"The biggest misconception is that HFT firms or market makers have to win purely by nature of being fast." Lucas Schuermann (@variational_lvs) started a quant fund out of a Columbia dorm room, dropped out when a New York hedge fund sent a term sheet, and sold it to DCG in 2019. Built the electronic market-making system at Genesis, DCG's trading arm, when the desk was still hedging by phone. That desk moved hundreds of billions in volume. He now runs @variational_io, which raised $50M led by Dragonfly in May and has cleared $300 billion in volume since launching . "It looked like Wolf of Wall Street. Traders on the phone, traders in Bloomberg chats and Telegram chats, hedging on screen onto Coinbase, relatively manually." We cover: - ⁠Everyone thinks HFT wins on speed. He says it wins on flow. Client order flow buys you internalization, information, and fee tiers that no amount of latency does - The three real moats in institutional finance: flow, capital, and trust. Why trust is the one nobody models - ⁠What it takes to electronify a live desk: rewiring the engine while the plane is flying, with no option to land - ⁠Why a risk system is just very high-frequency accounting wearing a quant costume - ⁠Moats vs. durability. "Will A beat B" and "should this exist in 20 years" are different questions, and most people conflate them - ⁠Funding rates are the last unsolved problem in perps. His answer is an instrument TradFi has used for decades, brought on-chain - ⁠The honest case against his own product, from someone who's been the market maker, the broker-dealer, and now the platform - ⁠Why the price of a trend tells you nothing about the trend. A hundred car companies, two survivors, and airlines as the counterexample - His contrarian take: the cypherpunks won. We counted the 98% that died and forgot the 2% that went mainstream - "Ed and I are the worst macro traders, the worst kind of traders in human history" - His one-word answer on how to differentiate yourself: hubris Highlights: 00:00 Intro 00:50 "The biggest mistake was starting the fund at all" 03:03 Crypto in 2017 was a nightmare of a market, which is where the alpha was 05:00 Good alpha makes a little every day, not a lot at once 06:36 The term sheet that made him drop out of Columbia 09:04 Taking a phone-and-Telegram desk electronic without turning it off 13:09 Why a risk book is high-frequency accounting 14:29 The most underappreciated edge at a large firm: flow 15:52 The biggest misconception about HFT firms 17:12 Flow, capital, trust. Where moats actually come from 20:14 "Genesis stopped being fun the moment it went over 150 people" 23:20 You don't make money on a 3-year view. You make it on a 10-year view nobody can see 29:44 Perps ate the world, and everyone built the same order book 38:40 Total return swaps, and how TradFi actually gets its leverage 41:14 Internal vs. external market makers, and the case against him 47:19 Contrarian take: the cypherpunks won 53:56 How to tell a real trend: dig deeper, find more exponentials 58:14 Price is not economics: the car manufacturer and airline trap 01:01:10 Three tools to get expert in any domain fast 01:09:20 He turns the final question back on me