Trading As A Video Game

23/05/2019 On the Floor Laughing: Traders Are Having a New Kind of Fun - The Atlantic
T E C H N O L O GY
On the Floor Laughing: Traders Are Having a
New Kind of Fun
JAMES SOMERS MAY 9, 2011
Wall Street twentysomethings are playing the most sophisticated, dynamic, immersive
game in the world. Here's how it works -- and why your job might soon turn into a
massive multiplayer experience.
It's just past noon on a Friday and I'm on the fourth floor of a skyscraper in lower
Manhattan watching numbers rise and fall. The place is teeming with them--
numbers by the screenful, screens everywhere you look -- but I've been told to pay
attention to just one in particular, and what's really important is that I'm supposed
to say something if it goes above 1,238. I'm not yet sure why.
I'm here to watch my roommate work. I realize that might sound insipid, but my
passive curiosity about his job -- he trades complex equity derivatives for a "bulge
bracket" bank -- has metastasized over this past year into something closer to
devastating envy as I've seen him come home, day after day, buoyant and satisfied.
I need to know what the hell goes on down here. I need to find out why, of all the
https://www.theatlantic.com/technology/archive/2011/05/on-the-floor-laughing-traders-are-having-a-new-kind-of-fun/238570/ 1/11
fledgling professionals I know, he seems to be the only one genuinely delighted to
go into the office every day.
Quickly you get the sense that something strange happens in this room. There
must be three hundred people within eyeshot, all but a handful of them healthy,
handsome, well-dressed men in their mid-twenties or early thirties. (My friend
points at various colleagues around the room: "Triathlete; runs marathons;
hardcore cyclist; marathons; marathons..."). They look less like they're working --
reading e-mails, say, or putting together a slide deck -- than calmly responding to a
crisis. Maybe it's because they're wearing headsets and their heads are darting
from screen to screen the way lizards' do and their keyboards are unusually
colorful and they're talking fast like Aaron Sorkin characters in an
incomprehensible argot as streaming real-time line charts flicker loudly in their
faces. It's like a mission control center.
They're packed in pretty tight. Workstations are aligned in blocks of twenty, two
facing columns of ten each, guarded by the dancing backs of ergonomic swivel
chairs. It's a bit of a shambles to navigate, but no matter, hardly anyone stands up.
The market is a fickle leviathan, after all, and its keepers don't like to leave it
unsupervised. Hence all the takeout. And hence the way my roommate falls asleep
(early, instantaneously). These guys are at it -- glued to their desks, mentally
engaged--for six and a half hours straight.
The upshot is that there is a lot of energy on a trading floor. Go to a law firm, Silicon
Valley startup, magazine, or corporate headquarters. Even if what they do there
shakes the world, even if the staff practically sneezes vibrant creativity, still you
can't escape that Office-y undercurrent, the unmistakable intimation of malaise
you find wherever adults are stuck inside doing their homework. This place, on the
other hand, feels like something closer to an active battleship.
I'm starting to think it has something to do with the computers. From far away each
station looks like one of those extravagantly immersive arcade games -- like
something you get into rather than sit down at. That's probably why I keep calling
them "stations."
My friend's has six distinct screens. They're arranged as a row of two above a row
of four in a bowed-out fan pattern that looks basically like a robotic sail. I'm told
that this array is driven by three machines, each with a preposterous eight CPU
cores. Maybe he needs them -- at the moment he has forty-four windows open.
These include a Bloomberg terminal with prices, news, charts, and analytics that
all update or redraw themselves more than once per second; several small forms
for buying and selling different kinds of securities; some PDFs ridden with
legalese; e-mails with long, redundant subject lines and laconic bodies; a bare
bones programming IDE; a dashboard that shows his "book," or set of open market
positions, with stats regarding risk and the like; some very intimidating
spreadsheets; chat rooms, IM conversations, and the occasional video conference;
a custom program to query internal databases; and miscellaneous browser
windows. It all runs snappily.
Beneath the screens he has something called a turret, which is like a regular human
telephone except that it has sixty active lines and a button density close to what you
see on studio sound boards. Among other things it includes the option to broadcast
its user's voice over the room's loudspeaker; this feature has apparently been used
of late (though not by my friend) to share Rebecca Black's "Friday" with the entire
floor.
The all-in costs for a setup like this -- hardware, software, and data subscriptions --
come to about $200,000 per year.
I'm feeling small when that number I was supposed to keep an eye on ticks to 1239.
Excited, I look over to my friend as if to ask, what now?, and he says, "I have to buy
$60 million worth of S&P futures." Which he does in about four seconds. Which he
does as though wildly unreasonable sums of money weren't involved.
I think it's worth dwelling on this for just a minute. I think we're tempted to treat
$60 million as not all that big of a deal, especially in the midst of an economic
crisis involving sums literally five orders of magnitude larger. There is even a way
in which being unimpressed by tens of millions of dollars is itself kind of
impressive -- you come off like one of those rich guys who guesses the price of a
beautiful house by saying "six or seven," as though anything less than a few mill
might as well go on the far side of a decimal point. It tickles the ego a bit, is what
I'm saying, to act natural around such indisputably absurd piles of money. Which is
exactly what I'm doing as I watch my high school pal carefully, but casually, in his
overlarge suit, put in an order for sixty fucking million actual American dollars.
You can see why a young guy out of college might get a kick out of working here.
(And why a Phi Beta Kappa who studied physics and neuroscience at Harvard
might have had a hard time getting in the door.) Imagine the psychological impact
of having that kind of money and machinery at your fingertips. You must feel
powerful. Too powerful, even, like a young pilot who's just been given the keys to
his first F-35 Lightning II tactical strike fighter. A mixture of relish and trepidation.
Yet for all that I'm still unclear as to what my friend does, exactly, besides clicking
buttons when one number gets bigger than another number.
He puts it this way: customers -- hedge funds, pension funds, insurance companies,
rich individuals and so on -- come to him via a sales team demanding a very
specific payoff function. A typical request usually involves a complex combination
of rules and triggers, say, "We want a monthly stream of 12% returns as long as
price X stays above 95, a downside no greater than Y, and a coupon of 120% of the
principal in the event that A, B, and C all happen on or before the close of trading
on April 11th." His job is to use math and intuition to figure out an appropriate price
for that payoff function, and when the terms are settled, to make trades that satisfy
the customers' constraints.
Trouble is, every time he does that he puts the firm's capital at risk. To manage the
exposure he has to find a countervailing hedge: a set of miscellaneous financial
instruments, like equities, options, futures, or others more exotic, that when
combined approximately neutralize the original trades. He spends the bulk of his
working day solving puzzles like that, trying to maintain a kind of homeostasis,
avoiding any serious risk while making money with a little edge baked in here and
there.
Of course it's hard to see things at that level when you actually watch him work.
What stands out instead is a whole lot of fine-grained maneuvering: flitting from an
open chat window over to a spreadsheet to run quick scenarios based on a new
idea; backing off from a trade to see where his risk is at for the day; tracing
counterfactuals ("if I do this and the market does this and I do this..."); catching a
position on the verge of a critical price, diving into "crisis mode" for two minutes,
eyes fixed on a few specific numbers, poised to react with a chord of contrapuntal
trades; leaning back to watch the market for certain thematic trends; shouting to
one of the senior traders on his desk when he's confused about something;
blocking half an hour to drill down into the details of a contract's code; working out
a low-level tactical "line"; jotting quick calculations and graphs; executing a series
of rapid trades, running through a mental checklist to avoid mistakes; kibitzing
with colleagues; responding to e-mails; eating; and keeping an eye on the news.
He says that his attention span has shortened but that in return he's picked up two
abilities: broad situational awareness, i.e., the ability to juggle lots of disparate facts
in working memory; and the pre-scandal Tiger-Woodsian knack for blocking out
distractions when something big is on the line.
The more I watch, the more I think I understand the peculiar grip this place has on
him -- and, for that matter, the peculiar grip it seems to have on me. From the
minute I walked in here I've been sort of dazzled. I've felt almost exactly like I did
when I was first invited as a nine or ten year-old into the cockpit of a commercial
airliner. There is just something undeniably cool and complicated and a little bit
spectacular about both places, each in its own way the frenetic nexus of an intricate
machine. It looks fun, basically -- in the one case because you get to fly a plane, and
in the other because people take you seriously and pay you lots of money and yet
what you do all day is qualitatively equivalent to playing a video game.
If that sounds a bit silly, consider for a moment what makes a game a game.
The trick seems to be that games are constrained in a way that the real world isn't:
there is a board, field, pitch, court, area, table, ring or other enclosure that bounds
the action in space; clocks that bound it in time; and rules that restrict the space of
allowable moves.
In some ways those constraints are what make games mentally satisfying, because
they relieve us of what existentialists called "the anxiety of freedom." By giving us
obvious, well-defined goals, they save us from having to define success; and with
points, leaderboards, heads-up displays, indicators, badges, etc., they tell us
exactly when we've achieved it.
Humans crave that kind of structure, probably because we get so little of it in real
life. It's a lot harder to say whether you "have a healthy romantic relationship" or
"are making a lasting contribution to something bigger than yourself" than that
you've "lined up the yellow gemstones," "scored more points than the other team
in twenty minutes," or "collected forty pounds of silver."
Think of the pleasure we get crossing things off lists, the thrill of reaching "inbox
zero" or finishing a book. We want to accomplish things and, maybe more
importantly, we want to know that we've accomplished them.
Games (and video games in particular) exploit that essential insecurity. They're
engineered to unfold as a series of short feedback cycles, every action a small
experiment that concludes in minutes, if not seconds, with concrete consequences:
you either win or lose points. That vivid loop keeps you constantly engaged. It
sucks you into the micro-mechanics of the game, because even the smallest
maneuvers give you the feeling of "getting somewhere." You can't help but tweak,
tweak, tweak your way up the game's learning curve, an eye always on your rising
score.
Now think of what a trader does. A trader's job is to be smarter than the market. He
converts a mess of analysis and intuition into simple bets. He makes moves. If his
predictions are better than everyone else's, he wins money; if not, he loses it. At
every moment he has a crystalline picture of his bottom line, the "P and L" (profit
and loss) that determines how much of a bonus he'll get and, more importantly,
where he stands among his peers. As my friend put it, traders are "very, very, very
competitive." At the end of the day they ask each other "how did you do today?"
Trading is one of the few jobs with an actual leaderboard, which, if you've ever
been on one, or strived to get there, you'll recognize as being perhaps the single
most powerful driver of a gamer's engagement.
That seems to be the core of it, but no doubt there are other game-like features in
play here: the importance of timing and tactile dexterity; the clear presence of two
abstract levels of attention and activity, one long-term and strategic, the other
fiercely tactical, localized in bursts a minute or two long; the need for teams and
ceaseless chatter; and so on.
Not to mention that the whole job takes place indoors in a kind of software cockpit
driven by people sitting in a climate-controlled room staring at screens scrabbling
away on colorful complicated keyboard controllers.
Mind you, the game the traders play is nothing like Mario or Zelda or Megaman. It's
not a shoot-em-up or racing game. What it is is more like Starcraft or maybe
TradeWars: an intense, cerebral, massively multiplayer real-time strategy game.
It's a game grounded in information: prices, mostly, but also all kinds of news and
rumors and oblique signals, whether by way of balance sheets or CNBC. It's the
kind of game that requires the player to immerse himself in data, distill from it a
sort of strategical gestalt, and convert that high-level battle plan into a series of
discrete maneuvers, in this case trades on the open market.
The difference here being, of course, that it's all real.
A trader's interface may be remarkably abstract, but in this game the points matter.
Somewhere down the chain--somewhere far down the chain, maybe, but there
nonetheless--a trader's clicks and keystrokes become redeemable as actual pork
belly or oranges or oil, as mortgages and savings and pensions. Bits become dollars
and dollars become stuff.
That basis in reality changes everything. It means that those flickering prices my
friend so closely attends to are not just big, but bloody, too, alive in a way that a
gamers' aren't, by virtue of being grounded in the big-ticket wants of real fleshy
people. They have a soul behind them--or if that sounds hollow, a will. The pulse of
the invisible hand.
The data a trader plays with, just by virtue of being connected to significant
amounts of actual people's money, has a depth to it--gravitas -- and a kind of
genuine dynamism that can't be programmed.
Not for lack of trying: the hackers who develop games like TradeWars go to insane
lengths to simulate, say, the rates at which various resources deplete on different
planets -- they need to understand how the price of lumber reacts to average
rainfall, demographics, seasonal logging activity, prevailing trade routes, etc.
They'll spend days in a library reading about the types of food that nomadic
peoples ate, and how much they stored each winter, just to know how many
"nutrition points" they should award for different kinds of in-game meat. They try,
in other words, to capture as much as they can of the dynamics driving our world,
not for the sake of verisimilitude itself, but because it just so happens that the
"realer" things are the more fun players seem to have. Actual healthy economies
and climates have a balance that's hard to capture in a few hundred thousand lines
of code.
On the one hand you might call the trader's game a simulacrum, an ersatz replica
of, say, the sort of kinetic corporeal bazaar you'd find in the midst of the Roman
Forum. But in spite of its abstraction it delivers. It finally exceeds the player's
expectations; it's an answer to years and years of video games that gestured toward
authenticity but always fell short. Trading in the way my roommate trades is not
just neat and dynamic but weighty, too, perhaps even more full of significance than
its erstwhile counterparts. The very same forces that seem to enfeeble it -- chiefly
the fact that it's all computerized -- are in fact responsible for the acceleration of
the profession's metabolic rate to the point where it's now more active, more rich
with data and decisions and dollars, than it ever was.
What I want to say, then, is that trading equity derivatives is like playing a game
written by programmers who got every mechanic exactly right. You might balk: "Of
course they 'got it right' -- trading feels real because it is real!" But when you think
about the bizarre circumstances of these electronic trades -- how they're
simultaneously rooted in significant human commerce and yet so far abstracted
from it -- and when you see your friend drag and drop real fortunes the way I might
crop a Facebook photo, you come to believe that working on a modern trading desk
is more like playing an excellent flight simulator than actually flying a plane.
My guess is that Moore's Law will do this to more and more jobs. Think of Predator
missions in Iraq being controlled by joysticks in Southern California, or oil reserves
being fractured and drilled by remote control. Maybe we're entering the age of
Ender's Game, a science fiction novel by Orson Scott Card in which students are
trained to become military commanders via a series of increasingly elaborate
wargames, the most advanced of which turn out to have been real all along. You
can go to war and keep your hands clean, enjoy synoptic control of a complex
adaptive system from the comfort of a chair.
It's a new -- and potentially dangerous -- brand of fun.

Trading As A Video Game

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23/05/2019 On the Floor Laughing: Traders Are Having a New Kind of Fun - The Atlantic

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