The bizarre mindset of quant “culture”
Quant culture is going to be highly annoying -- unless you went to physics grad school. Just saying….
Your highest paid people on the quant team are playing chess in the middle of the work day — and markets are open.
A system chooses investments based on a simple linear model — that seems ridiculously dumb — and does it with no human overrides — just careful data validation and system error checking.
That's the scene in pretty much every successful quant team.
Most quant finance books talk a lot about the math, but we usually need a cultural shift to let quant be what it is, which is needed for it to be financially successful.
Unless we have a fund where every leader went to math or physics grad school, we are going to artificially grow a quant-friendly mindset and culture. In our videos we talk about the culture more than the math. Frankly, the math, as important as it is, is easier. The biggest quant alphas come from the simplest models, but a normal wall-street or business culture will block them before they deliver PnL.
The quant pattern (“horse, astronaut, princess”) is pretty simple. In fact, it’s so simple that it becomes a problem. It can take a mindset shift just to relax enough to let quant happen. A common pitfall is over-complication.
The transfer of decisions from people to algorithms, while simplifying, can unsettle people.
Similarly, the trust we place in our quant team can feel extreme. We trust that high aesthetics in data and engineering are worth the substantial cost. We trust the highly-paid modeling team enough to let them play around as they try to relax and get ideas, even when that feels lazy or wasteful. It isn’t lazy or wasteful, but we understand the feeling.
The good news is that if we defend quant, and fight through our own discomfort until we fully embrace the new simpler reality, we really are halfway there.
If it’s helpful, try to remember that we actually have a new job that will replace the old annoying tasks that we don’t really have to do anymore. The new job is to find really great people and protect them.
The reward is that quant transforms the way we lead. It makes leading fun. We get to focus on long-term growth, and on business expansion. That’s because algos now replace our daily fire-fighting and and because quant-style systems deliver huge cost-cutting.
The best part is that because good quants are always highly self-motivated, almost all of our HR and management headaches disappear. Also, the exceptional alphas and economics that quant can deliver tend to mean our LPs and investors stay happier and more supportive of us.