaving them to
die. Therefore everyone must be selfish at the base level during their lives.
Suicide would be the exception to this rule. Those that commit suicide are
giving up life because in one way or another they feel that they are unable to
obtain what is needed (needed is used in a lose sense) to live.
The
second level is safety and security. People are greedy and seek to obtain
safety and security through health, employment, property, family, and social
stability. These needs are always taken to the furthest extent to help secure
the physiological needs and make life easier. Being healthy is a way to make
sure that you can fulfill the physiological needs to the highest capacity
(meaning excess or in what is required to live one more day). Employment
ensures that a person can afford to buy physiological needs such as food,
clothing, and water. People will always look to maximize their earnings as well
as find a stable job so they can attempt to maximize their needs at all levels
of Maslow’s Hierarchy as well as fulfill the need of security. Property is not
needed to live but, when talking about land, it is wanted to help protect their
other property in the form of things that are needed such as food and things
that are not needed such as toys or tools used to meet their physiological
needs. Family and social stability are maximized by individuals based on the
amount of money that they can obtain. I would argue that many people don’t have
kids or have small families because they evaluate their time and money and
spread it so they can maximize their personal pleasure. Families and social
stability bring pleasure to the individual through feeling needed or through a
parent taking credit as to raising someone like themselves. Many parents feel
they have failed when their children have chosen a different life path than
what the parents have chosen for themselves. Social stability or, as I view it,
having friends makes individuals feel needed or important since friends are
people who support you emotionally and/or physiologically. Safety and security
are not needed but everyone seeks to have safety and security as a way to make
life easier which is obtaining things that are in excess, meaning greed.
The
third level is love and belonging. All humans seek friendship and love. We seek
to be accepted by others as it is needed for psychological well being. Can one
define how many friends, family, or lovers one needs? I would argue that humans
constantly seek more in all three categories. It is nice to have friends and we
are always seeking the acceptance of those around us. The more people that
accept us the better we feel about ourselves. Family acceptance is also sought
after. An example is when children imitate their parents and want to be like
them since similarities can lead to acceptance by others. The category of
lovers can be quite complicated since this varies from society to society. In
the United States some seek many casual partners and some seek a mate for life
to fulfill acceptance and sexual intimacy. Either way people are seeking to
gain more partners or are seeking deeper emotional connection. When humans feel
that a connection no longer exists many of us seek new partners and new
relationships. Over time in the United States divorce has become more
acceptable and people move on from one relationship to another seeking “more”
of a characteristic within a relationship. We are all greedy in either the
quantity and/or quality of intimate relationships.
The
forth level is esteem. The last level of love and belonging, I believe, is tied
to esteem in the fact that acceptance (similar to respect) builds self-esteem
and confidence which is also obtained through achievements. Humans want to feel
as if we have value and we define our value through achievements and acceptance
of others. All humans have different achievements but as we achieve our goals
we gain satisfaction and feel we are valued. We gain pleasure from the feeling
of being accomplished and valuable, and seek more of this feeling by setting
new goals or planning new ways to gain greater acceptance from people we know
or by looking for new people to gain acceptance from. Depending on your
beliefs, humans are either designed from God or from natural selection to seek
pleasure, and gaining esteem is one of the many pleasures we seek. Why would
someone stop after a small amount of pleasure is gained if they can gain more;
the answer is that humans are greedy and usually will seek more pleasure as
long as there is a positive net gain to them.
The
fifth and final level is self-actualization. This includes morality,
creativity, spontaneity, problem solving, lack of prejudice, and acceptance of
facts. This last level in my opinion is mental stimulation. When someone finds
something that stimulates their desire to reach self-actualization they feel as
if they are better than others which gives them a feeling of accomplishment or
self-actualization. Once we experience success through self-actualization we
seek more because it is pleasurable. There is no limit to how much pleasure we
should gain which means that humans are greedy.
This last level is what I consider
the Greed Block. The Greed Block is my theory on why people think greed is bad.
People think greed is bad because they feel they have moral obligations to
mankind and/or God. They feel that if they follow these morals and defy the
natural instinct to be greedy that they rise above the natural human impulse
and are better people because they can put the whole above the individual. The
fact that they are trying to defy a natural law is illogical and makes society
worse off. To prove society becomes worse off can be seen in the Invisible Hand
theory by Adam Smith that describes how individuals must be greedy to make the
whole (society or the economy) better off by creating an equilibrium.
Example: For this example we assume more is better which, by
definition, greed is. I would argue that all humans would prefer more of a good
thing and less of a bad thing. The best example is a game of tug of war between
two people. To measure how well off each person and society (the two players in
the game) are in each scenario we will use utility. Utility is an economic term
used as a unit of measure for happiness. The higher a person’s utility, the
happier they are. Utility is not an exact measurement and is only used for
theoretical problems.
Scenario A: If one person has the Greed Block and just takes the
very basics of food and shelter they will allow the other person, who follows
the natural law of greed, to take more than their fair share. The Greed Block
person will be pulled over the line and will be much worse off than the greedy
person. The Greed Block person was attempting to be selfless which would help
the society of two to become better off. The end result is that the utility of
the greedy person is very large and the utility of the Greed Block person is
very small. Now this end result is neither good nor bad but logically seems
wrong if both parties and their society could have been better off as a whole.
A mathematical example of Scenario A would be that the Greed Block person had a
utility of 10 while the greedy person had a utility of 90 which would be a
total of 100.
Scenario B: If there were two Greed Block people playing tug of war
then they would both slightly pull at the rope but realize they were happy as
is and would let the rope go limp. The mathematical example of Scenario B would
be 10 for each person for a total society utility of 20.
Scenario C: Now if both people in the tug of war were equal and
were both greedy people there would be a struggle and a more even distribution
of utility. A mathematical example of Scenario C would be 60 on both sides for
a total utility of 120.
The mathematical examples of the
three scenarios show that a society of greedy people would yield the highest
utility. (This has not been proven through research at this point but I would
like to conduct research to support this theory. There could be research out
there that supports this but I have not found it thus far.) The Greed Block
people’s goal was to create a society where we all benefited by not being
greedy. Their end goal made society worse off and was not successful since
society could have been better off and their goal accomplished if they would
have followed the natural law of greed. I view society as a web of ropes that
all intersect at the middle. As each person pulls on their end we as a society
maximize our personal utility as well as the total utility of the society. I
will continue this tug of war example in future writing about the concept of
greed. I know not everyone has the same strength in tug of war and in life which
will be discussed in future writings.
In conclusion of this section on my
Greed series I see a strong connection between Maslow’s Hierarchy and the
concept of greed as being a good and a natural law. Maslow’s Hierarchy has
different levels of needs for humans which can be viewed as levels of
greediness. The more greed each individual has the better off the society will
be. Each human should experience all levels of Maslow’s Hierarchy to the
fullest extent possible through their greed. Through the theory of the
Invisible Hand and my example of a tug of war, greed makes a society better.
The goal of an individual should be to maximize the well being of one’s self
based on the natural law of greed. Based on greed we should maximize utility to
the greatest extent possible. The next paper will be on why laws are required
within a society and how government and greed go together hand in hand to
create a better society.
Thursday, May 3, 2012
Greed 1.0
Introduction to the Greed Series
I am going to be exploring the concept of greed by writing a series of blogs and getting feedback from those of you reading as well as from the people around me. Through my recent readings of finance, economics, and the news I have begun to question whether greed is good or bad. Since I am pursuing Financial Engineering and have read many news articles about how bad and greedy Financial Engineers are, I have started to question the society we live in. So please feel free to read the first paper below and give your feedback.This photo is courtesy of InvestingCaffeine.com |
Greed - 1.0
The word greed has a negative connotation. First we must define greed so that we can discuss the concept of greed. According to Merriam-Webster online dictionary, greed is “a selfish and excessive desire for more of something (as money) than is needed.” That definition is basic and easy to understand at first but the question then becomes what is needed? Is needed food and shelter? Or is it more than that? Is love needed? The question of needs can become controversial and we will therefore assume that it is food and shelter so that we can continue on our exploration of greed. Greed dates back to the biblical times and is condoned by Christians and many other religions as a sin. The question I would like to explore is why is greed bad? Can we all be greedy and be happy? Or is greed bad for a society?Wednesday, March 28, 2012
What is Financial Engineering?
A financial engineer is someone who uses computer programming, finance, and mathematics to analyze financial assets. Many financial engineers specialize in specific areas of finance such as trading, risk management, asset management, and corporate finance. Some popular positions are algorithmic trader, derivatives trader, strategist, finance software engineer, proprietary trader, hedge fund managers, and risk manager. Risk management is a very broad area which could be a job for an investment bank, hedge fund, or any financial or corporate institutions who is looking to manage their risk in financial assets.
Financial engineering is relatively new and the father of financial engineering is Fischer Black. There are about 22 master programs in North America and data about these programs and rankings can be found on QuantNet.com. The field has been controversial in the news lately since most derivatives are created or transacted by financial engineers.
For anyone who is interested in learning more about the field I would recommend reading two books. The most influential book I have ever read is a book about Fischer Black called Fischer Black and the Revolutionary Idea of Finance. Fischer Black based his life on the CAPM model and the pursuit for knowledge. Financial engineering is all about creating new models and theories which can be seen in Fischer Black's life. If you are considering financial engineering and don’t eat, sleep, and dream about finance I would not recommend pursuing it. The average salary is fairly high and the growth potential is good but only for those who are dedicated.
The second book is My Life as a Quant by Emanuel Derman. The book is about Emanuel Derman’s life and how he became a quant. He like many financial engineers that helped start the field were from quantitative fields such as physics. He now teaches at Columbia University and has contributed to the field in many ways as a professor and practitioner.
The road to becoming a financial engineer is long and hard. A master is a minimum requirement for quant positions at investment banks and other financial institutions. The programs are getting more competitive every year as students from around the world are competing to become financial engineers. There are also more programs being created to meet the high demand for financial engineers but be wary since where you go matters just as much as what you know and who you know.
Please feel free to leave comments or ask questions.
Saturday, March 3, 2012
Dimitri Bianco Update
Below is a copy of the letter that has been sent out to my close contacts about what I am doing in regards to Financial Engineering.
Arielle and I are very excited to move to Ann Arbor, Michigan!
Everyone,
As many of you know after graduating from WSU I have been pursuing a career as a trader on Wall Street. I applied to over 170 jobs and have networked with many people. I learned from many rejections as well as advice from network contacts that I needed more education in financial engineering as Wall Street shifts toward quantitative analysis. I applied to seven schools and have been accepted to the Claremont Graduate University and the University of Michigan. I will be accepting the offer from the University of Michigan and will be starting school July 2nd.
I would like to give a special thanks to those that wrote recommendation letters; Steve Matthews (family friend and corporate lawyer at PRS), Dr. Donna Paul (my corporate finance professor at WSU), and Dr. Gene Lai (my financial modeling professor at WSU). I would also like to thank Ron Vodika for changing the way I look at life and gaining a desired career; Nathan Soper for giving advice, a job interview, and helping me to create a great resume; Emanuel Derman’s book My Life As A Quant which has motivated me by his life as an example; Fischer Black’s life and ideas as portrayed in the book Fischer Black and the Revolutionary Idea of Finance which has been the most influential source on my outlook of life and education; my parents for a place to stay, a job, and for being my parents; my many networking contacts that have made impressions on me; and last the most important, my wife Arielle for supporting me and motivating me when times looked grim.
Again thank you to everyone for helping me get to where I am in my journey. I will send out major updates as I progress.
For updates, my thoughts, and research please visit my blog biancomarketresearch.blogspot.com
Sincerely,
Dimitri BiancoArielle and myself at WSU. Special thanks to Matt Holmes for the taking the picture. |
Thursday, February 9, 2012
Irrational Financial Advisors
An interesting approach that I have never thought about is the CAPM (capital asset pricing model) with a lifetime of investing. Typical financial advisors will tell you to load up on risk when you are young and then ease off of it as you get older. One might think this makes sense but it is a mirage. The concept that when you are young you expect to have more time and could make up a loss if one was taken. The question is why you would take that risk if no additional return is granted. According to the CAPM which is widely accepted, diversification of risky assets reduces unsystematic risk (the risk which an individual stock contains that can be diversified away. In contrast is systematic risk which is also called market risk and cannot be diversified away). So why should an investor stock up on risky assets such as stocks at a young age and bear more risk than is preferred? It would make more sense to develop a well balanced portfolio of stocks and bonds and hold a portfolio that matches ones risk preferences. An individual’s risk preferences might change over one's life but betting that markets will be positive long enough for you to recoup your losses is irrational. Investors, especially average people should not take bets that they do not understand. A market can crash at anytime and as Maynard Keynes once said, "Markets can remain irrational longer than you can remain solvent." Don't be fooled by high end investment banks.
The inspiration for this article is based on the thoughts of Fischer Black. For those of you who don't know who Fischer is, he is the father of financial engineering and one of the brightest minds the world will see. He was many generations ahead of his time in the thoughts he produced. He is still very controversial due to his forward thinking. He is also the only person I know that believes as I do in a general equilibrium. I hope that this article makes you think twice about your investing practices.
Fischer Black |
The inspiration for this article is based on the thoughts of Fischer Black. For those of you who don't know who Fischer is, he is the father of financial engineering and one of the brightest minds the world will see. He was many generations ahead of his time in the thoughts he produced. He is still very controversial due to his forward thinking. He is also the only person I know that believes as I do in a general equilibrium. I hope that this article makes you think twice about your investing practices.
Sunday, January 29, 2012
Economic Thought
As Adam Smith states specialization is key to increasing productivity. The real question is how far should this idea be taken? As globalization increases and economies continue to grow larger and larger should specialization be divided by country, state, city, or corporation?
My thoughts on this topic are as clear as most economics. I feel as globalization occurs and economies continue to grow the spectrum of specialization should continue to narrow. If one was able to graph this idea it would look like a concave function. As civilization began and many people never traveled outside of their village I can see the idea of corporations or families trading or individuals within families trading due to specialization. As economies grew and globalization started to progress countries could benefit from trading those goods that they were good at. Many factors could dictate which goods or services a country was efficient at but the main factors being raw materials and available labor. Now as globalization continues and the movement of goods becomes cheaper and more efficient, specialization at the corporate level seems to be more efficient than other spectrums. I am not stating that only one spectrum is present but the most efficient form of specialization seems to occur more at the present time and in the future with corporate specialization.
This theory seems accurate to me but is my graph right or is it different? Maybe it cycles.
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