I got covered in an Israeli newspaper talking about Occupy.
Here’s the article. If you can read Hebrew, please tell me how it reads.
Update: here’s a pdf version of it.
It reads well
Humm, and you a technical person? http://translate.google.com…paste the link into the box on the left and translate it…
Hebrew does not translate well according to my Israeli friends.
They’re correct. I’ve tried it before with Google translate, doesn’t work.
Yes, it’s a little rough to read, but I found that the nouns and verbs mostly made sense, and a few salient adjectives and adverbs added enough color to make it readable.
I’m fluent but I’m getting blocked with some app ad on my phone. If you could email me the text of the article at firstname.lastname@example.org, I can help. Thanks
I just added a link to the pdf version to the post.
Will do it in parts, as I have some pressing issues. (Yes, I’m fluent and am translating without machine assistance.)
“The fact that we are smarter than others doesn’t give us the right to take their money.”
Cathy O’Neil left a thriving academic career, became a numbers guru on Wall Street, and worked next to giants like Larry Summers. Four years were enough for her to leave by slamming the door and to go out against the system: hedge funds which profit on the backs of retirees, banks which play with models, and mathematicians who are used mainly as ornaments.
Tali Shamir, New York
Everything began in 2006, as O’neil (sic) decided to abandon …
[Using google translate with my corrections:]
It all started in 2006, when O’Neill decided to abandon a promising career as a professor of number theory at Barnard College in Columbia University in New York and move into the world of finance. Until then, she had passed through the most prestigious academic institutions in the U.S.: Berkeley, Harvard, MIT. “But I did not like the slow pace and the politics of academia,” she says, “I wanted to influence the world.” Her mathematical talent immediately got her a financial engineering job at one of the world’s largest hedge funds, DE Shaw, considered the Harvard (translator’s note: given David’s background, more likely the Stanford) of hedge funds. ” She was the only woman in her department and loved the intellectual challenge, but after two years the financial collapse began and she discovered that the world she joined was busy creating problems much more than solving them. This she did not like.
Caption under the picture:
Kathy O’Neill, the woman behind the influential blog Mathbabe. “After the crisis everybody took a deep breath and said, “Okay, I’m still rich. Hunger remained, competition intensified, the values have not changed. Because of that I left.”
Q: When did you realize that Wall Street was not for you?
A: “It happened gradually. When I looked around, I realized that everyone felt that they do not belong. The environment was designed that way so that you will always feel that your security is temporary. You feel safe only when you get a fat bonus. We were like rats in a maze without enough food. That’s an unappealing environment.”
Q: I guess no one there lacked food.
A: “Obviously. They were really disappointed if they received only an 80 thousand dollar bonus! That constant insecurity influenced the morals of the people and pulled to the field people without morals. When you are so concerned about your status, you don’t question things. The perception of half the people was “clearly we will take money from anybody we can.” They would say:’ It is not enough to have money for myself, my wife and my children, I need enough money for my grandchildren so they will not have to work. Only then will I feel secure.’ They never thought about society and the community around them.
“The second half was made up of workers who could be very nice people if they were working at another company. They just were so insecure and afraid that they were stupid. I wanted to tell them, ‘It is not that you are not smart enough, it’s just a terrible place to work in.”
FULL DISCLOSURE: I am happy to translate from my fourth (Hebrew) to my third (English) language. I worked at DE Shaw in the mid to late 90s and have a different take on that experience than Cathy, but I will do my best to faithfully translate the article.
The article makes for a good read. As far as I can tell the translation of your words to Hebrew was faithful, and your message comes through. The statements about you seem correct (compatible with what’s you’ve revealed on the blog).
Do you want a brief sketch? A full back-translation?
Hey, Lior, if you can translate faster or better, please help out, as it does take me some time as I am trying to maintain accuracy and fidelity.
I’m on it.
Should I go back and translate the earlier parts?
Only if you feel my translation is inaccurate. I am quite fluent in both languages (and in financial engineering, as well).
In 2009 she left DE Shaw for a job at a risk management firm, and in 2011 she decided to cross the line finally. She founded a personal/social blog named Mathbabe, in which she disperses some of the mystery which surrounds Wall Street and tells about her experiences in the financial battlefield. Her biting posts and her sharp performances in the media have made her part of a new wave of former financiers (as Yves Smith and Bill Harrington) who report on the behind the scenes of the world of money, and help in formulating reasoned professional cachet for the argument that has been repeated over and over the world: Something is rotten in the financial kingdom. As it happened, a few months after O’Neill went live with her blog, “Occupy Wall Street” came to the world which found in O’Neill a natural partner [or ally]. Today, along with maintaining the blog and working as a data scientist (she helps companies use current information to create forecasts for customer behavior, and will publish in September a textbook in this field), O’Neill also organizes the activities of “alternative banking” – one of the most productive products which grew out of “Occupy Wall Street.”
Google Chrome detects non-English pages automatically and translates them at the press of a button. This is the main reason Chrome has been my default browser for awhile now, but just yesterday I downloaded and began reading Julian Assange et al.’s “Cypherpunks: Freedom and the Future of the Internet,” which could make me change my mind about using it. For now anyway, the translate button’s a nicety I’m sold on.
“I signed quite a few documents by which I am forbidden to talk about my work, but no one forbade me from talking about technique,” she says. “I felt like I was part of a secret guild – I could not find the things I learned from working in the financial industry in any book. I thought to myself, ‘If only one could use them for the better, not the worse.’ In her blog O’Neill combines her personal stories with unrelenting critique of all parts of the financial system: from hedge funds, through banks, to the rating agencies and regulators. That did not stop the SEC from recently offering her a job, but she refused politely. “They proposed that I should investigate insider trading, but that is like chasing a recreational drug user rather than a Colombian drug dealer,” she explains. “I am interested in systemic problems.”
Using “stupid money”
While at D.E. Shaw O’Neil worked in a team of about 20 traders, programmers and quantitative analysts (“quants” in the professional cant). Their role was to formulate and test new trading models composed of purely computational strategies. In other words, strategies based on numbers alone and not the properties of the investment. They searched for models that would allow them to stay one step ahead of other investors. “In the main you try to anticipate what the average investor would do and then act not based on the future result but on the result of the result”, she tries to explain. “You know what the models currently on the market will do, so you can predict their predictions ahead of time. We only worked with numbers. There was no further digging [proper Hebrew, not sure what your English was] beyond this, to the ideas or economics behind the models”. In fact, occasionally O’Neil’s only role was to supervise a computer that conducted trades automatically based on the models the team developed.
“The more I understood what we were doing, the less I was enthuiastic about it”, she tells. “I realized that we were taking advantage of the fact that people were investing their pension savings in the financial markets”.
Q: How did you do that.
“I can’t reveal details. In the main, you predict what a pension fund will do at the end of the month — which is pretty easy since by law they are required to report this in their forecasts — and then you preempt them and make money off it.
Q: This causes them losses.
“Yes. If you know, for example, that pension funds must buy $1M of instruments related to the S&P 500 index, then you know that the S&P 500 will rise. If you know something is about to happen you can make money off that.”
This is called “stupid money” and “smart money” — two phrases O’Neil heard repeatedly during her time at the hedge fund. They signify the distinction between simple investment and sophisticated investment, done based on future-predicting models. “Much of the money made in the financial markets is at the expense of stupid money”, she says. “It made me wonder why we were taking money from others just because we were smarter. The answer always was ‘we aren’t doing anything illegal’. The were defining moral as legal”.
She wrote about this culture in a series of posts called “Working with Larry Summers” which were read around the web. Prof. Summers, previously President Clinton’s Secretary of the Treasury and later a senior advisor to President Obama, “would come once in a fortnight, write a few ideas and we’d work on them”, she tells now. “He was between jobs, after leaving the presidency of Harvard and before he went to work for the Government (for this temporary job he made $5M in 16 months [the reporter]). He was arrogant, a man who cared more to win the argument than to be right. But he wasn’t worse than anyone else. The people there were like that.”
“A Hedge fun is a kind of mythical environment where intelligence overcomes all obstacles and you are supposed to be king of the universe. Instead of competing over who has the biggest or who is strongest or sings the best, you compete over who is smartest — and the indicator for smarts is apparently money. If you are making money, you must be smart. When the crisis started, everyone took a deep breath for about two weeks and then said `OK. I’m still going to be rich’. The hunger didn’t go away, the competitiveness got worse, the values didn’t change. This was one of the main reasons I left, as I don’t care about money so much”.
Erratum: Section title should probably be “exploiting stupid money” or “taking advantage of stupid money”.
Wall Street won’t become ethical
Immediately after leaving D.E. Shaw, O’Neil started looking for a new, more ethical job. “I decided to be part of the solution and not part of the problem, so I applied to regulatory bodies, but I didn’t get callbacks”, she tells. “I applied to the Federal Reserve and they never replied, and eventually I was hired by Risk Matrix, the risk management company. I thought that if I improve their models I’ll make the world a better place”.
She studied risk models, and tried to find new ways to calculate the risks entailed by the credit derivatives that caused the financial crisis. It took less than a year for her to discover — one more — that the world is uglier than she thought. She did find ways to minimize massive financial losses, but no-one cared. She found the largest banks, the ones ‘too big to fail’, displayed particular indifference. “Customers would call us when they had an issue with a risk report we prepared for them” she tells. “When the largest banks called, they never cared about the numbers. The comments were always about the color or font we used. They just wanted things to look good, in the most literal sense”.
O’Neil realized that the problem lay not with the quality of the models, but with the banks always finding ways to ignore them, or game them for their needs. That they paid for the services didn’t help, since “they were our customers, and we couldn’t offend them”. The banks, she realized, used the models as a fancy rubber stamp for their products. “The software featured many ornaments intended to impress clients — for example Monte Carlo simulations (a method for calculating probabilities using random numbers [the reports]) and sophisticated optimization tools — but in the end the banks and their financial managers always inputted their own market estimates”, she recently wrote. “The put in completely ridiculous estimates of imaginary returns and almost completely elided the risks”.
“I had always been attracted to mathematics since it is clean; answers are always either correct or incorrect”, she says today. “In Wall Street I learned that this is not exactly the case. Mathematics may be absolute, but the way it is used is not. At the end of the day the decisions we make are ethical, not mathematical, and we use the mathematics to create the impression they are based on facts. You can engineer the best models in the world, but it won’t matter at all if the largest banks don’t care that they are doing something dangerous”.
“Nobody in finance really cares, fundamentally. They aren’t putting their own money at risk, and greater risk means greater chances for a larger bonus. The mentality is `even if I bring down the firm, I don’t care’, since even that won’t lead to punishment. If they lose, the worst outcome is losing their job, and then they would find another one. This is a system that incentivizes risk-taking”,
Q: So you say: “Put ethics aside and concentrate on incentives”?
“I am not asking Wall Street people to become ethical. I was there and I know that it won’t happen. Half of them couldn’t in the first place. I also don’t think that they should all be sent to jail, but I want a rational system, and that people who are responsible for major failures wouldn’t be honoured.”
Errata (my errors): “one more” should be “once more”, “if I‘d improve their models I’d make the world a better place”.
An intentionally complicated system
O’Neil first arrived at “Occupy Wall Street” with her 11-year-old son. “A few days later I heard one of the protesters give an interview and say wrong things. But it’s not that these people are ignorant. Accusing them of not understanding the financial system is ludicrous. Nobody understands that system. I don’t understand it either, and I worked in it.”
Q: Does Larry Summers, say, understand it?
“No. He may think he understands it, but he is a larger ignoramus than me, as is Allan Greenspan (the former Chairman of the Federal Reserve) and Robert Rubin (Secretary of the Treasury in the Clinton administration). These economists may understand some economic issues overlaying the financial system, but the system is the engine. A good example is the manipulation of LIBOR: the economists didn’t know. They didn’t understand the incentives, didn’t understand the manipulation. They also didn’t think they were supposed to understand. They told themselves: `those finance people must know what they are doing’. Greenspan and Summers were two of the biggest anti-regulators, since they had this religious belief that people have incentives to be honest, incentives such are reputation. This isn’t true. The only incentive is to make more money, and it isn’t worth it to do the right thing.
Q: What about the claim that the banks returned the [bailout] money with interest?
“This is not about money, it’s about risk. It’s true that the largest banks return the money, but one we gave them the money, we also gave them the status `too big to fail’, which itself is worth a lot of money. We created an expectation of the next bailouts, so the banks today have an incentive to take even greater risks. Not only did we give them free insurance, we also told them: `please, make the next bailout bigger’”.
If it was up to her, the first thing she’d do is split the large banks, so that their crashing wouldn’t threaten the system, and wouldn’t have such a “massive influence on legislators and regulators”. Another ambition, less concrete, is that “people should stop use mathematics as a weapon of intimidation. It is a weapon that economists use to justify unethical ideas”.
Q: Do you think you’ll succeed and have an effect?
“I think we already have had an effect. There is a consensus today that `too big to fail’ is a problem, which wasn’t the case a year ago. I don’t know how much of that is due to us, but there is a lot of talk about this, even by Fed Chairman Ben Bernanke. On the other hand, nobody in Wall Street wants a reform, and things will only change when politicians feel the pressure to make changes . I’m not naive and I know that politicians don’t understand finances. They get from the industry lobbyists not only money, but also information. But I am not pessimistic. As they say in `Occupy Wall Street’, `a week before, no-one knew the Berlin Wall would fall’. If it isn’t working and people know it — it will change”.
Errata due to me: should be: “as are Allan Greenspan and Ron Rubin” and “the largest banks returned the money”
Errata in errata: Alan and Robert. But who cares…you guys rock!
I can add that the talk-backs of this article are very in favor of you and your story. Few testify from their own experience as bank employees (in Israel and abroad). They echoed what you said.
I’m fluent in both and definitely willing to vouch for the translations. Great job, guys!
I read Hebrew, and I just read the article (this is how I got here). I think it written very well, and delivers a clear message.
Well that Hebrew article got me here… To your interesting blog
Thank you all for translating and sharing!
Yeah, you guys are incredible!
I got to your blog after reading the article. I think it is well written and your vision is clearly tranlates to Hebrew. As one who works in the financisl industry in Israel, I can really relate to the things you say. Good Luck!!!
While I did part of the translating, I just want to make it clear, I respect Cathy’s opinions, but I do not agree with them. My experiences on Wall Street and my outlook on the profession diverge significantly from hers. But as a skeptic, I always appreciate hearing and reading other views. My views on Big Data, on the other hand, I believe mesh with Cathy’s views. I first learned about Cathy at a Columbia seminar on Big Data that she presented.
The article is very good. It is like a sane voice. It made me search for your blog, which i didnt hear on before. Sagit (young Israeli economist)
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