Beating the Odds – Susquehanna International – Jeff Yass
At first blush, poker would seem to be at odds with the rational decision-making that Yass preaches. But poker — well-played poker — is all about making decisions, again and again and again, that are most likely to succeed: when to bet, and how much; when to call, when to fold, based on the cards dealt and actions of other players. Which makes poker played well the opposite of gambling. Making the rational decision, again and again and again — it’s the Susquehanna mantra. Over time, you’ll come out ahead. Poker is akin to trading in other ways: The decisions have to be made fast, under pressure, and there’s the lurking risk that what you want to happen, or the bad result that just happened, will color your decision now. Poker tutorials are designed to bleed out such stupid emotion.
Eric Brooks, one of the founders of Susquehanna, left the company to play tournament poker. He won the World Series of Poker in 2008, and immediately announced that his $415,856 purse would be donated to the Decision Education Foundation, a Palo Alto-based initiative he works with to teach the “science” of decision-making to children. With that, what June Binney observed in Jeff Yass’s dorm room in 1975 — They really believed there were rational decisions for anything that came their way — had morphed from getting rich to spreading the news.
At any rate, the beauty of the poker/trading connection is how simple it is — yet not so easy to institute. As one former Susquehanna trader who gave poker tutorials says: “It’s hard to embrace that culture. Who has the time to teach, on the level they do? Who knows poker? That kind of vision can come only from the top. They love the gaming of it. The gaming of the whole venture.”
WHICH IS WHY Jeff Yass doesn’t want this story published — he’s afraid it will all be taken away. Yass declined to be interviewed, but tried to control this story through repeated calls to the magazine’s president and editor, with missives from two lawyers, and in an off-the-record meeting. His old friend June Binney describes Yass as charming and very funny. I sensed a man about to get a colonoscopy.
Many people who know him say he is highly nervous about security. After 9/11, Yass and company were worried that incoming mail could be laced with anthrax — a fear at many institutions. For a few weeks, a trailer was set up in the parking lot, where all mail was checked out before it was allowed into the building. Security guards were hired to monitor visitors. The trailer is long gone; the guards remain.
Perhaps Yass’s fear of being written about is really a different concern — that Susquehanna could be fingered as a greedy player in our financial markets, a stealth mover and shaker that has gotten fat as others have lost life savings.
That accusation doesn’t wash, though. We now know, of course, that Wall Street was front and center in our economic problems because it orchestrated an elaborate game of lending money to everyone and his brother for houses, and then sold off those loans in bundles in what amounted to a classic pyramid scheme. Susquehanna doesn’t operate that way. In fact, in the financial world there’s a great deal of tittering about the company having taken its own substantial hit recently in long-term municipal bonds, though Susquehanna’s diverse and complicated hedging techniques make such claims iffy. At any rate, both Susquehanna itself (through the company’s lawyer) and a former high-level administrator say the company is in better financial shape now than two years ago. Investment Dealers Digest estimated four years ago that the company had $16 billion in assets; company equity currently available for trading is conservatively estimated by ex-employees to be several billion dollars. But given the company’s secrecy, only Jeff Yass and a handful of others know for sure.