My Life as a Quant (17 page)

Area 10 was absolutely world-class in computer science and physics. Brian Kernighan, Dennis Ritchie, and their coworkers had invented the now legendary C programming language and the UNIX operating system there, and then built the entire suite of programming utilities that carried nerdily cute names like
awk, ed,
sed, finger, lex,
and
yacc
. Area 10 had played a large role in evangelizing the dual view of programs as both tools and text, written not only to control electronic machines but also to to be understood and manipulated by people. At the labs people were proud of programming and viewed it as an art. In physics and engineering the Labs was an experimental and theoretical powerhouse, producing research in electronics and information theory that made possible many of the subsequent advances in communications. Bardeen, Brattain, and Shockley had invented the transistor there in 1947, and Claude Shannon published his landmark paper “A Mathematical Theory of Communication” in the
Bell System Technical Journal
in 1948. There were fundamental discoveries made, too–Penzias and Wilson won the Nobel Prize for discovering the cosmic radiation left behind by the Big Bang, as predicted by Robert Herman. Even during the period I worked there, Horst Stormer, now at Columbia University, did the research on the quantum Hall effect that recently won him a share of the Nobel Prize. Near the end of my stay there, in 1984, Feynman came to give a talk on the theory of quantum computing, a technology then just emerging into infancy. The economics research group in Area 10, later disbanded, was also renowned; Robert Merton had published his definitive paper “Theory of Rational Option Pricing” in the 1973
Bell Journal of Economics and Management Science
.

I envied anyone and everyone in Area 10 their apparent freedom, and rued my self-perceived lack thereof. For several years I commuted in a shared minivan from Manhattan to Murray Hill and back, and met a number of other Members of Technical Staff who, like me, worked in the applied areas of the Labs. I noticed that engineers who had come to the Labs straight from graduate school became rapidly accustomed to the corporate bureaucracy and pettiness; they had known nothing better. But those of us who had previously been independent scientists always chafed at the civil service atmosphere, and many of us ultimately left.

Bill Toy, with whom I collaborated a few years later at Goldman, had been a particle experimentalist whose PhD advisor, Jerome Friedman, later won the Nobel Prize for discovering the quark structure in the deep-inelastic electron-nucleus scattering experiments that had stimulated my PhD thesis work. Bill had also worked at the Labs prior to coming to Goldman and had experienced similar frustrations to mine. Our trouble was that we wanted to get things done. The Labs could be fun if you were the kind of person who was simply happy to tinker away with expensive up-to-date equipment, but we didn't function that way. I wanted the satisfaction that comes from creating something. But in Building 5, so many of the projects I worked on ended in a confused impasse. You did some work; you wrote some internal document; Harley told Jim Downs about it; he then pronounced it a failure or a success for some cryptically inarticulate reason you couldn't understand. We were forbidden from publishing it because it was proprietary; yet often, no one inside the company had any real use for it. I was increasingly sympathetic to whomever coined the slogan “information wants to be free.”

I detested the cult of manageriality at the Labs. I was thirty-five years old when I arrived there, and very quickly realized that you got no respect in Area 90 unless you were a manager. In my previous life in physics, talent and skill were everything—you felt sorry for people who ceased creating in order to become administrators. But at the Labs, talent seemed to be a commodity, fodder for managers to buy and redistribute. Supervisors were actually forbidden from doing “technical work” on the grounds that competing with their employees in this way was demoralizing. Instead, managers became experts at intracorporate maneuvering. They seemed to have forsaken their abilities for an incestuous familiarity with the system which was valuable only in that organization, at that time.

I felt old at the Labs. My colleagues treated all forty-year old MTS as over the hill. Against my best intentions, I began to look at them and myself in the same way. I could not imagine living like that for the next twenty years. When I eventually went to work at Goldman, I was relieved and exhilarated to discover that the firm appreciated solid skill and talent. Traders, salespeople, programmers, options experts—they all worked with their own hands and made a very good living.

It was also at the Labs that I first witnessed political correctness. It was only 1981, but once a year we were compelled to attend a day-long, off-site, group therapy-style meeting run by external consultants. There, we were trained in color and gender sensitivity. We played group games in which you had to declare in public what kind of animal you identified with, and why. (The otherwise meek woman who became my supervisor a year later said she identified with lions, because it was the females in the pride who killed.) We listened to music and described the feelings it evoked. We acted out skits representing hypothetical crises in the workplace. In one episode, for example, we were told that a crowd of male and female MTS had gone for lunch to a nearby offsite restaurant, without their supervisor. While there, one of the male MTS told a dirty joke. A woman MTS felt demeaned. Should she have (a) kept quiet, (b) confronted the male, or (c) spilled the beans to her supervisor on their return to the Labs? I don't recall the correct answer.

You were supposed to bare your soul about your prejudices in these extracurricular sessions in front of your colleagues and supervisors, and then return to work with them again the next day. The apparent justification for this invasion of privacy was that your personality and prejudices could affect the quality of your work and were therefore a legitimate corporate concern. I detested this conflation of the personal and the corporate. Just because I worked for them didn't mean I had to discuss my internal hang-ups in public one day a year. Nor did I especially want to hear about theirs. At the tail end of the dot-com bubble, twenty years later, I was dismayed that for a brief period even Goldman Sachs ran rife with consultants successfully peddling their quackishly trendy prescriptions for team building.

Meanwhile, in Building 5, conformity of ambition ran wild. Several of the women there, ex-scientists like the rest of us, were avidly reading
Dress for Success
and following its precepts. They began wearing mannish suits with padded shoulders and silk neckties. One female MTS warned me never to wear a brown suit, speaking with an earnestness so great that I have never been able to buy a brown suit since, for fear that she really knew something significant. One day, nevertheless, she cried in my office while telling me about her personal problems. No one seemed to know whether to be businesslike or empathetic. At some time in the middle of my stay there, Bell Labs itself was rent apart by the breakup of the Bell System and the divestiture of the Baby Bells. I remained with AT&T, while some of my colleagues were sent off to Bellcore, the newly formed telecommunications laboratory of the Bell Telephone Companies.

The inefficiencies and irritations of working at the Labs could fill a book, but the stupidity that most illustrates the picayune nature of the bureaucracy was the command, from somewhere above, sometime in 1984, to enter our overtime hours (at work or at home) onto the time cards we filled out each week, even though there was no pay for overtime at all. This was simply an inducement to suck up to your management by lying to them about how much work you did above and beyond the call of duty. It was an irrationality worthy of the “Dilbert” cartoon, whose creator Scott Adams, unsurprisingly, spent several of his working years at Pacific Bell.

But there were some good points to life there, too. The Center was filled with ex-physicists and mathematicians, part of the late-1970s
zeitgeist
that caused scientists to stream out of academic life and into corporations. Many of them were particle physicists I had known before. I grew friendly with Mark Koenigsberg, who loved puzzles of any kind. He was absent the day I first came to interview, but soon after I started work we bonded over a mutual dislike of many of the same things. Six months after I left the Labs for Goldman, he followed me out the door to Salomon Brothers. Mark and I became friendly with Larry Kegeles, a physicist about my age whom I had met a few years earlier when he was a PhD student in general relativity at the University of Pennsylvania. Steve Blaha, another former particle physicist I had met at various conferences over the previous seven years, had come to work in the Center, too, giving up his academic post at Williams College. He too left the Labs a few years later to become a software consultant and author in the Boston area.

Mark, Larry, and I banded together. Once I dragged them to the Ethical Culture Society in New York to listen to a talk by Chogyam Trungpa himself. Larry, like me, had an affinity for the offbeat, and he became interested in Reichian analysis. Years before, I had seen Dusan Makeveyev's funny movie about Reich,
W.R.: Mysteries of the Organism
, and enjoyed its Slavic sensibility and clever equation of sexual and political repression. Now I read Myron Sharaf's
Fury on Earth
, a biography of Reich's strange brave life.

Life at the Labs was lax, and we went out to eat long lunches at low-quality Jersey restaurants on Route 22. When we occasionally took visiting interviewees out to dinner, the rendezvous of choice was L'Affaire, whose pretentiously sophisticated name told you everything about the people who ran it, the food they provided, and the people who took us there. Once, sitting in my car in the parking lot outside Building 5 during a prolonged downpour after a long lunch off premises, Mark, Larry, and I pondered the famous two-condom combinatorial problem that spread through the Center:

Two (heterosexual) couples decide to have group sex with each other in all possible male-female combinations. They have only two condoms, and everyone is scared of catching some venereal disease. How can they manage four couplings with only two condoms? The first man puts on two condoms, one over the other, and then sleeps with the first woman. Only the outer surface of the outer condom and the inner surface of the inner one has had contact with any potentially infectious surface. The man removes the outer condom and sleeps with the second woman. The second man then dons the removed outer condom whose inner surface has until now had no contact with anyone's skin, and sleeps with the first woman, whose only contact has thus far been with the outside of the same condom. Finally, the second man dons the second condom over the one he is already wearing, and sleeps with the second woman, who again only experiences a condom she has already touched.

It was impossible to resist the temptation to generalize to
N
couples.

Larry was a serious marathoner, and he and I went running together several times a week at lunchtime, part of a small crowd of avidly compulsive runners at the Labs. We would walk down to the small shower room that belonged to the Building and Grounds staff, change, warm up on the grass, run for 30 to 45 minutes, warm down, stretch, shower and change, and then eat lunch in the cafeteria. It took close to two hours, and put a sizeable dent in the workday, especially if you worked nine to five, but no one seemed to care. I have never before or since been that fit or that fast.

We held an occasional educational seminar in our group and once, early in 1981, Larry gave a talk on the Black-Scholes theory, which I had never heard of up to that point. I became briefly fascinated by the fact that options payoffs involved the algebra and calculus of Heaviside (indicator) functions, which I had used in particle physics; later I came across an early paper by Mark Garman of Berkeley, who exploited these same relationships. But options theory was largely irrelevant to what we did at the Labs, and my temporary interest quickly faded. I understood nothing about hedging or risk-neutrality, and I paid no attention to the stock market.

Several years later, Larry, Mark, and I were sent to a two-week MIT executive summer session on finance, taught by Stuart Myers from his textbook with Brealey. We lived in a campus dorm and luxuriated in our freedom from corporate life, running on the MIT track in the late afternoons and eating in Cambridge in the evenings. Myers's course focused on the Capital Asset Pricing Model, and I was captivated by the apparent similarity between financial theory and thermodynamics. I saw a perhaps-too-facile correspondence between heat and money, temperature and risk, and entropy and the Sharpe ratio, but have never since figured out how to exploit it. The course was brief and intense and required more work than we put into it. One of the lecturers was Terry Marsh, now a Professor at Berkeley and a founding partner of the financial software firm Quantal. At that time he was just beginning to make his reputation, and I was always happy to run into him years later at professional finance meetings or when I gave a seminar at the Haas business school at Berkeley.

I viewed AT&T as a job, and a disappointing one at that, but Larry had a strong spiritual streak, and believed that we were all playing a part in improving human communication. I thought that laughable then, but perhaps on some level he was right. Nevertheless, he, Mark and I—all stifled—were gone within five years.

What I did like above all else at the Labs was the beauty of creating software. Ignorant people called it “coding,” as though there was something mechanical about it, the mere uncomprehending translation from one set of symbols to another. People who liked it unabashedly called themselves “programmers.” Whatever you called it, I discovered that programming was one of the purest activities; it was truly architecture with words. By some strange unanimity of opposites, both my scientist and business-world friends were condescending about programming—they thought it inferior to doing physics or making money. But I fell in love with it.