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quantnoob


Total Posts: 85
Joined: Oct 2006
 
Posted: 2006-10-20 17:28

It seems that quant work would be intrinsically more interesting than trading, yet most quants want badly to move into trading. Why is this? Are quants becoming second-class citizens in a lot of places? This wouldn't make sense to me, given that it's relatively easy to get entry-level trading jobs and very hard (need PhD, plus connections or good HH) to get quant jobs.

I'm not trying to stir up flame in asking this; I'm looking for a diverse array of honest perspectives on the matter. It seems that quanting is becoming an undesirable role compared to trading, and I can't see why (other than the upside for the best traders) this would be the case.


pj


Total Posts: 3402
Joined: Jun 2004
 
Posted: 2006-10-20 18:05
Dollar Bill?

BTW you should definitely try and take some sort of holiday... good for the soul. (Donal Gallagher)

IAmEric
Phorgy Phynance
Banned
Total Posts: 2961
Joined: Oct 2004
 
Posted: 2006-10-20 18:24
If you haven't read it already, take a look at Derman's book, "My Life as a Quant". Quants have ALWAYS been second class citizens.

JabairuStork
Beat Box King

Total Posts: 970
Joined: May 2004
 
Posted: 2006-10-20 18:45
It comes down to this:

Quants are a cost, traders are profit center.

That's how just about every organization views things, and eventually most quants get tired of taking shit from and feeling like they are underpaid relative to the traders.

FDAXHunter
Founding Member

Total Posts: 8362
Joined: Mar 2004
 
Posted: 2006-10-20 18:47
Most traders are 2nd or even 3rd class citizens. It just that the few that are not get all the spotlight. While quants may not be 1st class citizens, they are never 3rd class cititzens. It's a different job. For people with different utility curves.
You like a small chance to strike it real big? Become a trader. Or an actor in Hollywood, similar thing.

I think quants, even though they are supposed to be more intelligent, don't understand this very well. They just see Brad Pitt walking by and think "I want to be like that."

The Figs Protocol.

quantnoob


Total Posts: 85
Joined: Oct 2006
 
Posted: 2006-10-20 20:39

"Most traders are 2nd or even 3rd class citizens. It just that the few that are not get all the spotlight. [...] You like a small chance to strike it real big? Become a trader."

But if trading is driven by skill rather than luck, we can appeal to the fact that that the ability to acquire skill in a non-athletic game is heavily g-loaded. Quant traders, assuming they get the chance and don't botch something so badly, early in the learning process, as to be fired on the spot, will be able to pwn rainmaking bullshitters in half a year flat. 

Is your argument that success in trading is heavily influenced by luck and not very skillful? I've encountered that sentiment, but I don't know if it's mainstream... a lot of people also think poker is a luck game.


FDAXHunter
Founding Member

Total Posts: 8362
Joined: Mar 2004
 
Posted: 2006-10-20 20:57
No, I'm not saying that it's necessarily a luck game.
I'm saying that the probability of someone having it in them to be a great trader is really small. Just like athletes. In fact I think of traders much like I think of athletes. It requires a certain make-up to be good at it. It's not like you wake up one morning and say: "Gee... I think I'm going to be a really great quarterback." By the time you spent 5 years training intensely you might discover that you're still, like, the world's second worst quarterback ever.

Of course, Aleksey Vayner would disagree with me here.

The Figs Protocol.

quantnoob


Total Posts: 85
Joined: Oct 2006
 
Posted: 2006-10-20 21:30

Why do you think only few people have the talent to be great traders? I think a lot of people (by which I mean, maybe, 1 out of 200-1000 in the general population) do. Most intellectual endeavors are a mixture of intelligence, drive, and acquired skill. (For example, there's no such thing as a "talented novelist" who can't write essays; though he might be better at one than the other, if he's a great novelist, he's probably at least a good essayist and vice versa, when speaking in terms of natural talents. (In terms of performance, straddling is obviously much more common, in practice, due to differences in the requisite skills as well as the willingness and ability of individuals to acquire some and not others.) Genetic talents aren't so finely specialized for there to be a "natural psychological novelist" rather than, more likely, a "natural writer" or "exceptionally verbally gifted person." The only component that's natural is the intelligence: drive may be out of a person's control, but its fluctuations are steered by external motivations, and skills can be acquired. I'm pretty sure there have been a very large number of successful traders with IQs in the 140s if not 130s. While a real adult 140 is fairly rare (it would be about 98.5th percentile in an analyst IB class, for example) in the general population, it's not uncommon at all at a quant level (probably near median).

So the requisite IQ for trading may be unusual among IB analysts, but it's not in short supply among even undistinguished quants. I think what's more likely in the case of quants who do poorly at trading would be that they fail to seek out, aggressively, mentors who can impart to them the necessary skills to be great. General intelligence without skill is rarely useful for anything, and I'd imagine that the skills necessary in order to be among the best traders would be as hard to find as the best traders.

It's still possible, of course, that the reason natural great traders seem to be rare is some personality trait other than intelligence, but the only two candidates would be risk-appetite and value of money. As a whole, Americans seem to value money, and like risk (otherwise, gambling wouldn't be such a profitable industry) so, while those traits aren't universal or uniformly distributed, they're not exceedingly rare either.


crowlogic
Banned

Total Posts: 270
Joined: Jan 2006
 
Posted: 2006-10-20 21:47
quantnoob, very fascinating points.. dont take my advice too seriously, no one else does and I'm not 'in the profession'. But I thought it was interestnig to note that Feynman only had an IQ of 124 or so... however, he was an *extremely* creative guy and not just mathematically. He used to scribble equations while in strip clubs, play around with sensory deprivation and drugs in order to explore states of human consciosness, interpret hieroglyphics and participate in ancient indian chanting rituals in the desert cause he got bored. All of these might not show up on an IQ chart but did were they a cause or effect of the genius within him? Lots of more stories like his. As it is, I'm designing an artifical agent-based decision model to quantify and execute strategies.. its certainly a long road to travel and it seems to be paying off.

One should respect public opinion insofar as is necessary to avoid starvation and keep out of prison, but anything that goes beyond this is voluntary submission to an unnecessary tyranny. --Bertrand Russell

FDAXHunter
Founding Member

Total Posts: 8362
Joined: Mar 2004
 
Posted: 2006-10-20 21:53
quantnoob, great post dude. Very phunny. Smiley

quantnoob: I'm pretty sure there have been a very large number of successful traders with IQs in the 140s if not 130s

And I'm pretty sure you have no idea what you're talking about.

See, I think you're just typing away thinking how you think the world should be. You have glimpsed a little bit behind the curtain and all of a sudden you think you understand how the entire world moves.

In fact, the best traders seem to be of roundabout average intelligence. The super smart tend to get owned, as they usually think they are too clever by half.
There is an unproportional mass of fairly stupid ones who survive, mostly due to their ability to really keep things simple (can't make it complicated if you can't think complicated).

So you think being smart destines you to be a trader, rather than a quant? Think again.

The Figs Protocol.

quantnoob


Total Posts: 85
Joined: Oct 2006
 
Posted: 2006-10-20 22:12

"quantnoob: I'm pretty sure there have been a very large number of successful traders with IQs in the 140s if not 130s

And I'm pretty sure you have no idea what you're talking about.

[ (supported with) ]

In fact, the best traders seem to be of roundabout average intelligence."

I never precluded the possibility of people with average intelligence being successful or even excellent traders. I was arguing that 140+ IQ *wasn't* necessary for being a good trader and, therefore, the purely natural component of the necessary wherewithal is not rare. In essence, you affirmed my argument.

"The super smart tend to get owned, as they usually think they are too clever by half.
There is an unproportional mass of fairly stupid ones who survive, mostly due to their ability to really keep things simple (can't make it complicated if you can't think complicated)."

This is counterintuitive and interesting. Since it's rare for abstract intelligence, standing alone, to be a disadvantage, I'd like to know more details about the mechanism through which this works. Is it that smart people tend to "overfit" their strategies or have too much confidence in their beliefs?

"So you think being smart destines you to be a trader, rather than a quant? Think again."

I have no idea. On what I've heard about the careers at mainstream banks, it seems that quant has become a stepping stone to trading on account of being pigeonholed, most places, into an undesirable position (grunt work and longer hours than traders have, for less respect) in which case it would make sense for a person of quant-level intelligence to learn how to trade and do it. I hope this, about the relative desirability of quant vs. trading, isn't true, if only because quant seems like it would be more intrinsically desirable and interesting. I guess the solution is to target the banks/funds where quants are highly respected.


sfca


Total Posts: 904
Joined: May 2004
 
Posted: 2006-10-20 22:24
Wow.  High numbers those.  Into the 130s and 140s.  I worked in a place once with a bunch of people sitting in front of computer monitors and they seemed to be buying and selling securities.  One of the ones who seemed to make a huge amount of money in the long bond market probably had the IQ of a bag of hammers.  I could definitely beat him at chess or trivial pursuits, but dang it, somehow that money thing.  He seemed to be good at it.  Go figure. 

FDAXHunter
Founding Member

Total Posts: 8362
Joined: Mar 2004
 
Posted: 2006-10-20 22:27
quantnoob: In essence, you affirmed my argument.

Well then, that worked out great for both of us.

quantnoob: the purely natural component of the necessary wherewithal is not rare
No it isn't. But that's like saying: Most people have muscles, therefore we should all be able to be world class athletes. There is no single attribute that makes a trader better than the rest. It's a certain combination of things. Just like there is no single attributes that makes a great athlete. Even a porn star needs a few different "attributes"... and while the probability of having a single one of these is pretty high, the probability of having all of them is very low.

That's my take on it.

quantnoob: I guess the solution is to target the banks/funds where quants are highly respected.

That would be the idea. If you want to play football, it helps if you are on a team that wants to actually play football too.

The Figs Protocol.

Energetic
Forum Captain

Total Posts: 1488
Joined: Jun 2004
 
Posted: 2006-10-20 22:39

I'm saying that the probability of someone having it in them to be a great trader is really small. Just like athletes. In fact I think of traders much like I think of athletes.

Curiously, in his latest annual "town hall" speech the head of our Fixed Income dep't referred to the prop trading group as athlets.


For every complex problem there is an answer that is clear, simple and wrong. - H. L. Mencken

JabairuStork
Beat Box King

Total Posts: 970
Joined: May 2004
 
Posted: 2006-10-20 22:47
quantnoob, based on what you are writing here you sound like you are in academia, and possibly considering moving into the finance industry. Your views are typical of many people in academics, but come off as rather naive to anyone who has spent some time in the business.

The second most common type of metaphor used on trading desks is athletics. Traders like to think of themselves as (gifted) athletes, capable of achieving victory by superior prowess.

The most common type of metaphor is military. Banks make money because of the coordination of vast logistics and supply chains which depends on lots of individuals who are willing and able to follow orders.

rowdyroddypiper
NP Wrestling Champion

Total Posts: 1181
Joined: Apr 2004
 
Posted: 2006-10-20 23:12

"The most common type of metaphor is military. Banks make money because of the coordination of vast logistics and supply chains which depends on lots of individuals who are willing and able to follow orders. "

Absolutely.  It's really weird, working with a bank that has a clear command and control and well mapped out infrastructure vs. one that doesn't.  The bank with the system could be staffed by people that you wouldn't consider intellectually intimidating but can do process when you need process. They always win.  The other bank could have a s00per genius staff but they can't avoid tripping over their own dick on the small stuff and they always lose. 

It is a commonly held belief among people that view themselves as intellectually superior that raw brains will carry the day.  That is not the case.  Maybe in some small subset of markets there's an opportunity for gobs of intellectual horsepower to generate outsized returns but that represents only a small percentage of investment activity.  There's an awful lot of deals out there that trade on charisma, connections and a reputation for getting shit done where being able to solve a pde doesn't help a whole lot.

Quant traders, assuming they get the chance and don't botch something so badly, early in the learning process, as to be fired on the spot, will be able to pwn rainmaking bullshitters in half a year flat. 

First your premise is flawed.  I don't know that a guy implementing a quantitative strategy would be head to head with a "rainmaking bullshitter" so it might be hard to compare.  Could you elaborate on what you think a "rainmaking bullshitter" actually does?  I mean is this some charicature of a trader that abuses assistants and grabs asses or do you have a more meaningful description.  And if you think half a year in one product type is enough for pwn a guy with a track record, you're delusional.  I've said it before, guys with less than 2 years don't get phones...well maybe they get those little cell phones that can dial like four pre-programmed numbers, in case they forget what their boss wanted while they're out getting lunch Smiley.


We are awakened with the axe, night of the living dead at last

Jim


Total Posts: 165
Joined: Jun 2004
 
Posted: 2006-10-20 23:27

This is counterintuitive and interesting. Since it's rare for abstract intelligence, standing alone, to be a disadvantage, I'd like to know more details about the mechanism through which this works. Is it that smart people tend to "overfit" their strategies or have too much confidence in their beliefs?

As a matter of fact, this phenomena has been called the Intelligence Trap by creativity "guru" Edward DeBono:

"Very bright people look at messy problems, cut through the complexity and quickly figure out solutions. Unfortunately on rare occasions, their solutions are wrong. What they do not realize is that their subconscious is at work. Unknown to them, it is filtering out data counter to their solution and highlighting data that supports their solution. They are also very quick in defending their own solution and do it well."

 


entaroadun


Total Posts: 8
Joined: Apr 2006
 
Posted: 2006-10-24 03:07
I'm not in the field, so I may be talking out of my a$$, but here we go.

Several weeks ago, I was traveling between NYC and Boston, and happened to sit next to an equity trader. I'm a software engineer, and I was pounding out some Java on my Mac, rapidly switching between emacs, ant, test case execution on the console, and a mysql client. I guess my speed impressed him, because he expressed interest. He said he wanted to learn math and C++ to become a quant (" 'cause that's where the money's at"), and since I knew a tiny bit about the industry and want to be a quant myself, we started talking.

He was brash and impulsive, had a severe case of ADD, and wasn't that smart. I explained the very little I knew about the higher math involved in quant training, and he backed off very quickly.

The sense that I got from him is that traders, or at least equity traders, are very similar to low ranking field officers. They need to process many streams of information simultaneously to arrive at solid decisions quickly. The conscious mind isn't built for that; the subconscious is. That's what we mean by "gut" or "instinct". Contrast that with the slow moving, single-threaded Hamlet process that most academics use, and you quickly see the difference. It's what separates a military planner from a lance corporal or first lieutenant.

He also revealed some things about the recruitment process. His firm preferred video gamers who play first-person shooters or real-time strategy games: classic "twitchy" games that require the ability to crystalize winning tactics in the subconscious and process multiple streams of information simultaneously. He also said that they weed out people who deliberate too long. He asked me what the angle between the hour and minute hand are at 3:30. Of course, I said 75 degrees. He said 90. We argued for several minutes. Apparently, that was one of his screening questions, and they accepted his incorrect answer. I guess it's more important to quickly arrive at an approximation that's good enough, decide, act, and move on. They also did a lot of psychological games and tests of improvisational acting and storytelling.

Is this fairly accurate?

Given that, I want to be a trader before becoming a quant, just to get some of those "gut" skills crystallized before numbing my subconscious with higher math. I get the sense that it's easier to be a trader first before all that learning gets in the way.

apine


Total Posts: 1009
Joined: Jun 2004
 
Posted: 2006-10-24 04:13
i thought that a lot of what entawhatever said was on the mark. things went markedly south after "is this fairly accurate." and i got a good laugh from the improvisational acting screening test. "cut. cut. cut. i lost money."

actually not all traders are gut traders. that is what makes it so difficult to describe the successful attributes of a trader. as FDAX said, it is a combination of things taken together -- but -- they are not always the same combination of things. patience can be a virtue for one trader and attn deficit disorder a virtue for another. some make money being nimble and others being stubborn.

the idea that you are going to be a either a trader or a quant is unlikely enough given that you have another career. to be both is even more so. not impossible, but i'd recommend that you find out what you'd rather do and pursue it. it is ALWAYS best to pursue your interests. it is the one piece of advice that is appropriate for all. dont worry about money or whatever. money will take care of itself if you are good -- and the chances of your being good at something is far better if you are interested in spending time doing it. anyway, this has been repeated over and over in this forum and few get it.

Too many people make decisions based on outcomes rather than process. -- Paul DePodesta

entaroadun


Total Posts: 8
Joined: Apr 2006
 
Posted: 2006-10-24 04:39
Gut skills being lost with academic exposure isn't that silly. The military service academies recruit on the same principle. There's a reason why high school athletes in leadership positions are preferred in field combat positions. They've already cultivated the skills, and higher education won't rob them of it.

I'm glad to hear that there's more diversity in the trader ranks than I thought.

Being the best mime won't get you paid. What you like doing and what you're good at have to both line up with market demand. In my case, being a quant probably has enough meat to keep me interested. I'd probably be a horrible trader.

doctorwes


Total Posts: 577
Joined: May 2005
 
Posted: 2006-10-24 07:01
Two comments.

First, it's rather hard to describe what it is that makes a good trader, but it seems to correspond to what military types refer to as Fingerspitzengef├╝hl (which I guess is what entaroadun was talking about). It's difficult to explain, but in my experience it's quite real, and quite different from the kind of consciously reflective, analytical thinking that quants are familiar with; in fact, there's some evidence that the distinction has a neurological basis. Sounds like a fascinating topic.

Second, there are lots of different kinds of traders, who do very different things. What is it that you really want? I imagine the vast majority of traders are basically flow traders. I've never had the slightest desire to do that for a living. Whereas being a quant turns out to be a pretty good job, all in all, if you can survive the first couple of years.



omd


Total Posts: 258
Joined: Apr 2005
 
Posted: 2006-10-24 13:58
Fingerspitzengef├╝hl - playing some poker should help with this if you lack it. Play against people at a casino - not your buddies.  Online might be good too, but I have not done that much.

yo

doctorwes


Total Posts: 577
Joined: May 2005
 
Posted: 2006-10-24 15:10
By the way, this article is also thought-provoking (though nothing new to some folk around here).



NorthernJohn


Total Posts: 7
Joined: Oct 2006
 
Posted: 2006-10-29 18:53
Entaroadun said "He said he wanted to learn math and C++ to become a quant (" 'cause that's where the money's at")"

This sounds very strange. Quants are well paid, but I think that it would be very, very hard for a trader to come to the conclusion that the quant world is "where the money's at".

I wonder if maybe you came across sommeone who works for a bucket shop, or similar, as opposed to sommeone who really runs a trading book. Too much seems wrong about your guy's attitude and, especially, recruitment preferences.

And I have never, ever, heard of someone wanting to be a trader to become a quant. This all seems pretty mixed up.

gunboatdiplomat


Total Posts: 5
Joined: Oct 2006
 
Posted: 2006-10-31 17:46
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