
Goldman Sachs Has Started Giving Away Its Most Valuable Software - prostoalex
http://www.wsj.com/articles/goldman-sachs-has-started-giving-away-its-most-valuable-software-1473242401?mod=e2fb
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jonknee
tl;dr By "give away" they mean allow their sophisticated clients access the
tools to do business with Goldman. It's not open sourced or available
publically in any manner.

~~~
amelius
I'm missing the rest of the tl;dr. What is this software used for? Why is it
so valuable?

~~~
Maven911
It's used for pricing & risk management. Considered the best in class for
large banks and has been attributed (at least partially) for GS scathing away
from the financial crisis relatively unharmed because of being able to quickly
price things, determine risk throughtout the firm, and make quick decisions.

~~~
jsprogrammer
GS scathed away with their former president as the Secretary of Treasury
overseeing the rescue of their dependencies.

Who has made such attribution?

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9NRtKyP4
Many other banks expose some of their pricing code as a web application to
varying extents. For example
[https://live.barcap.com/](https://live.barcap.com/) which was inherited from
LehmanLive, considered state of the art for fixed income back in the day.

Also as the article states, anything that still has an actual competitive
advantage won't be released.

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burnbabyburn
it's behind paywall, can someone tell just what's this software about?

~~~
swampthinker
You can click "web" which will provide you a link to the article without the
paywall.

But just for you: "Called Securities DataBase, or SecDB, the system remains
Goldman’s prime tool for measuring risk and analyzing the prices of
securities, and it calculates 23 billion prices across 2.8 million positions
daily. It has played a crucial role in many of the seminal moments of the
firm’s recent history, including its controversial trading just ahead of the
financial crisis."

~~~
molsongolden
Just to continue on:

"Many of those tools are being offered in the form of web-based applications
that customers can customize and operate on their own."

Sounds like they are turning what used to be heavily guarded internal software
into client-facing apps.

~~~
internal_tools
I would assume because this space is becoming more of a commodity and their
tool is no longer unique -- on it's face. So by making it available to
customers they can garner goodwill and entrench themselves.

~~~
p4wnc6
The tool is also extremely messy internally, written in a proprietary language
that resembled a very early version of Python and has accrued nearly
unthinkable technical debt. Delivering usage via webservice lets them better
hide the dysfunction on the other end of a service call.

This whole topic is not all that newsworthy. The team within Goldman that had
architected and developed this years ago had spun out into a consulting group
that essentially reimplemented the same thing in Bank of America (Quartz),
JPMorgan (Athena) and many others, now including Morgan Stanley, and even
trickling down to smaller banks like PNC.

I consider it one of the biggest ripoffs in modern finance that those
organizations have paid untold fortunes to adopt the Goldman-like approach,
sometimes even with new or additional proprietary languages brought in on the
project. It also adds systemic risk for society because it further correlates
these internal banking systems between the largest banks. If something goes
systematically wrong with it in one place, there's a comparatively high risk
the same sort of thing can or will go wrong in another too.

If we were bearing that risk for a good reason it might be OK. But really
we're only bearing it because of the superficial branding of Goldman, and the
pressure on banks to hand wave and appear to be doing something in the
aftermath of the 2008 crisis. And so they go for what looks politically
defensible (e.g. "well, this is what Goldman did and they survived the crash"
\-- despite it being widely researched and reported that Goldman's position in
the crash truly had nothing at all to do with superior risk management systems
and was a mixture of political favors and luck) instead of anything sensible
from a system design point of view.

~~~
TheLarch
Besides introducing systematic risk, the sale of this software by Goldman
smells fishy. Despite the Blankfein quote about maybe selling for $5 billion
back in the day, if the software is what they purport it to be, wouldn't
selling it be akin to Amazon licensing their product distribution to Walmart?

I've wondered what these million dollar per month programmers do on Wall
Street. This really puts it in perspective.

On that note, it's completely depressing to see many of the best minds of our
time working on shit software that adds nothing to society. Another swath of
them are working on getting people to click on ads for Facebook and Google.

~~~
dmix
> Another swath of them are working on getting people to click on ads for
> Facebook and Google.

Which finances Google's driverless car efforts and an untold other amount of
businesses (like gmail). Plus the salaries of thousands of developers and the
myriad of other people who work for Google, and the subindustries it supports
(bus drivers, chefs, real estate, etc). Just because their specific job isn't
world-changing doesn't mean it has no positive effect on the world.

Silicon Valley has benefited greatly from the ad industry which is why the
popularity of this type of complaint bothers me.

Same with Goldman. They do contribute to the world by facilitating commerce.
Although they likely contribute far less to the world than SV developers since
they siphon so much off the top for ultimately marginal longterm ROI. They
also ultimately wouldn't make so much money unless they did provide some value
to the economy beyond exploitation of byzantine financial systems.

~~~
TheLarch
I grant that Google is more of a social good than Facebook.

Your claim that Goldman has contributed is a debated topic. Paul Krugman
favorably mentioned a study that purports to demonstrate that Wall Street's
endeavors are largely unproductive. I can't find it now unfortunately.

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lordnacho
So, is it data, a database, or a risk-management tool?

Sounds like something that could have been hard with constraints of 1990s
hardware, but these days any old person could rent a cloud to do this.

Also, I suspect people who aren't involved directly in the technology talk it
up a lot more than would someone who was involved in building it. The execs
have bet on it with budget money, and they get to open or close the gate,
making it seem more important than it really is.

At the end of the day, every financial form has a bunch of code that lets them
slice and dice their data. GS didn't survive the crisis because they had this
system, they survived because they had a system and made some wise choices.

~~~
smallnamespace
It's also a very slick integrated development environment for financial use
cases.

The securities/price data are exposed as first-class entities in an ORM layer
and you can manipulate them easily with scoping rules.

For example, if you want to get the current USD/JPY rate, it's just:

    
    
      Rate(Security("USD/JPY"))
    

If you want to know what the price of an FX contract is under different rate
regimes, you can actually set that price and then reevaluate the contract,
e.g.

    
    
      SetDiddlescope() {
        Foreach(X, [90, 100, 110]) {
          Rate(Security("JPY/USD")) = X // Only takes effect within this scope
          Print(X + ": " + Price(MyFXSwap))
        }
      }
    

How this actually works is that most object's fields are dynamically
recalculated using an early form of functional reactive programming (note that
SecDB was mostly built in the 90s). Fields specify their dependencies, and
when their dependencies change, the field's value gets invalidated. This is
very similar to how ReactJS or Angular work.

Unlike React or Angular though, you can force intermediate calculations to
take on certain values as well; for example, in the scope above, you can also
force Price(MyFXSwap) to take on a particular value. This is useful, for
example, you had a book of securities, MyFXSwap was one of them, and you
wanted to see how the price of your book would change.

Even though all the securities are actually in a database somewhere, anything
happening locally gets cached to an in-memory database so the performance is
pretty decent. The security database itself, btw, was much closer to a pure
distributed object store; there wasn't much in the way of querying ability.

~~~
RockyMcNuts
To get the benefit, you need the securities models…and the data to feed the
models…real-time prices…covariance matrices…volatility surfaces…at which point
you're living in a very Goldman world. Not that that's a bad thing but it
creates a lot of lock-in.

Also I'm not sure what the upside is to letting people run on-premises, vs.
providing cloud APIs based on it (they make it sound like the former).

Just the software, without the models, data, strategists, is kind of like
providing a proprietary environment of Microsoft SQL + R.

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gadders
Dubno also went on to try and re-invent the same system when hired as CIO of
BAML. It was called Quartz there.

~~~
arthurcolle
Don't forget JPMorgan too ;) w/ Athena

~~~
lucozade
That wasn't Dubno but Kirat Singh who worked for Mike at GS. I thin kit was
the first of the SecDB offspring with other attempts at BAML and Morgan
Stanley. I believe Deutsche bank are also doing something similar.

~~~
gadders
Kiran worked for Dubno at BAML as well.

It's not common from people to go from bank to bank re-creating the same
system. Seems particularly common with people GS though.

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0xdeadbeefbabe
tl;dr The software is called SecDB. Giving it away is like giving a sports
almanac to people that can't travel back in time. Somehow GS ended up using it
at the right time, and even had fun speculating on how much to sell it for.

~~~
B1FF_PSUVM
Drats, I was hoping it was something mischievously strategic about
"commoditizing the complement" and wondering which was what.

(As in pushing for cheap software if you have exclusive hardware, and vice-
versa.)

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hkmurakami
Not its excel models??

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runjake
To save others a few seconds of their life, you can click the "web" link under
the submission title on this page and avoid the paywall.

h/t swampthinker

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seycombi
use search link instead
[https://www.google.com/search?q=Goldman+Sachs+Has+Started+Gi...](https://www.google.com/search?q=Goldman+Sachs+Has+Started+Giving+Away+Its+Most+Valuable+Software&ie=utf-8&oe=utf-8&client=firefox-b)

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varcharlie
Clickbait, shame on you! "Sign up or login"....

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gavanwoolery
So now Goldman can create artificial risk with its software and further
manipulate the market to its will? I think this "gift" fits under the
definition of a Trojan horse. Conspiracy maybe, but think about how easy it
would be for GS to make a trade based on the numbers its software spits out,
before those numbers are public. The SEC has let far bigger things "slip" in
the past.

~~~
wintermute42
You have no idea what you are talking about. How exactly does GS manipulate
the markets to its will? You'd think their balance sheet would look better if
that was case..

~~~
cmdrfred
>How exactly does GS manipulate the markets to its will?

They rig the ratings agencies and libor[0].

[0][http://www.bloomberg.com/news/articles/2012-07-18/goldman-
sa...](http://www.bloomberg.com/news/articles/2012-07-18/goldman-sachs-s-
blankfein-says-libor-scandal-undermines-trust)

~~~
smallnamespace
Your article doesn't support your point; it's Goldman's CEO complaining about
_other_ people manipulating LIBOR.

[https://www.theice.com/iba/libor](https://www.theice.com/iba/libor)

Goldman Sachs did _not_ manipulate LIBOR because it's not even one of the
banks that is asked for LIBOR submissions (they were an investment bank, not a
commercial bank).

I'm all for bashing banks when it's appropriate, but it's our obligation to
get the facts straight first.

