Goldman Sachs Has Started Giving Away Its Most Valuable Software
wsj.com
wsj.com
It's so distant from the truth that you can't even find information about pricing, plans ,conditions, etc.
It's a nice way to get investors' attention though.
If a customer uses a bank's database to do their pricing, they tend be much more likely to do their trading with that firm. This is why firms like to have their models become the market standard. (Example: "Lehman Live" was used to price Mortgage Backed Securities. Unfortunately that didn't end well)
Who has made such attribution?
Also as the article states, anything that still has an actual competitive advantage won't be released.
1. Is a distributed data store for market positions, etc. 2. There's a dataflow/spreadsheet-like valuation engine on top of the data store 3. It's had long-term and senior level support among management, and most/all of GS's positions and businesses are available within SecDB. 4. There's a large pool of internal talent that's well acquainted with SecDB and how to use it.
So... it gives GS an easy way to see where they are, and then run models to figure out where they might be under different hypothetical scenarios.
What's noteworthy about this to me is that while they may be 'giving away' points 1 and 2 from my list, points 3 and 4 are the bigger competitive differentiators for Goldman. Even if another bank immediately adopts SecDB, while they may get the technology, it'll take them quite a while to integrate it as fully into their culture and business. SecDB implemented for a small bit of a big bank and run by a bunch of relative newcomers is a very different thing than SecDB as it might be implemented at Goldman.
Erm... https://github.com/saleyn/secdb
Written in Erlang with a C driver for low level stuff.
Author is Serge Aleynikov. Ex-GS employee sued in multiple courts over many years by GS.
But yeah, not "officially known" as in they released, but there is probably some association there. Just a guess ;-)
(BTW, Nice username.)
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."
"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.
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.
SecDB is still, even with its warts, the leader.
The software is junk software. There's no other secret thing going on -- no misdirection or duplicitous motives. A certain class of high-paying customers responds more to the Goldman brand name -- or at least believes it buys them cache with regulators or investors. For that class of customers, vetting the reliability and quality of the tech stack is at best an afterthought. Since that pile of money exists as a thing for Goldman to target, they do target it.
I advocate that more people should prioritize vetting the technology. If so, they would see it is not of sufficient quality to justify its use, let alone paying to perpetuate it elsewhere. But I'm not naive -- the political approach will always matter more to a wide range of people than will a more objective assessment.
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.
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.
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.
https://www.bloomberg.com/view/articles/2016-08-24/are-index...
However, I've read Mike Milken and, despite his warts, I believe he did radically improve capital allocation. So it certainly has happened over the years. -- edit: I meant about Mike Milken
Somewhere along the line CTO's or their juniors with budgeting authority were convinced that Goldman's success was due in some measure to SecDB and Slang, which is pure nonsense.
F9
I completely agree with the parent and grandparent posts! I worked with one of the SecDB clones for three years at a Too Big To Fail bank, and it was criminally bad (imho). It's snake oil.
I agree with the grandparent post 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"
The snake oil in this case is what p4wnc6 (who's spot on) highlighted: "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" [at other banks].
The product that they sold (a SecDB clone) is pure snake oil, and the projects (which were massively expensive) delivered very little value.
Consider: If SecDB really lives up to the hype, then why would Goldman let all these other banks steal Goldman developers and straight-up copy it?
[1] http://news.efinancialcareers.com/us-en/253040/three-bank-of...
However, a customer who blindly puts their trading book onto some Goldman application isn't smart enough to do business with Goldman.
As someone who worked at a large bank providing month-end marks for customers (as a 'courtesy'), we knew that we were basically just seeing the stuff we had sold them, and at most half of any other positions they asked for were actually bonds they owned.
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.
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"))
SetDiddlescope() {
Foreach(X, [90, 100, 110]) {
Rate(Security("JPY/USD")) = X // Only takes effect within this scope
Print(X + ": " + Price(MyFXSwap))
}
}
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.
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.
I worked there for almost three years before I realized that we were playing around with FRP.
> in an ORM layer
... and I didn't realize that I was using an ORM for a good six months.
Life at Goldman was good as a developer. Retinal scarring from those damned blue windows aside, I kinda miss it sometimes.
Unfortunately you program SecDB mostly in proprietary internal languages (not SQL), which while I understand they are moderately capable, they lag behind the 'state of the art' in programming by quite a long way - I wouldn't image it's even on a par with Python, I think somewhere like Lua is probably more accurate.
Caveat - this is based on chatting to people from GS, I don't have experience working with any of this first-hand.
The secret sauce isn't the technology -- it's the decades of quant models that have been programmed using the stack.
A lot of the advantages of a unified cross-desk risk calculation system aren't realized until it's widely adopted, and it's difficult getting the desks to buy in to changing their thinking to an FRP mindset and adapting all of their existing code.
At Goldman, SecDb was developed by the Strats, who were part of the individual desks in a hybrid tech/quant role, not part of the Tech division. To some extent, SecDb was a bottom-up system driven by the desks who needed it, but in the other firms, it has been the technology divisions trying to push the new system on the desks. It's partly a political problem.
In order to jumpstart their systems, the other firms poached experienced talent from Goldman. Goldman's culture is generally receptive to suggestions and constructive criticism, at least comparatively. These new upstarts showing up and making suggestions to the old guard has not always gone over well at other firms. I'm told one ex-Strat who wrote discount curve calculation code at Goldman showing up at the new firm's technology division, noticing a discontinuity in his new firm's curve, poking around the code in the quant svn repository, and gently pointing out to the author that the same mistake had been made at Goldman several years prior. The response was not so much the expected "oh, hey thanks", but instead the very next day the entire technology division's read access to the quants' svn repository got revoked.
SecDB is not just another IT project with an end date for the business. Ultimately, that is what distinguishes it from all the other copycats on the Street.
It's not common from people to go from bank to bank re-creating the same system. Seems particularly common with people GS though.
(As in pushing for cheap software if you have exclusive hardware, and vice-versa.)
h/t swampthinker
They rig the ratings agencies and libor[0].
[0]http://www.bloomberg.com/news/articles/2012-07-18/goldman-sa...
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.
https://newrepublic.com/article/132628/goldman-sachs-settlem...