Toby Carrodus On How To Succeed As A Quant

Quantitative analysts – nicknamed “quants” – specialize in using complex mathematical and statistical models to trade global financial markets. Toby Carrodus is an experienced quant and international investor who became a multimillionaire in this field in his 30s. He holds a Bachelor of Economics from the Australian National University, a Master of Science in Economics from the Humboldt-Universität zu Berlin, and has worked in London, Frankfurt, Los Angeles, and Sydney.

Toby Carrodus clarifies that beyond a healthy knowledge of linear algebra, statistics and computer programming , doctorate degrees in mathematics or computer science are not a requirement to succeed in this field.

He shares the insight that all else equal, three personality traits will differentiate you from the pack as a quant: creativity, interpersonal skills and grit.

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Creativity

Toby Carrodus explains that the majority of quants use reasonably well-established methods and techniques from textbooks and journal articles in STEM disciplines to process financial market data. Many of these methodologies date to the 1980s, so they aren’t that imaginative or groundbreaking.

In the above context, creativity is one aspect that makes a quant stand out from the pack. To Toby Carrodus. creativity means linking together concepts in ways others cannot. It is a vital part of establishing innovative, uncrowded trading signals, he says.

“Being creative requires you to have a thorough understanding of the limitations of the models being used,” he explains. If a quant understands the limitations of a model, states Carrodus, they will have better judgement in knowing when it is appropriate to loosen certain model assumptions.

Carrodus says many quants waste time focusing on the unrealistic, “perfect” world provided by theories that stumble in the real-life messiness of finance.

“Finance is dominated by the erratic nature of collective human behavior,” he says. “The best quants realize the limitations of theories and apply only what is useful to real-world applications, instead of trying to shoehorn reality into a neat theoretical model.”

He jokes: “In theory, theory and practice are the same. In practice, they are not.”

Interpersonal Skills

Toby Carrodus admires the Greek philosophy of Stoicism, which celebrates self-sufficiency, introspection, and self-education. His actions are congruent with this philosophy, having taught himself the skill sets required to work as a professional quant, including linear algebra and coding. Also personally this ethos has helped him pursue his goal of “consciously creating a nicer, more thoughtful environment in the trading industry, in contrast to the menacing dog-eat-dog experience which tends to prevail.”

Developing soft skills is always going to help you no matter your line of work, affirms Carrodus. But particularly in quantitative analysis, where so much focus is placed on numbers and technical concepts, interpersonal skills can really help. “One of the noteworthy traits I have observed in the more successful quants is interpersonal skills,” he explains.

Social and communication skills are not renowned among quants, and they aren’t critical to those new to the field. But as quants move into management, they become more removed from direct number crunching. That’s when the job matures and requires more people skills.

But even before a quant is promoted to management level responsibilities, Toby Carrodus rightly explains why interpersonal skills matter: “Your ability to interact with others, thoughtfully disagree with them and persuasively put forth ideas will determine how much impact you make at your organization.”

He also points out that trading large sums of money can be intense and put strain on work relationships. Markets are volatile and people make mistakes. Having good relationships with your colleagues is therefore critical.

“Trading often involves dealing with stressful situations,” he says. “If you have good relationships with your co-workers, you can focus on addressing problems as a team instead of bickering.”

Toby Carrodus recounts how he himself has been embroiled in such tense situations at times. His key learning is that relationships and focusing on the people are critical to managing any scalable trading operation.

Grit

“If quant trading were easy, we would all be rich,” Toby Carrodus says. “It is easy to get discouraged or disillusioned in this game of what can seem like constant failures. Most research results are negative yet require so much effort.”

Even gifted quants from prestigious universities can start to doubt their abilities in the face of such a challenge. “It has been sad for me to observe colleagues with brilliant minds – much smarter than me – not succeed because of a genuine lack of resilience,” he says.

The boiler-room nature of this business can make immensely talented quants self-implode. Toby Carrodus carefully states that “successful quant trading takes intestinal fortitude and tenacity more than it does pedigree.”

In other words, it takes “grit.” Carrodus notes that this is hard to teach. “I have noticed that quants with more stable home lives and hobbies outside of work appear to have the most tenacity,” he says. “Perhaps this is due to having an outlet or ability to switch off rather than carrying their problems with them everywhere they go.”

Toby Carrodus gained grit from facing obstacles early on. During his high school years, his mother, a single parent, raised him on government support in small-town Australia.

Despite this, he worked hard to excel at university and attain scholarships during his undergraduate studies, which took him to Canberra, Adelaide and even Germany. While in Germany, he learned that university education was free, so he taught himself German and got a free postgraduate education in the process.

Another example of Carrodus’ grit is the decision he made to teach himself to code. Early on in his career, Carrodus realized that technology was shaping and replacing jobs. Instead of seeing this as a threat, he saw it as an opportunity.

He taught himself to program by getting up several hours before work each day, as well as completing night school.

These examples illustrate not only Toby Carrodus’ grit, but also his approach to life: rather than waste time complaining about circumstances, he gets on with the job and focuses on making the best out of a given situation.

This attitude has seen him attain great success at an early age despite humble beginnings.

His approach can therefore serve as a blueprint for any aspiring quant. If you don’t know linear algebra, statistics or programming, nothing is stopping you from teaching yourself these fields in an age where so much quality knowledge is accessible for free over the internet.

Once you’ve mastered those skills, you can elevate your career as a quant by focusing on your creativity, interpersonal skills, and acquiring some grit in the process.