What Agustin Lebron talks about

Welcome to Better System Trader, the podcast to help systematic traders of all levels improve their trading. We'll give you loads of expert tips and practical advice on system design and validation, money management, trading psychology, and many other topics. Whether you're just starting out or a savvy systematic trader, we're here to help you improve your trading and find more success. This is Better System Trader with your host, Andrew Swanscott. Hi there. Welcome to Better System Trader. Glad you could join us for this fine episode where we're going to be talking about something incredibly…

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We'll also talk about identifying personal edge and leveraging that in the markets.

So the way I think about it, a true edge, a good edge is something that you know and can do that the marginal participant in the market doesn't and can't.

But what about if you're, like, if you're just starting out or perhaps you think you found your personal edge, but you're not getting the results that you're looking for?

Now in your book, you have a quote that says, if you can't explain your edge in 5 minutes, you don't have a very good 1.

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Because you can you can ask you can sort of answer the question at a very base level by saying, well, their edge is that they understand prices better Than the marginal participant in the market.

And in in some sense, Jane Street's biggest edge is that Jane Street isn't bad at very many things.

And then I would say there's sort of there's the highest, the meta level, the thing actually that interest me the most, which is fundamentally, Jane Street has an edge because they hire really, really good people.

But I I, you know, I do think there is still edge for the the smaller fish.

Do you want to know what is going on in the minds of CTOs out there regarding compensation, hiring, retention rates, the churn rates in employment? Well, you're gonna have a wonderful opportunity today to listen listen in on a conversation led by Augustine LeBron with 10 CTOs in the room and very interesting thoughts and ideas about what's going on out there right now. So have fun. From 7 CTOs, my name is Etienne Gebruin, and you're in the CTO studio. Somebody said it was a hot topic. Yeah. Darmin's a hot topic. What do we pay people? What are we supposed to be paying people? So as I said, I'm…

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So you have people that are good at managing revenue, but you also have people that are good at managing risk or managing resources.

But the way I would measure the value of somebody who like a DevOps person or somebody who's good at at QA and managing risk, the way I would value that person is very different than the way I would value somebody in business development who could drive a lot of rent.

But, yeah, like, I think that the key insight there, Steve, that you're having is business value, whether it be revenue, risk, or whatever, is the thing that drives how much you like, what's the roof on what you can pay somebody?

Taking a job at a new company that you don't know is a risk, and there's a cost associated with that risk.

I tell my kids this all the time. Like, life is not short. Life is long. And what that means is you should think of yourself as having many opportunities to learn things and try things and do things. Software development is fundamentally an exercise in sociology. Like, in organizing teams and in creating processes and culture and conventions around the building of software. I think finance is 9% of GDP. Is that too high a price to be paying for liquidity and price discovery? Okay. Today, I have the pleasure of speaking with Augustin Lebron, who is the author of the laws of trading, a trader's…

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Because you probably don't have edge because you're not better than a marginal trader.

And if you think you have edge, it's probably because you unfactored in risks and other costs.

How much are you willing to, give up your edge by telling us what this is?

Or because I would think you say in the chapter on edge that 1 of the ways you can actually get is to specialize.

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Very, very much the opposite of what you would think of as as we'll say, like, the modern high frequency, you know, low edge done 1000000 times kind of trading that I also did a bunch of.

Some of the stuff in your books about having edge and edge is the need for a marginal player.

Like, you don't have an edge unless you know someone who doesn't have an edge.

And the other side of, I think, the edge is, look, 1 thing that we know is that markets are incredibly complex, heterogeneous.

Gildan Media, a division of recorded books presents The Laws of Trading, A Trader's Guide to Better Decision Making for Everyone by Augustine Lebron. Narrated by Timothy Andres Pobon. Limit of liability, disclaimer of warranty. While the publisher and author have used their best efforts in preparing this book, They make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or…

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If your costs seem negligible compared to your edge, you're wrong about at least 1 of them.

And 3, every moment is unique, meaning every edge and outcome is truly a unique experience.

In any case, you wait for the next edge to appear and go through the process again and again.

By that, I mean a book that will not hit the best seller lists, but that as you go through life, you will find that it has been read by most interesting people you meet who care about trading, risk taking, economics, or decision making, and that you will recommend it enthusiastically to the rest.

What is edge in the context of the financial markets, and how does it come about? It can be many different kinds of edge, but in the end, something that makes you money is something that either you know that nobody else knows or something that you can do that many other people can't do. You managed the Jane Street cohort for Sam Bagden Fried. He was definitely noticeable. He challenged people to explain things. Sam was like, day 1, I'm gonna ask all the questions. I'm gonna figure things out. We've seen a huge growth in retail trading post COVID. Prediction markets are growing in the last 5 ye…

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The way I define it in the book is edge is something that either you know or you can do that the marginal participant in that market either doesn't or can't.

I guess this is more a specific question about, you know, executing on edge or rather well, it's just about trading in general.

Like, I definitely definitely have edge or I definitely can do this thing.

What is the way in which they're developing edge, thinking about it, improving it?

I wanna ask a little bit about your time at Jane Street. You worked in the London office. And 1 of the things that I think fascinates a lot of people is they see these stories of the news of these top quant shops raking in billions and billions of billions of dollars, but it seems like a black box. You know, we have the efficient hypothesis of the market. And, obviously, if these guys are capitalizing on all these different inefficiencies, that can't 100% be true. How do these quant shops hire talent that can continuously generate and execute on their edges and make money. I think every great…

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Like, I definitely definitely have edge or I definitely can do this thing.

What is the way in which they're developing edge, thinking about it, improving it?

And so maybe your system doesn't actually have to keep nearly as much of the relative edge because there's enough absolute edge to maybe make up for that.

If you're not constrained in that way, I if you have enough risk capital to deploy during those times, those are very often extremely good times to trade.

What's up, outliers? Welcome back to the Outlier podcast. I have Augustine here to tell us how trading is super easy. It's a way to fast, easy riches with minimal effort, stable monthly income, and I'm really excited to learn the secret. So what's up, Gustin? Thanks for having me on. It's great. So being is that I nailed that intro, the funny part is for those that obviously wouldn't know, but when we originally started talking, I had mentioned doing a podcast, and you were like, that sounds kinda interesting, but I'm not sure it would be, like, exactly the right fit because my my primary piec…

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But just the way they talk about their trading, there's probably a bit of what you just said, right, where, like, it's clear they have some edge, but they might not be thinking about it quite the right way or or or maybe as as optimally as they could.

But the times you see people just kinda get in over their heads just because, like, they're sort of destined to go broke because even if their trade did have edge even if their trade did have edge, you're way past, like, some Kelly fraction or something like that.

And I think this gets back to the 1st thing that we talked about, which is, like, really being self aware about what is the differential edge that you have in the market or that you might have in the market.

So I would say I think the chapter on edge, I I think I really like.

What's up, everyone? Welcome back to the outlier podcast. I have a familiar face, Augustine LeBron here in red celebrating the bloodshed. No. I'm just kidding. That's actually something we'd say in the military, though. But we are gonna be taking a look at strategy development. And this is something that you and I had gone back and forth in DMs a little bit on doing a follow on session, and you expressed that you wanted to do something, like, more practical and kinda hands on using a live example. And I love that because it's really easy to talk about stuff and to try and show pieces of it. I…

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You can kinda think about the risk versus return efficient frontier that you wanna live on.