Quantitative financial trading is one of the highest paying parts of the world’s highest paying industry. 25 to 30 year olds with outstanding maths skills can earn millions a year in an obscure set of ‘quant trading’ firms, where they program computers with predefined algorithms to trade very quickly and effectively.
This makes it an attractive workplace for people who want to ‘earn to give’, and we know several people who are able to donate over a million dollars a year to effective charities by working in quant trading. Who are these people? What is the job like? And is there a risk that their trading work directly harms the world?
To learn about all this I spoke at length with Alexander Gordon-Brown, who has worked as a quant trader in London for the last three and a half years and donated hundreds of thousands of pounds. We covered:
- What quant traders do and how much they earn;
- Whether their work is beneficial or harmful for the world;
- How to figure out if you’re a good fit for quant trading, and if so how to break into the industry;
- Whether Alex enjoys the work and finds it motivating, as well as what alternatives careers he considered;
- What variety of positions are on offer in quant trading, and what the culture is like in the various firms;
- How he decides where to donate, and whether he has persuaded his colleagues to join him in becoming major philanthropists.
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The key points, times of various questions and extra resources are below.
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Table of Contents
- Quant trading pays very well, plateauing at between $300,000 and $10m a year after five to ten years, depending on performance. This of course allows for very large annual donations.
- The job is highly intellectually challenging, and most staff are very satisfied with their work. Turnover in the firms is very low. The culture is quite geeky – nothing like the aggressive and showy stereotype of some parts of finance. The work is highly collaborative and good teamwork skills are vital.
- There are arguments both that quant trading is socially useful, and that it is socially harmful. Having investigated these, Alex thinks that it is highly likely to be beneficial for the world. Rob is less confident, but still leans towards thinking it is net positive. Both explain their perspectives and consider some potential downsides.
- The most common majors to study to get into the industry are maths, computer science and physics, but people with the necessary abilities can apply from many other fields too. The key trait they look for is “evidence of general problem solving, or puzzle solving, or analytical thinking”. Coding isn’t necessary as it is taught to you.
- While very competitive, the application process is quite straightforward, so it’s worth a shot for many people.
Overview of the discussion
1m30s – What is quant trading and how much do they earn?
4m45s – How do quant trading firms manage the risks they face and avoid bankruptcy?
7m05s – Do other traders also donate to charity and has Alex convinced them?
9m45s – How do they track the performance of each trader?
13m00s – What does the daily schedule of a quant trader look like? What do you do in the morning, afternoon, etc?
19m10s – How do quant trading firms search for errors in markets to trade on?
22m30s – How are mathematics skills actually used?
25m00s – What are the different kinds of trading roles?
28m00s – Does Alex do high frequency trading?
30m25s – Does Alex enjoy the job and why?
32m30s – How can you tell if you’ll enjoy the work?
34m20s – Why the culture is nothing like the Wolf of Wall Street stereotype.
37m50s – Do quant traders have better judgement than other people and if so how?
41m10s – Is the industry very secretive?
42m50s – Is quant trading itself beneficial or harmful for the world?
51m00s – How is liquidity and a sensibly priced stock market useful for society?
56m00s – Do we really need extra liquidity now or do we already have enough?
1h00m00s – Is high speed trading socially useful or just wasteful?
1h03m50s – How can someone tell if their skills are a good fit, or good enough, to enter quant trading?
1h06m50s – Can you get in if you went to a less elite university?
1h08m00s – What extracurricular activities will help you show that you’re a good fit?
1h09m35s – What fraction of people who apply get a job?
1h11m10s – What is the application process like?
1h13m45s – How can you apply and do well?
1h20m00s – What alternative good career options are there for people who have good quantitative skills?
1h22m20s – How does earning to give compare to direct work?
1h24m00s – What about going into academia? What other nearby options are there?
1h26m40s – What if you want to focus on problems that are limited more by the supply of skilled people than funding?
1h29m30s – How does Alex decide where to give and what does he donate to?
1h33m15s – Does Alex worry about losing his altruism due to being in a corporate environment?
1h35m15s – Would his altruism be more likely to be reduced at other kinds of firms, for example a hedge fund?
1h37m20s – Is it unmotivating to only be helping people through donations?
1h40m00s – What are the natural exit opportunities for people who want to leave?
1h41m45s – Do people retire early because they’ve earned so much?
1h42m45s – Is there much risk of the industry declining due to competition?
1h44m00s – Final appeal to try to get a job in quant trading.
- Algorithmic trading on Wikipedia.
- Career review of quantitative trading in hedge funds.
- Is finance too big? by John Cochrane.
- Does finance benefit society? by Luigi Zingales.
- How much do hedge fund traders earn? by 80,000 Hours.
Want to earn to give for effective charities in quantitative trading? We want to help.
We’ve helped dozens of people plan their earning to give careers, and put them in touch with mentors. If you want to work in quant trading, apply for our free coaching service.