QuoteOriginally posted by: NorthernJohnQuoteOriginally posted by: flairplay I have always thought that smart quants exposed to real life would ask the right questions more often than they do . And I have a suspicion some may turn out better than average traders who get their jobs just because they were mathematically challenged in the first place. The cult of the trader is over blown - there are many monkeys out there (though of course there are many fine ones too).I understand financial institutions are not set up for longer term goals, but if they were, the smart way would be to expose quants to the real world as soon as possible, with all its messiness and complexity. In the meatime, quants try to out do each other by invoking more and more abstract mathematics for the sake of it.Two points I'd make here.The first one is that it is getting a bit tiresome to hear, again and again, people hinting that quants are the more intelligent side of the trader/quant partnership. I just don't see it. It seems to reside in the strange idea that abstract mathematical ability (a particularly "pure" strain of intelligence) implies enough of the other pieces of intelligence to rise to the top in other arenas.And secondly, why the assumption that quants are being kept away from the "action". I really would prefer my quants to sit on the desk with me and the structurers, as part of one team, where ideas flow best, and where everyone can contribute to every discussion.They choose not to. They are happy sitting on a separate floor.Interesting points.My take on point one: No one group has the patent on intelligence. You can never tell just by training or discipline. I see both misimpressions, that traders are smarter, or that quants are. Even a PhD from a top school tells you little about the individual applicant. Or 10 years at a hedge fund or a bulge bracket firm as a trader.But the point remains:Many quants with the inclination to do real life stuff are kept away because of the path dependency of their careers. Say you are driven and have some numerical talent. Instead of doing a business school MBA, u end up getting a theoretical physics PhD from Berkeley, driven both by the glamour of the field and the challenge. Ground realities about mutiple post docs lead you to finance. You are not necessarily unsuited to trading, or a worse trader than the business graduate who started at 21 in the graduate scheme. But you are pigeon holed. You may be a fair bit of an all rounder in your life, and therefore able to adapt - but trading is not the obvious entry point for you. Maybe you were never the dry individual that some suppose you are.Of course on the other side are the boring quants - the ones who believe the papers they read are the real thing. Models can only ever approximate reality, and writing down this SDE or that will never tell you how non linear real markets are. That the actual fun is non linearity. That the trader is really the non linear "control" hired by management. That ulitimately the fun of trading is the same fun as competitive sport. Instinct, timing, technical skills, anticipation, playing to your strengths, and understanding the interaction between your decision making and that of others. How that is what makes a market.Point two:That is sadly true. There is the quant type who completely avoids the mess and stress of the real world, happy to escape it, and happy to create a parallel world. A fun game is to look a the number of pointless quanty results in many papers going around which are either trivial to traders, or which satisfy Pauli's famous epithet of "not even wrong." How many of these results can a trader guess even without reading the abstract? Are there truly very many surprising results out in the quant literature?I think finance is a very young field, still immature, where many senior board members and the like are still not overly knowledgable and do not make the best use of the talent they hire. Finance is an applied field, with some elements of science, some art or better still artisanship, and many of competitive sport. The best practioners are those who combine all the above elements, and if you automatically rule out tehnically trained people, then you are imposing a narrow view of the world.In contrast, if you were to apply to NASA with an Engineeing PhD you need not automatically become a researcher, you may be the one in the astronaut program. In fact, your training would not be held against you - perhaps even seen as a plus.One of the analogies I often use is that while a butcher may be good with a knife, it does not necessarily make him a fine neurosurgeon. Years of hard training in medical school does not mean that a butcher, with his instincts for cutting a lean peace of meat, would necessarily make a better surgeon than his rigorously trained academic counterpart. Long as the medical graduate recognises that his thoretical knowledge is only a tool, that he must learn the practical aspects of neuorsurgery, he has no obvious disadvantages compared to a butcher - except a later start in the job market. Of course many quants suffer from hubris and make the mistake of not learning about the real world. Ultimately that is lack of common sense and general intelligence.But I have seen often of the other fallacy as well - the lore of trader as king. It has slowly disappeared as it is seen as those with instinct and timing, openness and skill, make the better traders, and technical skill - just like good technique acquired from years of practise in sport - can be a handy advantage if sensibly used. Still many a prospective neurosurgeon in finance is managed by a butcher without much appreciation of the finer points.I think as the field matures further, both instinct and skill - along with technique - will be seen as desirable attributes. We trade in ever more esoteric parameters and patterns, and not being able to understand the product will be a handicap. Just as it is in neurosurgery.Skill is never just instinct - it is talent honed by practise and hard work, acquisition of technique and ability to use it when it matters. So many supposed "instinct" traders with poor skill have got burned over the last 15 years that it is clear that skill is not just instinct. Increasingly skill in traders will be seen to be a combination of instict and technique - and to trade competitively you wont be able to manage without one or the other.So many traders I have seen delude themselves that they dont need understanding and knowledge - almost always with predictable disastrous results. And too many quants ignore that knowledge - especially idealised and limited - is only just that. A derivatives trader 30 years from now will have to have both - almost like a good test pilot. Rather rambling - and not sure I have articulated this too well.