Did the Geeks Win?

A line from a great article in this week’s WSJ got me thinking:

There used to be a strict hierarchy: Traders made money and won glory while programmers wrote code and stayed out of sight.”

Not any more. Times have changed.

Let’s get electrified

When I started out on the trading floor in the 2000s, algorithmic trading had been a feature of equities, futures and FX markets for years. Many of my MIT classmates made fast starts in that world as algo-trading became hugely popular and profitable.

But back then, bond trading was still driven by long telephone calls and a lot of shouting. I still remember trading BP through the Deepwater Horizon crisis in 2010; there was lots of shouting at salespeople and jotting down trades onto a paper blotter. Halcyon days – they seem like a hundred years ago – I’m sure many of you have memories and stories dating back far beyond my own.

But over the subsequent 5 years I spent trading before we founded Origin, the industry took on a different feel as bond trading got electrified. This trend has only sped up in the 3 years since.

Engineering talent

Today, when I visit clients and step back onto the trading floor, I notice that what was once a place of intense noise and stress, is now quieter, calmer, and more cerebral.

We’re hearing how desks are investing in engineering talent, specifically hired to develop algorithms for making markets in cash bonds, credit derivative indexes and more. This isn’t new. Desks have been recruiting the best engineers for decades. But what is new is that the level of investment in these individuals and strategies is outstripping the spend on old fashioned trader types by a margin.

Athletes and engineers

What’s interesting is that in spite of a focus on engineering, human input isn’t being lost. Rather, expert relationship builders have grown in value. Human decision making is elevated to a higher level of risk management as individuals watch over algos whilst managing vital relationships.

As in equities, algos deal in small transactions, while humans manage large blocks. Thus, relationship management becomes even more important, as the profits lie entirely on those larger trades. You need to be the bank that gets the call. And the bank that gets the call is the one with the human relationship. Despite the rise of algorithms, the relationship is still the ultimate driver in this business. I’m confident it always will be.

Championing talent

This shift towards engineering and technology is reflected in the wider economy, especially here in London. Some say that the tech boom proved ‘the geeks won’, referencing how titans like Gates, Jobs, Musk, Zuckerberg and Bezos weren’t exactly starting quarterbacks in college.

This feels a bit narrow minded. The success of these entrepreneurs and their companies isn’t driven by some sort of “geeks vs jocks” culture war. It’s because they have built fast growing companies (enabled by technology), that harness the best of all flavors of talent. Creative thinking, whether it’s in design, business development, or even business model construction, is actually increasing in importance. And nothing about the past decade has taught me that the value of relationships is going down.

But, there is no denying the increasing influence of technology and tech-literacy in today’s world and in our industry in particular. But it doesn’t mean that some will win or others will lose. As the WSJ article points out, while programmers are increasingly getting more involved in trading decisions, traders are starting to take programming classes.

I could try and convince you that the team at Origin is filled with the perfect mix of traders and programmers, humans and machines, athletes and engineers. In truth, we’re a team of people who are constantly learning and re-skilling as the world changes. Take Rob and I: we were both educated as engineers and traders by profession, and we’re now evolving into technology entrepreneurs. We have developers on our team who are self-taught and have come from a variety of backgrounds. Ultimately, I’m thankful our industry champions individuality and downplays hierarchy. The geeks didn’t win. Neither did the jocks. Talent did.