January 26, 2018

Nice read: How a Misfit Group of Computer Geeks and English Majors Transformed Wall Street

A harbinger of the techies who would storm Wall Street in a decade, this new generation of hedge-fund introverts would replace the profanity-laced trading rooms of the 1980s with quiet libraries of algorithmic research in every corner of the markets. They would also launch an early email system and look into the prospect of online retailing, leading one of Shaw’s most ambitious employees to take the idea and run with it. Yes, the seeds of Jeff Bezos’s Amazon were planted at a New York City hedge fund.

Thirty years ago, all of that was yet to come. All Shaw told Sussman at the time was, “I think I can use technology to trade securities.”

Sussman told Shaw the Goldman offer he had received was inadequate. “If you’re confident this idea is going to work, you should come work for me,” Sussman told Shaw. The offer led to three days of sailing in Long Island Sound on Sussman’s 45-foot sloop with the financier, Shaw, and his partner, Peter Laventhol. The two men —without disclosing many details — “convinced me they believed they could generate models that would identify portfolios that would be market-neutral and able to outperform others,” Sussman remembers. In lay terms, the strategy would make a lot of money without taking much risk.

Read more at http://nymag.com/selectall/2018/01/d-e-shaw-the-first-great-quant-hedge-fund.html

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