Opinion

Emanuel Derman

Dog’s Lives

By Emanuel Derman
August 5, 2012

I am in Santa Fe, NM, about to spend a few weeks at the Santa Fe Institute where I hope to learn something about market microstructure and agent-based models.

Everyone in Santa Fe (i.e. the few people I’ve met thru work here in the past — I wrote a chapter of Models.Behaving.Badly here in 2009, using their excellent library) seems to think Santa Fe is paradise on earth, and maybe it is, though I prefer paradise on the seashore. I  have this atavistic urge to find a place that is easygoing but has access to culture, and yet lets you back off from the discontents and irritations of politics and corporations. People here seem to think this is it. But, I should add, people here seem to be close to retirement.

One of the points I tried to make in Models.Behaving.Badly was that models were analogies, comparing something you don’t understand to something you do, e.g. a nucleus to a liquid drop, or stock returns to smoke diffusion, whereas theories were (attempts to discover) absolute (rather than relative) descriptions of phenomena (e.g. Newton’s laws or relativity). I spent an evening with an accomplished physicist here, and was pleased to see that he agreed. When I was here last I read Maxwell’s papers from the 1860s; he called his final description of the electromagnetic field a theory, having first tried a bunch of metaphorical models to warm up his intuition and understanding.

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En route here, Aaron Brown emailed to ask how I came up with the title My Life as a Quant, as background to an article he’s writing. This led me to the following recollection:

When my kids were really small, no more than three or four years old, I used to love to take them to entertainment that was simultaneously enjoyable for adults and children, eve if on different level. On TV you could find Sesame Street and The Muppet Show. For live performances, among others I had lucky strikes with Joseph and the Amazing Technicolor Dreamcoat at a theater on 2nd Ave, The Paper Bag Players at Symphony Space, a show of Randy Newman songs in the East Village. I remember my son becoming mesmerized by the latter.

We also saw some terrific movies — a Japanese one about dogs accidentally marooned in the Antarctic through the winter, and then, My Life as a Dog, a Swedish film about a young boy whose mother is ill and sends him away to live with relatives. It’s a complicated story, but the boy often reflectively compares his plight to others worse off, for example Laika, the Russian space dog, sent up alone into orbit on Sputnik 2 when I was in high school.

I never liked the word ‘quant’ very much when I first started on Wall Street some years after that movie, and realized that people who used the word used it somewhat derogatorily. In those days, I never heard anyone self-describe themself as a quant. I had this impression confirmed in the Nineties when I read Mark Kritzman’s and Gary Gastineau’s Dictionary of Financial Risk Management, where they commented, at the end of the definition of the word quant: ‘often pejorative.’

When I came to write my memoir, the perception of having been a second-class citizen in the early days of quantitative strategies led me to think of the movie My Life as a Dog, and modify Dog to Quant for the title. The subtext was meant to be dogs.

Nowadays quant is a hotter word (quant fund, battle of the quants, etc etc) and many people who call themselves quants wouldn’t have passed for what we considered quants in the old days.

You can read the truly sad story of what actually happened to Laika here: http://en.wikipedia.org/wiki/Laika. I hadn’t known this until today.

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