My Introduction If I ran a trading firm this would be Day 1 reading. After finding out where the bathroom is and filling out your W-4, you would be handed this book and told to finish it by tomorrow. After 1 year on the job, you are required to re-read it. There are many sentences in this book that serve as somewhat off-hand or connecting, but are deeply insightful. The kinds of things that would not be perceived by a novice but veterans will recognize they are reading something by a deeply experienced professional. As a veteran of options trading, I found this feature makes the book transcend being informative into being delightful. Trading is the art of decision-making turned into a high-rep game. It requires:
- multi-level thinking
- sound epistemology
- discipline
- self-awareness
- self-honesty
- alignment
- humility
- curiosity
- competitiveness
- collaboration
- creativity
- comparing
It is deeply intertwined with technology, math, and economic reasoning. This book is an instant classic. The rules in the book are reductions of vast, hard-fought institutional knowledge and the leading edge of thinking about risk. The author combined his training and experience at Jane Street, a legendary quant trader and market-making firm, with a broad intellectual acumen. Both his engineering background and affinity for liberal arts and philosophy come through to create a guide that transcends a single discipline. Personally, reading this book left me with nostalgia as the type of thinking was the water I swam in when I was at SIG (Jane Street’s lineage traces to SIG alumni who became under-the-radar legends themselves). My second personal feeling is, “damn, I wish I wrote that book.” Except I couldn’t. The author is an elite synthesizer with a nuanced comprehension for coding, organizational behavior, interviewing, and data analysis.
My notes are below. They are sparse compared to the depth of insight crammed into 250 pages. Every chapter covers a “rule”, situates that rule in the context of finance, then applies it to decisions all people face in the course of life.
This chapter is a thorough walk-thru of how trades can be expressed in so many different ways. [Me: Simple buying or selling an asset is a blunt trade expression. Derivatives allow the single summary price of an asset to be decomposed into finer bets. You can bet on distributions and timing in ways that trading the underlyer do not allow.]
[Me: The rule of this chapter was one I regularly employed. Hedge the exposures you don’t want because you have no edge in predicting. Isolate your bets so they map as closely as possible to your reason for wanting the risk.]
The trading contexts in this book are a thick skin on what is happening underneath.
It is actually adapting the lessons from markets and decision-making to explore the richness of life itself by animating our collaborative natures. It harnesses our privileged intellectual endowment in the hierarchy of nature in service of our inclinations towards human progress and flourishing.