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Risk Management
Risk-taking
Portfolio Management
there have been several threads bouncing around lately on how being a risk-taker and portfolio manager is a brutal job and i promised to weigh in. most of what i think is in the below thread, but a few more points here.
first off: if you have useful and productive skills for advancing the welfare of society, and enjoy that, please do it. if you are a brilliant writer, then write books that make the rest of us experience joy and passion.
this is for us degens who do not.
this is for us degens who do not.
for creative, mathematically and statistically and computationally inclined folk who are good at wrestling data and models to see deep patterns where others cannot, riding the high-dimensional waves of financial markets is silly fun.
nothing else has the richness of data, immediacy of feedback, and resistance to bullshit (at least over the long term) of the job of extracting money from the panic, euphoria and chaos of global capitalism
financial markets are human emotion and psychology and cognitive limitations incarnate in a million different ways; different and challenging every year, utterly nonstationary (to the chagrin of AI maximalists)
once you figure out you are good at understanding some small piece of the puzzle, it is addicting, compels you back to learn more
the difficult things that people point out are real.
making or losing millions of dollars from day to day for reasons that are mostly out of your control - thats real af.
if you start out in that situation without being insanely over-prepared, it will break you.
making or losing millions of dollars from day to day for reasons that are mostly out of your control - thats real af.
if you start out in that situation without being insanely over-prepared, it will break you.
i know a lot of surgeons. in their training, they work insane 48-hour shifts straight. they do this because they are being trained so rigorously and intensively in the specific process of their sub-discipline that they could do it in their sleep and blitzed out of their mind
despite popular perception, very few successful hedge fund managers - especially those of the modern generation, not the 1970s when the industry was in its infancy - started their firms out of their dorm rooms in college with no training. very much the opposite.
most of them started as quants or traders on a team of exceptional people. we learned blocking and tackling, the details of the trade, how to not make mistakes. we learned what a rigorous investment process looked like, in a team environment where we were constantly taught
they graduated to work as sidekicks to experienced portfolio managers who perfected a craft over decades. we learned how that craft identifies highly specific sources of aloha but also had a hundred different pieces to it that all had to be done well as part of a tight process
learned how to build incrementally on a rigorous process of idea generation, portfolio construction and risk management; learned how an idea or a backtest is a start but is only a tiny part of what actually drives repeatable, sustainable alpha;
and by the time they started their own hedge funds or pods at multistrats, they already had a process to replicate and run, confidence in the quality of that process and its results over time; could manage the anxiety of the short term...
because they weren't sitting down every day trying to figure out what to do, but operating a machine they were intimately familiar with, together with a team that built redundancy and creativity and virtuous feedback cycles
there are ups and downs from there but they are infinitely more manageable because you know your process and what its characteristics are, you know the range of reasonable uncertainty, you can learn and adapt incrementally
and its fun af. i could never have a real job.
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