Saturday, December 9, 2023

Q&A with Brad Schaeffer



Brad Schaeffer is the author of the new book Life in the Pits: My Time as a Trader on the Rough-and-Tumble Exchange Floors. His other books include the novel The Extraordinary. He lives in New Jersey.


Q: You’ve noted that Life in the Pits began as an article in The Wall Street Journal. What inspired you to write this book about your experiences as a commodities trader?


A: A few reasons. One, I had such a fascinating experience down on the floor for the six years or so I was there, that I felt the stories had to be recorded before I forgot them.


Also, I found that as I wrote them down, I began to realize just how many lessons from so many very smart people I’d learned, that I thought imparting them to anyone, especially those looking to speculate in the markets, would be a valuable exercise.


I felt that, as the floors are now closed, this was the right time to write my story, as I see it as an epitaph of a way of doing business that began before the Civil War and then ended so abruptly as technology did away with “open outcry” as it was called.


And since I was not only a full-fledged trader right down on the floor, but a professional writer as well with several books under my belt and over 300 articles to my name, I was well-positioned to take on the project.


Q: Of the various experiences you describe in the book, are there any that had an especially big impact on you?


A: Well, I think the one that sticks out most is in the chapter “40,000 Ticks” where I describe how I watched a simple hand-signal miscommunication lead to an error that cost the group I was trading with at the time—my brother and his partner—roughly a million dollars in a matter of seconds.


It wasn’t just the trauma of the event itself but how my brother handled it that taught me several important life lessons.


First off, life can turn on a dime. In his case, what he thought had been a six-figure winner became a seven-figure loser so fast it almost defied our imagination. So always know that however good, or bad, you have it, things can change, and when you least expect it.

Second, is that when life knocks you down you really do have no choice but to get up, brush yourself off, and get back in there. That’s what we all did the day after the error. There was nothing else to do but shake it off and start trading again.


So perseverance definitely was on display, as was serious character and maturity on the parts of my brother and partner (well, that is after a wild night of blowing off steam, but you have to read the book to get into all that!).


Finally, the fact that I talk about it now almost as a joke (and I treat it humorously in the book) when at the time it seemed like the end of the world shows that all things pass and you will get through no matter what life throws at you.

Q: What do you think are some of the most common perceptions and misconceptions about the exchange floors?


A: That the guys on the floor are somehow “in-the-know.” That we knew what was going on in the wide world outside our little fishbowls. But we didn’t. If there was news that would move markets, we were usually the last to know. As such, our job was to react to pricing as much as make it.

Another thing is that it wasn’t nearly as chaotic as it looked to the outside. Yes there was screaming and yelling with red-faced alphas hurling insults as well as prices back and forth, but once you could read the hand signals and get a feel for the flow of business, it was actually a very efficient system for transacting…very rare errors like the one above notwithstanding.


Also that the floors were a den of insider thieves. Quite the opposite. Because we lacked the information beyond the prices right in front of us. So, in a way we were all faced with the same information (or lack thereof) and so in the end, what made a great trader was whether or not he/she made money. Period.


Your degree or other credentials mattered little down there. I stood next to a Harvard law grad on one side of me, and a high school dropout tennis pro on the other…and they were equally as good at pricing complex derivatives quickly and making markets and trading.


So, in this odd way, the trading floor was among the most honest places I ever worked. You couldn’t hide behind politics. Your P&L had the final say on whether you were a success or not.


Q: What do you hope readers take away from the book?


A: Well, one of my favorite observations I first heard from Steve Jobs (although I’m not sure if he coined it) is that oftentimes in life you can only connect the dots backwards. That sometimes if you feel like your life is going nowhere, or you have no direction, it could be that you’re just unknowingly doing prep work for the career that finally suits you.


For example, I start off my story not on the exchange but in an art studio for an ad agency. Also I talk about being a waiter and other jobs I had like teaching physical education at a community for mentally handicapped.


All these seem as far away from the trading floor as possible, yet the skills I learned in these various jobs—collating and prioritizing information (like which tables needed service most), patience with irrational outbreaks (such as when mentally handicapped turned violent sometimes), calm under stress (having to get artwork done by this deadline), humility and lack of entitlement (being the head artists’ gopher)—prepared me quite well for the leap to the floor.


I also hope from a practical standpoint the readers take note of all the nuggets of wisdom I have learned over the years—both in trading and life in general—working in such a demanding and unconventional business.


The people I met got there, and stayed there (many didn’t), through hard work, chutzpah, and drive. They were very smart and I learned from “osmosis” much of what I needed to be successful in business and life from them.


Q: What are you working on now?


A: I have just finished a novel called The Next Signpost, which is about a New York writer and Annapolis lawyer who find each other through a series of events triggered by personal tragedy.


It examines how people get through tragedy, like the loss of a son or a beloved relative with Alzheimer’s, and how love, in the end, does find a way.


It takes place in New York, Annapolis, and St. John in the USVI. I think it is one of the more impassioned books I’ve written up to this point.


Q: Anything else we should know?


A: That I’ve written two other novels as well as this semi-autobiographical book about my time on the floor.


My first book, Of Another Time And Place, takes place in WWII Europe and is about a Luftwaffe fighter pilot who has a moment of moral clarity and tries to rescue a family of Jews hiding in his Bavarian home town by spiriting them out of Germany towards Allied lines during the height of the conflict on the continent.


It’s also about growing up as a boy in Nazi Germany and how evil slowly, imperceptibly infected his once innocent and happy childhood.


My second book, The Extraordinary, tells the story of a contemporary family on the East Coast trying to deal with their returning injured Marine patriarch…as told through the first-person narrative of Wes, a 14-year-old autistic boy, and youngest member of the dysfunctional if loving family.


The book tackles both PTSD and autism. It reached number one in Kindle in the category of Autism, Psychological Disorders, and Childhood Psychology.


Plus I have written articles on everything from history, to politics, to pop culture, science, the arts, business, and general ruminations in life that have been published in The Wall Street Journal, NY Daily News, National Review, The Federalist, The Hill, Daily Wire, Zerohedge, and others.


So I’m out there if you want to check the out as well as my more personal stuff on Substack.


--Interview with Deborah Kalb

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