Morning Coffee: Goldman Sachs' most humble partner on internships to avoid, or not. Ex-hedge fund manager says that most people can never be traders
Back when Kunal Shah was an intern in the early 2000s, people apparently told him “Don't rotate into fixed income trading desks — it's all going to get automated”. Now, looking back on that advice from his position as global co-head of FICC at Goldman Sachs (and co-CEO of the international business), he has a fine perspective on why this was wrong, and what that means for people starting their careers today.
Basically, as Shah points out, it was kind of true that many of the tasks which used to be given to juniors have been automated. Physical trade tickets don’t need to be collected, fewer things need to be typed into spreadsheets and travel can be booked online. But, as is often said, that has merely meant that front-office jobs have become more interesting and really more meaningful for analysts and associates, and so fixed income trading is quite the opposite of a dead end.
Shah believes that today’s generation of interns are well placed to understand that the integration of AI into the job will likely have a similar effect. If building spreadsheet models can be automated, and the font sizes on Powerpoint presentations can be automatically “pls fixed”, that’s going to be great news for people who are able to take advantage of it. As he says, “Junior talent are inherently tech-savvy, and they don't have the legacy of why we do things in a certain way. They can see how to disrupt us.”
Shah himself has gained a reputation over the years for being approachable, humble and quite witty.
He is also known to be accessible to junior ranks, reproducing the mentorship and help that he got in the early years. In his most recent interview, he recalls having a coffee with Ashok Varadhan, currently Goldman’s co-head of global banking and markets, back in 2003 when Shah was a fresh analyst and Varadhan was already a partner.
It’s perhaps a little bit unrealistic to hope to follow the career trajectory of someone who’s famous for making Partner at the absurdly young age of 31, but it’s certainly possible to learn from his attitude. If you’re capable of saying that the best thing about your job is that “no day is the same” and meaning it (in reality, lots of them are pretty similar), then you’re well on the way to having it made, and if nothing else, your colleagues are more likely to like you.
Elsewhere, Hugh Hendry is less smooth and easy going. Hendry once evocatively summed up his investment style by talking about a climber who had to saw his arm off when it got trapped under a boulder. In his view, it’s understandable that the climber waited a few hours before making the decision, but if you procrastinate like that in financial markets, “you’re going to be found dead on the side of the mountain”.
Many things have changed since then, but Hendry’s philosophy apparently hasn’t. In advertising the “Acid Capitalist Summer Camp” that he’s promoting in the Caribbean paradise where he now lives, he’s promising to train people how to be more impulsive and not to miss opportunities. As he says, “you watch your own money sit still while everything around it moves higher and you tell yourself you’re being sensible. you wait for it to feel clear. you wait for someone to confirm it. and when that moment comes it’s already gone. you wait until it feels safe. and safe is always after the move.”
But, unlike a lot of investment gurus, he is quite clear that learning this lesson won’t make you into a star trader. In his view, “that takes years. real years. obsessive years. like training for a sport. every day. every hour … that’s fantasy”.
So, rather than learning an investment approach, you’ll just be more likely to saw your arm off if it needs sawing. Which, to be honest, isn’t necessarily the worst use of your investment conference budget for the year.
Meanwhile …
Western AI models are banned in China and now Goldman Sachs bankers in Hong Kong can't access Claude. (Financial Times)
While everyone else in both the private equity buyside and financial sponsors sellside is still talking up the prospects for an IPO boom and lucrative exits, former Goldman Sachs banker Vinay Kumar is putting a dampener on things. As he’s raising a private credit fund for Silver Rock, the firm spun out of Michael Milken’s family office, he’s pointed out that “The era of buying something, levering it up, then taking dividends and selling it at an elevated multiple is over”. (FT)
As the proverb has it, targets are an opinion, forecasts are an opinion but real estate is a fact. Jane Street employees would do well to take note of the fact that the firm has made an offer to roughly double its London office space. (Bloomberg)
As well as complicating its own journey toward IPO, the fact that OpenAI has missed some revenue targets is likely to be greeted with a sigh by capital markets bankers who are currently working on the SpaceX deal, as xAI is a material part of the valuation there too. (WSJ)
It seems that prediction markets are even better hunting grounds for algorithmic trading than crypto markets. According to recently published research, 69% of all traders lose money, while the top 1%, most of whom show evidence of being bots, account for 75% of all the betting profits made. (Bloomberg)
Citadel has received regulatory approval to set up its 18th office in a place even sunnier than Miami; they will open doors in the Dubai International Financial Centre. (Financial News)
NeeDoh, a sort of squashy stress toy, has become the latest TikTok craze, meaning that, inevitably, rare versions are selling for silly money. It’s a bit like NFTs except slightly more dignified. (WSJ)
Sam Bankman-Fried seems to have annoyed the judge in his motion for a retrial. (Citation Needed)
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