Am I Bad for Society?

I was talking to a friend of mine the other day who is currently without formal employment, and when I asked him what his plans were, he said that he and his roommate were starting a hedge fund. Now, being pretty judgmental, I viewed his venture as misguided at best, absurd in all reality, and a great way to lose all his money at worst.

But I think what bothered me most is that investing, in my view, doesn't really do anything. This is not an indictment of all finance: A person who makes widgets is producing something, the person who founded his company is the condition on his production, and the venture capitalist who provided that entrepreneur with startup capital makes it all possible. Similarly, banks in general serve a valuable because credit (in moderation) is the lifeblood of entrepreneurship and homeownership.

But somewhere along the line, things get attenuated. Banks sell mortgages to bigger banks to make money; bigger banks sell them to various investment houses to raise their money; and these investors cut them into little tiny pieces and sell them to the capitalist elite who trade intangibles and make gobs of money off them. But I have to believe the trickle-down stops at some point. For every dollar made by a trader who makes money off such esoteric enterprises, how much "value" (defined however you'd like) is added to society? And couldn't that person be much more valuable to society if he became an engineer?

Did the financial system really collapse because the smart people started working on Wall Street?

Note: This is not said without a sense of self-awareness. As a soon-to-be litigator, I know that I, too, will probably take more value from society than I will add to it, but I think my point remains.