Geeks ‘usurping Masters of Universe’ in Wall Street

Tom Wolfe, author of The Bonfire of the Vanities, said buying and selling stocks and bonds on the trading floors of New York and the City of London used to be the next best thing to armed combat.

The so-called Masters had masculinity “to burn” and were “slightly older, vastly richer versions of the frat boy” who thought of retail banking customers as “muppets”, “suckers” and “baby seals”.

But in 2009, “a bunch of nerds known as quants shut the golden door flat in their faces”, said Wolfe, in an article for The Sunday Times magazine.

The so-called quants started showing up on trading floors in the late 1980s to set up computers to retrieve financial information from the markets, he said.

The gifted mathematicians devised foolproof ways of profiting from mispriced stocks and bonds and were able to play the markets by detecting lags in pricing, he added.

This developed into high-frequency trading with enormous computers devoted to buying and selling mispricing opportunities taking place in millionths of seconds, said Wolfe. By 2009, these accounted for 73 per cent of all trades.

“For a hot quant prospect, employers would pay up to five times as much as for a Master of the Universe,” said Wolfe. “Or as a New York Post headline put it recently: ‘Slick Wall St guys ousted by $1m geeks’.”

He added: “What the Masters didn’t realise was that their muppets... provided only the liquidity... useful mainly to provide the quants’ robo-diddlers with numbers to play with, discrepancies the robot battle machinery could game and exploit.”

Former Deutsche Bank staffer turned Cambridge University neuroscientist John Coates carried out research which showed sharp physiological changes in traders during trading sessions.

Referencing Mr Coates’s work, Wolfe said quants had high cortisonal levels, indicating stress, instead of high testosterone, resulting from sitting in chairs, mute, trying to monitor six screens at once, which obscures any connection to the real world.

He said some 460,000 people in the financial industry had lost their jobs since 2008. And the so-called Masters of the Universe have become “Eunuchs of the Universe”, said the 82-year-old American writer.