The Daily View 5/6/2024: Jane Street, 180+ IQs Study, Crypto, and more

Item #1: Jane Street is big. Like, really, really big.

If anyone is confused as to what Janes Street does exactly, that is the point. Like all quant firms, it’s highly secretive.

MainFT already reported the headline numbers — net trading revenues of $4.4bn in the first quarter, after a $10.5bn haul in 2023, and a profit margin north of 70 per cent — but it bears repeating.

That is the fourth straight year of net trading revenues exceeding $10bn. Gross revenues came at a record $21.9bn in 2023, up 34 per cent from 2022. That’s equivalent to 1/7th of the combined equity, bond, currency and commodity trading revenues of all the major global investment banks last year.

If Jane Street is so profitable, why can’t a competing firm undercut it? If its business model is ‘providing liquidity’, it’s not like only Jane Street does that. So I am left with more questions than answers.

These firms are shrouded in mystique. But it’s not that hard to make money. Anyone who is smart enough to pass the interviews to get hired there is probably smart enough to trade and develop their own strategies and keep all the profits to themselves. A 30-50% CAGR from leveraged tech and shorting Bitcoin probably exceeds any hedge fund. But getting the initial capital is hard.

It’s not that secretive, as there are large communities devoted to discussing leveraged tech ETFs, nor does one have to be a genius to do it. So why doesn’t the method become saturated? Because for the method to fail would imply that the ‘big tech dominance’ thesis fails, which is extremely improbable given that all signs in terms of the economy point to it being true.

Item #2: Today, Robinhood received a Wells notice regarding its cryptocurrency trading operations. This caused Robinhood stock and cryptocurrencies and crypto-related companies to fall.

Yet again, we see a recurring pattern of bad news being dropped during the market hours. This bias of bad news being released during market hours makes shorting Bitcoin profitable when limited to market hours. Being short means I can profit from the sudden plunge of the price when bad news is dropped. Owing to high IQ I was able to figure this out this news bias and profit.

It also shows how regulation continues to strangle crypto and why it’s inferior to tech stocks. People who own crypto or crypto stocks have regulatory risk, but investing in the biggest of tech stocks means better returns and less risk.

Item #3: Interesting tweet by @tracewoodgrains:

Scores above 140 or so are unreliable. One individual who stands out as having a legit 180 IQ, as in a 1-in-10+ million rarity, is Murray Gerstenhaber, a mathematician who died at 96 in 2024 and was one of the last surviving participants of the study. He’s an example of one of possibly hundreds of people who have among the highest IQs in the world, that is not on any ‘highest IQ’ list and is relatively unknown compared to more famous examples. Earning a doctorate 3 years after undergrad meant he already mastered all the material. None of this ‘4 years of undergrad, 4 years of grad, 4 years to write the thesis, etc.’ Maybe even as early as secondary school he was already an expert.

Item #4: From the Intrinsic Perspective, How to teach your two-year-old to read.

Having a 2-year-old with an extremely high IQ probably helps greatly, too. Given that IQ is highly heritable and the author certainty has a high IQ, teaching his kid to read at an early age should not be a problem. He writes, “Please note: teaching your child to read, and especially to read early, is not for everyone.” Yes, because not everyone’s kid has a genius-level IQ. I wish there was more to it than this, but IQ is doing much of the heavy lifting here.

There are some edge cases where average-IQ kids can read early, like at 3, but these are outliers. Hyperlexia is sometimes associated with autism, but it’s much rarer than just having a >130 IQ. From what I have read and from experiences of parents, high-IQ kids tend to seek out books and other material out of curiosity. They do not have to be forced that much. It’s the parents who have to be prodded, not the kid.

Item #5: From Reddit’s Late Stage Capitalism: Are billionaires mediocre people? Are they, dare I say it, midwits?

I would not blame greed so much as I would attribute billionaire-status to luck (e.g. fortuitous economic conditions, good timing, rich parents, etc.) and persistence. I agree though–outside of tech, healthcare, or finance–the majority of rich people are not exceptionally smart. They found something that worked and then honed in on that, combined with tons of luck.