As I read “How I Became a Quant“  it seems that quants are more often born than made.  Of course it takes time to time to become a quant in the same way it takes time to become a doctor, lawyer, or engineer.  The difference is that one does not exactly just get a degree in quantitative financial analysis to become a quant.

Being a quant is very much like “having the knack” a la Dilbert.

Being a quant and becoming a successful quant are not one in the same.   So I must consider what might possibly give me an edge?   How can I possibly out-quant other quants?   The short answer is by providing “common sense descriptions and open-the-kimono transparency to investors”.   The long answer is to long to fit within the margins of Arithmetica or this blog post.   BTW, the other part of the long-short answer is by offering much lower fees than other hedge funds.

I’ve discovered in my electrical engineering career, that having the best data is not, by itself convincing.  Neither is having the best analysis, or proofs.   Sadly, having adequate data and analysis PLUS the right amount of polished persona, political acumen, and just a bit of luck tends to be the best alchemy for “winning arguments” in engineering.   Choices that alter the status quo are particularly difficult to influence with “mere data”.   Unfortunately for the would-be-quant, winning the initial argument is just the beginning.   If the choice proves to be  successful, getting a proper share of credit for ones part in the decision becomes its own challenge.

Finding a path to more direct to credit (or blame!) for one’s ideas appeals to me.   I am happy to put my own skin (money) in the game, provide detailed disclosure to my co-investors, and let the chips fall where they may.

With finance the proof is in the pudding.  Yes, luck, good or bad, is also a significant ingredient.  There are benchmarking tools (like Fama/French) to help separate luck vs. skill… but how many sophisticated investors bother to read — let alone grok — the Morningstar reports?   Shy meticulous self-motivated due diligence, sophisticated investors have these information proxies:  1) low fees, 2) track record, 3) fund transparency, 4) fund manager skin-in-the game.  In fact, without adequate fund transparency, rating agencies like Morningstar cannot even compute Fama/French 3-factor models.  Such folks are well-served with a proper mix of low-cost index ETFs and/or funds.

I ask myself, “For folks like these, what kind of ancillary fund would I seek?”   The answers I, as a quant, come up with is 1) low fees, 2) kick-ass transparency, 3) significant skin-in-the-game, 4) awesome algorithms and compute infrastructure.  I’m working hard on the first three.  I’m afraid #4 will only come with time and capt ital, lots of capital.  I’m hoping that 3 of 4, plus just a bit of luck perhaps, will produce that time and capital.  Until then,  3 out of 4 aint bad.