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Quant firms at least are one of the few places where noncompetes can make sense. It's an extremely IP sensitive industry with stupendously high pay where the em

• gmerc 3y ago
  Why does it make sense. Pay employees for their work and they’ll stick around.
  • chiefalchemist 3y ago
    To your point, it's ironic that firms who push a free market ethos don't actually want to compete. Instead, they want a thumb on the scale that tilts the advantages in their direction. Welcome to Crony Capitalism (which should not be confused with traditional capitalism).
    • js8 3y ago
      The absence of "traditional capitalism" from history makes it really hard not to confuse it with "crony capitalism". Perhaps you mean liberalism, as an ideology of capitalism.
      • chiefalchemist 3y ago
        Perhaps. But, for example, we didn't always have The Fed. We didn't always have WS. We didn't always have "too big to fail". We didn't always have taxpayer financed bailouts. We didn't always have a top heavy (Fed) government (that has more influence than it has common economic sense). At yet all those entities verbally champion "free markets" and "capitalism being a superior economic paradigm", Etc. Minds get lulled into the repetition of the words and stop checking the action. Reminders to turn on your BS detectors add some balance. Not much, but some. Fwiw, I'm speaking freely and in broad strokes. If liberalism would be a better word then sure, whatever helps cut through the BS. Thanks.
        • js8 3y ago
          Sounds like you are, in "broad strokes", longing after 1870s or something. I think you forgot how crony (or crappy?) it was. What I am saying, if you really want this "traditional capitalism", which never really existed, you need some mechanism of how to avoid rich getting richer and becoming cronies (as they always did). I don't think you have an idea what such a mechanism should be.
          • chiefalchemist 3y ago
            To clarify, crony capitalism is when "regulation" and "oversight" are euphemisms for thumb-on-the-scale rules that result in a less than level playing field. The winners? The cronies. And back to my previous point about The Fed, etc. We're told that those are "for the greater good" (words) but - and to your point - the rich are not only getting riche (actions),the rate of that wealth transfer (to the top) is accelerating. We can call it whatever you want. And I'm not saying I want anything. I was simply pointing out that the majority of those - at the top of the financial food chain (e.g., WS) - who advocate for "free markets" are full of shit. They're lying. So maybe to make you happy we shoukd just say: Less Bullshit Capitalism? Will that satisify you??
            • js8 3y ago
              I think I understand what you're saying, but this has always been simply called "capitalism". The "fake" regulators are simply a response of people with power in the system to societal attempts to fix the most egregious flaws of liberalism (laissez-faire). You seem to be similar to naive communists, who, in the face of communism turning totalitarian, tried to "save" the idea of planned economy (for instance) by claiming that totality isn't what they wanted. Ignoring the fact that the totality was put up to prevent bad behavior of people and companies, to which the planned economy led to. Similarly, here you complain about natural consequences of laissez-faire capitalism, without admitting that the latter is the cause. I am not saying that good ideas in capitalism (or communism) are unsalvageable. But then you need to detail the mechanism of how to prevent the natural course of action (empirically observed) to take place. (My personal preference would be to replace free market for labor with worker democracy, while leaving most other things up to free market. Although such a system could hardly be called capitalism anymore.)
    • golergka 3y ago
      Offering a contract with whatever stipulations to a potential counterparty that he can sign or not sign on his own accord is competing. Forbidding your counterparty from putting certain stipulations in their contract by using government intervention is not.
      • chiefalchemist 3y ago
        If they limited the vendor's (i.e., employee's) options, how is the being competitive? And if the market colludes to handcuff vendors (to the benefit of the hiring companies) how is that being competitive? Employment is already at will, and that is mutual to both parties. Why should one side be allowed to purposely disadvantage the other side? How is that being competitive?
  • Xelbair 3y ago
    exactly this. Pay them well, and treat them well and they will stay. This is just another tool that employers use to nickel and dime their employees.
  • thedufer 3y ago
    The argument against this is that a company spends millions of dollars in research to learn something valuable, and anyone who didn't spend that money can trivially outbid for the employee that knows the results, since they can pay the employee some significant portion of the cost of the research that they didn't have to do and still come out ahead. I'm not sure I entirely buy this, but it's a lot more nuanced than "just pay your employees well".
    • convolvatron 3y ago
      this is the kind of noise you get when you decide that an idea is something that can be owned
    • cortesoft 3y ago
      Then maybe the conclusion is don't spend millions to research that type of thing.
      • therealdrag0 3y ago
        What type of thing? This applies to anything. We need to pay close attention to maintaining rules to foster research and innovation.
  • gosub100 3y ago
    Free market for me (to trade securities), but not for thee (to trade your skills).
    • smabie 3y ago
      Free markets allow contracts that are upheld by the government though?
      • gosub100 3y ago
        I meant "free market" in the sense of open trades on an exchange. Except for exigent or criminal cases, it's very difficult to undo trades. The "That's not fair"-argument doesn't work except for exigent (circuit breaker halt) or criminal cases.
• blueboo 3y ago
  If it doesn’t make sense in California’s Silicon Valley, how can it be justified in NYC
  • vgatherps 3y ago
    Lack of noncompetes is the reason that most trading firms have opened offices everywhere except SF
  • ffgjgf1 3y ago
    > how can it be justified in NYC Wouldn’t it make a whole lot more sense considering what kind of business they are in?
• saagarjha 3y ago
  What kind of sensitive IP do quants have? How is it different than the tech industry?
  • infecto 3y ago
    General strategies of trading on financial markets. Entirely different than working at Google.
    • izacus 3y ago
      And what benefit does the economy and society get by allowing monopolization of these strategies by a single company at the expense of basic right for workers to switch jobs to the ones that pay them the most? It sounds so profoundly anti-capitalist - if the knowledge of certain strategy is so important, the employee should be retained by paying them more and giving them better perks instead of enforced labor contract.
      • infecto 3y ago
        I am not defending for or against not sure why you replied to me. But I think it is slightly silly reading your statements knowing that the individuals in that hyper specific industry are top earners already and educated to know what they are signing up for.
      • lordnacho 3y ago
        This is exactly the right question. If quant firms make the world a better place by tightening spreads - a common justification - then wouldn't we get an even better place if everyone knew about these strategies?
        • durumu 3y ago
          A counterargument here is the effects on internal transparency. If a quant firm knows its employees can leave and join a competitor tomorrow, they will be less forthcoming with IP. The lack of openness could lead to lower productivity within the firm, as work gets duplicated and teams can't share their insights with each other.
• bachmeier 3y ago
  > Quant firms at least are one of the few places where noncompetes can make sense. It's an extremely IP sensitive industry with stupendously high pay where the employee is going to someone probably competing very directly with you, for the same/similar opportunities. So the solution is that employees should only be able to work for one employer in their career? I wouldn't disagree with this argument if the noncompete came with a payout in the tens of millions of dollars.
  • infairverona 3y ago
    I feel like the solution is to force the company to pay full TC (average of previous years + inflation or something?) for the duration of the noncompete.
    • arrrg 3y ago
      In Germany non-competes have a max duration of two years and compensation has to be at least 50%.
      • caskstrength 3y ago
        Living two years on half the salary sucks though.
        • ghaff 3y ago
          Realistically though, you're never going to have a system where it's generally more attractive financially to spend a couple years on the beach than to keep working. That's a perverse incentive. But, yes, that's the thing with gardening leave. There are certainly some people who would be fine with taking a year off at significantly reduced pay--but not the majority.
        • F-W-M 3y ago
          It's a great start into freelancing though. They have to pay you 60% of your former salary upto 110% of it.
• matwood 3y ago
  Non-competes have only ever made sense where the employee is compensated for signing. Codifying this change would immediately make companies stop with blanket non-competes, and only have them on key people. While not impossible, non-competes without compensation are already hard to enforce as judges don't look kindly on preventing people from earning a living. The problem is the asymmetry of power let companies bully and intimidate ex-employees.
  • vgatherps 3y ago
    I mean yeah that's the point I made? FWIW, trading firm noncompetes are almost always compensated with the base salary and they're still blanket applied. A major contributor is that the employer is only paying a fraction of the true employee compensation, making it easy to blanket apply and creating a form of golden handcuffs.
    • thedufer 3y ago
      They're not applied as widely as it may seem. The terms are typically "up to" the length of time, and in practice firms waive 50-100% of the non-compete length pretty frequently, which is a decent sign that the cost is non-negligible. It is a bit tricky not knowing until you quit how long you'll be held to it, though.
  • bdowling 3y ago
    If judges start to throw out non-compete agreements that don’t have separate compensation (apart from usually salary/experience), then you will just see companies explicitly write their contracts such that that X dollars are explicitly for the non-compete agreement. At least in some industries, however, there is a consumer protection/public policy argument against non-compete agreements, where: (1) there is no legitimate property interest to protect (e.g., the “trade secrets” held by the companies aren’t trade secrets at all because every company in the industry knows them), and (2) it is bad for consumers/against public policy to allow companies to use non-compete agreements to stifle competition where there is no legitimate property interest to protect.
• amadeuspagel 3y ago
  Isn't the same true for SV companies, and aren't they doing fine without noncompetes?
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  • iancmceachern 3y ago
    It's often stated as one of the reasons SV exists at all. So many stories, start with thr traitorous 8
• jampekka 3y ago
  Of course can be beneficial for individual companies, isn't hoarding up IP an impediment for progress in general? In this specific industry tough one could argue that impeding progress is a good thing for the wider society.
• mhh__ 3y ago
  It's hard to forget how this stuff works though. It's just theatre. You obviously shouldn't be able to walk off with a model but especially with hindsight I could bang out some models I've worked on very quickly as long as the infrastructure was amenable
• davedx 3y ago
  Eh. Firms quants work for compete with the public market not each other. Writing an automated trading strategy isn’t targeting specific actors, it’s trying to convert alpha into profit. I guess there’s a weak argument to make for the HF part of HFTs
• Hizonner 3y ago
  So they only make sense in an industry that probably shouldn't be allowed to exist in the first place?
• caskstrength 3y ago
  > Quant firms at least are one of the few places where noncompetes can make sense. It's an extremely IP sensitive industry with stupendously high pay where the employee is going to someone probably competing very directly with you, for the same/similar opportunities. Cry me a river. If knowledge of some particular employees worth so much to the quant firms, then they should pay them not to leave accordingly.
  • vinceguidry 3y ago
    To play devil's advocate here, this law would literally make that illegal. What keeps me from taking the money then leaving anyway? A signed contract is the only way, and banning non-competes means making that contract unenforceable.
  • sesuximo 3y ago
    People sometimes leave and take less money. Plenty of other reasons to change jobs.
  • helicalmix 3y ago
    …sorry, how much exactly do you think quants make?
    • KRAKRISMOTT 3y ago
      Mid 6 to low 7 figs usually. They are usually one "tier" above SWEs i.e. an average new quant would make the same amount as an average mid-level NYC software engineer, in absolute monetary terms of total compensation. The high end firms like Jane Street and Two Sigma pay the equivalent, scaled to FAANG levels. Overall performance of the firm is a key factor in the compensation too.
  • hamandcheese 3y ago
    Knowledge of a secret does not imply that you provide value.
    • bobthepanda 3y ago
• pitaj 3y ago
  For those unaware: Quant = quantitative analyst
  • omgmajk 3y ago
    Thank you!
• faeriechangling 3y ago
  It makes sense for the owners. It doesn’t make sense for the public that Jim Simon’s alone becomes a multi-billionaire off exploiting the financial mistakes of ordinary people.
• stillwithit 3y ago
  If it’s rooted in math none of the IP should be protected. The training and definition of axioms and viable algorithms should be an open human endeavor. Letting capitalism dictate what math is public and private is pretty fucking draconian
• thatguysaguy 3y ago
  Are quant firms positive sum for society? I can imagine that some trading leads to goods being priced more efficiently or w/e but I doubt the level of alpha these firms are chasing has positive externalities. If not, you should shouldn't really care about this hurting their industry.
  • shortsunblack 3y ago
    They are really not. The growth of financialization coincides with economic stagnation in U.S. If anything, the data shows the opposite. Finance sector is more or less a parasite on the productive economy.
  • Goodroo 3y ago
    They are a net negative in the sense that you have some of the brightest minds in the country working on derivatives instead of being in STEM labs
  • gumby 3y ago
    You highlight a more general problem: the social/economic function of finance is to be a service industry to ensure there is liquidity available (that other people can use for their purposes). What bugs me is that somehow society lionizes people in the money industries over those doing equivalent service jobs like gardening, lawyering, much less more important ones like garbage collection.
    • firstplacelast 3y ago
      Society does not do that. They can extract more capital, so they’re considered more important. If gardeners were paid 500k/year, they would be exalted. It has nothing to do with the work or the value provided to society. People just love money and praise those that have it.
      • gumby 3y ago
        Worship of the rich is a sickness in society. Like I said, the value of banking is akin to the value of gardening, and worshipping the bankers just enables destructive distortions.
• tomp 3y ago
  Quant firms have already adapted years ago. Now they don't have 6-24m non-competes anymore, but 6-24m notice periods. You're paid full salary (incl bonus) but you don't work ("gardening leave") and obviously can't work for a competitor (because you can have a non-compete while you're employed).
  • ghaff 3y ago
    So what's the incentive to keep working under those conditions?
    • tomp 3y ago
      I guess bigger and better bonuses in the future? Like, why would you quite and semi-retire for 1-2 years when you can keep working for like 5 years and actually retire? (I'm just LARPing, I have been out of the industry for a few years by now...)
      • ghaff 3y ago
        I guess it depends where you are in your career. If you're really aiming at a five year time horizon, then I can see it making sense to stick around. But, if you're yonger a year or two fully-paid vacation sounds pretty tempting.
    • mancerayder 3y ago
      Other than getting paid without working for 6-24 months? Did I misread?
      • YetAnotherNick 3y ago
        I think the GP meant why should you work when you can get paid without working.
        • dh2022 3y ago
          You could work for a much higher bonus and salary. The way gardening leave has been described here is for people who are not looking to take their highly valuable knowledge somewhere else for higher bonus / salary.
• miohtama 3y ago
  > It's an extremely IP sensitive industry with stupendously high pay where the employee is going to someone probably competing very directly with you, for the same/similar opportunities. Maybe it should not be IP sensitive. It would be the interest of public to bring more competition to the quant landscape and make their profit margins lower through the competition.
• bumby 3y ago
  Importantly, even if noncompetes aren't enforced, trade secrets can still be grounds for litigation against a former employee. They can't just go from one employer to another and take all the secret sauce recipes with them.
  • therealdrag0 3y ago
    Based on what? I honestly don’t know and most comments seem to be assuming that’s not the case. And also in some ventures it might be pretty hard to litigate when everything is done behind closed doors. How would you know if a rival trading firm is using an algorithm influenced by yours or not?
    • bumby 3y ago
      Are you asking under what grounds are trade secrets enforced? In the U.S., that would be 18 U.S. Code Section 1832: Theft of Trade Secrets. The USC are passed by Congress so it's applicable in the entire nation. If you're asking what's the point, the idea is that it helps foster fair competition. Suppose a company founder has to dilute their ownership by taking on millions in investment to finally get a breakthrough. You don't want a system that allows an employee to immediately walk away and start a company of their own with that knowledge and completely undermining those who put in the money and effort for R&D. But, maybe to your point, just because it's illegal doesn't mean it's easy to litigate. Much of the legal system is specifically to avoid litigation. Apropos to this discussion, even if a contract isn't enforceable, it only has to be perceived as having teeth to give it value. It's like when a baby elephant is tied to a stake and it grows to an adult still thinking that stake prevents it from leaving. All it takes is for an employee to think a non-compete has merit to keep them in place.
• aussieguy1234 3y ago
  I read a story in this article about a person being sued after they found another job after they were laid off. There should be exemptions for non competes when it's the company firing or laying off the employee. When a company decides to do that, they need to be willing to bear the consequences of their decision.
• norir 3y ago
  > It's an extremely IP sensitive industry I know this will not resonate with some, but on some level I do not really subscribe to the idea of intellectual property. My personal belief is that the brain is more like a radio receiver. The ideas are floating out there for anyone to pull down. The more sensitive among us are able better able to hear what is there and report it back to the rest of us. To claim ownership of an idea is to me like claiming ownership of the note A or the pythagorean theorem. Of course there should be some rewards for introducing novel ideas to the world but to me the real reward is the creative experience of bringing something into the world that was previously unknown. In an ideal world, I do not think that hedge funds (or most fintech) would even exist. It sort of offends me that we would waste our civic resources legally enforcing ip rights. But I also understand that my position is far from universal.
  • Coherence97 3y ago
    I think your viewpoint is great and poetic. However, since most people are not as mature as you, our societies are not as mature as you. Meaning that until this fact changes, I do not think it is realist to expect someone to give something for free when they could make billions with it. You have to be a saint or already have everything you could ever dream of
    • shortsunblack 3y ago
      The only way the someone can make 'billions' is because of the state-given and enforced monopoly on production. Without this required threat of state violence, your ideas start being worth much less in the actually competitive markets.
  • bumby 3y ago
    This is an idealized notion (but one I wish everyone could adhere to). In reality, intellectual property rights were considered a necessity for societal progress. Before intellectual property rights, many ideas were lost because they were guarded too tightly. If that person died, those secrets were potentially lost forever and, presumably, society would be worse for it. So we developed IP rights as a way to share ideas in exchange for exclusive rights to them for some time. (This isn't discounting how these laws can be perverted to hurt the original intent). Likewise, trade secrets are a mechanism to help foster better (and fairer) commercial practices under the guise that society will benefit. It's a pragmatic take rather than an idealistic one.
• lowbloodsugar 3y ago
  Transfer of intellectual property is already illegal. If a quant was aware of something amazing they could try to transfer it anyway - just without taking the employment. Yeah, it’s illegal. So non competes are about the person and the skills the person brings. And fuck that.
• qrck13 3y ago
  Not only quants can have some good in-depth knowledge and ideas in those firms. As a Software Developer in one of such companies, I do know a lot of sensitive details too. And then, traders who use the software I write - they are very much connected to Quants, thus having lots of valuable ideas in their heads (both of their own and ones they got from Quants). But for SW devs, the non-competitive agreements in Finance industry isn’t really the same kind of bondage as for Quants. If Quant changes company - his options are very much limited to other companies doing trading, thus directly covered by non-competitive agreement. If SW Dev changes the company - he can choose the company working in other industries not related to finance, and then he is free as a bird.