
My Manhattan Project: How I helped build the bomb that blew up Wall Street. - gaika
http://www.printthis.clickability.com/pt/cpt?action=cpt&title=My+Manhattan+Project&expire=&urlID=35003522&fb=Y&url=http%3A%2F%2Fnymag.com%2Fnews%2Fbusiness%2F55687%2F&partnerID=73272
======
madmanslitany
This is probably the first substantial article I've seen on the lead-up to the
recession written by someone who's "one of us." It seems like much of his
career activity took place a decade ago, but much of what he relates still
rings true for computer scientists and software engineers on Wall Street today
(excluding those that go straight into trading, banking, etc., of which there
are a lot).

Until the recession hit, the odds of you making well over six figures in three
or four years without even being that extraordinary were pretty high if you
worked for one of the big five investment banks, and if you went to work for a
hedge fund, you could be making much, much more than that without having to
become a "business person."

It's more demanding psychologically (ironically, sometimes what I think is
most poisonous to technologists' morale on Wall Street is the occasionally
subservient and submissive attitude of some of their peers towards the traders
and bankers) than working for a normal software company is, and your absolute
maximum monetary return is still the highest with a startup, but in a way,
it's an interesting middle ground between the stability of a regular software
job and the potential payoff of a startup (just looking at the money here,
personal fulfillment is a completely different discussion).

And although the whole "second-class citizen" thing does sting, it is
interesting to see how much softer the criticism of the article's subject is
on the New Yorker site compared to the vitriol usually hurled at an actual
banker or trader; in fact, a few months ago, in the midst of the worst part of
market volatility, one of the technology directors where I work was stopped
for talking on a cell while driving; the cop asked him where he worked, and
after telling him, our director implied that he was only let off without a
ticket because he was in tech and not a banker.

------
epall
> Now that I was spending more time on the floor, I wondered why the men’s
> room always stank. Then one afternoon at three, when I was in there taking a
> leak, I discovered the hideous truth. Traders had a contest. Coming in at
> eight, they never left their desks all day, eating and drinking while
> working. Then, at three o’clock, they marched into the men’s room and stood
> at the wall opposite the urinals. Dropping their pants, they bet $100 on who
> could train his stream the longest on the urinals across the lavatory. As
> their hydraulic pressure waned, the three traders waddled, pants at their
> ankles, across the floor, desperately trying to keep their pee on target.
> This is what $2 million of bonus can do to grown men.

~~~
marvin
I'm sorry to have to point this out, but this comment doesn't deserve 30
points. It's just a quote from the story, it's not insightful and doesn't add
anything of value to the comment thread.

------
biohacker42
_...confessed to him that I had never studied finance, and I had only taken
one course in computers_

This lack of formal qualifications seems common on wall street, perhaps this
isn't surprising.

I know I didn't want to work as a programmer for a finance company because I'd
prefer to be a first class citizen in a software company even for much less
money.

Perhaps wall street only gets second tier engineers, scientists and
mathematicians?

I know of one specific case, where yet another person without formal training
made it high up as a programmer at a well known large institution who's name
I'll withhold.

This person was very well compensated for doing the kind of horrific wheel
reinventing that only smart people without formal training can do.

Needless to say all kinds of wacky hi jinks ensued over that person's years at
wall street.

In one instance he like all other programmers was forbidden to use malloc. And
everything was on the stack and of size 512 - EVERYTHING. Who made that
decision? Why the financial managers obviously!

And I'm thinking that a big part of wall street's downfall is all that under
qualified personnel, there primarily for the money.

I think very few quants and people in their positions ever had the confidence
and power to stand up to the finance guys.

I think if finance firms went to the trouble of hiring people who have better
options they might not be in so much trouble.

Then again if you're gambling with other people's money and your compensation
only has upside, no downside with risk - nothing would have prevented the
crash.

~~~
HeyLaughingBoy
Not even close! I don't think you'd want to hear it, but whereever a huge
amount of money is, you will find some of the world's smartest people.

People and businesses don't make such astronomical amounts of money just on
sheer dumb luck. They do it by being very smart, knowing the system and
analyzing it for maximum profit. Of course, human nature being what it is,
wealth can cloud the vision of even the smartest people, leading to the
situation we have now.

But don't think for a second that Wall St. is populated only by "lower tier"
thinking.

~~~
weiser
In Savings and Loan crises of 80s, wall streets banks lost all the money they
made during the previous 25 years. In the current crises, I dont know the
exact number but it is worse than that.

So if you believe that wall street banks actually make any money, you might
want to reconsider your view points.

~~~
eru
It's not necessarily the banks. Wall Street bankers made a lot of money.

------
mustpax
Great read.

I really appreciate it when posters take the trouble to link to the printout
version. So much more readable, this is bliss. Thanks!

~~~
spatulon
Unfortunately, the full-width text harms readability far more than removing
the advertising and navigational clutter.

My browser window is typically sized to a width of around 1200 pixels --
pretty typical I would think -- so the printer-formatted version results in
lines of around 30 words. That's too long to be able to read comfortably, and
I think it's unreasonable to expect me to resize my browser depending on the
type of website I'm reading (I have it as wide as 1200 pixels for a reason).

The standard, screen-formatted version
(<http://nymag.com/news/business/55687/>) is specifically designed at a fixed
width for comfortable reading.

I agree in principle that there are a lot of distractions on the screen-
formatted article, but linking to the printer-formatted version does not seem
like the right approach. Perhaps the best current solution is that readability
Greasemonkey script that appeared a few weeks ago.

~~~
DLWormwood
I solved that problem by putting a JavaScript bookmarklet in my browser that
narrows page text. I found this online, but I forgot where; hopefully HN
doesn't mangle the following text... (you'll need to remove linebreaks to get
it to work)

    
    
        javascript:(function(){var%20newSS,%20styles='body%20{%20margin-left:
        auto;%20margin-right:auto;%20max-width:45em;}';if(document.createStyleSheet
        )%20{document.createStyleSheet(%22javascript:'%22+styles+%22'%22);%20}%20
        else%20{%20newSS=document.createElement('link');%20newSS.rel='stylesheet';%20
        newSS.href='data:text/css,'+escape(styles);%20document.getElementsByTagName
        (%22head%22)[0].appendChild(newSS);%20}%20})();

~~~
justinweiss
I've started to use the bookmarklet at
<http://lab.arc90.com/experiments/readability/> for most long articles -- it
boosts the font size, increases the margins, and cuts out the background and
sidebars. Unfortunately, it didn't seem to work for this particular article.

~~~
raintrees
Unfortunately for me, that bookmark and its code requires me telling NoScript
that I trust each website - Not something I care to do, at this point. But I
agree that it works quite nicely on sites I "trust."

------
DLWormwood
The crisis in a nutshell...

    
    
        "Oh, people who have defaulted on loans in the past. That’s why
        they’re called subprime," he informed me.
    
        "But if they defaulted on loans at 8, how can they ever pay back a
        loan at 16 percent?" I asked.
    
        "It doesn’t matter," he confided. "As long as they pay for a while.
        With all that excess spread, we can make a ton. If they pay for three
        years, they will cure their credit and re-fi at a lower rate."
    
        That never happened.
    

While there are those out there who would look at the writer like a gun
manufacturer whose product ends up in the hands of criminals, it's really all
the fault of the people who made this greedy risk, _practically knowing_ that
defaults were going to happen anyways, that really deserve the blame in this
mess...

~~~
DLWormwood
Good grief... another plum passage...

    
    
        I asked my colleagues, what was a CDO exactly? Like CMOs, they were
        structured products, but the underlying collateral was not limited to
        home mortgages. They could be anything...  "Diversity of collateral"
        was the pitch. Some things could go bad, but not everything at
        once. It never has, except during the Depression, and we’re so much
        smarter now. That could never happen again.
    

Sorry for the self-reply, but this article has taught me more about this
fiasco than all the press and commentary over the last year. An impressive
piece of writing...

------
mattmaroon
You can't blame yourself for what inevitably happened. It's the people who put
only best case scenario numbers into every variable in the risk modeling. And
even if you removed that from the equation, you were just providing a product
banks wanted and if you hadn't someone else would. The disaster would still
have occurred.

~~~
denik
Well, a bank could also say "if not us, someone else would".

"the disaster would still have occurred" logic is flawed.

Not that I want to blame the guy, he wrote an impressive article after all :)

------
dschobel
_I asked him how the bonds worked.

“You put chicken into the grinder”—he laughed with that infectious Wall Street
black humor—“and out comes sirloin.”_

I'm speechless.

------
wallflower
" I used to go to the trading floor and watch my software in use amid the sea
of screens. A programmer doesn’t admire his creation so much for what it does
but for how it does it. This stuff was beautiful and elegant."

------
sonpo
A great read. It makes me think about the software I write on a daily basis
and how it's effects may be felt much further than the end user I am providing
it directly to. Interestingly, I currently write software (admittedly much
less complex) for a mortgage company, so the article hit home.

Regarding the author - should he be "blamed" or feel ashamed of his work
somehow? I don't think so, and I'm glad to see that he doesn't think so,
either. The software he was commissioned to create worked and performed well
for it's intended purpose.

What if a software engineer lands a job working for a defense contractor to
create programs for missiles, bombs, or other weapons? Are they to blame for
the world war? Of course not, but that seems to be what some people are
thinking. [I'm not sure if that comparison is fair, but it makes sense to me.]
Could they have turned down the job based on principal? Sure, but sometimes a
job can be very tough to come by. Besides, who would think a simple
programming job could possibly lead to such catastrophe, especially in the
business world? Maybe that's a take away, or at least something to think about
when looking for your next gig.

------
comatose_kid
"Once upon a time, this [securitization] seemed like a very good idea, and it
might well again, provided banks don’t resume writing mortgages to people who
can’t afford them."

While the banks shouldn't escape blame, didn't this securitization facilitate
shoveling the risk onto the buyers of these 'bonds', encouraging sloppy
lending practices?

~~~
alexandros
I think the problem was the loss of semantics from one side to the other. As
long as the buyers are informed, all else should be fine.

~~~
dschobel
Is that even possible when mortgages are leveraged at a rate of thirty to one
and sliced and diced and bundled in every conceivable way?

~~~
alexandros
when they are sliced for specific dimensions, then, yes, the semantics should
be a default property of the result. When sliced and diced for obfuscation,
not so much. If they were indeed obfuscating purpusefully, then there is a
fraud case in here. This however does not make the technique guilty by
association.

~~~
ewjordan
"If they were indeed obfuscating purpusefully, then there is a fraud case in
here."

Unfortunately, not quite. Our laws regarding these things are very primitive,
which often means that you can be in perfect legal compliance, yet still
commit some very severe fraud against the people you're making offerings to.

I find it rather unlikely that our regulatory system will ever catch up with
the state of the art in finance. There's too much money to be made in the
short term by shoveling risk off into the cracks and pretending on paper that
it doesn't exist, and it's too easy to do.

~~~
eru
How about regulation that requires revealing everything, but that does not
require any minimum standards?

~~~
dmv
One of the flaws of these articles is that they are vastly simplifying the
instruments built. From reading, you might think that you understand how to
build a CMO or CDO, or to analyze one. I don't, and you don't. I am not
actually sure that, after the author of this article's software went into
place _anyone_ could. The government has had months to examine the private
books of some of our more nationalized-like asset managers, and is still
throwing darts. Regulation that requires revealing everything, but does not
require minimum standards, is like being able to bypass QA and security
reviews by providing access to the source code... to multi-million line
programs. Yes, eventually you can work it all out, but not in time to be
helpful.

------
spoiledtechie
Epic Story. Good read.

------
zby
As a redemption he should write that again and publish as an Open Source
library - so that everyone could analyze what is going on.

------
perplexes
Broken.

~~~
ramchip
Well, it does not work here either for some reason (Opera), but I just googled
the title and found the article: <http://nymag.com/news/business/55687/>

