6 ms·

How D.E. Shaw's Wall Street Geeks Overtook the Paypal Mafia

51 points by infinite8s 11y ago

auntienomen 11y ago
Number of billionaires is a pretty strange metric. Thanks, Forbes.
- Brig303 11y ago
  +1. Then HBS or McKinsey should be in the lead here when compared to any other organization. Point is that PayPal mafia planted the seeds of the the social media revolution; unsure if DE Shaw is even a close second on impact.
  - auntienomen 11y ago
    Depends on what you think Amazon's impact is, I guess, and how much of that you're willing to credit to DE Shaw.
  - xadhominemx 11y ago
    You think so? I count 4 or 5 billionaire McL alumni -- Louis Gerstner (probably), Michael Pearson (for now), Sheryl Sandberg, George Gillett Jr., Silvio Scaglia. Maybe more on an absolute basis, but it's out of 10,000's of alumni.
    - storgendibal 11y ago
      Yeah exactly. McKinsey burns through 100-200 associates a year in the US alone.
chollida1 11y ago
Doesn't using the number of billionaires produced seem like a weird measure to use for who is "better"? Especially, considering only one of the 7 people became a billionaire directly from working at either company? If anything, this small data set just helps reinforce the idea that incredibly successful people don't just appear, they have a long history of being top performers.
- DannoHung 11y ago
  More to the point: Access to money begets money.
HiLo 11y ago
I would take the most talented from Wall Street over the most talented from Silicon Valley any day of the week. Furthermore, while SV has its VCs, their AUM and returns are laughable compared with almost any other strategy. Cold hard truth is most Wall St types see SV as a backup, not something to aspire to. I'd also like to point out that DE Shaw has essentially been using machine learning and advanced statistical analysis applied to markets for a long, long time. I wonder where Bezos got the idea :)
- zeeshanm 11y ago
  In finance you don't create any value. It's pretty much a zero-sum game. I never understood why money is the biggest motivator for a lot of people. So absurd.
  - CPLX 11y ago
    You're vaguely aware that YC is a private equity firm right?
    - zeeshanm 11y ago
      To be clear, finance "for the sake of finance." ;)
  - voxic11 11y ago
    What do you mean finance doesn't create value? Do you believe good decision making to be valueless? Finance is what determines capital allocation and ensuring that capital is allocated smartly is of huge value.
    - caminante 11y ago
      Don't take the bait. He's just trolling.
  - thibautx 11y ago
    To think of finance (or more specifically, trading/investing) as well as financial products/derivatives as a zero-sum game is pretty naive. A simple example to illustrate my point: Let's say we have a corn farmer whose crops will come in 4 months. He can buy (or sell) futures contracts/options contracts to guarantee that he can sell his corn for today's market price, in case the price of corn goes down. If the price of corn is up in those 4 months, he can let the contract expire worthless. If the price goes up, he loses the $ he paid for the option contract and some trader (whose job it is to take the other side of the position and manage that risk) profits. But, he is happy to have that insurance despite losing money on that "trade". Financial services extend far outside of the financial sector and benefits people broadly. Though for each individual trade, it might seem like a zero-sum game, the competition between investors and traders allows for efficient capital allocation and risk management outside of the financial sector. Without financial services, everyone would be exposed to unmanageable risk and volatility which is inherently bad for capitalism.
caseysoftware 11y ago
Focusing all the attention on the three billionaires of Paypal is an odd one, especially when you consider that the "early employees" bunch is closer to two dozen.[1] This makes me think Forbes doesn't understand how an ecosystem works. While they think the three billionaires are "at the top" of everything, there are more creators & technologists, marketers & promoters, lawyers & advisors, and a dozen more roles that the Paypal mafia fill for each other and others. And that's not even considering the network effect of so many people with long/old working histories together. 1: https://en.wikipedia.org/wiki/PayPal_Mafia https://en.wikipedia.org/wiki/PayPal_Mafia
nostrademons 11y ago
This article smells like a P.R. hit for Two Sigma Investments. Note that they list 4 billionaires from D.E. Shaw: David Shaw (founder), Jeff Bezos (founded Amazon.com)...and the two Two Sigma founders. The link to Two Sigma is the only link that appears in the piece. And if you look up Two Sigma, they are hiring aggressively, and almost all of their other appearances are glowing articles in Forbes.
- m52go 11y ago
  I see your point, but Two Sigma has been hiring aggressively...for years, it seems.
- mrcrassic 11y ago
  I worked for Two Sigma for about a year. They've been on a hiring spree for years, and I understood why: they're trying to build Amazon-level technology for just them. Excellent company to work for; highly recommend them!
  - deleted 11y ago
    [deleted]
flavor8 11y ago
I can add a little more to this. Before founding Two Sigma, Siegel co-founded an online bookmarking company - blink.com (http://www.adweek.com/news/advertising/iq-news-cool-tool-think-blink-38487 http://www.adweek.com/news/advertising/iq-news-cool-tool-thi...). It was pretty good for its time, but ultimately died soon after the 2001 bust. He could probably have gone back to Shaw (or a similar fund) after that - which would have been the safe move - but, luckily for him, didn't.
acchow 11y ago
Have vapid puff pieces been on the rise in the past couple years?
- sbisker 11y ago
  You bet they have! The reputational risk to a media outlet of writing a digital puff piece is now negligible; they can basically drive traffic to or away from it as they please. There are also real SEO benefits to mediocre pieces beyond ordinary daily readership.
cperciva 11y ago
In the mathematics community, D.E. Shaw is famous for hiring people who do well in mathematics competitions. While they were never identified explicitly, I had an amusing phone call after the first time I wrote the Putnam, which I have to assume was from one of their recruiters. As closely as I can remember it: Recruiter: I understand that you did very well on the Putnam competition. I work for a company in New York which is looking for mathematicians, and we always find that people who do well on the Putnam work out very well here. Are you interested in finance at all? Have you found a job yet for after you graduate? Me: Uhh... you do realize that I'm only 15 and won't finish high school for another two years, right?
- sokoloff 11y ago
  I worked at D. E. Shaw for a while (in the FarSight group mentioned in the article), and I assure you that wouldn't have stopped us from hiring you if it was legal in the jurisdiction...
  - cperciva 11y ago
    Maybe they thought it would be difficult to get an H-1B for a 15 year old. ;-)
- bbgm 11y ago
  Back in the day I used to be in awe of DE Shaw. When a hedge fund billionaire publishes papers like this [1] you do end up admiring the fellow. 1. http://onlinelibrary.wiley.com/doi/10.1002/jcc.20267/abstract http://onlinelibrary.wiley.com/doi/10.1002/jcc.20267/abstrac...
  - cperciva 11y ago
    My stock answer when hedge fund recruiters email me is "if I wanted to be a quant, I'd work for DE Shaw". Everybody seems to understand that response, interestingly enough.

51 points by infinite8s 11y ago

auntienomen 11y ago

Number of billionaires is a pretty strange metric. Thanks, Forbes.

Brig303 11y ago
+1. Then HBS or McKinsey should be in the lead here when compared to any other organization. Point is that PayPal mafia planted the seeds of the the social media revolution; unsure if DE Shaw is even a close second on impact.
- auntienomen 11y ago
  Depends on what you think Amazon's impact is, I guess, and how much of that you're willing to credit to DE Shaw.
- xadhominemx 11y ago
  You think so? I count 4 or 5 billionaire McL alumni -- Louis Gerstner (probably), Michael Pearson (for now), Sheryl Sandberg, George Gillett Jr., Silvio Scaglia. Maybe more on an absolute basis, but it's out of 10,000's of alumni.
  - storgendibal 11y ago
    Yeah exactly. McKinsey burns through 100-200 associates a year in the US alone.

chollida1 11y ago

Doesn't using the number of billionaires produced seem like a weird measure to use for who is "better"? Especially, considering only one of the 7 people became a billionaire directly from working at either company? If anything, this small data set just helps reinforce the idea that incredibly successful people don't just appear, they have a long history of being top performers.

DannoHung 11y ago
More to the point: Access to money begets money.

HiLo 11y ago

I would take the most talented from Wall Street over the most talented from Silicon Valley any day of the week. Furthermore, while SV has its VCs, their AUM and returns are laughable compared with almost any other strategy. Cold hard truth is most Wall St types see SV as a backup, not something to aspire to. I'd also like to point out that DE Shaw has essentially been using machine learning and advanced statistical analysis applied to markets for a long, long time. I wonder where Bezos got the idea :)

zeeshanm 11y ago
In finance you don't create any value. It's pretty much a zero-sum game. I never understood why money is the biggest motivator for a lot of people. So absurd.
- CPLX 11y ago
  You're vaguely aware that YC is a private equity firm right?
  - zeeshanm 11y ago
    To be clear, finance "for the sake of finance." ;)
- voxic11 11y ago
  What do you mean finance doesn't create value? Do you believe good decision making to be valueless? Finance is what determines capital allocation and ensuring that capital is allocated smartly is of huge value.
  - caminante 11y ago
    Don't take the bait. He's just trolling.
- thibautx 11y ago
  To think of finance (or more specifically, trading/investing) as well as financial products/derivatives as a zero-sum game is pretty naive. A simple example to illustrate my point: Let's say we have a corn farmer whose crops will come in 4 months. He can buy (or sell) futures contracts/options contracts to guarantee that he can sell his corn for today's market price, in case the price of corn goes down. If the price of corn is up in those 4 months, he can let the contract expire worthless. If the price goes up, he loses the $ he paid for the option contract and some trader (whose job it is to take the other side of the position and manage that risk) profits. But, he is happy to have that insurance despite losing money on that "trade". Financial services extend far outside of the financial sector and benefits people broadly. Though for each individual trade, it might seem like a zero-sum game, the competition between investors and traders allows for efficient capital allocation and risk management outside of the financial sector. Without financial services, everyone would be exposed to unmanageable risk and volatility which is inherently bad for capitalism.

caseysoftware 11y ago

Focusing all the attention on the three billionaires of Paypal is an odd one, especially when you consider that the "early employees" bunch is closer to two dozen.[1] This makes me think Forbes doesn't understand how an ecosystem works. While they think the three billionaires are "at the top" of everything, there are more creators & technologists, marketers & promoters, lawyers & advisors, and a dozen more roles that the Paypal mafia fill for each other and others. And that's not even considering the network effect of so many people with long/old working histories together. 1: https://en.wikipedia.org/wiki/PayPal_Mafia https://en.wikipedia.org/wiki/PayPal_Mafia

nostrademons 11y ago

This article smells like a P.R. hit for Two Sigma Investments. Note that they list 4 billionaires from D.E. Shaw: David Shaw (founder), Jeff Bezos (founded Amazon.com)...and the two Two Sigma founders. The link to Two Sigma is the only link that appears in the piece. And if you look up Two Sigma, they are hiring aggressively, and almost all of their other appearances are glowing articles in Forbes.

m52go 11y ago
I see your point, but Two Sigma has been hiring aggressively...for years, it seems.
mrcrassic 11y ago
I worked for Two Sigma for about a year. They've been on a hiring spree for years, and I understood why: they're trying to build Amazon-level technology for just them. Excellent company to work for; highly recommend them!
- deleted 11y ago
  [deleted]

flavor8 11y ago

I can add a little more to this. Before founding Two Sigma, Siegel co-founded an online bookmarking company - blink.com (http://www.adweek.com/news/advertising/iq-news-cool-tool-think-blink-38487 http://www.adweek.com/news/advertising/iq-news-cool-tool-thi...). It was pretty good for its time, but ultimately died soon after the 2001 bust. He could probably have gone back to Shaw (or a similar fund) after that - which would have been the safe move - but, luckily for him, didn't.

acchow 11y ago

Have vapid puff pieces been on the rise in the past couple years?

sbisker 11y ago
You bet they have! The reputational risk to a media outlet of writing a digital puff piece is now negligible; they can basically drive traffic to or away from it as they please. There are also real SEO benefits to mediocre pieces beyond ordinary daily readership.

cperciva 11y ago

In the mathematics community, D.E. Shaw is famous for hiring people who do well in mathematics competitions. While they were never identified explicitly, I had an amusing phone call after the first time I wrote the Putnam, which I have to assume was from one of their recruiters. As closely as I can remember it: Recruiter: I understand that you did very well on the Putnam competition. I work for a company in New York which is looking for mathematicians, and we always find that people who do well on the Putnam work out very well here. Are you interested in finance at all? Have you found a job yet for after you graduate? Me: Uhh... you do realize that I'm only 15 and won't finish high school for another two years, right?

sokoloff 11y ago
I worked at D. E. Shaw for a while (in the FarSight group mentioned in the article), and I assure you that wouldn't have stopped us from hiring you if it was legal in the jurisdiction...
- cperciva 11y ago
  Maybe they thought it would be difficult to get an H-1B for a 15 year old. ;-)
bbgm 11y ago
Back in the day I used to be in awe of DE Shaw. When a hedge fund billionaire publishes papers like this [1] you do end up admiring the fellow. 1. http://onlinelibrary.wiley.com/doi/10.1002/jcc.20267/abstract http://onlinelibrary.wiley.com/doi/10.1002/jcc.20267/abstrac...
- cperciva 11y ago
  My stock answer when hedge fund recruiters email me is "if I wanted to be a quant, I'd work for DE Shaw". Everybody seems to understand that response, interestingly enough.