Going Infinite: The Rise and Fall of a New Tycoon

by Michael Lewis

It wasn’t enough for the trader to make money. You needed to be able to explain why you were making money. A great trader at Jane Street was not a great trader unless he could explain why he was a great trader—and why some great trade existed. As one former trader put it, “It was, Why are you great, and how do we replicate you? And if you could not answer the question, they doubted you.” But these little research projects didn’t need to begin in a dignified way, with some theory about why some market might be inefficient. Often they’d be triggered by some weird event the trader had observed while trading. For example, you might notice, as Sam once did, that exactly twelve hours after the price of certain South Korean stocks rose on the Seoul stock exchange, the price of certain other Japanese stocks rose on the Tokyo stock exchange. Your first thought might be that this is merely a coincidence. But then it keeps happening. You dig into some old data and find that the same thing has been happening in these stocks for several months. You might trade on it—and buy the Japanese stocks the instant the South Korean stocks rise. You might even make money. You wouldn’t have satisfied the Jane Street system, however, because you didn’t know why the Japanese stocks were rising in price twelve hours after the South Korean stocks. And so you looked even further into it—as Sam had. And he found that the prices of both the South Korean and the Japanese ETFs were being driven by a single...