Bit risky telling someone what their job is, but nevertheless I'd suggest you missed the forest for the trees. The profitability of a trading firm is directly linked to their ability to allocate capital in a way the market likes, and someone with great information thinks that hiring lots of smart people achieves their goals more effectively than hiring small numbers of smart people.
> Something is seriously twisted in its current state
100%, but it isn't the concentration of smart people in finance. That is a good thing - better more scheming bankers than lawyers.
Free market capitalism gives capitalists perfect freedom to operate in the sliver of the Venn diagram that connects what is possible with what customers will pay for. If they step outside that, they go bust.
If there is a problem is probably that the US government didn't let enough companies go bankrupt in the aftermath of the 2008 crisis, and the same idiots that were in charge then are still in charge, or their protegees.
? Because...?
Well...sure, but I don't see these people working to allocate capital to benefit society.
On the whole, the financial industry's influence tends to be to allocate capital to benefit the financial industry.
I get that liquidity is important, but it's not important enough that we should be siphoning off huge chunks of the money in the economy to give to these people as thanks for maintaining it. Frankly, that kind of concentration of wealth decreases liquidity and ends up, over the long term, being directly counter to the stated goal.
Everyone should then actively decide what specific companies they want to put their capital towards. Instead of baskets of indices.
There is a lot to say on the subject of whether the financial system regulation is creating the right incentives. But there isn't really much room to debate that designing trading strategies is a waste of talent.