I've thought a lot about this too (I used to work in HFT). Here's what I think:
- The only part I didn't like in your article was how you described creating indicators as exploitation. The limit order book is public by design so all traders can look at it. People have the free choice to trade on a centralized exchange or not. This is a trade-off between revealing information and being able to trade quickly without calling all your friends asking if they want to buy some Bitcoin.
- I'm guessing you used data from other exchanges outside the one you were trading as indicators too. That's unquestionably good since your trading helped information propagate faster or more accurately than it would have otherwise.
- Markets are only zero-sum in isolation. Most participants derive utility from things outside short-term profit and loss. Maybe they trade to manage risk, to hedge, to gamble, have a longer time horizon than you, whatever. They just want to trade and get back to their lives. They don't want to waste time squeezing the last fraction of a basis point out of their fills. It's hard to believe, but they actually enjoy getting picked off, run over, paying too much spread, whatever things make you feel bad or indifferent about the service you provide.
I used to get filled making markets on Nasdaq (which pays resting orders a rebate, and charges crossers) when BX (which pays crossers a rebate) was at the same price, and could lay off the trade for an instant profit. The people who traded with me paid for the luxury of saying "fuck it, send it to good ol' Nasdaq." I used to think it was stupid of them, and from the perspective of a prop trader, it was mind numbingly stupid, but they probably had more productive things to do than read every exchange fee schedule or hook up to every small exchange.
- Providing liquidity has nothing to do with resting limit orders vs. crossing the spread. Providing liquidity is about taking risk off the hands of people that don't want it, and moving it across time to someone else who does. If you're market neutral, trade many round trips every day, and end relatively flat, you've played that intermediary role as a liquidity provider regardless of what order types you use.
- Crossing against mispriced orders is doing the world a favor. You're not the bad guy picking them off. If anything, they're the bad guy for holding the market at an incorrect price.
So maybe think of yourself as more of a service provider. Not only will you feel better, but viewing trading through that lens tends to make you a better trader. Strategies truly built around an exploitation mindset are fundamentally unsustainable, since you run out of people to exploit. Providing a service works forever.
FWIW, the rest of what you wrote is almost exactly how the pros do things. If you built this system yourself, you could make far more than 200k at a prop firm. If you're interested, reply with a throwaway and I can refer you to a friend who's still in the business.
You ask a great question: If a business isn't able to employ American workers at competitive pay, what purpose does it serve for the country? Why should it be here or exist?
I have sympathy for cash poor startup founders, but offering substantial equity works wonders. Like a real amount, not something that rounds to 0. It's hard to feel bad for someone who wants to keep all the upside and not pay a good salary. Someone making 500k elsewhere should be a key hire, so spend or dilute yourself accordingly.
If most American startups aren't able to hire American workers at competitive pay and start moving little by little to (say) Canada, aren't there a risk that the whole VC/startup ecosystem will slowly move there? If the Apple/Google/Amazon of tomorrow are Canadian, how does that serve USA or American workers?
It's a short term vs long term balance. As an American you should want US to remain dominant in the startup ecosystem. Restricting startup access to skilled workers is counter-productive in the long run, even if it serves your short-term interests.
Businesses do not exist merely to serve their host countries. They serve the needs of many people, including shareholders, customers, employees and the communities (not just countries) they are based in.
> You ask a great question: If a business isn't able to employ American workers at competitive pay, what purpose does it serve for the country? Why should it be here or exist?
One would assume that the business still pays taxes, bills, rent etc.
It's still a net gain to the economy, especially when the alternative is for the work to go overseas.
And doing that may put downward pressure on wages for ordinary Canadians. Their citizens vote, too.
I don't think offshoring to India is a real worry. They lack the rule of law and stable business environment of countries like the US and Canada. Nobody with sensitive IP would outsource their core business there. If offshoring worked well, even with H-1Bs being allowed, companies would already prefer keeping Indian employees there with lower salary and COL, but they don't.
I also have a hard time believing fully remote work will ever be more than a niche thing. Shared context and serendipitous discussion of ideas are so important.
How does moving high paying jobs from Canada to Canada while being done by the same people reduce wages in Canada?
If anything it will greatly help the local economy, and increases tax revenue for local, province and federal govts.
>If offshoring worked well, even with H-1Bs being allowed, companies would already prefer keeping Indian employees there with lower salary and COL, but they don't
It can just be expanded to include more jobs if it keeps getting harder and more expensive to hire in the US.
Brain drain from India to US currently hinders it, but if the rules keep getting tougher, retaining talent in India or attracting them to Canada becomes easier.
Remember when lots of people thought high quality cars couldn't be made in Japan or South Korea?
Regarding Canada becoming a hub for offshore workers, back in 2007:
>I also have a hard time believing fully remote work will ever be more than a niche thing. Shared context and serendipitous discussion of ideas are so important.
Isn't GitLab 100% remote?
I think Github has like 60% of people remote as well.
Also, the Linux kernel has been developed with people being fully remote for the most part.
If they could hire someone locally at their desired level of pay, they wouldn't. But while a legitimate talent shortage (at any price) may exist for super elite, specialist roles, there are plenty of citizens who can do typical engineering or IT work. Companies that don't pay enough will have a hard time with hiring though, thus perceiving a shortage.
Employers know it's harder for them to switch jobs so they have leverage. They can't complain or do much if management requires they be on-call in the evening or work late. This makes the H-1B worker more attractive to management at the same salary level, since they'll do more work and won't rock the boat. I've also seen H-1Bs receive the same base salary offer, but over time their variable compensation/RSUs (large portion of TC at many tech jobs) and salary progression are much worse.
I don't think it's unreasonable to limit H-1Bs to exceptional talent, or at least review their total compensation more thoroughly to ensure they aren't putting excessive downward pressure on the wages of ordinary middle-class citizens.
Each company treats their employees differently but we don’t. Our compensation is equal and based on position (so two people that do the same job are paid the same). We do differentiate options but only based on the current state of 409a (so person joining earlier gets more).
We pay the best we can. It’s completely open and transparent to all our employees. But there is no way to compete with $400k salaries paid to selected workers by few companies.
Paying low 100s + de minimis equity for distributed systems and DSP engineers in a super high COL city like LA is going to be a hard sell for most. People with real experience in those fields will be older, can't reasonably support a family there on that salary, and have a lot of options. The type of inexperienced employee who could pick these things up quickly is already being courted by FANGs on campus, for more money.
To get someone to work for that salary, the equity needs to be meaningful, or the startup needs to be the next Facebook or Google, not a niche product. If I'm thinking of working for you, at the max equity you list, the rosiest picture I could paint myself is an exit 4 years from now for $500mm, after which I'd get $500k assuming no dilution = $125k a year. And that's assuming all the stars align to make that happen.
I don't think you should close, since you have a cool product, but maybe consider moving to a lower COL area? I'm sure you could find plenty of people in a place like Huntsville, AL. Lots of defense contractors have engineers with the skills you need and I bet working for a fun startup would be more exciting than what they're doing now.
This is why over the long-term, restrictive immigration laws will cause tech jobs to move abroad. There is no fundamental reason why the global tech industry has to be so concentrated in Silicon Valley. The workforce - which is heavily international - is there at the moment, but if American immigration policies restrict the workforce, the companies will eventually move operations to wherever their workers are.
Bingo. And once talent does move offshore, it’s going to be really really hard to get it back. Because let’s face it: SV is a horrible place to live in. Housing is too expensive, poor public transportation, endemic homelessness and the chance that an earthquake will wipe out the whole region.
If another city say Bangalore or Vancouver does get the critical talent required to kickstart the Tech boom and be a viable competitor, tech companies will migrate wholesale and never look back.
(1) While we are at it, let’s stop externalizing costs to some other territories. And to really make things equal, we are going to price all other things equally at a global level with certain cost adjustments to account for shipping and geography and similar factors. Oh let’s not forget that all labor needs to be allowed multinational freedom of movement and migration to anywhere, similar to how much freedom multinational corporations enjoy. And probably going to need to unify all 195 nations into 1 global state too.
Then this little immigration and globalization issue will finally disappear, which would be fantastic for everyone.
(2) Or we can continue opening up the globalization box piece by piece because each change is really great for some groups and really bad for other groups, which only serves to heighten social conflict and wars like the trade war that has been happening. There will never be enough assistance provided for groups that are negatively impacted by globalization; governments are much too slow acting reactively and proactively.
You realize that most of the changes that you and others want to make are just as unrealistic solutions as the above, and only one is a permanent solution? Right? And as a result of the fragmentation of the world we find ourselves in, incremental changes will not solve anything really. You can move the tech hub or dominant economy somewhere else and it will end up getting restricted again because there will never be enough relief from crowding unless the tech hub becomes more decentralized like most other industries. Further, even being decentralized there will be incumbents created in Canada that will eventually find the changes to be undesirable just like the USA.
Canadians will eventually say China is ok but Indians are externalizing too many degree education costs. And there might be another trade war, and someone thinks they have the answer by moving the dominant economy somewhere else and the same issues will surface again.. and round and round we go in circles until people have finally had enough of kicking the can down the road, throwing the garbage over the wall, and the globalization wars and option 1 happens.
If human civilization survives long enough, option 1 (one world government) will definitely happen, because it makes a lot of sense in a highly interconnected world. But it's very hard to say how far off it is.
The problem with flyover countries and other places inside the US is the same fickle immigration rules apply. And how many people around the US want to migrate to Alabama or Mississippi?
>At the same time, if the companies export their labor to exploitative countries, their goods and services can be tariffed.
This isn't manufacturing. I really doubt local techies in Canada or India are being exploited.
> The problem with flyover countries and other places inside the US is the same fickle immigration rules apply. And how many people around the US want to migrate to Alabama or Mississippi?
There are many universities in Alabama and Mississippi that produce ample high-quality graduates. I can tell you that, comparing with the courses published on OCW, my curriculum and its rigor did not differ much from that of MIT.
This is where the tech companies located throughout the region get most of their employees. There are, right now, tech jobs in places like New Orleans, Mobile, Huntsville, Birmingham, Hattiesburg, Jackson, and at least a half-dozen other cities in those two states - and not just one or two employers in each, but enough to jump around a little during your career.
So, a company opening there could expect to draw from the same pool of talent everyone else is, and successfully attract a lot of candidates for salaries great for the area and substantially less offered by FAANG. Not a lot do it (just one guy in my class, for example), but as the number of jobs and their pay increased, less people would leave to work in CA. Eventually, yes, you'd drawn in people who want to move here from other places. About a quarter of my current workplace (~150 employees) relocated from elsewhere in the country.
If you get to the point where you can't find anyone else for any sane amount of money, then...open up another office somewhere else in the country. Why is your first jump that fickle immigration rules are going to be the problem rather than hiring the people already here?
For many companies, cost is not as much a factor as being able to attract top talent, and not fragmenting their offices too much by spreading teams across them.
Many people in smaller metro areas that you mentioned are able to relocate to the West Coast, and many people actually do. The are no visa or immigration issues for them.
If the choice for a new location is between Vancouver and Mississippi, literally anyone in the world can work in Vancouver easily, expanding their potential hiring talent pool. Whereas a Mississippi office only attracts people that are unwilling to relocate to the bigger metro areas within the US. Any new location in the US has to deal with these new immigration issues if they don't find an exact match or if they have to hire a foreign born grad from one of the schools you mentioned. Vancouver does not have these issues.
Good analysis. The reality however is, that there are hardly any people with experience in other areas. We can only follow the current distribution and don't have a decade to build out our own talent from scratch. We invest heavily in education and growth, but it still has some time limits.
We already have sister offices in CO, MN and Czech Republic for this reason. It ads crazy complexity to the operations, but at least we have access to more talent than we had before.
I'd suggest that your premise ('hardly any people with experience') is wrong. Half the skills you list are relatively common. For a company of your size, finding a few dozen people with most of those skills in any major metro area in the U.S. is pretty trivial. Granted, the price you'll have to pay for them might not make you happy[1]... but they do exist.
[1] it's not FAANG level, but it's also not 105k. (if your top end compensation is significantly higher, you should probably be indicating that. Or perhaps breaking out minimum salary by position if they differ significantly.)
Those are not skills, those are positions. We don't list skills, as they are quite arbitrary and really don't say much about their potential.
> Perhaps it's just me, but when I see a salary listing without I high-end, I assume that's because it's pretty low.
We found that writing the upper bound, many candidate assume that the upper bound is the general compensation and get quite upset if we don't value them as high.
Commercial work will always pay better than academia. Roles like trader/quant where your value is measurable & portable will always pay better than being a drone in a big machine like Google. If anything, front office finance roles aren't underpaid: people with similar skill sets are underpaid elsewhere.
I don't work in trading anymore, so I'm not talking my book here. Trading is zero-sum at a transactional level, but has knock on benefits beyond profit and loss:
-Making it easy for companies to raise capital through IPOs or offerings (without a robust secondary market for securities, people will be less likely to invest)
-In commodities: Letting businesses bear the risks they want and insure against the ones that aren't their core business
-Liquid markets let real people trade in and out of investments without friction at fair prices
-Providing accurate price signals to other businesses and the broader economy
So I don't think I was saving the whales, but I don't think it was wasteful, either.
Also, as a mildly clever OCD math guy who's semi-good at writing fast C++ code, I don't think I would have been curing cancer anyway.
ETA: At least in the case of HFT, if you accept that markets need intermediaries of some sort, it seems more efficient to have a few dozen tech/math guys do the same job thousands of guys in mesh vests were doing years ago, and cheaper.
I knew, or at least knew of, some of the vest guys as fathers of people I grew up with. As in any group it’s a mixed bag, but I feel pretty confident that none of them were missing their true calling in pushing forward the boundaries of our understanding of hidden markov models or getting speech recognition to work. We’ve used those kind of resources to free up people to, I don’t know sell whole life insurance policies or something. I’m sure there’s a sense it which it is efficient, like I said I’m not a centrally planned economy guy, but there does seem to be something off about it.
I mean there are computational cancer models that need to be written and optimized.
Again I've seen the same just running a single HFT desk within a larger firm. The only time we ever lost money was from rare technology errors. Trading equities, even if one position spikes 5-10% bad on news, you will still make money, because it's just one little position out of the thousands of tickers you trade. Even guys making far fewer bets in asset classes like FX only ever lost on extreme dislocations like the Euro/Swiss unpeg.
If you make a large number of bets, even with just a tiny statistical edge, you will be consistently profitable. RenTech probably isn't profitable every day, but I bet over a year they make at least as many bets as someone like Virtu makes in a day, so it's not surprising that they never have a down year, provided they have the edge.
1: Now does this mean Virtu the business made a profit above cost every day? Probably not. But it does show that consistent trading profits are achievable.
I'm not sure RenTech and Virtu are comparable though (although I'll admit I don't work in the industry, so correct me if I'm wrong), but based on the article from Matt Levine on his Bloomberg column "Why Do High Frequency Traders Never Lose Money?" [1]:
> Imagine how suspicious it would be if, for instance, your local supermarket made money on every carton of milk that it sold. That just seems too good to be true, doesn't it? How can they know the price of milk before you do? Shouldn't they be losing money on half of their milk, and making it on the other half, so that things balance out? Doesn't the fact that they always make money suggest that they're ripping you off? [...] That is, Virtu (like Goldman) is selling a product, and that product is liquidity, and it charges for that product. High-frequency trading firms are in the business of acting as middlemen, providing a valuable service by letting buyers and sellers trade as soon as they want to, rather than waiting for fundamental sellers/buyers to come in on the other side of the market.
As I understand it, RenTech is taking an investment position which is why the returns are remarkable whereas virtu is (as Levine puts it), selling liquidity.
RenTech doesn't publish much so I'm merely conjecturing based on their volumes and other information that's in legal filings. There are a lot of ways to provide liquidity and fair pricing over diverse time horizons. It doesn't really matter how they do it. If your bets are independent and you have a statistically significant edge, you are basically guaranteed to make money with proper bankroll management.
From what Virtu's published, they make two-way markets, and once filled they scalp a tick, arbitrage in another product, or cross if the market becomes weak. Maybe RenTech does something like buy underpriced oil producers whose prices haven't moved up after bellwether stocks in the industry like XOM and CVX have, then sell once the spread between them converges. I'm sure both firms have loads of different tactics. The key thing is that they're mildly better than chance.
Virtu makes money because they take advantage of a structural setup in the market: they trade retail flow from the likes of Schwab and Robinhood.
This is vastly different than making money in the markets just by connecting to an execution venue and receiving market data.
In the former you have a clear edge over the market because you receive dumb uninformed flow. In the latter example you are left to fend for yourself and challenge the EMH purely through your math skills and insights.
Return on capital isn't a super meaningful metric for capacity constrained trades. If a fund earns 80% returns, but has no means to compound the resulting profits through the same mechanism, whoever receives them naturally puts them into something with worse returns, so their wealth still grows slowly over time.
I think Medallion is somewhere between HFT and stat arb, probably a mix of multiple strategies along those time frames. The faster you trade independent opportunities, the more you recycle capital, and prime brokers extend tons of leverage. When I worked in HFT, our profits were bound by other factors way before cash, and my desk's ROC was far higher than this when doing well (even when doing poorly, ROC was quite high. It was the expenses of finding those returns that killed us).
If all the money is employees', Medallion is basically just a prop firm. The employees paid out of the fund are essentially partners/owners, and the rest earn discretionary payouts of management/performance fees.
Even within the fund structure, most profit is return on labor, not capital. I'm sure if you compare margins paid to partners in professional services firms like law or consulting vs. typical publicly traded companies, they're also far higher, but Cravath, McKinsey, etc. won't let you buy in as a passive investor; you have to work for it.
ETA: If you're wondering how it's possible to earn 80% returns, or even more: there are myriad tiny inefficiencies you can trade on given the right research and infrastructure. I'm sure 80% is simply the point at which Medallion makes the optimal $ per year relative to risk. They could probably throttle back, make less $ on smaller capital, but far higher percentage return, if they wanted.
You might notice that the prices of trading A for B, then B for C, then C for A results in more A than you began with if done instantaneously.
But you can’t do that for a trillion dollars, because the “price” of an asset is just the best offer to buy or sell, and those are capped at the quantity of the best offer. Once you exhaust those, the arbitrage might not exist anymore because the remaining best offers will be worse. Say the market has capacity to actively exploit arbitrage for $10,000. You will earn the same amount of dollars if you have $1,000,000 or $10,000 if you exploit it to the max, but your return will be 100x better if your base is $10,000.
i've been thinking about your comment for about 12 hours now (over night after reading it last night). i don't quite understand the force of it.
>If a fund earns 80% returns, but has no means to compound the resulting profits through the same mechanism, whoever receives them naturally puts them into something with worse returns, so their wealth still grows slowly over time.
i don't see why this matters at that AUM. treat it as a fixed annuity for the fund members and it's still fantastically successful (if you know of a savings account that i can safely withdraw 80% of 10b from every year for 20 years please let me know).
>Even within the fund structure, most profit is return on labor, not capital.
i think this is just a matter of "levels of abstraction". if i invest in a mutual fund that has portfolio managers and analysts are my returns thereby ROC or returns on labor? obviously according to GAAP they're returns on capital but inside the mutual fund there are people laboring away. if i in-house that mutual fund along with all of that research infrastructure why does it suddenly become return on labor? it's the same economic activity.
Money quote on page 345: "In the second study, Mosing, Madison, Pedersen, Kuja-Halkola, and Ullén (2014) had over 10,000 twins representing an extremely wide range of music skill estimate deliberate practice and perform tests of music aptitude. Mosing et al. (2014) found that there were genetic effects on both music practice and music aptitude. More important, there was no evidence for a causal influence of music practice on music aptitude. Identical twins differing massively in amount of deliberate practice did not differ significantly in music aptitude."
Apologies for being contrarian, but let me flip things around: Perhaps people who are able to benefit from practice enjoy it and tend to do more of it.
I get excited learning about the latest C++17 features and used to love reading stock exchange specifications, which most people would find about as exciting as a root canal. I find it rewarding because I can apply what I learned and feel a sense of satisfaction. Conversely, I've always sucked at golf and could barely stomach the half-dozen lessons I tried, even though I consider myself a diligent person and spent years practicing many other things. I never improved my swing and the entire experience was nothing but frustration. If you have a rough time at a beginner or intermediate level, it's hard to gin up the desire for continued practice beating your head to a wall.
The premise of this paper is naturally enticing. If you had only tried a bit harder practicing lay ups in gym class, you could be just as good as Michael Jordan (ok more like you could get a bit closer, since they claim practice explains ~20% of results). I don't really buy it.
> If you had only tried a bit harder practicing lay ups in gym class, you could be just as good as Michael Jordan
I don't think it's that - MJ obviously had a lot of things going for him other than his practice ethic (for one, not too many people are 6'6"). Most people just want to be slightly better than their peers - they want to be the best player on their rec league, and understand they're not going to the NBA.
That holds some water, since as the article notes deliberate practice has more effect at the lower levels of competition.
Or to bring it back to your golf analogy - you were never going to be even a low-level professional golfer, but with enough deliberate practice you could've probably held your own against your co-workers at a company event. That's the goal of most people engaging in deliberate practice, outside of very select environments.
Obviously that doesn't counteract your sheer anguish of practice, though, and you're right that it's quite difficult to practice if you don't have an aptitude for the task.
In the same vein, I think the term "deliberate practice" may produce misleading results. If you love music and you're very good at it, you may not count a jam session or some idle noodling around on a guitar to be "deliberate practice" but they would still contribute to your skills.
Likewise I suspect if you asked a bunch of mid-level gamers how much time they spent "deliberately practicing" to improve their skills, the answer would be low compared to their total playtime, and that their skill levels would correlate much more strongly with total playtime than with deliberate practice.
Neither of your examples qualify as deliberate practice. People can plateau at one skill level for decades and make sudden jumps in ability by deliberately focusing on one specific skill. Expertise is at least in part, the combination of excellence in multiple related skills.
> An expert breaks down the skills that are required to be expert and focuses on improving those skill chunks during practice or day-to-day activities, often paired with immediate coaching feedback. Another important feature of deliberate practice lies in continually practicing a skill at more challenging levels with the intention of mastering it.
K. Anders Ericsson, Ralf Th. Krampe, and Clemens Tesch-Romer. The Role of Deliberate Practice in the Acquisition of Expert Performance. Psychological Review 1993, Vol. 100. No. 3, 363-406 [
That's kind of the point. "Deliberate practice" definitely helps to hone particular skills which fill holes in your overall competence. When you're performing at ultra high levels, you probably already have optimal performance in most areas, and all you have left to practice are particular skills.
Also, how you measure "sports performance" and what a percentage point means at different levels seems crucial to the whole thing. Maybe deliberate practice only accounts for 1% of performance... but an athlete who's 99% perfect is twice as good as an athlete who's 98% perfect.
Bear in mind that the musical aptitude being measured has little to do with how skilled they are as a musician. They are measuring things like ability to differentiate tones separated by 1/2 to 1/30 of a semitone, rather than how much you would want to listen to them play.
This. Not having children sooner is one of my deepest regrets.
My wife and I had our first when we were 30, and luckily, another through IVF, which is far more complicated, painful, emotionally draining and expensive than you'd expect based on how people casually talk. It's unlikely that we can ever have more, even though we could easily take care of them, and we both come from big, happy families.
I was afraid to get married and start a family. It seemed so daunting and I dreaded being a bad father/husband or letting a poor innocent kid down. My parents grew up struggling in Portugal and as poor immigrants to the US and I wanted no part of that. By the time I felt ready I had a few million dollars in investments, owned a large apartment in a nice city without a mortgage and was doing well in a very competitive job (HFT).
And it ended up not mattering a bit. My industry got decimated, just as I'd feared, and I never touched a single dollar of the money I had put away. My kids never starved. My wife still had her job. I work hard and am somewhat clever. I found another that paid more than enough, not finance money, but plenty.
Kids aren't that expensive. Once you have a family you aren't going to fancy restaurants or racking up big bar tabs every few weeks. Clothes can be cheap if you look around. Your kid doesn't need a 50k preschool. As long as you're employable in a middle or upper middle class job, you can take care of a kid. Money and career success aren't even the toughest parts. Being an old dad sucks. Everything is just physically and mentally harder than when I was in my 20s. In retrospect, I wish I were waking up at 3am to change diapers instead of getting in from the club at 26.
It's a cliche but I feel more joy and personal satisfaction watching my sons grow and learn new things than anything else in the world. I've been very fortunate, had a lot of successes and cool experiences, but nothing comes close.
Make sure you preach this. It's a message that people need to hear. Our children's generation is getting decimated before they are even born. I look at my Facebook and I'm saddened to realize that half of my friends probably won't have kids. They're great people and a world with their children in it would be a better world.
Yes, it's a very complicated situation though. I see a few causes among my peers:
-College alone, except for a select few schools and/or majors, is no longer a strong signal for getting jobs. My wife went to a good state school and studied Philosophy in undergrad, but had trouble finding good work. She ended up at a top law school, starting her career at a big law firm when she was 25. More post-grad education isn't necessarily bad, but it often leads to debt and delays independent adult life milestones.
-Less loyalty from company to employee and vice-versa compared to years ago. Hiring generally bright people and training them up to work for a decade plus is unheard of today at most companies. I was lucky to get my job out of undergrad and move up the ranks. Many of my peers had to hop jobs and cities.
-Geographic bifurcation of haves vs. have nots and tech eating the world. The best jobs are concentrated at fewer companies, mostly in very expensive cities like with high housing costs. Around the smaller city where I grew up, baby boomers in middle management could earn good salaries, but there were few good entry-level jobs. People move away from home for a career. Having kids means expensive childcare or one partner giving up a job/taking less lucrative work. In the "good old days", extended family would help with the kids and it was easier to get by on one salary.
-This will sound controversial, but availability/acceptance of hedonistic pursuits: world travel, casual sex, drinking/drugs/partying, video games, porn, etc. I'm sure the Tinder era makes this even easier. On a more banal level, when I was single, I rarely cooked a meal for myself or even did laundry. Eventually this felt empty but it was a siren song at the time. There's very little social/peer judgment telling you to "grow up." I could still live like this today if I wanted to. I'm not a Ned Flanders type: It was mostly fun, but I do think extended adolescence can extend a bit too long.
Anyway I don't really like to preach to people. Raising a family is hard work, and it's a full-time 100% always-on commitment, even more than that finance, tech or big law job. It might not be for everyone. I will say for the people who want to some day, but want just this one trip to Machu Picchu on their Instagram, one more notch on the headboard, one more Michelin three-star tasting menu, one more good bonus/promotion, etc. etc. to just take the leap.
I’m also not inclined to tell people how they should live their lives, but this is the one issue that seems important enough to me. The stakes are high (human lives are in the balance) and it seems like hedonism and self involvement are the main things I see preventing people from having kids. Basically I want to shake people and say, “Forget about your vacations and highly cultivated lifestyle. None of that matters in the end, so you might as well give it up to make some new people.”
Most people know this on a visceral level. If you only live for yourself, you'll never be satisfied: There's always someone with more. I definitely had some kind of seeking feeling but couldn't put my finger on what I was missing. Nobody really told me what to do.
The decline of organized religion might play a part? These communities provide a purpose beyond the self through volunteering/charity, steer their members to start families, and provide role models/mentors for younger men & women to model.
IMO, the rise of extreme ideologies is telling. Rudderless people are so desperate for a moral code and sense of belonging that even alt-right neo-Nazis look like an attractive option instead of a sad joke. I'm not sure what type of positive community fills this need today. I'm not a religious believer, nor are most of my peers. I volunteer at a food pantry, but the volunteers are kinda transient and it doesn't feel like a cohesive group.
I won't comment on better/worse since I have no idea what op meant and it also makes no sense to compare. Having children is a fundamental human right. It's a shame that people who are capable of doing so, and want to do so, defer this goal until it requires medical intervention or becomes impossible, just to have a good career or fit in with their peers.
I don't think being versed in family life matters. The older I get, the more I realize that the folks in charge are just as confused as I am half the time. Everyone learns as they go. Nobody is born knowing how to raise a kid and every kid is different. If you give them a safe & nurturing place, spend time with them, and try your best, you'll do just fine.
For whatever reason, I ended up with a lot of friends who are smart, conscientious people. They’d make great parents. Well above average. Mostly it seems like they’re not having kids because they more focused on other things (career, personal growth and achievement, etc). Having kids seems to have been relegated to an afterthought among the culturally ascendant class. And certainly having lots of kids is looked down on as something only weird religious people do.
Insurance is an apt analogy. Intuitively, if someone consistently makes money, they're just skimming without providing any value. People were astonished that Virtu made money almost every day, but wouldn't care if GEICO made money almost every day.
In statistical expectation, you are better off not selling your stock to an HFT market maker. They are only buying from you, on average, when the spread you pay is more than they expect the stock to move. You could wait and sell to someone else for a tiny bit more, on average.
In statistical expectation, you are better off not insuring your car. The insurance company writes the policy such that their expected payout over its lifetime is less than the premiums they collect.
But real people don't live in the world of maximizing expected value. The guy selling his stocks is doing it a couple times a year, and doesn't want to risk losing a few % if the market gaps down, just to make a tenth of a penny more in expectation. Nobody wants to take out another car loan if their shiny new SUV gets hit driving out of the dealership. Bearing risks people don't want is valuable.
So bizarrely, while these services may satisfy a need, consumers are only really happy when the provider loses. Nobody looks back on decades of crash-free driving reminiscing about paying those insurance premiums. Nobody likes to sell stock and see it tick up.
(And I'm hand waving assuming you're a randomly selected trader or driver. If you have inside information, trading with anyone is positive EV. If you drive drunk at 100mph but have no tickets or DUIs on your record, insuring your car is positive EV.
I'm also hand waving away comparative advantage. That better price an HFT market maker gets when turning over your trade may not be achievable for you. Maybe they can trade on more exchanges or predict prices better to get out at the right time. They do this all day so trading optimally is not a waste of their time, but it's probably a waste of yours. In that case, you may lose more and take more risk doing it yourself. I think that's closer to reality.)
> you are better off not selling your stock to an HFT market maker
You are also better off selling into a market containing at least on HFT market maker. Without them, spreads become fat. It is notable that the principle aggressors, at the political level and until recently, when HFT became an armchair economics term of art, against HFT were the old line market makers.
- The only part I didn't like in your article was how you described creating indicators as exploitation. The limit order book is public by design so all traders can look at it. People have the free choice to trade on a centralized exchange or not. This is a trade-off between revealing information and being able to trade quickly without calling all your friends asking if they want to buy some Bitcoin.
- I'm guessing you used data from other exchanges outside the one you were trading as indicators too. That's unquestionably good since your trading helped information propagate faster or more accurately than it would have otherwise.
- Markets are only zero-sum in isolation. Most participants derive utility from things outside short-term profit and loss. Maybe they trade to manage risk, to hedge, to gamble, have a longer time horizon than you, whatever. They just want to trade and get back to their lives. They don't want to waste time squeezing the last fraction of a basis point out of their fills. It's hard to believe, but they actually enjoy getting picked off, run over, paying too much spread, whatever things make you feel bad or indifferent about the service you provide.
I used to get filled making markets on Nasdaq (which pays resting orders a rebate, and charges crossers) when BX (which pays crossers a rebate) was at the same price, and could lay off the trade for an instant profit. The people who traded with me paid for the luxury of saying "fuck it, send it to good ol' Nasdaq." I used to think it was stupid of them, and from the perspective of a prop trader, it was mind numbingly stupid, but they probably had more productive things to do than read every exchange fee schedule or hook up to every small exchange.
- Providing liquidity has nothing to do with resting limit orders vs. crossing the spread. Providing liquidity is about taking risk off the hands of people that don't want it, and moving it across time to someone else who does. If you're market neutral, trade many round trips every day, and end relatively flat, you've played that intermediary role as a liquidity provider regardless of what order types you use.
- Crossing against mispriced orders is doing the world a favor. You're not the bad guy picking them off. If anything, they're the bad guy for holding the market at an incorrect price.
So maybe think of yourself as more of a service provider. Not only will you feel better, but viewing trading through that lens tends to make you a better trader. Strategies truly built around an exploitation mindset are fundamentally unsustainable, since you run out of people to exploit. Providing a service works forever.
FWIW, the rest of what you wrote is almost exactly how the pros do things. If you built this system yourself, you could make far more than 200k at a prop firm. If you're interested, reply with a throwaway and I can refer you to a friend who's still in the business.