THE CROWDED TRADE IS YOU
The entire course of my professional career was changed in 1994 when a co-worker handed me a copy of Liar’s Poker, Michael Lewis’ classic book about the tremendously successful mortgage bond trading desk at Salomon Brothers. I instantly knew that that was what I wanted to do. Not be a trader. Not be a mortgage bond trader. I wanted to be a mortgage bond trader at Salomon Brothers. Period.
I spent the next year or so preparing for my future career as a Salomon Brothers mortgage bond trader. I read everything available on the market and plowed through a half-dozen dust-dry thousand-page textbooks on bond and derivative math. I mailed out my resume (it’s 1994 remember) and eagerly waited for my career on Wall Street to begin.
Except it didn’t.
By this point there had probably been tens of thousands of people who had read Liar’s Poker and were cold calling the Salomon bond desk daily looking for a job, just like me. And by 1994 they were probably getting hung up on mid-sentence, just like me.
As I was psyching myself up for another round of being rudely hung up on, a colleague asked me why I didn’t consider trading something else. He had a friend who had just started trading electricity, this new thing that nobody knew anything about. He was hiring.
“What kind of a loser trades electricity for a living?” I responded.
Two weeks later, that loser was me.
I spent the next twenty years institutionally trading power, natural gas, coal and oil. Nobody is ever going to write a book about it (not even me), and most of the firms I have worked for will never be household names. But I did it, I was a professional trader. Just not at Salomon Brothers on the mortgage desk.
In 2024 I see lots of very talented young people fascinated by trading. Inevitably, they want to become quantitative traders at the name-brand hedge fund of the moment, the one with the cutting edge of technology, hyper-aggressive culture, and eye-watering bonus payouts.
The same articles and podcasts are being seen by tens of thousands of aspiring traders, all of whom are doing whatever they can to be as compelling a candidate as possible because they know they are competing, literally, against the best students in the world for a seat on the desk.
When I lecture at universities, I like to do an exercise where I ask the class to put their hands up if they have ever heard of Goldman Sachs or Citadel. Invariably, 100% of them have. I then ask how many have heard of Vitol, Trafigura, Bunge, or Cargill. Invariably, almost 100% have not.
Vitol produced $400B of revenue in 2023, 7th most of any company in the world (according to Wikipedia). Trafigura did $244B, Cargill did $177B.
Goldman Sachs did $46B.
There are companies most candidates have never heard of trading products they wouldn’t imagine in markets that, in some cases, are set to grow exponentially over the coming years.
And they are hiring.
There is nothing wrong with aspiring to the most challenging job in the most challenging firm in the most challenging market, something I referred to in a prior post as “The Hard Hard”. Just know that everyone else is also aiming at that exact same target, and that that massive swarm of highly capable, highly competitive individuals makes getting and keeping that position much less probable.