Inside the Black Box: The Simple Truth About Quantitative Trading

12.1. GATHERING INFORMATION

How does one actually go about finding out what a particular quant does? Quants are notorious for their secrecy and paranoia. And this is not without reason. Much of the skill of quant trading comes from experience and knowhow, not from raw mathematical superiority. There is an excellent book called The Interrogator, by Raymond Toliver, from which many useful lessons can be learned on how to get information from a quant.^[] The book's subject is Hanns Joachim Scharff, a former World War II Luftwaffe interrogator who succeeded at gathering information from downed Allied pilots without the use of any physical force or psychologically stressful techniques. Instead, Scharff used three major tools: trust building, domain knowledge, and an organized system for tracking and retrieving information.

Before detailing Scharff's techniques, I want to stress that I am no fan of wars or interrogations, nor does the relationship between investor and quant manager closely resemble the relationship between interrogator and prisoner. But there is one similarity, I believe, that allows lessons from the latter to be useful in the former: In both cases, information that one party is reluctant to provide is needed by the other.

The first technique Scharff used is also the most obvious: He built trust with the pilots he was interviewing. In fact, Scharff remained friends with a great many of them after the war, and they seemed universally to respect and like him. Turning to ...