The strange life of employees of a quant hedge fund manager

It’s not all glamour and adrenalin on the buy-side, you know.  A very few people live the actual life of a hedge fund titan making billion dollar trades in nanoseconds.  A slightly larger number are close enough to the action to be able to credibly pretend to be “a hedge fund manager” on social media and in their dating profiles.  And then, at quantitative hedge fund DE Shaw, there apparently used to be people whose job it was to literally pretend to be the eponymous Mr Shaw, taking the same flights as him in the same seats and using the same car services a few days ahead of all his trips, to see whether there are any difficulties en route.

Of course, David Shaw has more or less given up on active money management to concentrate on his research interests, but stories about his obsessive optimisation of everything are part of the folklore of the company.  Staff were given all sorts of assignments to optimise things which aren’t susceptible to algorithmic modelling, like the best Chinese food for the boss to eat, or the best mattresses to rest his billion dollar brain on.  There has even been an off-Broadway play written about his demands, in which the character based on former Shaw employee Elizabeth Meriwether is driven so crazy that she develops a fear of bathing.

Why did he do it?  There’s something of an echo of an old joke people used to make about Bill Gates – that if he dropped a $50 bill, he would be best off to leave it on the pavement, because the ten seconds it took him to bend down and pick it up would be better spent generating value for Microsoft.  And you can sort of see how quant culture might incline people to think this way.  After all, sports teams focus huge amounts of attention on marginal gains.  In principle, if you could save David Shaw half an hour’s thinking time by planning the best route through an airport, or get him slightly better refreshed from a night’s sleep on the best mattress rather than the second best mattress, that might turn into an idea worth 0.2% extra performance on the Shaw funds, which would pay for a couple of dozen full time concierges.  As one employee was told, “if eight hours for you saves five minutes for David, that would absolutely be a good use of your time”.

It’s almost a convincing argument.  But surely there’s a danger that if you kept up this sort of micromanagement of your daily life, after a while you might sort of lose your grip on reality. Nobody’s time is really that valuable, and nobody is really spending every waking moment perfectly optimally.  A culture of perfectionism is all very well, but it tends to mean that you don’t ever have small problems, only large ones, particularly when dealing with fallible human beings.

Daniel Davies –

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