My Life as a Quant | Emanuel Derman

Summary of: My Life as a Quant: Reflections on Physics and Finance
By: Emanuel Derman

Introduction

Delve into the fascinating journey of Emanuel Derman in ‘My Life as a Quant: Reflections on Physics and Finance’ as he transitions from a passionate physicist to a thriving financial engineer. Explore how the marriage of physics and finance came to be, as the unstable economy demanded expertise that physicists possessed and a diminishing job market in academia left them seeking solace elsewhere. Witness Derman’s personal trials, as he grapples with the challenges of academia, cultural differences, and the relentless politics of Wall Street, while carving his path to becoming Financial Engineer of the Year.

When Physics Meets Finance

Physics has become an essential part of the financial world, with physicists being sought after by Wall Street firms due to their exceptional ability to measure change. The collapse of the traditional job market for physicists in the 1970s prompted this influx of talent to other fields, like finance. With a highly regulated post-WWII economic order breakdown, only physicists had the aptitude to understand and, potentially, predict the new financial world’s nature. The intrinsic mathematical tools and modeling prowess of physicists became crucial in measuring change in a sophisticated manner. This unexpected alliance between physics and finance is a marriage of convenience, as governments that previously funded physics heavily in the 1950s and 1960s did not do so in the following two decades, leading to a surplus of physicists chasing academic positions. As a result, academically unemployable physicists began receiving offers from Wall Street firms, paying substantially more than the average academic salary.

From Physics to Finance

At the age of 16, Emanuel Derman entered the University of Cape Town, where he developed an interest in particle physics. In 1965, he moved to the US for graduate studies at Columbia University in New York City. Despite his desire to understand the universe, he found himself unprepared for the top-tier American grad school. Derman realized that he excelled in applied mathematics more than atomic physics and quantum mechanics. The most valuable lesson he learned was that while talent was important to succeed, perseverance and luck were the most critical factors.

From Physics to Perseverance

Emanuel Derman’s journey from physics to perseverance was not unmitigated bliss. He faced tough competition, academic politics, and psychological pressure in the meritocratic world of physics. After years of productive work, Derman received his Ph.D. but found scarce job opportunities. He took a post-doctoral position at the University of Pennsylvania, where he encountered xenophobia and made a career error. However, he discovered the German spiritual guide Rudolf Steiner, who left a lasting impression. Derman’s perseverance paid off as he found an interesting puzzle in physics, which led to another post-doctoral position at Oxford University. Derman’s story highlights the challenges and rewards of pursuing a career in physics.

Derman’s Journey to Wall Street

Derman moved from Rockefeller University to the University of Colorado and then to AT&T Bell Labs. His physics career was fading, and he considered studying medicine but lacked the courage. While in Colorado, he practiced Tibetan Buddhist meditation. After realizing that job searching was wearing him down, he joined AT&T Bell Labs, feeling guilty about leaving academia.

Trapped in Corporate Bureaucracy

Derman’s tenure at AT&T felt like imprisonment in a labyrinthine system that prioritized politics and arbitrary rules. While theoretical research thrived at Bell, Derman wrote software and dreamed of escape. His time in this environment proved useful, but it took five years to break free.

Want to read the full book summary?

Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.
You need to agree with the terms to proceed