Wall Street needs a makeover

I recently got to thinking about the role of Wall Street - asset managers, hedge funds, etc - and whether they really promote society's well being, and whether the field is over saturated today.

I certainly believe that we, as a society, are better off with the likes of Vanguard - low-fee index fund king - who allow the general public to invest at least part of their hard-earned money in stocks, which have shown to be a relatively good investment in the long term. However, I think the glitz and glamor of the industry has now attracted far too many individuals for the wrong reasons - greed and money - and society as a whole is probably worse off as these talented individuals go to Wall Street to - essentially - shuffle a deck of cards, instead of working as engineers to, say, build a better bridge, or come up with a new treatment for an illness, or research better ways to produce energy, etc.

Buying and selling stocks is really not very difficult - you click a button these days. So the question is what do you buy and what do you sell. Some generally ask why, but many do not. Regardless, in today's world, we have an industry in which people make 'careers' out of trying to shuffle around other people's money, and in the process they hope to become ultra wealthy. It's really ludicrous, but understandable if you are really producing something good for society, i.e. returns consistently in excess of the average like Warren Buffett. But, given that over 90% of asset managers cannot even beat the S&P 500, I really don't know why they exist. Moreover, I don't know why people happily give them their dough. Wait, I know - financial illiteracy.

Wall Street has become a gigantic card shuffling machine, where the cards are other people's money. This money has been earned by people who actually 'produce' stuff - tangible and intangible - and contribute to the economy's goods and services. Wall Street, on the other hand, simply tries to catch the wave and hopes that other people (those working at companies like GE, MMM, etc) will be successful at building stuff or providing services, but that they (Wall Street) will be enriched. Hedge funds engage in the most sophisticated form of gambling using options, credit default swaps, and other derivatives that are nothing but a zero-sum game, e.g. for the option buyer to win, the seller must lose. (It is not so with stocks in the long run). Anyway, the whole thing is absolutely absurd and I am not surprised that it is falling apart right in front of our delicate eyes.