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High-Frequency Programmers Revolt Over Pay

forbes.com

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Re: High-Frequency Programmers Revolt Over Pay

#61

Post by pierrefar »

patio11 wrote: post #2

I think financial industry programmers are at the leading edge of this phenomenon (much like quants were the leading edge of programmers being paid for value rather than for hours), because they're the programmers who can most easily demonstrate that their code directly made a company millions. They're not the end of it by a long shot. Take A/B testing, analytics, conversion optimization, etc. If you are good at thes…

The problem with performance-based pay is that there are quite a few variables outside your control. Say you're doing a simple A/B test that you've correctly deployed. Now imagine Big Boss Man (or Big Client Man) decides to change something else on the website that is likely to affect the results of your test. What do you do then?

Suppose the website goes down and the company doesn't make its millions and now they can measure no performance increase.

Then there is politics. Big Boss Man might go to his Big Big Boss Man and tell him that he deserves the pay rise because he hired you or brought you in as a consultant, and so you're just a tool to his genius. Good luck with that one.

My point is simple: if the bosses or clients don't want to pay you performance, they can find a million ways to do so. Tough contracts only go so far and my suggestion is to never enter such a relationship unless you're 100% trusting of the bosses or clients.

Re: High-Frequency Programmers Revolt Over Pay

#62

Post by shin_lao »

jmillerinc wrote: post #17

I have a feeling this article confused the creators of the trading algorithms, which is what makes the money, with pure programmers, who are hired to implement someone else's pre-existing algorithms. Sometimes these are the same person, but in those cases that person almost always has a profit sharing contract, not only a base salary. (And if they don't, they're crazy.) The fact that the programmers in the article on…

HFT algorithms aren't that complex. When it comes to finding the differences of pricing between two brokers buying from the cheapest and selling to most expensive, there's no need for an advanced pricer (and there's no time anyway).

The difficulty of HFT is designing a machine that can trade fast enough. I'm not sure you realize how difficult this is. You just can't take a quant and make him an über C++ programmer overnight.

There's a reason why you need people with different skills to make money, and the reason is that becoming really skilled in whatever field takes years.

Good companies pay everyone making a direct contribution to the profit a fair share, those who don't lose their talents.

Re: High-Frequency Programmers Revolt Over Pay

#63

Post by gaius »

SkyMarshal wrote: post #48
endtime wrote: post #8

>He says one group was generating $100,000 a day from his high-frequency trading software and paying him $150,000 a year. I'm not saying I don't want the guy to have a higher salary, but there's an implied fallacy here. It seems he should be paid relative not to how much value his code generates, but to how hard it would be to replace him.

And making 100k/day using the tens or hundreds of millions of principal an investment bank can provide is a far cry from making 100k/day trading one's own savings.

From the article:

He found a partner, and together they began trading on their own. The programmer now pockets more than half of any profits his software generates. The programmer says he's making about the same money he did at the job he left. But at his old job he'd topped out in pay while now he says the sky's the limit

Re: High-Frequency Programmers Revolt Over Pay

#64

Post by patio11 »

davidw wrote: post #59
patio11 wrote: post #2

I think financial industry programmers are at the leading edge of this phenomenon (much like quants were the leading edge of programmers being paid for value rather than for hours), because they're the programmers who can most easily demonstrate that their code directly made a company millions. They're not the end of it by a long shot. Take A/B testing, analytics, conversion optimization, etc. If you are good at thes…

> Take A/B testing, analytics, conversion optimization, etc. If you are good at these, you can generate several million dollars of value over the course of a week. If you can credibly offer the prospect of results like that, some companies will pay you very well indeed. Given the above statement, which I think is accurate, and given that you're pretty good at those things, and given the following statement from your…

I did some consulting over the summer, and will do some in the future. Speaking generally, clients pay me quite well but customers pay me quite well while I sleep. I'm probably not going to talk consulting on HN too often -- it might sound like advertising.

Re: High-Frequency Programmers Revolt Over Pay

#65

Post by thailandstartup »

nradov wrote: post #36
drx wrote: post #5

Earlier quoted context omitted.

Minute trading introduces very high levels of liquidity to the market. Your thinking represents a common fallacy: "I cannot immediately see any benefit to X, therefore X is pointless / should be abolished".

Everyone understands that high liquidity is beneficial: it lowers the cost of capital thus allowing businesses to expand. But have researchers ever quantified the liquidity premium reduction provided by HFT versus the economic rents extracted by the traders? Depending on the ratio, society might actually be better off with a little less liquidity.

I think that we do overpay for this liquidity. Both in terms of economic rents extracted, and the wasted resources poured into the competition. I wonder if there might be a way to keep most of the liquidity but at a fraction of the cost

Re: High-Frequency Programmers Revolt Over Pay

#66

Post by sambe »

drx wrote: post #13
abstractbill wrote: post #6

Earlier quoted context omitted.

Is more liquidity always better? (It's an honest question - I have no idea myself).

Good question. I would imagine not, especially from the point of view of someone who can exploit an illiquidity.

Good answer. Arguably, in a simplistic sense more liquidity is always better for the functioning of the market. But if we have a lot of "false" liquidity that perhaps encourages people to make optimistic assumptions, and that liquidity can go away... like it did a few weeks ago (or during a crisis...). Maybe some people can profit from this, especially if they have the ability to front-run?

Re: High-Frequency Programmers Revolt Over Pay

#67

Post by davidw »

patio11 wrote: post #64
davidw wrote: post #59

Earlier quoted context omitted.

> Take A/B testing, analytics, conversion optimization, etc. If you are good at these, you can generate several million dollars of value over the course of a week. If you can credibly offer the prospect of results like that, some companies will pay you very well indeed. Given the above statement, which I think is accurate, and given that you're pretty good at those things, and given the following statement from your…

I did some consulting over the summer, and will do some in the future. Speaking generally, clients pay me quite well but customers pay me quite well while I sleep. I'm probably not going to talk consulting on HN too often -- it might sound like advertising.

I suppose doing both is ideal; I just wonder if it's possible you'd end up with the consulting being so much more valuable than bingo cards that the logical thing would be to do more of the former. Something that makes $1 when you sleep is not competitive with something that makes you $1000 when you're awake, even if, ultimately, the former is a superior model.

Also, I don't think anyone minds if you mention that you do consulting; your feedback here is very valuable. One of the things I appreciate about this community is that self promotion is ok as long as it's not completely out of context or otherwise annoying.

Re: High-Frequency Programmers Revolt Over Pay

#68

Post by roel_v »

patio11 wrote: post #16
endtime wrote: post #8

>He says one group was generating $100,000 a day from his high-frequency trading software and paying him $150,000 a year. I'm not saying I don't want the guy to have a higher salary, but there's an implied fallacy here. It seems he should be paid relative not to how much value his code generates, but to how hard it would be to replace him.

When you say "should", are you making a positive observation or a normative claim? My positive observation is that people get paid whatever amount they can successfully negotiate, and a programmer at the very top of a field with ungodly amounts of cash money flowing around is in a good position to negotiate lots, because their BATNA is "I walk one block out of this office, have coffee with someone, and a week from no…

It's a positive observation in the sense that one's actual market value is equal to the cost of replacement. The price discovery method (negotiation) is imperfect, causing the discrepancy between the market value and the actual paid price, but the point of the grandparent would still hold.

Re: High-Frequency Programmers Revolt Over Pay

#69

Post by sfk »

jacquesm wrote: post #57
msy wrote: post #56

Earlier quoted context omitted.

You clearly haven't worked in finance. The traders get a percentage cut, as do the quants, it's only reasonable the hackers started asking where their cut was. However they are conflating programmers and quants here, the guy who puts together a FIX interface is a pretty replaceable cog, the guys who develop algorithms and their implementations are quite literally worth their weight in gold if they're good. The thing…

> You clearly haven't worked in finance. Chase Manhattan bank, the Netherlands branch, formerly the Nederlandse Crediet bank, about 3 years from when I was 19 to when I was 21, both as a systems level programmer as well as an application programmer. > However they are conflating programmers and quants here Yes, but I didn't, I only spoke about the programmers. They do not come up with the models, they just lay the br…

Please refrain from using the bricklayer image here. It is demeaning, silly and wrong. In order to implement a mathematical model, a programmer has to:

  a) Understand the model.

  b) Come up with a fast algorithm for the specification.

  c) Prove the algorithm correct.

  d) Make no mistakes implementing the algorithm.
All of this has nothing to do with bricklaying. Moreover, it's quite ironic that the geniuses who come up with the models often "forget" point c) for their own work.

Re: High-Frequency Programmers Revolt Over Pay

#70

Post by rwmj »

tom_b wrote: post #11
patio11 wrote: post #2

I think financial industry programmers are at the leading edge of this phenomenon (much like quants were the leading edge of programmers being paid for value rather than for hours), because they're the programmers who can most easily demonstrate that their code directly made a company millions. They're not the end of it by a long shot. Take A/B testing, analytics, conversion optimization, etc. If you are good at thes…

I'd actually love to see more jobs that offered the opportunity to work with a small base salary but increased compensation levels based on measurable results. I'm really curious about non-startup work models that would encourage this. So far, the easiest path would seem to be via consulting, where you sold your services as business services that happened to be software-based rather than as a "warm body" to staff som…

Surely you can just invest a large proportion of your salary in company stock and achieve the same end?
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