A Few Questions for Twofish-Quant.

I know I didn't actually ask the question, but this thread has been really informative and helpful to me as well. I've appreciated reading your responses as well twofish-quant.

I do have something I'd like to ask though, if it's not too intrusive. What kind of programming jobs did you have before you made it to Wall Street? Does your current job make use of a lot of the skills you had to use/develop at earlier jobs? I do assume the types of projects you do are going to be dramatically different, but I'm just a little curious.

 The reason Wall Street likes people that are good with math is that if you are good with math, you are probably very flexible. Suppose you are really, really good with algebraic topology. Now it turns out that algebraic topology isn't that useful, but suppose you find out that stochastic statistical auto-coorelations models are import. Someone that doesn't have a math Ph.D. may just wait around looking for someone to teach them this stuff, but no one has time. If you are really good with math, then you go on google, download papers, buy some books from Amazon, and teach themselves what they need to know.
I love this piece of advice. As I get older and work a few more professional-type jobs, I'm beginning to realize it's not always about what you know but the qualities you've developed through the experiences you've had.

I think that's why the best employers typically want both a resume and a cover letter from candidates. Maybe just to get a small sample of how you think.

 Recognitions: Gold Member Science Advisor Staff Emeritus Just a small and maybe off-topic reply to the idea of open admissions at MIT. The same issues are often discussed about some famous schools in France: extremely difficult to get into it (but nothing special once you are there). I think that what has not been integrated (strange for someone from Wall Street ) is that value = rareness. If you distributed 50 diamonds to every girl in the world, they wouldn't love diamonds anymore. What makes these hot shot schools worthy is that they only admit a small number ("the best"), so having been there has value because it is rare. The aim is not the quality of the teaching or the special skills you get there. The aim is to be able to say that you belong to the small and select club who went there. That you've been a winner of a particular kind of competition. Make 10 million people follow freshman physics at MIT, and MIT doesn't mean anything anymore.
 I like your "out-of-the-box" thinking, twofish-quant. I doubt that MIT will ever change that drastically (or any of the other prestige universities as vanesch points out). However, it is the kind of thinking that gets some other university who is not in the "club" to change and suddenly eat everyone else's lunch.

Recognitions:
 Quote by vanesch Just a small and maybe off-topic reply to the idea of open admissions at MIT. The same issues are often discussed about some famous schools in France: extremely difficult to get into it (but nothing special once you are there). I think that what has not been integrated (strange for someone from Wall Street ) is that value = rareness. If you distributed 50 diamonds to every girl in the world, they wouldn't love diamonds anymore. What makes these hot shot schools worthy is that they only admit a small number ("the best"), so having been there has value because it is rare. The aim is not the quality of the teaching or the special skills you get there. The aim is to be able to say that you belong to the small and select club who went there. That you've been a winner of a particular kind of competition. Make 10 million people follow freshman physics at MIT, and MIT doesn't mean anything anymore.
So if MIT admits everyone, then it will be valueless, then no one will want to go there, so it can admit everyone. QED

 Quote by vanesch Make 10 million people follow freshman physics at MIT, and MIT doesn't mean anything anymore.
Yes, this is exactly right. Make 10 million people freshman at MIT, and MIT loses it's prestige.

It's not just that value = rareness though. There are a lot of really small schools out there no one cares for. The trick is, MIT has an image and reputation that evokes ideas in a person's mind. It's a brand. There's a surprising amount of information conveyed in a brand name, and I can't say I blame people for wanting to be a part of the club. There's a lot of financial value in owning a brand/ being branded.

The school's position is probably a little different though. They have a brand that they need to protect and that is done by carefully selecting who they allow into "the club." They need people to go out in the world, attain respected positions and be successful. Then donate. That makes school look like a terrific place to attend and study.

It's kind of an organic marketing process. Get smart, successful people to attend. Make money, gain respect. Then respect draws more smart, successful people to the school. And the people who are willing to throw money at them.

Recognitions:
 Quote by vanesch What makes these hot shot schools worthy is that they only admit a small number ("the best")
So if in fact "the best" is not true - then the non-elitist advice would not be for MIT to admit everyone, but to find the best somewhere else - another school, another profession - maybe even one that doesn't involve science. I dare say many from MIT might even agree that there is no best - worthy human endeavours are more like the complex numbers than the reals.

 A couple of essays that seem apropos to the discussion: http://www.paulgraham.com/colleges.html http://philip.greenspun.com/teaching...conomic-growth

 Quote by vanesch Make 10 million people follow freshman physics at MIT, and MIT doesn't mean anything anymore.
And it shouldn't mean anything.

The fact that you got your degree from MIT ***should*** be totally irrelevant. It's a *HORRIBLE* thing when people want to take a waves class at MIT when they could get a better educational experience at a community college. If a community college can teach freshman physics better than MIT, then people should go to the community college, and if they won't because of branding nonsense then we got to change this.

The fact of the matter is that classroom instruction at MIT is not particularly good. Your average community college has better teachers than MIT has. MIT's main focus is research, and it has motivated, brilliant students. If your students are good then you can have some professors that are totally incompetent at teaching. You can have a professor that just cannot teach, and then the students will figure out how to learn the material.

MIT has a wonderful culture, and one part of the culture that is wonderful is that MIT teaches you to hate brands, and hate MIT.

 Quote by Sankaku I like your "out-of-the-box" thinking, twofish-quant. I doubt that MIT will ever change that drastically (or any of the other prestige universities as vanesch points out).
I don't think we have a choice. The thing about branding is that brand perception can change in an instant. MIT like any other bureaucratic institution will refuse to change if it can survive without changing. But I don't really think it has a choice. The latest financial crisis are creating *huge* financial problems for the prestige universities.

In 1950, if you wanted to learn freshman physics, you basically *had* to go to MIT. Today, you can download the entire class on the internet. That radically changes the world, and MIT has to figure out how to change with it.

 However, it is the kind of thinking that gets some other university who is not in the "club" to change and suddenly eat everyone else's lunch.
University of Phoenix.

 Quote by AsianSensationK I do have something I'd like to ask though, if it's not too intrusive. What kind of programming jobs did you have before you made it to Wall Street?
I worked for about five years as a software developer, my Ph.D. involved huge amounts of programming, then there is programming I did at MIT, then you can go back to when my father brought home the TRS-80 Model I that I used when I was six. Also, it's just not jobs, but I spend a lot of my free time programming.

 I do assume the types of projects you do are going to be dramatically different, but I'm just a little curious.
It's not that different.

 I think that's why the best employers typically want both a resume and a cover letter from candidates. Maybe just to get a small sample of how you think.
It's really not. No employer that I know of will hire someone because of their resume or cover letter. The problem is that the resume and cover letter is just something that you rapidly look through to eliminate people that have no chance of getting the job. You take the stack, arrange them in an order, and then you call up the top ten candidates. Then you send in the top five for several rounds of face to face interviews.

You cannot find out how someone thinks from a piece of paper, and it's easy to create a good looking resume even if you know nothing. The resume is used to screen out candidates that obvious won't get the job, and then if you want to see how someone thinks, you give them math problems.

 Quote by AsianSensationK The trick is, MIT has an image and reputation that evokes ideas in a person's mind. It's a brand. There's a surprising amount of information conveyed in a brand name.
There's really very little information conveyed in a brand. A lot of emotion, but very little information. Coca-Cola is a powerful, powerful brand. It's just fizzy water in bottles. But Coca-Cola tastes *great!!!* Hmmmm...... Could it be that it tastes great because you see so many commercials convincing you that it tastes great.

Also this is really why you are in a better shape if you take some marketing courses. Graduate schools are trying to sell you something. *PROFESSOR* is a brand.

 The school's position is probably a little different though. They have a brand that they need to protect and that is done by carefully selecting who they allow into "the club." They need people to go out in the world, attain respected positions and be successful. Then donate.
And the money that you get from donations go into glossy brochures that convince everybody else that the brand is cool. However, the trouble is that to maintain a brand, you need large amounts of cash, and most of the major elite universities got hit really, really hard by the financial crisis. Harvard lost $5 *billlion* and MIT lost something like$2 *billion*. It's much worse, because they were counting on 15% growth for money. If you end up with 3-5% growth, everything falls apart.

My argument is that in the next three or four years, it will become obvious that MIT has to do something really radical to survive.

One problem is that if you think of education as an industry, there is only room for about three or four prestige brands. The *BIG* money is where the University of Phoenix is at. Think Walmart.

 It's kind of an organic marketing process. Get smart, successful people to attend. Make money, gain respect. Then respect draws more smart, successful people to the school. And the people who are willing to throw money at them.
The last part is where they are going to have problems...... I went to MIT. I'm smart. I'm successful. Why should I throw money at MIT when in fact I'll do much more social good if I throw money at a community college or raise money to improve inner city high schools? If MIT is going to focus on executive MBA programs and buying up Cambridge real estate, then that's great, but why should my money go to that.

Now if MIT were spending my money improving science teaching at in poor neighborhoods in Boston, I can go for that, but then the system falls apart when you have large numbers of people that now have decent skills, but can't get into MIT because their backgrounds aren't perfect.

 Quote by atyy So if in fact "the best" is not true
The problem here is "best" is subjective. OK you are a brilliant research mathematician but you stink at teaching algebra. Who made up the rule that you are "better"? (Any my answer, is that in the Cold War both the US and the Russians needed relatively small numbers of physicists and mathematicians to work on weapons systems, at so research got defined as "better.")

 I dare say many from MIT might even agree that there is no best - worthy human endeavours are more like the complex numbers than the reals.
That's fine but then you run into a problem in that it's weird that people that keep on saying that there is no "best" usually end up with money, power, prestige. If you aren't "better" than me, then why are you telling me what to do?

You are in a great position of power if you can define what "best" is, and people that get to define what the "best" is usually define it so that the "best" people are people that look, think, and act like they do. Actions speak louder than words, and you can usually figure out what someone really believes not by what they say, but how they act.

 Quote by atyy So if in fact "the best" is not true - then the non-elitist advice would not be for MIT to admit everyone, but to find the best somewhere else - another school, another profession
It's easy to be an elitist, if you think you are going to be a member of the elite. I'm not an elitist because it turns out that its very likely that I'm *not* going to be in the elite. I'm a loser and a failure.

One problem with getting into the "inner circle" is that once you get in, you find that there is an "inner inner circle". Once you get into the "inner inner circle" you find that there is an "inner, inner, inner circle"

At some point you just throw your hands up and just want to blow the system up.

 Quote by twofish-quant There's really very little information conveyed in a brand. A lot of emotion, but very little information. Coca-Cola is a powerful, powerful brand. It's just fizzy water in bottles. But Coca-Cola tastes *great!!!* Hmmmm...... Could it be that it tastes great because you see so many commercials convincing you that it tastes great
Actually, yes, this is the best way to phrase it. A brand is most like an emotional experience, or an attitude. There isn't a lot of relevant stuff conveyed in a brand name. But they're powerful things because of how people think.

I have a quote in my marketing book from the CEO of McDonald's basically saying, "If we lost every single asset on our books today through some freak disaster, we would still make tons of money because of our brand. We could borrow what we need, and continue business with relatively little trouble. Heck, we could give you every single asset of ours, keep our brand, and still make more money than you this next quarter."

 And the money that you get from donations go into glossy brochures that convince everybody else that the brand is cool. However, the trouble is that to maintain a brand, you need large amounts of cash, and most of the major elite universities got hit really, really hard by the financial crisis. Harvard lost $5 *billlion* and MIT lost something like$2 *billion*. It's much worse, because they were counting on 15% growth for money. If you end up with 3-5% growth, everything falls apart. My argument is that in the next three or four years, it will become obvious that MIT has to do something really radical to survive.
I believe it. They have to make more money somewhere in order to meet their budgets.

 Blog Entries: 2 Hello twofish-quant, some of my fellow students work at banks which got me interested. Does your job involve "financial mathematics" as described on this website "Finance for physicists" (for example option pricing)? Do you use any of the books cited on the website? And have you read Derman's "My life as a quant"? You mentioned your C++ skills. Is there anything else that can make me interesting for banks? Thanks in advance.

 Quote by Edgardo some of my fellow students work at banks which got me interested. Does your job involve "financial mathematics" as described on this website "Finance for physicists" (for example option pricing)?
More or less. The trouble with that website is that it's a bit outdated. The good/bad news is that there are about a dozen different types of jobs for physicists on Wall Street. Something interesting about mathematical finance is that it's a tiny, tiny part of finance, but finance is so large that it keeps physicists quite strongly employed.

 Do you use any of the books cited on the website?
Sort of, but again the website is out of date. Curiously it doesn't contain one of the books which I think is essential reading which is Kuznetsov's "The Complete Guide to Capital Markets" and Fusai and Roncoroni's Implementing Models in Quantitative Finance: Methods and Cases. Also you should look at Springer-Verlag and Wiley Finance since they will get you an idea of the type of problems that you need.

 And have you read Derman's "My life as a quant"?
Yes. Interesting book, but again, somewhat out of date. It's a very, very useful book if you look at it was history, but don't take it as a accurate representation of what Wall Street is like right now. One of the larger differences is that these are much. much more heavily computational than they were in the late-1990's. This is bad if you are a string theorist. Good if you are doing computational fluid dynamics.

Just to give one example of how Derman's book is a bit old. No one right now is that interested in modeling complex interest rate derivatives. People are interested right now in modeling negative and zero interest rates and counterparty default. You won't find a book that gives the standard method for doing that, because if there were a standard method for doing it, they wouldn't need you to figure out how to do it. Next year, they'll be interested in something very different.

 You mentioned your C++ skills. Is there anything else that can make me interesting for banks?
One big thing is to be a physicist and focus on writing a quality dissertation. There's nothing wrong with being a finance or economics Ph.D. except that if your Ph.D. is in physics, you are going find it much easier to to be a physicist with basic finance knowledge rather than an expert in finance. If you try to turn into an MBA or finance expert, then you'll probably lose the skills that make you interesting to banks and hedge funds.

One other curious thing is that you will be seriously, seriously miserable if you go into finance in order to make lots of money. It's really weird, because once you are in finance, you will make money that most people outside of finance consider to be huge, but because you are constantly meeting people that make even more money, so you end up feeling quite poor. Finance is also a horrible place to be if you like to be on top of the heap, for the same reasons. Also you'll probably end up living in the NYC area, which is both good and bad.

The one thing that would be useful is to read some standard finance texts. There is a huge amount of jargon. It's not that difficult to pick up, and it helps if you know it.

The other thing is to try to *think* about the "big questions." Are there too many investment bankers? Is what you are doing really economically useful? Personally, I think finance is economically useful, and there aren't too many investment bankers, but you have to think about this for yourself. The basic issue is that if you aren't really generating economic value, then you are just part of a bubble, and if you are part of a bubble, you are likely to get smashed.

The reason that you need to think about this for yourself, is that I really don't want to take the moral responsibility for encouraging you to go into a career that is going to blow up in three years. On the other hand, I don't want to the talk the moral responsibility for discouraging you from going into something that is going to boom. So I'll just say that its something that you have to think about.

Twofish-Quant, I just happened to read your responses and wanted to ask for some advice. I was actually looking into these kinds of Wall Street jobs and got shot down since essentially all of them require MS and Ph.D and I currently have a BS in Physics and minor in Mathematics.

The only thing that is preventing me from getting an MS or Ph.D in physics is the money. If it wasn't for that and \$100k already in student debt, I would be comfortably studying for an MS and Ph.D.

To me, it sounds like you are saying that Ph.D is mostly used as an indicator of proof that someone can work independently for a long long time without giving up easily and having the ability to adapt and learn new things (much like my time studying the physics major).

I have much of these qualities and have the determination to self-teach myself new things. In fact, I am moving towards a different career path as an Actuary (while still looking for physics related jobs.) So I had to go out, buy Actuary texts, study them and take special exams for this field. I've never taken any finance or Actuary classes in college, yet I am able to improvise. The benefit here is I can actually afford these books rather than a Ph.D. On top of that, I've self-taught myself in computer skills and programming to a point good enough to build and run an online business over the past 5 years (more proof of teaching myself new skills to make money.)

Now what am I suppose to do in order to get one of these Wall Street jobs by getting around the MS and Ph.D wall that is pretty much impossible for me to do because of a lack of money? To me it sounds like I can fit right in with that Ph.D mindset and research determination to do tough long jobs, plus I have some intelligence, but the only thing missing is the actual Ph.D or MS title. Any advice?

Thanks