From the Bookshelf This is a fortnightly review of bestsellers for business executives Life is a series of reality checks By Nicole Wong Expect a few bumps and potholes on the road to success The journey from school to the working world can be a hard one for young graduates. It often involves some tough lessons in the differences between dreams and reality plus the need for a fair number of personal readjustments. Emanuel Derman has a few practical tips about how everyone can learn to take the rough with the smooth and he shares them in his memoir, My Life as a Quant: Reflections on Physics and Finance. In portraying his transformation from ambitious scientist to managing director and head of the renowned quantitative strategies group at Goldman, Sachs and Co, he shows that a firm grasp of the realities we face, coupled with a sense of humour, can carry us through changing circumstances and pave the way to success. Arriving in New York City in 1966 from Cape Town, South Africa, Derman started a PhD in theoretical physics at Columbia University with the dream of "becoming another Einstein". The dream soon faded as he found himself surrounded by a cluster of Nobel laureates and more talented students, and it took him seven frustrating years to complete his thesis. This was followed by a further seven years of apparent setbacks in a series of less than ideal post-doctoral positions. With prospects for a tenured teaching position appearing gloomy, he decided to switch direction and started to work for Bell Labs in 1980. Business transition With his background as an academic, the transition to the business world was a perfect example of how important it is to remain flexible in difficult circumstances, and how such flexibility can lead to future opportunities. Struggling with his lingering desire to be a full-time physicist and the reality of having to prove his worth at Bell Labs, Derman made a special effort to focus on his daily job duties despite their irritations. Living in "the cult of manageriality" at the company, he began to learn computer programming, which turned out to be vital for his work on financial engineering at Goldman five years later. His life on Wall Street, with all its ups and downs, is another story of partial disillusionment. At a certain point, though, Derman succumbed to the temptation of better financial rewards and left Goldman for Salomon Brothers. He spent a difficult year there, finding out that he was unsuited to his job in the mortgage department and did not fit in with the egotism of the company's culture. However, after returning to Goldman, he went on to co-author some of the most influential financial models of the times. This series of experiences serves to remind us that career choices or changes must be carefully assessed on the basis of one's own knowledge, skills and personality. No illusions A realistic view of the profession you are in, as Derman's story would suggest, is also an integral part of long-term career success. When turning his back on what he saw as the petty egotism at Salomon, he had no illusions about the work environment he was going back to. In the chapter "Civilization and Its Discontents", he points out that the atmosphere at Goldman was a manifestation of the illusory prosperity on Wall Street. The financial markets were not always at their zenith and Derman's work on financial models would always be affected by any crises. Readers of My Life as a Quant will find a wry sense of humour in the writing, which no doubt helped the author become resilient over the years. For example, in his account of the inefficiencies of working at Bell Labs, Derman notes that: "[It] was an irrationality worthy of the Dilbert cartoon, whose creator Scott Adams, unsurprisingly, spent several of his working years at Pacific Bell." (My Life as a Quant, p.103) Accepting corporate woes as one of life's little ironies, Derman joked about the absurdities of the workplace with like-minded colleagues and met career challenges by seeing them for what they were – a lesson which many of us would do well to reflect on. Content highlights: Flexibility can move you beyond difficult circumstances to future opportunities A realistic view of one's profession is the basis for a long and successful career A sense of humour helps in getting through various challenges About the authors Emanuel Derman has a PhD in theoretical physics from Columbia University. He is the author of numerous articles about elementary particle physics, computer science and finance, and is co-author of the widely used Black-Derman-Toy interest rate model and the Derman-Kani local volatility model. Among his many awards and honours, he was named the SunGard/IAFE Financial Engineer of the Year in 2002. He is currently the director of programme in financial engineering at Columbia University and a columnist for Risk magazine. My Life as a Quant, the first book by Emanuel Derman, has been a favourite with readers and achieved critical acclaim among critics worldwide. It was named one of the "Top 10 Books of the Year" by Business Week. Taken from Career Times 4 March 2005 Your comments are welcome at [email protected]