

Quant Hedge Fund D.E. Shaw Fires 150; 10% of staff - dbfclark
http://dealbook.blogs.nytimes.com/2010/09/28/d-e-shaw-said-to-cut-10-percent-of-staff/

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pg
<http://ycombinator.com/apply.html>

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msort
This is sad. Founded by a computer scientist, DE Shaw is perhaps the most
tech-focused among hedge funds.

I once had a very challenging technical job interview there. Several
interviewers had PhD in Computer Science.

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joshu
i'm not convinced they're smarter than anyone else. i'd rather invest in
renaissance or citadel...

my coworkers at morgan were all physics or cs phds. and a consulting expert
got a nobel prize while i was there. amusingly, i interviewed at google around
the same time, and some of the engineers were condescending about the quality
and education of my coworkers.

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Juliuso
Renaissance over Citadel. If I'm not mistaken, Renaissance is purely automated
trading. No traders or trading floor in the conventional sense. Plus they
weathered the fallout of 08 much better than Citadel.

What's sad is that these smart people, including ones I've met while working
as a SysAdmin for a Prop Trading firm often don't have access to the capital
to start their own shops. This is due to the incestuous nature of the Finance
world, where it's a lot more about who you know than what you know.

Sadly, they're often in the employ of third-rate CEOs, who always get a cut
off the top, and pay the producers a mere fraction of what they made for the
firm and their clients.

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borism
it's not only purely automatic

 _The Medallion Fund has its own internal trading desk, staffed by
approximately 20 traders, and trades from Monday opening bell in Australia
through Friday closing bell in the US._

<http://en.wikipedia.org/wiki/Renaissance_Technologies>

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gord
I assume their business model is roughly : to implement algorithms that find
near-arbitrage opportunities by sifting through vast amounts of market data,
then use those to multiply investment funds. This sounds like the perfect
domain for a startup.. where a nimble small team of quant/developers would
have huge advantages, by being faster to rollout.

This is almost a pure software business, so why aren't these companies more
like startups? Is it because of the expense of getting fine grained and low
latency market data [eg. exchange colocation]? Or is it due to the contacts
needed in the biz to get the 'investment' funds to trade with? Or is it
because only large financial entities have access to these risky speculative
trades?

Side note : I see Jane Street Capital use Ocaml, and some other quants use
KDB/Q for implementing these kinds of algorithms, so it seems innovative
languages give leverage here. I was thinking Node.js + a js BTree api to
access streaming data would be a nice dev environment.

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msort
Two major difference of a trading firm from a software firm: 1) Large amount
of trading capital is needed to make a sizable profit. 2) Math, finance and
trading skills.

A trading firm needs above 2 items in addition to technical skills to succeed.
A team of good people with all 3 above items (capital, trading, tech) have a
good chance to succeed.

In fact, Citadel (one of the largest quant hedge funds) was started by one
person (Ken Griffin) when he was a undergraduate from a Harvard dormitory. It
is pretty much a startup success story.

There is a major culture difference: trading is the key activity; coding is
only secondary. This may explain why trading firms usually have a typical
wall-street tough culture, and don't feel like a typical silicon-valley
startup.

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gaius
Not so different as you might think. After all, a large amount of capital is
needed to build out a datacentre. Doesn't mean that Google is the only company
that can make a profit on the Internet.

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hugh3
Not really on the same scale. If you're a hedge fund, the most you can make in
a year is some small percentage of your total assets under management, so you
need to persuade people to give you _billions_ (at least hundreds of millions)
before you can start raking in the kind of dough that pays salaries.

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gaius
That's what leverage is for (and if it goes wrong you end up like LTCM).

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DevX101
How much staff is really really needed for these quant shops? After an
algorithm is developed isn't it just rinse/repeat? Honest question, as I'm not
a finance guy.

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rxin
The effective lifetime of a trading algorithm is only weeks. They need to keep
iterating to remain competitive.

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daylast
One thing I always found odd about DE Shaw is how casual the work environment
is. It's like google, but in Manhattan. The problem is NY isn't california and
quant finance isn't all software. There's a certain pace and overt
competitiveness to Manhattan that enforces a discipline and a work ethic onto
people. This works quite well in the Darwinian world of finance. But, from
what I saw of various parts of DE Shaw's operations there was somewhat a lack
of urgency to some fairly critical areas. A good firing spree every once in a
while seems to work wonders in putting the urgency back into the workforce.

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beagle3
Google has an office in Manhattan, 15th street and 8th avenue if I'm
notmistaken. I haven't personally been to any other google office, but it
doesn't look different than the pictures of any of them; All the perks,
sleeping pods and cafeteria stuff seems to be there.

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olegkikin
Is 10% really that bad?

If it's the bottom 10%, it should actually improve company's performance.

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aberman
Unless of course you follow that argument to its logical conclusion...

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nostrademons
That's exactly what companies like GE and Intel do.

I personally think it's terrible management practice, but it seems to work for
them, and there's always fresh young blood coming in at the bottom.

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nostrademons
The downvote seems to indicate a citation is necessary:

<http://en.wikipedia.org/wiki/Jack_Welch#Tenure_as_CEO_of_GE>

[http://www.geek.com/articles/chips/updated-rumors-intel-
layo...](http://www.geek.com/articles/chips/updated-rumors-intel-layoffs-fab-
delays-and-capital-expenditure-decreases-20020716/)

(The Intel practice was also confirmed in Andy Grove's book "Only the paranoid
survive".)

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mian2zi3
Did you read the second article?

> Intel announced it will reduce its workforce by 4,000 workers (5%), mostly
> through attrition or voluntary separation programs.

I joined Intel shortly after that article was written (2002). For much of my
tenure (3 years), Intel had a US hiring freeze (except through acquisition,
how I got hired) and aimed to reduce its headcount primary through attrition,
not layoffs. I felt like Intel treated its employees pretty well.

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nostrademons
I was referring to the comment by "Insider".

In any case, I think Andy Grove's book is a better citation, but some people
on the Internet don't read books.

