Engineer-A-Business

As over a dozen investment banks failed in 2008 and hedge funds’ values dropped about 50 percent, the opportunities in the finance field have become very unappealing and are unlikely to recover anytime soon. Even more depressing is the fact that it is difficult to achieve the performance level necessary to outperform other participants. In reality, building wealth in the field of finance has often been more of a matter of creating an illusion of success rather than actually attaining success itself. As the market went through its near death experience during the last two years, this strategy has become futile as well. This has left Wall Street a dead zone for individuals looking to achieve financial success. Perversely, this may actually be a good thing, because it inspires ambitious individuals to provide the world with new businesses and product innovation that will actually make a difference. Being successful in the business world now requires developing new products and services that will benefit the rest of the world rather than buying into the nonsense of Wall Street.

One of the lessons that we have learned from previous recessions is that the so-called geniuses of finance are largely responsible for the initiative and innovation are what ultimately save the economy. When you think about it, this shouldn’t really be that surprising. Any functional economy is going to rely on the trade of useful products and services. If enough people become rich trading articles that are essentially worthless, the economy is going to have to correct itself at the expense of those traders.

Don’t get me wrong, the entire field of finance is not utterly useless. Some of the services that have been provided have ultimately helped promote growth and efficiency. Unfortunately, most of the traders on Wall Street have chosen to focus on increasing their own wealth in a way that contributes little to the rest of society. Over time, they often end up leaving their success to chance as they choose to dedicate their lives to interpreting meaningless data of securities they choose to invest in with little interest in the broader picture of the market they are participating in or any concern for whether their profits come at anyone else’s expense. Inevitably, they learn to care because sooner or later they are the ones who end up their losing money to an equally indifferent party.

Another problem with making money on Wall Street is the efficient market theory that investors must contend with. It is believed that because almost all information related to a particular company or security is immediately available to investors, security prices will immediately change. This leaves almost no time for investors to act quickly enough to take advantage of an opportunity to make a profit in response to any relevant information. As a result, few investors are able to outperform the market in the long-term. The stellar performers in any given year are unlikely to be the stars the next year. This is obvious by the number of traders, hedge fund managers and investment bankers on Wall Street who fail to consistently outperform their peers. In fact, the quote movie Wall Street basically sums up the philosophy on being successful with the stock market: “Enjoy it while it lasts, because it never does.”`

On the other hand, entrepreneurs develop projects that create value for the rest of the society by developing products and services that solve particular needs. As their products have economical value, they are able to enhance their wealth better in the long than traders of meaningless securities who choose to leave their success largely to chance. They are also not buying and selling the same assets as millions of others and they can typically find a way to distinguish themselves from their competitors. This gives them discretion to buy and sell products in a way that gives them a much better chance of being successful than they would have playing the stock market or managing a hedge fund.

Last Updated (10 August 2010)