The Trading Game

One of the early highlights in Gary Stevenson’s book “The Trading Game” is the description of how he won a trading game organised by Citigroup to land a coveted summer internship. He describes how he employed second level thinking to beat all the chums with elite university educations who applied their theory knowledge from economics classes to a simulated trading market. And, he discusses how he eventually got hired by continuing to back himself and double down on his convictions even when the ‘rules of the game’ had changed and he lost big time.

If I had participated in this trading game, I would likely have been one of the overeducated chums he takes advantage of. There is a reason why Gary Stevenson at one point became Citigroup’s most successful trader worldwide while I ended up in investment research. I simply don’t have the skills necessary to become a good trader, while he has.

But as becomes clear during Gary’s days trading Swiss Francs, if a company hires people who continue to double down on their trades when the rules of the market have changed, it means that it will hire people who will make a lot of money most of the time, but lose even more – and very quickly – if the market changes. If most of the traders in investment banks and hedge funds are recruited based on this principle, it explains in my view why most traders’ return distribution looks like a short put option. Profitable most years but in some years, losses that accumulate so rapidly and become so large they endanger the entire company or – as in 2008 – the global banking system.

Yet, having read Gary’s book on my recent holidays, I cannot help but cheer him on. Or rather, I should say, I was lucky enough to have listened to the audiobook version of his book rather than reading the book. I recommend anyone to buy the audiobook, because it is read by Gary himself in his East London cockney accent (including quite a good impression of Scouse). This means the audiobook may be hard to understand for people with English as a second language (or Americans), but it adds so much more depth and authenticity to his story.

It is not simply a fascinating story about life on the trading floor of a major bank, but in my view, the best book about what is going on in the financial industry I have read in more than twenty years.

I know there have been many good books about the people working in the investment industry like Wolf of Wall Street and several bestsellers by Michael Lewis. And these are all great books but what I don’t like about them, and why I think Gary’s book is so much better, is that they glorify traders, hedge fund investors, or boiler room agents as anti-heroes. The people in these books may not be likeable, but they are heroes, nevertheless.

The key achievement of Gary is that he paints his colleagues and himself as both sympathetic people you want to hang out and have a beer with and at the same time people who completely lack any sense of ethics and are driven only by their unbridled greed. And it paints a vivid picture of how – at least in the 2000s and early 2010s – major banks let these guys run rampant without any real checks on their behaviour or the risks they take.

To some, the characters Gary encounters at the Citi trading desk may sound like walking cliches, like the Scouser who is the only person in the team without a university degree but beats all the other traders thanks to his skills painstakingly honed over 25 years in the real world, rather than acquired through textbooks. Or the obnoxious South African who makes racist, misogynistic, and antisemitic jokes and is only tolerated on the desk because he makes the company a ton of money. Or the middle-aged Englishman who drinks and eats too much, is extremely status-conscious, hates everybody better at trading than he is, and at the same time detests everyone worse.

But I can assure you, most people who have worked in the investment world for long enough will have met people like these guys at some point. People like that are around not just on trading desks, but in research and sales, portfolio management, etc. I know I have met every one of these guys in some form or another in my career.

And then there is Gary himself. A kid from a deprived background in East London who went to an elite university. A kid who uses his cockney accent and the prejudices this creates in well-educated trust fund kids to his advantage, i.e. to rip them off and make more money than they do.

Gary is not just a great trader but also a great writer, telling his story with vivid accuracy and sometimes laugh-out-loud anecdotes (all I can say is “I think JB’s phone is broken”). Listening to his book, I felt immediately charmed by Gary, possibly because I come from a working-class background myself and have graduated from an elite university like he did.

What makes his book especially powerful is that he provides no moral judgement of the actions he and his fellow traders take. In one sentence, he describes how he makes a huge bonus in his first year of trading while he still lives with his parents. In the next sentence, he writes how he cheats his parents out of helping them pay their rent or how he did not buy anyone Christmas presents while everyone in the family is struggling to make ends meet and still manages to buy him a present. No explanation or justification is given for his actions. No apologies are made, even in hindsight, which is why this book is so powerful. The reader is asked to judge for himself without guidance from Gary.

It is only as Gary’s physical and mental health deteriorates that he comes to his senses and looks for a way out. It is in this process that Gary becomes somewhat of a moral force in his fight against a company that is only interested in him as a tool to make more money for the company. I guess burnout will do that to you.

Gary’s book is a powerful tale of the industry and the people who work with Gary. And these people are driven, it seems, only by greed and characterised by a complete lack of ethics. These people are empty corporate automatons. And if the reader recognises himself in parts of this story, the question Gary asks implicitly is: What are you going to do about it?