Join us as we uncover the intriguing journey of Emanuel Derman, a pioneering figure in quantitative finance. Emanuel shares his compelling transition from a physicist to a quant, offering a firsthand look at how Wall Street came to embrace PhD physicists as essential contributors. Through entertaining anecdotes and insightful reflections, Emanuel illustrates the evolution of the quant profession from a misunderstood curiosity to a celebrated field that reshaped the finance industry.

Emanuel recounts encounters with notable figures like Stephen Wolfram and Douglas Hofstadter and discusses the significant contributions of institutions such as Bell Labs. We examine whether finance's mathematical models mirror the precision and efficacy of physics, reflecting on the changing cultural dynamics within the financial world. From humorous stories involving Mark Rubenstein to the deep philosophical musings on theories versus models, this episode promises a wealth of thought-provoking insights.

Emanuel also opens up about his personal journey, drawing from his South African upbringing and the familial influences that shaped his career path. We explore the emotional resonance of past memories captured on cassette tapes, reminiscent of a time before digital saturation. His new memoir, inspired by his early life, offers a poignant narrative that captures a bygone era and community. In a world where career fluidity is now celebrated, Emanuel's reflections provide a hopeful perspective on reinvention and the joy of pursuing diverse passions.

Sebastian David Lees

00:00

Welcome everyone to another edition of the Fat Tony's podcast, where today we will be exploring the intersection of finance and science. I'm your host, Sebastian Lees. Today we have an absolute pleasure of speaking with Emanuel Derman, a renowned physicist and quant. Emanuel was a pioneer in the early quant space, having worked at Salomon Brothers and Goldman Sachs, where he was later appointed managing director. He's the author of several books which I'm sure many of our listeners will be familiar with my Life as a Quant, models Behaving Badly and most recently, his newest book, which I have in my hands now, brief Hours and Weeks my Life as a Capetonian. He's also currently professor at Columbia University, where he's director of the program in financial engineering. There's so many accolades for Emmanuel, but it would take me an hour to list them all out, so I think I'll leave it there and just say Emmanuel Berman, welcome to Fat Tony's. It's an absolute pleasure to have you here.

 

Emanuel Derman

00:55

Thank you, I'm very happy to be here.

 

Sebastian David Lees

00:58

So I suppose the first question I want to ask you and this is the same question I asked another recent guest, rafael duadi, who was another early quant pioneer at the time you were part of this first wave of phd physics to really go into wall street traditionally at that time my understanding was trading was seen as much more of an intuitive, instinctual thing. What was the reception like to kind of on wall street to you know, guys from quant backgrounds, physics backgrounds, phd backgrounds coming in and do you have any interesting anecdotes from that time?

 

Emanuel Derman

01:35

Yeah, I spent a fair amount of my time in in writing models, behaving badly. To talk about that. I mean, I came. I came there I think maybe earlier than Raphael, I'm not sure in late 1985. Excuse me, I'm a little hoarse today. They knew they needed quant people. I went to fixed income quantitative strategies. They knew they needed quantitative people and at the same time, in a kind of nice way, they treated them as geeks. So there were, you know, people sort of treated you relatively well. But at the same time I have a lot of jokes from that time.

 

02:12

You know my, my co-worker, Raj Kani, and I got into the elevator and people said are you all allowed to get into the elevator at the same time, you know? Or if we walked at the same time, you know, or if we walked, at one point we walked between two traders who were talking and they sort of grabbed their heads and said, oh my God, like I can't stand the force field. You know it was. It was complimentary and it was sort of insulting at the same time, but I didn't pay much attention to it. I'd spent five years that I'd started out as a physicist, which I liked. Then I spent five years at Bell Labs, where I learned an incredible amount of useful software engineering, but didn't feel very, very happy from an organizational point of view. And so I was very happy, at age 40, to be in a quantitative strategies group and I didn't mind.

 

03:03

I didn't mind any of the of the so-called prejudice so would you treat it as a little bit of a curiosity at first? Because today, today, you know, when you look at the finance world, when you look at the quant world, it's all geeks, right. You know software engineers, very highly quantitatively skilled guys. Do you think at the time when you arrived, the writing was on the wall and we realized this was the future, or was it more of a kind of? This is a curiosity.

 

Emanuel Derman

03:32

No, it was a curiosity, you know. First of all, very few quant people dreamed of being traders. They were, I want to say, happy to be helping write models that traders would use. I used to think of myself as a theoretical guy working with the experimentalists, to use an analogy from physics or some other scientific field. You know, and even in the early 1990s, when I had switched, I'd gone to Salomon for a year and then come back to Goldman. I went to Goldman in 1985. I worked there three years. I went to Salomon for a year and then I came back to Goldman Equity Derivatives and I was in charge of quantitative strategies there.

 

04:15

And really, you know, being a quant was not a compliment. The reason I called my book my Life as a Quant I've repeated this many times, although not in the book was because I'd taken my kids to see a Swedish movie called my Life as a Dog and that rung a bell in the back of my head and that's why I chose that title. It's not that people didn't treat you okay and they paid you okay by my standards, but being a quant. There's a guy, mark Kretschmann, who wrote I think I have on my bookshelf back there a book called A Dictionary of Quantitative Finance and in there he has quant, a quantitative strategist, often pejorative.

 

04:55

This is like the early 1990s and you know people managing directors didn't have computers, they had desks that were just conference tables. It was kind of infra dig. I don't know how many American listeners are going to know what infra dig means. It was infra dig to have a computer and people, guys that worked in my group who were mostly foreign, I have to say they didn't want to put PhD on their business card because that was like a sort of brand of pain. That all changed later, I think, with the rise of DE Shaw and Renaissance and even DE Shaw losing tons of money during. I don't know if DE Shaw lost money during LTCM, but during the whole LTCM crash when you could see quant destruction as well as quant creation, I think quant's, in a perverse way, got a lot of respect at that point.

 

Sebastian David Lees

05:59

It's absolutely fascinating when you talk about it from this point of view, because for me, coming up quant was a badge of honor and something rigorous and something quite difficult to attain and it almost developed this kind of rock star status within an organization. So it's absolutely incredible because you're talking about the early 90s and 2010s. It's not that big a time span to have this complete 180 in the perception of these guys and it's just incredible.

 

Emanuel Derman

06:30

Hugo, traders were much more innumerate then. You know it was rare that you found traders that I want to say had a legal background, had an MBA background, had a law school background, mba background, had a law school background. Yeah, you didn't find a lot of PhD traders in those days or masters in a scientific degree traders. It all changed, I would say in the early late 90s. Very late now, maybe early 2000s, it started to change.

 

Sebastian David Lees

06:59

You mentioned. I think you mentioned in my Life as a quant that one of the initial factors for this influx of PhDs into finance was the kind of collapse of the academic work bubble in the 70s, going from the Cold War era, when huge amounts of money was pumped into research and all of a sudden a lot of that funding dried up, which drove PhDs into finance and other industries. What's interesting? I'm a software engineer and what we're seeing now beginning to see we've seen huge layoffs in tech and we're hearing all the time now commentary on AI is going to make a lot of software engineers redundant or at least make existing software engineers so much more productive that they won't need the levels of employment. Do you think AI could have a kind of a second wave of this kind of thing where we start to see the software technical quants who have gone in now being driven out into another field?

 

Emanuel Derman

07:59

Yeah, that's a very interesting question. I'm not a big expert on you know. I read up in a popular sort of way about what's happening with DeepSeek and all the latest stuff, but I'm not really a good judge of that. But yeah, I think that's a possibility. At the beginning, a couple of years ago, when ChatGPT came out, everybody said nobody was ever going to program again. You know, I'm a little skeptical of that. It could have that effect. I'm skeptical of AI discovering new things, but that may be wishful thinking.

 

Sebastian David Lees

08:34

I have mixed views on AI. I'm not an expert either. I just follow the commentary and I've heard the proclamation that software engineers are dead so many times now. Before AI, you had visual coding and things like that, so I'm a little bit skeptical as well. I do think it's going to have an impact. People think I'm derogatory when I say this, and I don't mean it in a derogatory way, but I consider AI to be a little bit like the implementation of the spreadsheet. Consider AI to be a little bit like the implementation of the spreadsheet. So if it can enable existing workers to be 2% to 3% more productive and it acts as a kind of underlying infrastructure tool, that's amazing because that has hundreds of billions of dollars in efficiency costs when you scale it across the economy. So I say that in a positive way, but I certainly don't feel like it's going to be this earth shattering paradigm that people are talking about. I'm getting kind of dot com vibes slightly from some commentators on this. So we'll see. Time will tell. Time will tell.

 

Emanuel Derman

09:36

Yeah, I'm on your side. I read. I forget what his last name is now. Gary is a. I got an email from him this morning. Last name is now Gary. I got an email from him this morning. I want to look. He's a cognitive scientist who writes regular blogs on AI and books on AI and keeps them tooting. The fact that they're vastly over, especially the chat GBT guys are vastly overselling what they have. I mean the energy they use and the amount of money they use is kind of astonishing. So I also get dot-com vibes, petscom.

 

Sebastian David Lees

10:13

We'll see. As you know, it's very difficult to predict the future. The first time I used ChatGPT it felt like a magic trick to me, in that the first time you see it it feels groundbreaking, and this is incredible. But the first time you see it, it feels groundbreaking and this is incredible. But the more times you see the trick repeated, the more the veil, the curtain, is lifted a little bit and you start to notice some of the inconsistencies and problems and flaws with it. So again, you know I'm waxing lyrical here, but time will tell.

 

Emanuel Derman

10:42

Yeah, it's funny what you said about a magic trick, because maybe I've changed my mind a little bit. I'm sort of impressed about what it does with apocryphally, what it does with x-rays and cat scans and stuff like that, but the first time I saw it, just over two years ago, I tweeted I'm going to just regard this as a parlor trick for now it's a good analogy and that's certainly what it feels like, because it's a black box and, you know, unless you go to a really low level of detail and step through, it's very hard to grasp.

 

Sebastian David Lees

11:12

And, what's interesting, all the software developers I know are now clamoring to AI and there's this public perception that software development is highly mathematical and it's not at all really. Unless you're doing something highly specialized, it's not at all really. Unless you're doing something highly specialized it's not terribly mathematical. And they're realizing, I think, a lot of software developers that to do I properly, it is mathematical, it's a fundamental different game and there's a very big difference between that. So, moving on, you mentioned bell labs and what I find fascinating about you is you're a little bit like have have you seen that movie, forrest Gump?

 

Emanuel Derman

11:48

A long time ago. You might have to refresh me.

 

Sebastian David Lees

11:51

So he, you know, it's his life story, his biography, and he intersects by accident or by design.

 

Emanuel Derman

11:58

In every picture in the past. Yes, yeah.

 

Sebastian David Lees

12:02

Yeah, the best, yes, yeah, yeah, he crosses paths with all of these influential people and you're you're a little bit like that, I think, because you know, when you look at the people you've come across, when you read your books, you know you've got. You've got bell labs, which you know as a software geek. The genesis of what came out of bell labs is incredible. You were the first wave of of quants and or early quant, and interacted with so many influential people in that space as well. You were at oxford doing some postgraduate research when you came across a young stephen wolfram, I think you mentioned briefly in it. Um, and also I think you mentioned as well, you know, coming across I forget his name out the author of Girdle Escher Back, which is Douglas Hofstadter.

 

Emanuel Derman

12:47

Yeah.

 

Sebastian David Lees

12:48

So you have all these wonderful connections, yeah.

 

Emanuel Derman

12:53

Some of them are connections and some of them are just collisions. I mean, I know Douglas Hofstadter, but he's not really a friend of mine. Steve Wolfram I see occasionally when he visits Columbia At the labs I was in a sidebar of people doing business research. I wish I'd been in the real pure research area but I wasn't.

 

Sebastian David Lees

13:18

I still think it's impressive. I think you're doing yourself a slight disservice there, I think in physics.

 

Emanuel Derman

13:22

For a while I knew a lot of. I mean think I think in physics I for a while I knew a lot of. I mean I was in physics from I came to columbia god helped me in 1966 and um and um I got a phd after a long, a long I don't want to say struggle, that's the wrong word after a long trip in 1973, and then I was a postdoc and assistant professor until 1980 and there I certainly was doing research in the vicinity of all kinds of people who I still know, although I don't see, like Mike Green, who is at Oxford now, I think, or Cambridge maybe, who invented string theory, who I remember was struggling with at the time. We all used to go to summer schools together, but they're very distinguished people I think you mentioned.

 

Sebastian David Lees

14:07

Yeah, I think there's an analogy. I believe it's in my life as a, but correct me if I'm wrong where you talk about in physics you can be very good at it, but you can meet people who are so vastly above your sphere. And then I think you mentioned your wife, who's in biology, and she says it's different in biology you can meet people at the top of their game, but they're not as far removed, whereas in physics can be just so intimidating.

 

Emanuel Derman

14:32

Yeah, and I can't really speak for biology from personal experience, but certainly in physics you can meet people whose work you can maybe understand. But you realize there's no way on earth you could ever have come up with anything like that.

 

Sebastian David Lees

14:47

I think there's a famous quote where you're talking about in physics, there may one day be a theory of everything. In finance and social science, you're lucky if there's a usable theory of anything. Yeah, that's my quote. Why do you think finance kind of adopted this veneer of hard science rigor?

 

Sebastian David Lees

15:10

is a genuine approach and how much of it is kind of wanting to project an image of stability. I think of it in the past. Banks, architecturally would imitate classical, Greek and Roman architecture to give you this impression of stability. Do you think the imitation of physics is a 20th, 21st century version of that?

 

Emanuel Derman

15:34

Yeah, hopping back for a second, I agree with what you said about banks. I mean, you know, in my lifetime, in the 70s or in the 60s, guys working poor I mean the 70s or in the 60s guys working poor I don't mean financially poor, but poor security guards working in banks in the late 60s and early 70s would God help them? Give Hearst to rob them. And now, when banks look like convenience stores, nobody's going to give their life to save the money in a cash machine. Good for them.

 

16:20

Yeah, about finance how it got so mathematical, I don't know. I used to like to say that the efficacy of finance is inversely proportional to the amount of rigor that they use. You know, if you read physics papers I don't anymore, but if you read classic physics papers from the 70s and 60s that created the standard model, it reads like applied math. If you've done applied math it doesn't look that different. Paul Wilmot is a big fan of that approach and I am too. And if you read finance or economics papers, they look like axiomatic mathematics. I don't understand how they got to that point of view. It's a kind of cultural respectability that they have to write like that. I don't know what to make of it, except I don't like it.

 

Sebastian David Lees

17:13

I love your observation on the security guard being willing to give his life, and maybe the architecture might have something to do with that of being in an institution. That's a very behavioral science take. I think rory suvlin, the behavioral science guy, would absolutely love, love that observation. Yeah, do you think? Do you think physics I I'm at risk of sounding derogatory here and I really, really don't mean it but do you think financial papers or any financial paper or model has the same level of rigor as a physics paper or model of the equivalent, or do you think it's an invalid comparison?

 

Emanuel Derman

17:52

Well, no rigor, yes, but efficacy? I think not in that. You know, when I came I think I write about all this, I'm repeating myself but when I came to work at Goldman and I was sort of working I was going to say almost apprentice, but working with Fisher Black at the beginning, and when we worked on Black Dermatology, I had this illusion, based on my just a year or two earlier life in physics Well, actually five years earlier, before Bell Labs that what we were building was a unified theory of financial or fixed income modeling. And he was much more pragmatic. He just thought there were different models suitable for different areas, even within fixed income, there might be one model for swaps and one model for mortgages and that they didn't all necessarily have to be consistent. And I came around to that view myself after.

 

18:48

You know, after a couple of years, that really you were trying to build some half plausible model that you could calibrate to that particular sector of the market and try to use it to extrapolate to nearby sectors or go from liquid securities to illiquid securities. That you calibrated, calibrated to illiquid securities, that you calibrated to illiquid securities that you're trying to price value. But I didn't think there was some global theory that explained the way people behaved and the way people behave. Yeah, rory Sutherland, the way people behave keeps changing anyway. It's not an invariant the way the laws of physics seem to be. So, yeah, I think the rigor is the same in a mathematical sense. But you know, I like to say the syntax is the same, but the semantics isn't the same. Right, the math may look similar, but what you're trying to do is different.

 

Sebastian David Lees

19:47

In physics, you're often trying to find a theory that accurately describes the way some part of the universe behaves, and in finance you're trying to build an analogy that you can extrapolate for a short region, to try to try to figure out what illiquid things should be worth based on what liquid things are worth. I think as well, you're right, you're always going to have, with any human system or any, you know, non-physical system, you're always going to have that element of a complex system, a complex system dynamics in there, which is, you're never going to get that almost platonic ideal that you get in physics models. Yeah, and I think as well, some of that may be lost and obviously I know you're a big advocate of this, of course, but you know, the danger is in mistaking the model from reality or the map from the territory. And we see that, yeah, we saw that in 2007. Personally, I think we might be getting to that at at the moment.

 

20:44

You know, we've got a huge speculative asset bubble, not just houses, but everything Markets seem. I'm in a slight state of disbelief at the levels markets are at, but I don't know. You know it's irrational. I have no idea where we're going with this, but it feels to me like we're in the midst of a bubble, and what worries me this time is it feels like an everything bubble rather than just, you know, a housing bubble or an asset bubble, and you know it's like Trump, but Trump crypto coin that was released a couple of weeks ago and it was, you know, pointless and it was like $17 billion, yeah yeah, market cap overnight. It's just absolutely astounding to me. So I don't know where we're going with it.

 

Emanuel Derman

21:26

But that that lies outside the range of all models. That's just. I don't know what you call that sort of somewhere between ponzi and political support I don't know.

 

Sebastian David Lees

21:38

I feel like we're in the twilight zone sometimes, to be honest.

 

Emanuel Derman

21:41

Yeah, that, that is where we are I agree with you about maybe everything bubble and also, yeah, people write a lot about the polycrisis, meaning you know the whole world going crazy, yeah. But yeah, I have a bee in my bonnet about what you're saying about finance and physics. I sort of have it, which not all physicists agree with me. But I have a sort of bee in my bonnet about the difference I tweet about it sometimes between models and theories, the difference I tweet about it sometimes between models and theories. And I feel like models are analogies where you say, oh, I'm going to talk about physics so I can understand the nucleus, by pretending for a little while that it's like a liquid drop of water that vibrates and oscillates and spins, and I know in my heart that it's not a liquid drop of water, but that's not a bad analogy. And I call that a model, meaning it's modeling it on something else, Whereas something like Newton's laws or Maxwell's equations or the Schrodinger equation, even if they're not right, I call those theories, and I think physicists think of them as theories too.

 

22:45

They give them the name theory, not model, meaning their attempts and I say attempts because they don't have to be 100% right, but their attempts to describe some part of the universe really accurately, and they may not be right. But, for example, I'm talking physics. But if you learned Maxwell's equations, it's impossible to think about light without thinking that it behaves according to Maxwell's equations and there's no gap between the theory and the event in your head. They're two sides of the same coin, anyway. And there are a lot of physicists I used to argue with. I once gave a talk at Santa Fe and they beat me up and they would say that what I call a theory is really for them just another model. But I think they use those words, but they don't behave that way when they're looking for the right theory. They don't feel like they're looking for a model, they feel like they're looking for some kind of truth and they behave that way. And it's interesting, maxwell I'm rambling a bit, but, but I once looked all this up and maxwell, he wrote down his theory of electromagnetic interactions in 1865, which wrote down maxwell's equations.

 

24:01

But in 1863 he tried to build a version of electromagnetic waves based on I don't know what you call it currents in water, and he wrote that he was building a model to try to build up his intuition and he had a clear distinction in his head between a model and a theory. When he finally wrote his final paper he called it a theory of the electromagnetic interaction. His earlier paper he called it a model. Anyway, as I said, I have a bean in my bonnet about the distinction between those two, only models. Even black shoals is a model based on an analogy with smoke diffusing or Brownian motion or something like that. It's not really true. Okay, I'm not going to say more about that.

 

Sebastian David Lees

24:51

No, no, this is utterly fascinating to me. You're right. As a software engineer I can relate to that, because when you're writing software, these days especially, you're really talking about what level of abstraction are you operating at? And you know, when you're writing objects in classes that that has very little direct bearing relation to what's actually happening. Several layers of abstraction down once it's compiled and then transferred into machine code and executed. But we use these mental models to help us through life and even in school. I mean, we're taught right, a british education, you're, but the model of the atom that you're taught at high school is not the actual you know. You get to university it's like what you learn is actually not quite true. But it's a level of abstraction appropriate until you reach the next one.

 

25:38

And I think there's a human tendency, in any field, to search for truth. I think we're hardwired, whether it's religious truth or scientific truth or personal truth. We're we're hardwired whether it's religious truth or scientific truth or personal truth. We're kind of hardwired to be on a quest for that, so maybe it speaks to something deep within us.

 

Emanuel Derman

25:55

I can tell you a funny story, if you like. When you said hardwired, it reminds me of the late Mark Rubenstein. I don't know if you know who. He is the guy who invented the binomial model and unfortunately he died a few years ago. A very nice guy and he once said to me that he thought he was hardwired to find the truth and I once had dinner with him, maybe 10 years ago, at his house in I forget where, just north of San Francisco.

 

Sebastian David Lees

26:25

Sausalito maybe.

 

Emanuel Derman

26:27

Yeah, maybe Sausalito Very good. And when I drove and I had rented a car at the airport, I was there for a few days. I gave a talk at the FE, but anyway, I went to his place and we had a long discussion about kind of a sophomoric discussion about free will and being hardwired, and he insisted there was no free will. And then when I left I had a rented car which I didn't really know and it was a convertible. I was trying to be. They upgraded me and I thought let me have fun. And and I backed out in the dark and I hit one of his little new trees and the exhaust cut it off and he was very upset and then I said to him we're all hardwired and there's no free will. I'm sorry but I'm not really responsible for this.

 

Sebastian David Lees

27:16

I love it. I'm going to use that one in future, I think.

I'm stealing it, but I think people don't really believe what they say is what they say?

 

Sebastian David Lees

27:25

I am fascinated by the art of what I call mental gymnastics and people being able to it, just absolutely I could. I won't go into it, but I could talk at length about, but I digress. What I'd like to move on to now is is to talk about your, your new book, brief hours and weeks, my life as a capetonian. Um, I mean, I know you sent me a copy. Could you remind me of when this is being released, when this is coming out?

 

Emanuel Derman

27:50

March 1st in I don't know three weeks or something like that, okay guys, you heard it first, Go and order a copy.

 

Sebastian David Lees

27:58

I think you can order an advanced copy now on Amazon.

 

Emanuel Derman

28:00

Yeah, the Amazon. I don't know the Amazon. There are a lot of problems with the publisher and the Amazon US. Amazoncom one looks fine and the Amazonuk one. One can order it, but it looks the hardback looks as though it was released on October 14th last year and the title is slightly messed up and I've had no success in getting them to fix it. But it's still orderable.

 

Sebastian David Lees

28:33

Well, hopefully we'll iron it out. I will say thank you very much for sending me a copy. I absolutely love this book. I want to talk about why I loved it in a moment, but I suppose the very, very obvious first question that you're going to get asked a lot is why your memoirs in Cape Town, in South Africa, as a child, in your adolescence? It's such a departure from your previous books about finance and your life in finance. What kind of prompted you to write this?

 

Emanuel Derman

28:56

Oh, I don't know. I mean I want to brag in some way and say that it's not really such a departure, in that I was looking at trying to write blurbs to advertise this book because nobody else will do it. And I had one from, from Paul Samuelson, who a friend of mine knew, and I sent him actually he wouldn't read email. This was like 20, 20 years ago but I sent him a manuscript and he wrote back a blurb that saying something like Emanuel Dermott's story reads like a novel, but it tells you a lot about how people use brains to make money, you know, on wall Street. And I want to say I like the idea of writing something novelistic in a way, and I didn't kind of know where to do that. I'm not really good at making up things totally, totally out of my head, so so partly I wanted to write something that had a story. Yeah, a lot of mixed reasons to write something that had a story. Yeah, a lot of mixed reasons.

 

30:10

It started out as a, as a, as a sub stack, and its title was my life as an african, which I don't know how that sounds in england, but in the uk that's well. Now that trump's here, it may not be forbidden, but it was totally forbidden as the title of a book. Every time I tried to have it as a title of a book, people told me I'm not entitled to call myself an African because I'm white, even though I'm an African. And eventually I kind of gave up and said, okay, I don't want to offend anybody. And I came up. I struggled with many titles and I came up with the Brief Hours and Lives is okay, it's from a Shakespearean sonnet.

 

30:47

That my life as a Capetonian was sort of a weak attempt to link it to what it's really about. I don't know, it's a lost world. I wanted to. A I wanted to write about that lost world. B I wanted to write something that had a little bit of a story. C I'm sort of horrified that I got up and left cape town because I was kind of a protected child and and if I'd known what I was in for I wouldn't have gone. I think I'm glad that I did, but if I'd known what I was in for 50 years ago I wouldn't have picked myself up and gone. So I wanted to write, write a little bit about that, that, um yeah, about how I came to, how I came to inflict pain and suffering on myself for a while it really is a wonderful book, and I'm not just saying that it I'm glad you like it it's very evocative and it definitely has that feeling of a yearning or a sense for a recently lost past and a kind of certain time and place that does not exist anymore.

 

Sebastian David Lees

31:47

My favorite thing about it it's a very ensemble book. It's very character driven and the way you write these characters is so wonderfully evocative. And I was wondering to myself is this your writing style, byproduct of your writing, or was it due to your upbringing in a very close-knit community? You know very close-knit community, you know very close-knit immigrant community, but you had all these wonderful larger-than-life characters around you, because I don't feel like everybody has that.

 

Emanuel Derman

32:14

I don't know. I do have. God help me. I at least. For the distant past, I have a very good wow. Look at that. I'm talking to an English person and I said past instead of past. I always say past. As soon as I go back to South Africa, which I don't do very often, I immediately start saying laugh and past again. I have a very good memory for the past. I don't know why Things leave a strong impression on me. I haven't read a lot of books, but the books I've read always leave a deep. The ones I have read and finished leave a strong impression on me. I haven't read a lot of books, but the books I've read always leave a deep. The ones I have read and finished leave a deep impression on me.

 

32:53

And I wanted to and, yeah, I wanted to write, as I said, how I came to do this thing. That was felt contrary to my nature. I really wanted to capture that lost world. I was part of an immigrant Polish Jewish community. My elder sister, who was 12 years older than me, who isn't alive anymore, she was actually born in Poland, you know. She came to South Africa as a two-year-old.

 

33:16

So an American, I'm Jewish, obviously, american Jews don't have this, don't have this sense of instability that we all had in this sense of instability that we all had as Jews in South Africa, as Jewish people, because they've been here two or three or four generations and they can't picture that being in that middle ground and I think it's gone now. But I wanted to sort of capture that yeah, of capture that um yeah. And then I had read these books by by uh nabokov, the speak memory, and by stephen swi, called the world of yesterday, that are all about their particular childhood, childhood environment, and I wanted to do something like that. And, lastly, I'm giving you all my influences. I really like I had read three books multiple times by JM Coetzee, who now lives in Australia, south African writer, but and they novelized versions of his childhood and and they influenced me a lot.

 

Sebastian David Lees

34:23

I really loved it. You don. I certainly don't. In the British education we don't learn a lot about South Africa and what we do learn is obviously overshadowed by apartheid. And if you've got a very limited amount of time in a curriculum you learn that and move on. So this was a really wonderful insight into a world, but I don't think there's that much source material out there and I found it interesting. Obviously you went into an academic career originally and in your book you talk about your mum kind of encouraging an academic career, of being more respectable as the kind of high of respectability. Do you think that influenced you to go down that path?

 

Emanuel Derman

35:01

Yes, definitely, I mean my parents. I don't really know my parents' lives in Poland, but I think they were sort of I don't know what to say in tuxedos and ties and smoking with cigarette holders and going to parties and looking even in a town of 40,000 where they came from. Not, you know what a shtetl is, I don't know. They're not shtetl Jews, you know. Not like Svidler on the Roof, they look like regular, I don't know what to call it capitalist city people. And then the way I knew them in south africa yeah, they were too, but much more struggling to make a living and um, they, my father, was successful in the end but through, through a lot of struggle and a much, a much harder life. And my mother always my father liked business. Although he was very smart, my mother was always encouraging everybody to to um, to not be in business.

 

Sebastian David Lees

36:11

Yeah, it's interesting you say that my next thought on this was going to be you talk about your father, who's much more like entrepreneurial, and obviously in your mid-career you sort of transfer from academia, finance, market, capitalism, and I think it's wonderful because it's almost like you've got both of your parents' influences there. You're sort of channeling your mother and your father throughout your career.

 

Emanuel Derman

36:34

Yeah, I wish it were. Yes, I wish it were true. You know, my father really was entrepreneurial in a small business way. You know he started lots of businesses. He, when I knew him when I was young, he, as I wrote in my book, he had a garage and and my mother went at the beginning, actually helped him pump gas in the garage eventually not and then eventually he became a property developer and did really well. But he was entrepreneurial in a, in a, in a small business and you know invisible hand kind of way.

 

37:07

I'm afraid I was never like that and neither really were my sisters. I think my father would have been proud if he'd been alive when I went to work at Goldman, but I was always doing this abstract stuff which in a way he approved of, but in a way it was kind of a struggle being a postdoc. I don't, I don't know what your history is, but it was struggle being a postdoc. As I wrote in my in my book, my father always said, my mother always I don't know which one, maybe both said if you, if you've got a career, you can. And you're Jewish and you're sort of a wandering Jew, given what happened in the Second World War. You can go anywhere you like with a career and in fact I was kind of the other way around. I had to go wherever the hell there was a job, you know, because there were so few postdoc jobs, and he saw me struggle in a way and I wish he'd been alive when I was more stable and successful in a business way.

 

Sebastian David Lees

38:04

I think you're right with the academia. I I've never worked in academia, but I certainly have friends and colleagues. Um, it is nomadic to an extent, especially now where you just have to go where the jobs are for a certain extent yeah so I want to.

 

38:19

I want to ask a slightly personal question now. Towards the end of the book you get to the point where you come to america at the end and what's interesting is I went back and started rereading my Life as a Quant because I hadn't read it for a few years, and it's almost seamless. You could read them back to back and get the throughput. It's like a prequel and it finishes immediately where my Life as a Quant starts and you talk about the sense of loneliness in quite an open way that you experienced on arriving in america and you know, trying to convey, I think, maybe to younger people, just how big the golf was in those days. There were no, you know, there was no email, but even phone calls you had to arrange in advance and cost fortune, and I think you talk about recording on cassette tape messages and posting them home.

 

Emanuel Derman

39:07

Yeah, yeah, look here.

 

Sebastian David Lees

39:10

Oh wow, you have them.

 

Emanuel Derman

39:12

I found them in the basement in the summer from my mother who had ALS motor neurone disease in England Wow and couldn't write at some point, and sent back and forth tapes and I was starting to listen to them. I found about 12 of them in the summer and you know I listened to two or three and I didn't want to listen to any more. There's nothing bad on them, but it was very odd. And you know what's very odd. Have we got time? Yeah, absolutely. You know. What's very odd is the voices are odd.

 

39:48

And when you haven't heard somebody's voice for 40 years, you know images stick in your memory very accurately. And voices, they sound really strange. You know, maybe I'm going to start listening to them again. They're only three or four minutes long, but they were something a little bit I don't want to say painful, a little bit strange. I didn't want to listen to any more of them, but I've still got them sitting here for three months. And my niece my niece who lives in Cape Town, her father is on one of these tapes, also sending me a message, and he died very young, at age 50. So she was 18 and she's like 55 now, you know, and she was not horrified. She was shocked to hear his voice. She didn't find it recognizable. And there's something strange Images. One has a much better memory for images than one does for voices, I discovered.

 

Sebastian David Lees

40:39

I've heard a theory I don't know how credible it is, but a lot of our memories. We're constantly remembering our memories and refreshing them, so there's a drift over time from the original source material and oh, that's interesting sure? Um, you're right. I mean I, I I don't feel that old, but I was born in the 80s and grew up in an era where there's very little media or you know, recording. You know I've got some photographs, but it's not like today where, from a very young age, you're constantly recording your entire life.

 

41:06

You know I've got some photographs, but it's not like today where, from a very young age, you're constantly recording your entire life, you know, on the supercomputer in your pocket yeah I have very relatively little stuff, uh, from my childhood, and when I see them now because my memory of it is just my memory rather than looking at sort of material it does feel strange. Even even from the late 80s it feels strange. So I can totally identify with that and I can't imagine how it must feel after 40, 40 years.

 

Emanuel Derman

41:32

Yeah, yeah, that sort of material yeah, people now have continuous video of of everything, of everything oh, I don't like it.

 

Sebastian David Lees

41:40

I'm I'm so glad I graduated just before facebook came in and just before camera phones became normal, and I'm so glad it wasn't there at university and because in my memory it was this gilded, idyllic time and I think, if I looked at source material now, oh god, it was horrible. I lived in, you know, squalid conditions and yada, yada, yada. So I like the fact that it's a gilded cage in my mind, I think, and I wouldn't want to see it.

 

Emanuel Derman

42:08

Yeah, I agree with you. I don't. I don't regret that. You kind of inspiring me. Maybe tonight I will start listening to just one or two more tapes again.

 

Sebastian David Lees

42:17

It would be fascinating to talk to you further, if you do, you know not not on a recorded podcast, but I just would be curious to hear your thoughts on it. I love the characters in your book. Obviously, you have your immediate family. I think my favorite side character is Dr Harry Berelevitz.

 

Emanuel Derman

42:35

Oh, berelevitz, yeah, yeah, he was an amazing man, yeah.

 

Sebastian David Lees

42:39

Can you tell us a little about him for the benefit of the listeners, because I found him fascinating.

 

Emanuel Derman

42:46

Yes, he was a general practitioner. He looked after me. I have a. My right thumb is a little not really, but a little bit funny because I had. I played cricket for our school and when I was 10 and we didn't wear gloves in those days or helmets or anything like that and our school didn't have that kind of equipment anyway and I got hit on my thumb by a tennis ball, by a cricket ball, and I batted a couple more strokes and then I went out and he came in the night and poked a hole in my thumb to let the blood out. He was a GP. He had a slight accent, unlike my parents who had a very heavy, heavy East European English accent. He had a slight accent, unlike my parents who had a very heavy, heavy East European English accent. He had a slight accent.

 

43:30

I think he'd come to South Africa as a fairly young child from no young man, maybe 14, 15, from Lithuania and then he'd worked for a while I didn't know all of this at the time and then he'd gone to Edinburgh and well, he'd gone to college somehow and gone to Edinburgh and got a medical degree and came back and he was like a wonderful man. He was a doctor in the way that they are now. He had these fingers that poked into your stomach and into your belly and felt everything. And when I had my appendix out when I was 10, he was the anesthetist and yeah, he was kind of somebody you could confide in. I was saying in my book that he said to me he's dead. I think his children are in Australia somewhere, like all the South Africans who've left. He said that when he was in Australia.

 

44:22

He once told me before I left that when he was in Edinburgh he suddenly realized he didn't use these words but that if you don't use it you lose it, and so he became a sexual virtuoso. He was like 80 years old and he told me this. I didn't quite know what to make of that. I'm repeating it now because he was a terrific. He was like a real family doctor but he was also very skilled. When I Googled him afterwards I found somewhere when I was writing the book I found some obituary written by other doctors and he didn't have an advanced degree in medicine but he had brought anesthetics to Cape Town at a very early stage and somebody quotes him as then saying to him I'm trying to remember the words. They're saying to him something like challenging him as to whether he could do anesthetics and he said I don't have a certificate, but I'm an expert.

 

Sebastian David Lees

45:23

If I remember correctly, the quote is no, I'm not a specialist, I'm an expert.

 

Emanuel DermanHost

45:27

That's right. I'm not a specialist, I'm an expert.

 

Sebastian David Lees

45:30

It's a wonderful quote You've got a better memory than me.

 

Emanuel Derman

45:33

Yeah, and I don't remember it from the book. Several people who've read the book always comment on it. There are no doctors like him anymore.

 

Sebastian David Lees

45:43

He's another one of these. Many, many components in this book are just things that do not exist anymore, and it's this. I think it wonderfully comes together and it surprised me how British it seemed in part. Oh, yes, I felt like there was a lot you wrote about that I could compare to my childhood in the 80s in the Midlands of England. There really was brand names, certain things you're referring to. I think you talk about Blackpool at one point, which I had no idea people outside of the UK were even remotely aware of, and just hundreds of little references, and it was just really, really interesting.

 

Emanuel Derman

46:18

We were Commonwealth until 1961, you know. So, although American pop, music and stuff had a big influence, we were British Commonwealth. You know, in the cinema, not in the movies. In the cinema they used to play God Save the Queen at the end of the movie and nobody called it a movie at the end of the film, and everybody, they would play God Save the Queen and the South African Afrikaans, which was the Afrikaner national anthem at that point. Yeah, everything Britain Before your time, tommy Steele. I don't know if you know who Tommy Steele is.

 

Sebastian David Lees

46:59

The name rings a bell, but I don't know.

 

Emanuel Derman

47:01

If I can remember he was pre-Beatles, pre-rock and roll sort of pop singer, bill Haley and the Comets they were British, I think.

 

Sebastian David Lees

47:12

I definitely have heard of those guys before.

 

Emanuel Derman

47:14

And I think Tommy Steele was around the same time well, it certainly felt evocative to me.

 

Sebastian David Lees

47:21

I want to shift out. I'm conscious of time. I think we've got about five or ten minutes left. Okay, I want to talk briefly about cults oh okay.

 

47:30

So there's a bit in your book where you talk about, I think you say, when you were 15, 15 or 16 years old, you started having Afrikaans lessons after school and you talk about the teacher having this weird device on the side and it's an e-meter and she was a Scientologist, which really surprised me because I had no idea that they were so widely Scientology was so widely spread so far back. She must have been one of the very early adopters, probably probably. And then you then go on to say that I think you entitled the chapter Cults or About Cults or something like that. And you go on to talk about your involvement and forgive my pronunciation here, but the Shomrim, which was a youth organisation you were involved in. I mean, you talk about it like it's a cult. To be honest, it all seems very idyllic and very the way you talk about it seems quite inoffensive. Is it tongue in cheek or was there a more sinister side?

 

Emanuel Derman

48:27

to it, I'm being a little tongue in cheek. I mean, you know I have very mixed feelings about belonging to that. I'm Jewish. My parents lost more than half their family in the Holocaust. God help me. I think Israel is a good place for Jews to have. All other questions putting aside for a moment about the Middle East.

 

48:56

And Shomrim was a branch of Habonim, which was the global. Shomrim was an age group within Habonim. It was like I don't know what it is in Boy Scouts. It's like the oldest group in Boy Scouts. So I sort of approve of it.

 

49:08

And at the same time in the early 60s it got really culty.

 

49:14

You know they put a lot of pressure on you. The part that finally drove me out was when I was going to leave South Africa anyway, was they wanted you to sign a register committing you to go and live in Israel maybe on a kibbutz, but certainly in Israel in order to continue being in. It was called a movement in the movement and I'm so friendly with people from there and at the same time so that pressure that they put on me and other people to commit or get out made me feel in retrospect like I was in a cult and I sort of deeply resented and at the same time it's left that being part of that organization has left a big mark on me. I think I have a quote over there from the prime of Miss Jean Brody which says mural spark it's a book and a movie and the teacher says give me a girl at an impressionable age and she's mine for life. I feel like I'm like that. They got me at an impressionable age and, much as I dislike certain things, I'm part of them.

 

Sebastian David Lees

50:18

Very honest answer. Reading it it didn't feel particularly sinister to me. It felt like I was doing a lot of good. It felt, you know, a lot of camaraderie. You talk about doing work at the local orphanage and things like that and having a group down there. It's all true.

 

Emanuel Derman

50:39

I don't regret any of it, but but there was a brief period they're not like that now, I think but there was a period when they were determined to squeeze you into a certain slot or force you out, and I happened to coincide with that period at age 18 and and I felt manipulated. Um, I don't regret it, but yeah, there was, but it was weird, you know, if you look at 21-year-olds wearing leather woggles and long khaki socks and doing a lot of those things, there was something odd about it, you know.

 

Sebastian David Lees

51:11

It's interesting, I wonder if you'd have told your yourself at that age, 20 years later, you'll be working at a wall street investment bank. Oh, god.

 

Emanuel Derman

51:21

Well, one of one of my, my sort of uh called a chad and chad and chad, and freuder is that a lot of the people who who went and lived on kibbutz which was a noble cause, from a they, they wanted to be socialist, you know, they wanted to work in a socialist environment, but in Israel many of them left. 20 years later, all the kibbutzim became businesses.

 

Sebastian David Lees

51:45

Yeah, yeah, I get it. I have a friend, a couple of friends actually who grew up in kibbutzim. They live in England now, but I won't go into on this podcast, but absolutely fascinating conversations with them about their childhood. So I suppose I've got time for one more question, if I can squeeze it in.

 

52:01

You talk, there's a bit in your book which I found interesting which is, I suppose, bringing it full circle, and it's about your decision to study abroad and obviously you know you did your undergraduate. But there's this bit you talk about where there's this feeling at the time that, yeah, you could do a PhD in physics in Cape Town, but the real physics quote unquote is done at MIT or Oxford or here or there, and if you really wanted to get on the bleeding edge of it, you just have to go there. It wasn't going to be a thing that could be done locally. Do you think that's still the case today, with technology and people being able to learn whatever they want? Do you think there's still a need for certain concentrations, whether it's academic or technical or philosophical, or do you think you can study anywhere now?

 

Emanuel Derman

52:52

That's a really interesting question. I think much more so you can study anywhere. Now, you know, I mean, when I was a postdoc in England to get the latest in the late 1970s, to get the latest articles, there were preprints. You know what preprints are Papers before they were published, but written as manuscripts that were mailed out to everybody and you needed to have them to be on the cutting edge, so to speak. Not, so to speak, to be on the cutting edge, and you had to get them by C-mail from Stanford. Now they're just on archive, there's absolutely no problem. So I think it's much, it's much easier, and you could probably be in cape town and still be part of some group that's doing research at cern, part of a 150 person group, probably, absolutely, yeah, an experiment. So I think it's much less so and maybe it wasn't even so dramatically so then. But if you wanted to do particle physics, you couldn't do that in cape town no, that makes sense.

 

Sebastian David Lees

53:57

You're right. You do see visiting lecturers now, visiting professors that have never actually been to the university or you know, they're just fully remote. And I think there's a human aspect where we're being in a certain community. I can imagine it's amplified in academia, perhaps more so than other fields there's that aspect of being part of a physical community.

 

Emanuel Derman

54:17

But I think at the time we all almost had the feeling that if you want to do nuclear physics, you could do it in Cape Town low energy nuclear physics. If you wanted to do high energy particle physics or theory, you pretty much had to go somewhere else.

 

Sebastian David Lees

54:31

Do you ever daydream about where you would be now if you hadn't left?

 

Emanuel Derman

54:34

somewhere else? Do you ever daydream about where you would be now if you hadn't left? Oh God, I sometimes wonder about it. No, I can't figure it out. I don't know what would have happened to me on a personal level or a professional level.

 

Sebastian David Lees

54:47

Well, I think that's a really good place to end this and I think we have about two minutes left. Anyway, I just want to say a sincere, sincere thank you. On a personal note, your first book, my Life as a Quant, had a profound bread and butter impact on my life and encouraged me to go into finance. I think, out of all the books I've read, what actually had the most pragmatic bread and butter impact in the direction of my life was probably my Life as a Quant, because it just gave me the confidence to switch careers in my 30s in a similar way. But you did so. A sincere thank you, and I still find it surreal that I'm able to talk to you right now. The absolutely wonderful conversation. I suppose, before we wrap it up, we've got obviously three thousand weeks. My life as a Capetonian, march 1st it's a truly, truly wonderful book. Order order two copies, one for yourself and one for a friend. Is there anything else you want to mention or talk about or plug before we call it a day?

 

Emanuel Derman

55:42

No thanks for showing my book. No, one thing you just said triggered something in me, and that is that when I grew up, it seemed like you would have to do one career for the rest of your life. Do one career for the rest of your life and I think the world's much more fluid now in what feels like a good way. You don't have to feel like if you started out being an accountant, you have to be an accountant for the next 50 years, or if you started being a physicist, and it's kind of nice that people can have these sequential, sequential careers. You kind of mentioned that and it happened to me and it was like astonishing, but I'm happy for it.

 

Sebastian David Lees

56:16

Yeah, I like it. I like the fact that life can have acts and chapters throughout your career. I think it's wonderful and I'm so glad that it's possible these days.

 

Emanuel Derman

56:25

Thanks very much for reading my book and asking me so many related questions.

 

Sebastian David Lees

56:30

Thank you for coming and thank you for answering them. It's been an absolute pleasure. Thank you, so so much.

 

Emanuel Derman

56:36

Me too, thank you.

 

Emanuel on Twitter(X)

 

My Life is a Quant

My Life as a Captetonian

Models.Behaving.Badly

Host: Sebastian Lees

Music: Tim Hofmann

Voiceover: Brian Roberts