Morning Coffee: Delirious traders spending $1k a day on AI tokens. What not to wear at Goldman Sachs, by the ex-CEO

There are people in the middle office of JPMorgan spending 'more than their own salaries' on AI tokens. They are not alone. There are people at Hudson River Trading (HRT) spending a thousand dollars a day on AI tokens. Maybe they are delirious.

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Iain Dunning, who is the head of AI at HRT, thinks they might be delirious. Speaking to Bloomberg's Odd Lots podcast last week, Dunning said the $1k a day spenders suffer from a kind of "AI delirium" during "surges of experimentation." This is understandable, said Dunning. It's also expensive. "It didn't exist at all as an expense type," he says. "It's a pretty profound new expense to have."

Hudson River Trading is an electronic trading firm known for paying very well and for being a good place to work if you're a developer. Not everyone there is consuming $1k a day of AI tokens. Dunning said it's usually more like $100 or $200. For this spending, the firm achieves a 50% productivity increase. "Not 2X productivity," said Dunning. Even so, it means that firms who aren't spending on AI tokens won't be able to keep up. 

There are second order effects to AI use. Dunning said HRT's winter interns began using "very technical quant finance research terms" that interns had never used before. This was because the interns had been asking AI models what the firm did. 

HRT has lost people to AI labs. Dunning said there was "very fierce" competition for talent from the labs for a while but that this has now eased off as the labs have become more like big tech. This is not a compliment. These days, HRT is more at risk of losing its people to dreams of personal AI glory. There is a strong sense that "you can get a VC to fund your idea based on very little," said Dunning.

AI token spending will only increase, along with AI token delirium. "As you have more success, you make more money, you're more willing to eat a thousand dollars a day," declared Dunning. In this delirious, crazy world, a need for a new kind of person is emerging. It's not for the "shape-rotator type" of the past, but for someone who is a theorist and a dreamer and who can describe what they want "clearly and without confounding factors." This is a skill that's not "evenly distributed in the population," says Dunning. 

Separately, if you are going to work for Goldman Sachs, dress discretely. 

The Wall Street Journal has elicited sartorial rules for male bankers from the recently published book by former Goldman Sachs CEO Lloyd Blankfein. Blankfein says conservative styling is the way forward. “I think I had half a dozen blue suits and a half a dozen gray suits. Every once in a while I went crazy and I got a pinstripe in one of my suits. My goal was to not dress in any way that would warrant a comment, either good or bad.”

Blankfein famously wears a Swatch. Low profile is the ideal. Belts must match shoes. Nothing flashy, no obvious brands. The more senior you become, the more discrete must be your attire. Bunching at the back of the shoulder of is no-no. Custom-made suits are the ultimate flex.

Meanwhile...

Debasish Patnaik, senior partner and leader of QuantumBlack, McKinsey's AI consulting arm, says banks are cutting teams of juniors by as much as two thirds. (Bloomberg) 

There are only 2,000 people globally who specialise in insurance linked securities which cover events like a hurricane hitting a major city. They are paid $400k to $670k. (Bloomberg) 

Underwriters on the SpaceX IPO have been told not to accept investors from Hong Kong or China. (Bloomberg) 

Goldman estimated that the rocket company’s revenue would exceed $470 billion in 2030, while Morgan Stanley projected it would reach nearly $330 billion. Goldman won the lead role on the deal. (WSJ) 

When Goldman Sachs worked on the Ford IPO in 1956 it earned a fee of $250k for its advisory work, even though the work was thought to be worth $1m at the time. But Goldman then had a long relationship with Ford. Sidney Weinberg joined the Ford board and for nearly half a century Ford became Goldman’s most prestigious investment banking client. (NetInterest)

Citi hired Andrei Kazantsev from Goldman Sachs as its global head of FX exotics trading. (Financial News) 

Mid-frequency trading is better suited to periods of market dislocation because the signal half-life for macro-driven correlation shifts is measured in hours and days, not microseconds. (Navnoorbawa)

The single highest-compounding bet you can make for your career is to become an expert in a domain narrow enough that you can become one of the fifty best people in the world at it within five years. (KoffeeGuy) 

Deutsche Bank was holding a lunch at a hotel during its leveraged finance conference in London when part of the ceiling collapsed. Someone was mildly injured. (Bloomberg) 

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