Where does it all end?
I learned when I was in my first grade not to start your journal entry with "today".
I noticed that I've been doing that a lot of times and I've been excessively using really. Sometimes I used really really and sound like a kid who just graduated from an elementary school. A simple look up found 46 really's from my entry.
TODAY, I had a chance to talk to a guy from our neighbor group. I've been talking to him a lot recently since he used to work at a Wall Street bank. He also went to Columbia for his MBA and undergrad, the school I want to go to for my MBA.
Today's topic was Finance as usual. We were talking what I should do in the near future and all that stuff. Then I asked him what's the point? Because from what I've been reading it seemed like people who went to prestigious schools go to wall street banks, do their 2-year analyst stints where they spend 100 hours a week at the office only to go to a private equity/hedge fund/venture capital firms.
I also have a huge interest in doing what's called "high-finance" in the future because it's interesting and is highly lucrative, but I had to ask this philosophical question. What's the point of doing all these? As of now, I don't have clear answer that would make everybody happy. Maybe there's no such an answer that would satisfy everybody. And it is irking me now.
Starting with PE, let me share my thoughts.
As of today, I feel like PE is purely driven by greed. You buy a company, flip it by changing some operation/go through re-org/cut out crap. Through these operations, a company's value appreciates, then you pay yourself dividends/sell the company. You can end up with some handsome profits, and a lot of PE's do. But I wonder what value does it add to the society? The money was made somewhere, but it was through the expense of people. It's a zero sum game since the growth isn't an organic one. I don't think you can achieve an organic growth by a sudden involvement of Wall Street bankers in a few years. You could argue that PE firms are enriching their investors with great returns, but I still feel like it's just a transfer of wealth, not a creation.
Although I don't understand all the strategies hedge funds are using, I'll talk about long/short equity funds. You either buy shares of a company that's under valued and sell it when the price goes up. This is simple value investing. Interesting things happen as you short shares of companies that are over valued. I'm still conflicted on this one. Long part, I don't have much issues with since it's what everybody is doing. However, I wonder if you could say shorting a stock is creating value. Yes, you are calling a company's bullshit out, so you maybe doing a "public good", but are you really doing the service for the greater good? Or is this also driven by pure greed. Right now, I'm leaning towards the latter.
I think venture capital is the cleanest out of these three. You are investing in an early stage company and sell your shares when companies go public. In order to make that happen, you are almost "obligated" to help young companies grow by introducing people/serving as board members and providing advice. So this at least feels like you are creating growth. You are helping companies grow because you want to make money. Eventually, you have to sell out as companies have a life cycle. Essentially, new companies are used as a vehicle to make money.
I personally think that VC could be the most fulfilling, but hedge fund also seems very interesting too. It's actually quite funny that I'm thinking about these philosophically because there's a chance that I might never make anywhere near these firms. So it's a worry that could be spared till later, but I think I need to have a clear answer that I can explain to other people and eventually myself since I don't want to be in Finance just for money. But I find it increasingly difficult to find other more "noble" reasons. Maybe Finance is for greedy people. Maybe there's only a transfer of wealth. I wonder if MBA can answer these questions I have, or that MBA is just a gateway to these industries. Well, hopefully the former's true...