

Interview with a Hedge Fund Manager: "I'm sure today I would never get hired." - garret
http://nplusonemag.com/hedge-fund-interview.html

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byrneseyeview
The "Wouldn't get hired" comment is pretty common -- in fact, an interview
with Daniel Loeb about his multi-billion dollar fund ended with him saying
something like "I couldn't get hired here. Bad grades in college, no MBA. If
you want to get a job here, you have to start preparing when you're thirteen."
(So once again, these guys are all using the same model).

Some funds have a program explicitly designed to hire people who 'wouldn't get
hired' under normal circumstances: <http://deshaw.com/articles/Alpha_2.pdf> .

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boredguy8
"I think what we need to do is go to everybody's house and make sure that only
licensed statistical arbitrage traders have black boxes."

Worth reading for that line alone.

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eru
So we should invent our own uncorrelated black-boxen?

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mojuba
... that would analyze what "dumb" boxes are doing at the moment and do the
opposite. If HFM is right about this, "dumb" boxes are moving big volumes of
money actually.

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eru
Oh, that would be meta-black-boxes. A fine idea.

Perhaps more humbly - I was suggesting simple black-boxes that do behave
differently. In statistical jargon: uncorrelated or even independent.

~~~
nostrademons
Everybody in the industry thought that their black-boxes were uncorrelated and
independent. That was part of the appeal of them (and also why it's so
difficult to sell algorithmic trading products - most firms want to develop
them in-house). Problem was that they had no idea what everyone else was
doing, and so most of them independently invented algorithms that behave
fairly similarly.

It's like the thousands of entrepreneurs that saw Friendster and said "Oh
look, only one competitor in the market, I'll build myself a social network
and get rich!" Or the thousands of entrepreneurs that saw Reddit and Digg and
said "Oh look, only two competitors in the market, I'll build myself a social
bookmarking site and get rich!" Or the thousands of entrepreneurs that saw
YouTube and said "Oh look, only one competitor in the market, I'll build
myself a video sharing site and get rich!"

The only way to get rich is to build things where there are _zero_ popular
competitors in the market, or where there are 1-2 competitors and everyone
believes it's fruitless to compete with them. Otherwise, you can bet that
thousands of people you haven't heard of are doing the same thing, and by the
time you get a product out they'll be getting a product out too.

(Incidentally, the first few quant hedge funds, like Renaissance or D.E. Shaw,
made out like bandits.)

~~~
DaniFong
"Everybody in the industry thought that their black-boxes were uncorrelated
and independent."

I'm not so sure. I interviewed at a Wall Street company that was programming
data channels headed into the black-boxes. They boasted that 30% of trades
were dealt with by computers. I mentioned that that should probably be enough
to drive some pretty serious feedback effects. I asked: in principle, if these
black-boxes handled _all_ the trades, where would the decision to trade or not
come from.

Instead of a blank stare, I was presented a cold, nervous look. He said
"basically all these algorithms have been worked out in the 70's and 80's, in
Academia. Nobody really knows what they're doing, or why they're doing it. But
they _are_ trying to compete by getting more data faster than the next guy. If
everyone trades the same, as long as you trade _faster_ , you'll win."

I asked if it was moral to play such a risky game with the economy.

I didn't get the job.

~~~
nostrademons
Everybody knows it in the sense that a debt collector knows that they're
ruining people's lives, but it's kinda swept under the rug. We also had the
experience of people saying "yeah, we don't really know how well our
algorithms our doing, so if you can develop software to tell us, we'll pay you
big bucks." (Though, last I heard, nobody had actually paid big bucks for the
software we did develop.) But it's the kind of truth that nobody really wants
to face, so they just kinda acknowledge it and then go about their business.

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tlrobinson
Wow. After reading that I realize just how little I know about finance.

I also now know how non-technical people feel when us programmers start
talking in jargon.

It was an interesting article though.

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sosuke
HFM is a Slashdot reader apparently:

"HFM: Yes, but I for one welcome our computer trading masters."

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scw
More likely The Simpsons:
[http://en.wikipedia.org/wiki/The_Simpsons#Influences_on_lang...](http://en.wikipedia.org/wiki/The_Simpsons#Influences_on_language)

~~~
sosuke
awww bursting my tech loving bubble, of course this shows how much I know
about television :)

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hollerith
Ick.

