Many people are concerned that ‘earning to give’ in the financial industry is overall harmful for the world, even if you give away most of your income to outstanding charities.
To figure out if this is true, we have been researching the size of the harms, and benefits, caused by finance. (Though please note 80,000 Hours is not just about earning to give and in fact we think it’s the best path for only a small share of our readers.)
One of the concerns we’ve investigated is that certain parts of quantitative finance are a socially-useless competition between traders that only changes who gets some amount of income, not that someone gets it.1 I think this is the case, but the incredible amount of inequality in the world makes this argument against working in finance fairly weak.
If you are working in ‘low-latency arbitrage’, make a random clever trade on a stock exchange and beat some other trader to a profit by 1 millisecond, whose pocket is this money coming from? A poor African farmer? No, they have no wealth to take. A middle class American family? It’s possible, but most of their wealth, if they have any, is probably in their house or bank account.2
We don’t have perfect figures here, but looking at reasonable estimates, you’re more than 80% likely to be competing against someone in the top 0.1% of global wealth – people so wealthy it scarcely matters if what they earn on their savings is any higher or lower. One estimate, that tries to take into account wealth being hidden from tax authorities, is that 30% of the time you’ll be taking money from someone in the richest 1 in 100,000 in the world!3
The vast majority of the wealth being actively traded in financial markets, often by automated algorithms, is owned by the extraordinarily wealthy. The vast majority of people in the world will never have the resources to be constantly placing orders on the stock market.
This means you can compete to fund your donations to the world’s poorest people without much remorse. A quantitative trader who gives to GiveDirectly might be the clearest example of a (legal) Robin Hood in the modern world. The more you feel that the super rich don’t deserve their wealth, the more justifiable it is to work to ‘arbitrage’ it away penny by penny and hand it to those in poverty.
Now this doesn’t mean that working in finance is actually fine – this is only one possible objection, to a particular kind of trading. The much more compelling concern to me is that excessive attempts to lend by financial institutions leads to a higher frequency of financial crises, which are horrible for people’s wellbeing. If someone were engaged in the kinds of activities that have created financial crises before – externalising risk to governments because the firm they work for is ‘too big to fail’, or working on fraudulent or near-fraudulent lending – I would much prefer that they left finance and stopped giving. I would also suggest they blew the whistle on anything illegal or troubling they observed.
But the concern that you are pointlessly taking from other people in the market doesn’t keep me up at night. The people you’re typically taking from are so rich that ‘drinking their milkshake’ is more neutral than harmful.