Finding Signal in the Noise: Machine Learning and the Markets (Jane Street)
146 comments
·March 14, 2025polygot
Very interesting podcast, I find that the guest was very candid so it was great to hear what it is really like working at Jane Street.
The reproducible-Python notebook problem/notebook for researchers mentioned in the podcast inspired me to create a new project, branch-pad https://github.com/alexyorke/branch-pad which is an interactive Python notebook environment that allows you to create and explore multiple branches of code execution.
hardwaregeek
I love this podcast but I can’t listen to it while running. It’s too interesting so I risk falling off the treadmill :D
laidoffamazon
> In Young Cho thought she was going to be a doctor but fell into a trading internship at Jane Street
Genuinely perplexing how they always try to show each multi-million earning engineer as some normal person and not someone that went to Exeter and Harvard
ecshafer
Graduating from a SUNY school, Jane Street gave me an interview and a fair shake. I didn't get the sense of elitism there. There does happen to be a lot of really smart engineers, mathematicians and scientists going to Harvard, MIT, etc.
There are places that without that Ivy League or Target School degree you don't hear back, I don't think Jane Street is one of them.
andrepd
JS absolutely does filter on school though.
laidoffamazon
Might be different with a SUNY PhD or another trading firm on the resume.
I don't think they'd ever call someone like me back, not that I'd ever be able to pass a coding round with them.
pclmulqdq
There are some firms that are very elitist in terms of their resume review requirements. You should note that for a place like Jane Street, "Harvard" helps, but it won't get you an interview. Someone who has done well at USAMO or IMO or has meaningful open-source contributions and goes to SUNY or a community college will generally have a better chance than a run-of-the-mill Harvard student. The median Harvard Math/CS student isn't getting an interview at Jane Street.
heavymetalpoizn
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foobar10000
I don't really see a lot of elitism in these circles - there's a chunk of such engineers that did not in fact go to Exeter and Harvard - but what they have in common is they are all to a fault very bright technical people that can produce complicated things quite quickly, and can communicate effectively with people around them - to make sure that what they produce is in fact useful :)
fireburning
ever meet any such engineers from the bottom 20% of the world population? just some food for thought :)
FabHK
You can levy plenty of criticism at finance. But they certainly take smart kids from wherever they can get them (for certain jobs; for others you need certain polish).
foobar10000
Personally know of 1 from Ghana and 1 from Nigeria - both engineers in HFT - both emigrated to the US post-college - so not that rare. Is it proportional to population? Of course not. Clearly there's going to be an english-speaking bias and an education availability bias and whatever bias du jour one wants to bake in. I don't think it is controversial to say that being born into poverty hurts - as naively as just accounting for malnutrition, for example, and going from there...
laidoffamazon
I genuinely don't think people that went to Exeter and Harvard (or MIT or Stanford or Penn or other JS feeder schools) see the rest of us as human unless there's another common factor like being employed by Jane Street and having those quirky hobbies the rest of them do - and then they rationalize it away by saying that the exceptions didn't apply to top schools, or were admitted but didn't attend for "financial reasons".
People like me are "NPCs" in their parlance.
upbeat_general
Seconding another commenter. I went to a state-school (maybe in the top 5 US state schools) and got an offer without any elite background.
pclmulqdq
I went to an "elite" school, but I worked at one HFT where the local team of 5 people had only me with a background from a similar school, and another HFT where I was one of three on my immediate team of ~12 engineers. At one point, one of my colleagues at the second firm asked me why I was there as opposed to the alternatives of (1) a company with more of a focus on the elite and cultivating power or (2) being an artist supported by my well-off parents.
laidoffamazon
Obviously Michigan, UCB, UDub aren’t in the same category, especially with prior trading firm experience.
upbeat_general
And it was none of the mentioned schools!
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__mharrison__
I read this and think: "I would love to spend a day with Jane Street and teach them how to use notebooks." So much effort is wasted because of knowledge gaps or systems that don't encourage best practices.
I just taught a course to a client this week helping them with this (and other best practices for Python).
edanm
I'm intrigued - I didn't listen to the post but wonder what kind of best practices you're talking about.
Do you have this written down anywhere or on video anywhere? I'd love to learn more about what you mean.
jakewins
I’m intrigued as well.. My experience is notebooks struggle as a format for production code. We encourage people who work heavily in notebooks to use them for exploratory work, but choose other tools when it comes time to ship.
When you are exploring something, experimenting, showing.. it’s great; train-of-thought structure, APIs like Pandas optimised for writing and terseness etc.
But when you have a piece of code that will lose a million dollars a minute if someone ships a bug, and which will be maintained by many engineers over many years, then you really want a format that’s optimised for long-term maintenance, incremental change, testability, and APIs optimised for readers.
edanm
I write production code, I also work lots in Jupyter notebooks.
Personally, I think the fact that notebooks are usually easier/funner for me to work with is a big problem. I'm by no means a Clojure expert, but I did do a semi-large project in Clojure a few years ago, and some of the ideas of true REPL-driven development that exist there are things I wish that Python supported.
It's hard to explain without actually learning it for real (and most Python devs mistakenly think Python has REPL-driven development; I sure did before learning Clojure!). But once you get used to being able to interact with your actual source code, and at any point just being able to write new code and immediately print out its value, then with one shortcut make it part of the regular codebase... that just blurs the distinction that exists between Jupyter Notebooks and production code in a way that makes everything much better.
__mharrison__
My book, Effective Pandas 2, has many of them. There's a few conference talks of mine floating around on YouTube that also mention some.
Writing clean data code is one aspect. Filling in knowledge gaps is another. Covertly teaching software engineering best practices to folks who "aren't programmers" yet sit down and write code in Jupyter all day is another.
I should probably write a blog post or record a short video. (I just taught a week long course on this for a client last week.)
ErikBjare
I've been back and forth whether notebooks are really "best practice".
Currently leaning towards no, as they are hard to test, compose, and version control (it is possible, but you need bespoke notebook-specific tools, and most just don't).
data-ottawa
Why are you trying to test and compose notebooks? Notebooks don't really fit into that lifecycle of work, they're implicitly script-like code.
Any time a notebook needed to be tested, refactoring it into a module and testing that was the better choice.
Notebooks in my opinion are by far the best tool for interactive and exploratory data work. I've been using Jupyter/IPython for 10 years and it takes very little discipline to keep them clean and clear. I've never bothered trying to deploy them in any meaningful way.
The quirks with version control are annoying, that's one reason I've switchex to marimo in the last few months.
brcmthrowaway
Ten years ago, all the $1mn+ earning engineers were in trading. Now they are in LLM/AI. Glad to see this happen, Jane Street has increased their advertising here because of this.
1oooqooq
Keynesian for machines
Workaccount2
I will eternally find it sad how much talent is wasted on trading. So much money, so much intelligence, so much time and effort, all the provide almost no tangible value to society.
bblcla
Tyler Cowen did an 'ask me anything' at Jane Street when I interned in 2016. One of the interns asked him exactly this: "What do you think of the fact that we all work here instead of, I don't know, curing cancer?"
He replied with, roughly, "Those of you who work here probably couldn't do anything else other than perhaps math research. Arguably, working here is the economically efficient use of your time."
I think about whenever I see a comment like this. Quant firms select for a very specific set of skills. In particular, I've found that many traders/software engineers in quant are very smart but not very self-directed. Places like Jane Street work well for people who can excel, but only when given a lot of structure and direction. I think this is not unrelated to why so many people 'accidentally' end up as traders after going to an Ivy League school!
arthurofbabylon
Tyler Cowen, master of the ‘cum hoc ergo propter hoc’ fallacy. He frequently mistakes the occurrence of phenomena for causative proof of that phenomena. He particularly exhibits this inclination when his confidence rises amid scant data (like the rest of us).
This error seems to be a particularly common (and often lauded!) trait among those who work in high-conjecture low-evidence fields (eg, economics). The prominent thinkers become skillful at deploying this fallacy: “see, it’s there, therefore <insert-personal-belief> is certainly the cause!”, using their credentials and esteem to mask the error. Listeners think, “well he’s a smart, respected guy,” and nod along despite the missing logical link.
I greatly appreciate Cowen’s podcast, and I definitely respect him as a thinker and inquisitor – so I don’t mean to discard his work or opinions (in fact, I appreciate his occasional brashness because it exposes the underlying thought/principle). However, many of his aggressive-yet-speculative statements (like the one you roughly quoted) are best received with an understanding of the error.
jxjnskkzxxhx
> He replied with, roughly, "Those of you who work here probably couldn't do anything else other than perhaps math research. Arguably, working here is the economically efficient use of your time."
Complete garbage. The same way that Jane Street hires smart people that don't know anything about trading and those people contribute, the same would be true if there was money in curing cancer.
andrepd
Plus, this post is about someone who quit being a doctor to work in trading!
Grimblewald
To build on / extend on this - quants / finance folks need to cultivate an image of only taking the very brightest, to justify the shit working conditions (even if pay is often decent) but honestly the brightest tend not to apply. Working in those environments is neither rewarding nor stimulating.
Barrin92
General intelligence is overstated sometimes, but it is a thing. Someone who is smart enough to work for Jane Street probably could at least be an intelligence analyst or software developer at the NSA contributing to national security. (Jim Simmons literally was a code breaker during the Vietnam War)
I don't think there's a gene for playing esoteric minigames on the options market while you literally suck at everything else
rtpg
While I’m sympathetic to the “people working hard to build out ad markets instead of cancer research” argument, I only believe in a weak version of this.
Why? I have met many “smart with computers” people. Many of them have terrible people skills, don’t show up to things on time, are unable to keep their workspace clean, don’t know how to explain anything, and cry about how they can absolutely never ever be interrupted because their workspace is so hard. There are also people who are “good at it all”, of course, but I have the impression that the math/computer people tend to be fairly unwilling to deal with even mild inconveniences.
People who can barely deal with the tyranny of daily standups probably would struggle a lot in a world where you need to write grant proposals continuously to justify your existence.
I’m being glib for effect, but there’s so much involved in getting work done beyond “being smart”!
Besides… it’s not like the reason we don’t do more cancer research is because smart people didn’t go into that. “Cancer research” is limited by funding for positions into that domain!
So “this quant should have been a cancer researcher” is saying “this person who decided to become a quant will be a better cancer researcher than a cancer researcher who went into that domain directly”. I don’t know the prestige vectors there but it’s a stretch in my book!
pinkmuffinere
Ya, I’m very surprised by the argument “you’re some of the best at numerical analysis and high frequency trading, and you’d be bad at anything else”, lol. That said, I think there are better reasons to work at such a place. Providing liquidity to the market is a good thing, and has real world value, it’s just hard for us to connect it to concrete outcomes. But as a simplified “toy” example, when they orchestrate a trade for/with a retirement fund, they help the fund improve its holdings at very low cost. That benefits everyone impacted by the retirement fund
elefanten
I didn’t take that to be his point. I assume he says “economically efficient” because he means their strongest skillsets don’t have (m)any other uses and they wouldn’t be realizing their potential by leaving those skills unused.
He probably overstates that case, especially talking to early career interns that haven’t yet narrowed their specialization and could pivot to other highly quantitative roles that use other high level math.
He’s also probably flattering his audience, to whom “math research” is more likely to be status-bearing.
Doubt he’s saying they’d suck at anything else.
alfiedotwtf
I would rather people work in trading than for the NSA
kjrfghslkdjfl
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null
owl_vision
I plus-one the last paragraph, well explained.
lysecret
Do you have a link to this talk by any chance?
bblcla
Unfortunately, no. It was a private talk.
ackbar03
Oof. Interesting take.
madars
Why would it be wasted? I like apples and I like being able to buy them any day of year, even out of season. The only reason I can do so is because there is an entire industry of people who manage the inventory, distribution, try to predict supply and demand, and take on a risk doing that. The principal reason why I can buy and sell equities at very small spreads any day of the year is similar: traders are competing to take the other side of the bet.
I also encourage everyone to read CFTC response to the Vatican's (!) Congregation for the Doctrine of the Faith https://www.cftc.gov/PressRoom/SpeechesTestimony/giancarlore... It talks about about the social utility of derivatives and refutes the narrative that they are basically tools of "speculation." Traders take on risks others can't bear, creating massive economic value that ripples through the entire system.
Workaccount2
There is an extreme case of diminishing returns at play here, and unfortunately the amount of money that flows through these markets is so incredible that it becomes worth it (more than worth it) to commission the top minds of society to push the limit as close to 1 as absolutely possible.
Derivatives have great value to industry. Derivatives that require the fuel of 15 math Phds to lock in fractions of a percentage pricing inefficiencies so their firm can pocket the difference do not have much value at all.
It's like employing Harvard Med surgeons to remove gold dust from gold market sidewalks, and calling it "gold market efficiency".
eadmund
> Derivatives that require the fuel of 15 math Phds to lock in fractions of a percentage pricing inefficiencies so their firm can pocket the difference do not have much value at all.
They have at least as much value as the total compensation of 15 math PhDs, otherwise that work would not be done.
mhh__
That isn't really what the math people are doing. Pricing is easy.
Infernal
And yet if there was so much gold dust lying on the sidewalk that you could pay 15 Harvard med surgeons enough to pick it up and still have some left over, would you just not?
achierius
Everyone understands that there's a pricing utility to markets and market speculation. But consider that, like in all things, the free market has its 'biases': wouldn't you expect that something like trading, which directly produces profit with very little overhead and maximal ability to hedge against rush, would draw an inordinate amount of capital -- in the same way that things like infrastructure, sans government intervention, naturally repel it?
We have far, far too much of our economy sunk into a sector that fundamentally produces nothing of value, one that only shuffles value around and chooses to whom it will be allocated (coincidentally, often the people doing the allocating!).
Compare our economy and its woes to China. Do they spend nearly as much of their human capital figuring out how to get an extra bp on some statistical arb? Thethe origins of DeepSeek are illustrative in this regard.
FabHK
Sure, some derivatives have some utility.
But, ok, Spread Networks spent $300m around 2010 to build a somewhat straighter glass fibre data connection between NY and Chicago. Other companies spent more to build a micro wave connection, since microwaves move faster through air than light through fibre.
Is that money really well spent? And I'm afraid a lot of what happens in finance is similarly private gain, without much social welfare increase.
pclmulqdq
That money is very well spent considering that the microwave network technologies developed for trading have huge applications for military and emergency response use. Similarly, millimeter wave technology built for trading firms in New Jersey could rightly be considered as one of the precursors to Starlink.
dietr1ch
> I like apples and I like being able to buy them any day of year, even out of season. The only reason I can do so is because there is an entire industry of people who manage the inventory, distribution, try to predict supply and demand, and take on a risk doing that.
This has been the case for well over 200 years and is not done by the same kind of people that modern finance/fintech employs.
Imagine the world 150 years ago and imagine were you'd allocate the smart people that's the highest paid these days. They'd be doing science and developing technology instead of doing finance. Why is finance that much more important now? (is it just because it makes rich people richer?)
mlyle
I do think finance is important in making markets more efficient, predictable, and liquid. In turn, this improves the amount of capital available and also improves the efficiency and availability of international trade.
It's also a sophisticated "export" product itself.
However, I think there's a point where, absent sufficient regulation, it overshoots and most of the effort goes to squeezing nickels out of everyone else in underhanded ways. I feel like we could get 90-95% of the benefits with a finance industry that's half the current size, and also avoid a whole lot of indirect costs that come with an oversized finance industry.
jfim
> I like apples and I like being able to buy them any day of year, even out of season. The only reason I can do so is because there is an entire industry of people who manage the inventory, distribution, try to predict supply and demand, and take on a risk doing that.
In practice, if the availability of the apples you're eating is dependent on finance people, they're commodity grade, not specialty varieties.
I don't eat apples, but I'd rather have a good heirloom tomato from the farmer's market than the commodity grade stuff that's at the grocery store.
pasc1878
How do you get to the farmers market? Walk? If not then how was your vehicle produced and powered and how were its components got to you?
ustad
While it’s true that trading and financial markets provide value, the conversation around “wasted talent” isn’t necessarily about denying the value of these industries. It’s more about the broader context - are all forms of financial activity contributing to the greater good, or are some activities just enriching a small group of people without providing societal benefits?
arduanika
Amazing link. Including the car mechanic joke.
leohonexus
Thank you for the link, it was very insightful.
twoodfin
If it didn’t provide value, nobody would pay for it.
The alternative to highly technical, agile quantitative trading is fat middle men, wide spreads, and capital sitting in 8%* stupider places than it would otherwise. That’s a pretty big deal even if the observable effects are extremely diffuse.
* Made up number, but if we woke up on Monday with nothing but the tech we used to trade in 1984 it would probably hit much worse.
godelski
Lots of things provide no value that people pay for.
The inverse is true too: lots of things provide value that no one pays for.
I find it shocking that anyone that programs would think this way considering how widespread and common open source tooling is. I don't know how you can get through your day without using OSS or even free websites like stack overflow.
null
twoodfin
Of course the inverse is true, and you don’t have to stick to software. Raising children produces value despite no one exchanging currency.
But generally nobody pays quants to lose money. They expect value over the other opportunities they have to use that same money.
Is this really controversial?
Workaccount2
My actual gripe is with where that value comes from, and what it's true cost to society is.
I'd argue that pulling these people out of moving society forward is just another form of externalized cost. The stanford guy who figured out how to halve the cost of solar in 2012 never got to realize it because $750k/yr to do stochastic modeling of cattle feed to (secretly) overcharge farmers for futures contracts was just too enticing.
TheAlchemist
The way I see HFT, is that previously this money was going to brokers and banks.
Now, most of this money is going to HFT shops, but you could also make an argument that some of it stays with the investors, since spreads are much smaller now.
There is 0 cost to society, maybe even a small gain.
As for moving society forward, I don't know. If not in finance, most of these guys would work for big tech companies trying to actively make kids and adults addicted to screens.
TeaBrain
>The alternative to highly technical, agile quantitative trading is fat middle men, wide spreads
No, this would be the alternative to securities and derivatives markets being electronic.
>If it didn’t provide value, nobody would pay for it.
The parent was remarking on the value provided to society, not the value provided to the firms.
zknow
they make the mistake of paying for it unlike those who know what to do https://www.investopedia.com/articles/investing/030916/buffe...
__cxa_throw
Theres large portions of the tech industry that are pretty useless to society too while paying incredibly high salaries random examples include: - facebook/google ads teams - various SaaSLOP companies
Lots of smart engineers that work on making buttons pretty and A/B testing crap rather than pushing the boundaries of science.
achierius
This is also bad. Huge amounts of our human capital are invested in fundamentally anti social enterprises. This sort of market failure seems to be endemic to our system as it stands today, and the only answers I've seen are "well, but that other bunch are even less useful!"
czk
This reminds me of Renaissance Technologies (Jim Simons, PhD in math from uc berkeley).
He started the company in 1982 after he left academia for finance and leveraged quant models for training, they mostly hire PhD mathematicians, physicists and scientists, working on algorithms.
They have a fund called Medallion that is closed off from outsiders (you have to be an employee I believe), and it averages 66% annual gross returns (39% net after fees). Generated hundreds of billions in profits.
whiplash451
Well. Read about him all the way to the end, then.
xrisk
At least it’s arguably better than working for giant ad engines.
lend000
From a technical challenge standpoint, trading is extremely difficult. But it provides high upside which only starting a business can exceed. However, starting a business has all the other uncertainty (regulatory, accounting, insurance, licensing, taxes, customers, branding, sales, product-market-fit), making it far more psychologically challenging overall. Startup founders need to learn and juggle a lot of things instead of hyper-fixating on markets. Basically, if you know you are sufficiently intelligent and talented as an engineer, your expected return is likely much higher in trading (especially via a big quant firm), with much lower risk.
If we want more talented traders to become founders building economic value (which we should all agree on), we need to make it less onerous to start a business.
keyle
I take the silver lining. Smart people getting rich is better than dumb people getting rich. Hopefully some day they'll do something good with that money.
jwr
The problem is that smart people are the ones being employed, not the ones getting rich.
twoodfin
I am pretty sure anyone who sticks around Jane Street for a while is getting “rich” by any popularly accepted measure.
memonkey
I would prefer good people get rich and bad people don't.
Nursie
I’m not sure that’s true either.
See for example “effective altruism”, which turns out to have been neither, but more of a self-deluded justification for insane greed, coupled with a god complex.
in3d
Ridiculous, uninformed comment. There is no question that Effective Altruism has done tremendous good overall by saving many, many lives. I say this as someone who disagrees with important aspects, such as valuing distant lives equally to local ones. They have also been more correct than anyone else about AI, pandemics, etc.
mhh__
Notebooks: just use Marimo. They've fixed python notebooks.
Been following signals and threads for a while, and it’s amazing. Have to be in a learning mood, but it gets pretty technical. Podcasts are a tough medium to do that in but if you really zone in, signals and threads is fantastic