The lost cure for cancer does not lie in a hedge fund somewhere

For some reason, a bit of a blast from the past is on my mind; Emanuel Derman's book "My Life As A Quant".

In summary, this book reads: "Once upon a time I was born, grew up and did a physics PhD. I enjoyed it, but it was pretty clear pretty quickly that I was no better than a mediocre physicist and had basically no chance of a prestigious academic job. So I went to Bell Labs, where I was a workmanlike professional scientist and computer programmer, but my career wasn't going anywhere there either. Then I went to Goldman Sachs, and everyone regarded me as a genius!"

Now it could be the case that Derman was a late bloomer and suddenly had an explosion of intellectual talent. It could be, but actually it wasn't; fair do's to the guy, he makes it abundantly clear in his autobiography that Fisher Black was the genius and that he himself spent an inordinate amount of time doing stuff on user interfaces that would be farmed out to a Visual Basic studio in Chennai today. But, it has to be admitted, that by the standards of investment banking, Derman was a genuine intellectual hero.

Basically where I'm going with this is that there is no great suction of the very best talents and most gifted of youths into securities trading, and no consequent intellectual peace dividend that could be reaped from regulating them. Yes even at those magical high frequency trading firms.

I've known quite a few guys who had physics PhDs over the years and a lot of them were pretty good. But in general, the ones who were good were also pretty realistic about whether they had the talent or aptitude for a life in physics. What the physics quants were always very good at was the systematic application of a mathematical toolkit to a problem, and very hard work on intrinsically not very interesting and not very cutting-edge problems. Lots of them also had the most amazing trainspotterish memories for detail; it's only a small exaggeration to say that a very large part of the design of algorithmic trading systems is the management of adjustments for bank holidays. They're the journeymen of physics, the builders of lab equipment, not the Einsteins. Most people in investment banking are either smoothy-chops sales types who might as well be there, or human wrecks like me that are pretty much incapable of anything else.