40: Open-source software and culture SHIFTS with QuantConnect CEO Jared Broad

TRANSCRIPT

Episode 40: Open-source software and culture SHIFTS with QuantConnect CEO Jared Broad

Shani Magosky: Hey, Leadershifters and welcome to another episode of the Leadershift Show with Shani. My guest today is Jared Broad, the CEO, and founder of QuantConnect. Jared, say a quick hello before I introduce you.

Jared Broad: Hi, everyone. I’m Jared, nice to meet you.

Shani: Guys and gals, Jared has so many cool shifting stories to share with us today. I don’t even know where to start but let me plant some seeds for your interest. As you may have already heard from Jared’s accent, he is not American. He is from New Zealand so he’s a Kiwi and between leaving New Zealand and now where he sits in Seattle, the journey has included humanitarian work, a cargo ship to Asia, New York City, being part of two guys in a garage starting a business all the way through raising capital and getting married to his wife who he met on Tinder, and maybe we’ll talk about that later, and now is the successful CEO of QuantConnect seven years in business now. We have a lot to talk about. Welcome to the show, Jared.

Jared: Thanks very much, Shani. It’s good to be here. It’s been quite the journey. Literally, all over the world at this point.

Shani: You’ve got a degree in biomedical engineering. Why didn’t you set up shop designing artificial limbs or whatever you’re supposed to do with that degree?

Jared: That was the plan. In college, university, I worked in a company where we were working on LVADs, they were mechanical hearts and designing wireless power systems. It would be like a belt that you would wear and transmit power into your body. Then when a prototype was built it was going to be five or 10 years before it was ever used or seen or in production. That lead time didn’t work for me. I’m much more of an entrepreneur and I really wanted to see something built and shipped and into use.

Shani: More immediate gratification, I get it.

Jared: All of those approvals took so long and all of the testings. I transitioned and went through a period of searching after that.

Shani: I really want to hear about that. QuantConnect is smack dab in the middle of finance. You work with hedge funds and a lot of assholes in some people’s terminology, but at the end of the day, you’ve got a great heart and you want to do good in the world and the idea for your company was born while you were on a humanitarian mission. I really want to have you share that story with the listeners here. Take it from here.

Jared: Firstly, I’m sure they get a bad rep. Quantitative hedge funds these days are much more computer geeks, much more softies interested in data, in math. I think the old days of the ’90s hedge fund have changed. After I graduated, I worked in New Zealand for a while and did about a year there as a consulting engineer and then really wanted to travel and I didn’t want to make any excuses for not traveling. I sold everything I had, put it all into my student loans and left with like $900 and a backpack.

It was terrifying, but I jumped on a cargo ship as an electrician and worked on this boat full of cables. It’s like 300 feet long. It’s a huge ship. It would carry masses of aluminum. I rode that up to Asia and was exploring Asia for a while. There I realized that I wanted to use that same approach of don’t make any excuses. I wanted to work and modernize humanitarian work. The humanitarian industry basically hasn’t changed. They’re still using paper logistics, they’re not doing anything different from what they’ve done 20-30 years ago.

Shani: When we say humanitarian work, let’s just clarify for our listeners, you mean non-profits and NGOs, essentially?

Jared: Yes. I didn’t have a specific idea at that point but I knew it was in that non-profit sector and the systems of helping people after a disaster and such. I was in deep China and there just happened to have been a massive tropical cyclone in the nearby country, Myanmar, so I hacked my way through the border and was able to get into the country just a week after the disaster and was in the first month of responders working with locals on the ground to get supplies in. It was a really weird situation because there was a military hunter, it’s like a dictatorship and they didn’t want the world to know how bad it was. There was no press getting out and nobody was allowed into the country. It was weird.

Shani: At the same time, they needed help, right?

Jared: They absolutely, yes.

Shani: You just show up? How do you get assigned some help to give? How does that even work there?

Jared: It was very ad-lib. I just showed up and started meeting people, started talking, started learning about the different organizations that were there and went and just knocked on their doors and looked to where I could help. Eventually, I found a local group who were doing runs down the rivers and loading up boats full of supplies. We were loading these boats and smuggling it down the rivers. It was crazy. Eventually, that turned into a full-time job and they did a UN-Habitat and a German organization called Malteser and worked there for about a year working with the organizations and doing runs from Bangkok across to get supplies.

Really got to learn the NGOs, how they worked, how logistics worked and see where they needed help. My immediate supervisor was Argentine, he had a very hot temper and we were working for a very rigid organization. He was incredibly frustrated with it and I was a Kiwi who’s very blunt and always looking for a very pragmatic solution. The two of us gelled super and we started an organization that did services for these NGOs and tried to modernize them. That became my focus of work for the next couple of years.

Shani: That was your first entrepreneurial venture.

Jared: Yes, and effectively and on the global scale I always dreamed of being an entrepreneur but it just happened. I knew that I wanted to work in the space and then after working in the organization and meeting the right people we just worked really well together and I was this engineer that preferred coding and he was a people person who had a lot of contacts with NGOs and so we worked together to build software for these organizations to cut down the amount of overhead and put everything into digital records so they had a perfect paper trail.

Shani: So money that they can have can go further, that’s so important.

Jared: And they know exactly where it goes and they have it all order and recordable. That was great. We did work all over the world for a number of different organizations but it was essentially a disaster-focused project. When you first have a natural disaster or something happens, there’s no systems in place and we were really good at getting systems set up very quickly because it’s all computerized and automated and just instantly set up an NGO as soon as something’s needed.

Shani: I love it. Even if that’s the only major thing you accomplished in your lifetime, you’ve done more than most people do in a decade. That’s amazing.

Jared: No, it was just a stumbling. Things just happened. I always try to take the view of what’s the worst thing that could happen. We’re saying that you get your arm cut off, that’s fine. [laughs] I don’t know.

Shani: You’ve got another one.

Jared: Yes. What are the chances of that? It’s never the worst thing.

Shani: As a biomedical engineer, you know you can go get one that works pretty well.

Jared: Right, right. It’ll be okay. Especially where I was working, it was pretty safe. There weren’t any real risks. It was a great couple of years, and the only problem was I had a lot of downtime. There were projects that were three to six months apart, and so I would spend three months preparing for the next one, or just doing nothing, or waiting, or finishing up other work. I really got interested in applying biomedical engineering math, the modeling of complex systems to the financial markets because it’s this infinitely hard problem. The financial markets are just millions of numbers influenced by billions of different factors and people all over the world, and so it’s this awesome math problem. I just started spending my downtime doing that, programming algorithms, giving thought to– [crosstalk]

Shani: Awesome math problem, that’s a new perspective. I like it.

Jared: I think for computer geeks, that’s exactly how they see it. It’s just lots of numbers and awesome to play with and put it into models. That was 2010. It became a full-time obsession. I eventually bootstrapped capital from friends and family and started doing it full-time, and running these models live in the markets full-time. For about two years, I was living in Chile with a super cheap rent and great technology and running this bootstrapped fund running these models. It was an awesome learning experience, again. It was this foundation to learning about all the challenges that Quants face, learning how there’s nothing like it in the world. At that point, it was 2010.

If you’d go on the internet by then, there was nothing about quantitative finance and algorithmic trading. At the end of that two-year period, I finally had an algorithm that was working and I was just thinking, “What do I do? Do I go and raise capital and try to scale this up or do I apply the system that I built to try and help all of these other engineers who are in the same boat, anybody who wants to do this?” It took me two years full-time, and I was working my ass off, 12 hours a day in my apartment hacking away and building systems. I decided to build the system and open it up to the world, and that became the foundation. In the middle of an apartment in Santiago, Chile, that was the beginning of QuantConnect.

Shani: Awesome, so the Linux of Quant software.

Jared: Right. To run Quant software, there’s a massive amount of technology that you need, and that’s just like Linux. Linux is this operational foundation to the entire internet. We see QuantConnect as this foundation to the entire quantitative algorithmic trading movement.

Shani: I love that. I remember when Red Hat was first out and doing all the open-source stuff because first, they were small-cap stuff back when I was at Goldman. People were like, “How are they going to make money if it’s open-source?” I think they figured it out.

Jared: Right. Red Hat is a nice icon in the open-source world. There’s always a way, and I think the business coaches are evolving so that the value isn’t so much in locking things in and making them private, it’s about getting more people to use your work by making them open and easily accessible, and then other business models come out of there.

Shani: Yes. Again, here’s another analogy. You’re bringing the shared economy to a space that used to be, protecting things with his life. No, no, no, you have to pay a lot of money for this.

Jared: Yes. Algorithmic trading is one of the most secretive areas. Everybody’s super paranoid about their code and about sharing it, and so we decided that we will try and take this open-source ecos that Linux has bootstrapped and started off and try and apply that to the finance world. All of the core algorithmic trading technology that QuantConnect’s made is all open-source. There’s thousands of people that download it, run their own algorithms with it. Hedge funds, they start up and use Lean technology to do what they need to do.

Shani: What does Lean stand for? Because that’s your acronym and it isn’t Six Sigma Lean, it’s something else.

Jared: Right, sorry, sorry, so QuantConnect is the company that we made, and it’s got an open-source project called Lean, which is the engine that runs the algorithms. It’s like Red Hat is the company and Linux is the engine. 

Shani: Totally. I know that. I just want to make sure listeners got that.

Jared: The Lean engine, that algorithmic trading engine, is completely open and people can go and download it and use it as they wish.

Shani: Yes, got it. Okay, so the culture or your philosophy on developing your platform in terms of it being open-source and collaborative has also been the cultural philosophy that you’ve instituted in your company culture, so talk to us a little bit about what are the fundamental tenets of your corporate culture that you’ve insisted on since you’ve gone from you and another guy to the size you are now.

Jared: Sure, sure. One of the things I learned in NGO work was that it’s very important for you to work with the community that you’re serving. It’s no different with financial technology too. Because we’re serving almost a hundred thousand Quants now from all over the world. We work very closely with them to design the features, to design the API, how’s it going to work, what do you need. We set some ideas and we see some ideas, but a lot of it is quite eye-opening in terms of, “We think you want this,” and then once we really go and get people’s buy-in, they say, “It’s not quite there, it’s something slightly different.” It’s shaped a lot of our core decisions as a company and the technology that we build and the design of it.

We are a strong technology company, it’s in our DNA, it’s in the way we work and everything. The Lean engine, the design, and the philosophies, they reflect our corporate philosophy as well, which is it’s open, and pluggable, and extendable, and it can fit the different needs that you need as a Quant, and so that reflects how we went and we got community feedback and we said, what do you need to do. We’re trying to gel 10,000 different opinions and build it in this technology. That’s how Lean’s evolved and become such an open-flexible engine that can be used in so many different contexts. As you know, the finance world is so varied. Everybody’s doing different strategies, different time horizons, and trading in different markets. It’s almost impossible to build a single piece of technology that can serve them all.

Shani: What do you say to the people who hear that your platform is open-source and say, “You’re crazy. You’ve got a valuable asset, you should be charging for it. You can’t control the quality if it’s open-source.”

Jared: We think we’re making a very long-term bit that the network effect of having everybody use our platform will be far more valuable than the short-term revenues that we can generate by charging people for using the platform. Being the operating system, being that standard that people can converse with, the two people on the other side of the world can say, “I know that Lean algorithm. I know what the standards you’re using and talking about.” That becomes the winning standard, that then people choose to go forward to use. Because if you’re a project manager, you’re trying to make the smart choice, how should I build this algorithm in my fund, how should I design the system? It should be the one where you can recruit talent that knows how to use it. There is a familiar open standard that you can manipulate and fix and modify. That’s the benefit of open-source, is that everybody knows the standard. If they don’t like it, they can change it. So the specific corporate thing they need to do, they can go and change it. It’s a riskier long-term bit.

Shani: Yes. Well, and that’s the key that I was trying to suss out of you is like, in the short-term, there’s some things that you’re compromising but in the long-term, you think it’s the right thing. That’s the point I really want to drive home is, how many of you are also thinking about the long-term consequences and benefits of the decisions that you’re making from as high as your strategy, and into little execution decisions. That’s really where the world’s going.

Jared, you’re a millennial, right? The proverbial they say all these terrible things about millennials, how they’re lazy and entitled and all they care about is saving the world. Well, I think you prove them wrong, right? Because you’re the furthest thing from lazy and entitled. You’ve worked your ass off, you’ve taken big risks, there’s zero entitlement with you and you’re putting all of that to work for a greater good, and with long-term thinking and honestly, it’s leaders like you who are the future of the world. Bravo.

Jared: [laughs] We’ll see. They are big words, but we definitely have, we’ve realized that finance doesn’t move quickly. It’s a slow-moving industry relative to the rest of the world and that if we were to make real change here, it would be a 10-year endeavor. It wouldn’t be a three-year startup where we make an app and exit in three years. We settled in for the long haul and made plans and philosophies for that vision, that long ball. All the way down to when we were, it was myself and Gustavo, and we were bootstrapping, in the very early days in Chile, and it was literally in a concrete room in a house. A garage is a nice term for it; it wasn’t a garage. It was a concrete room. A storage room in a kitchen, even smaller than the garage.

Shani: As long as you had Wi-Fi, who cares?

Jared: Yes, exactly. It was basically climate control because of the concrete walls. It was like a nice family insulated room. Yes, it was building and designing this tech with this idea that we love what we’re doing and it’s not that it’s a lot of, of course, it’s hard work but we’re loving every minute of it too. We are building and doing hard technology that nobody else has done and we’re opening up to people who are just blown away by the love of what we’re doing. It’s very rewarding work to even doing it on a very non traditional route.

Shani: Excellent. Talk to me a little bit more. We talked a little offline before we started a bit about the Bill Gates philosophy of philanthropy which it sounds like you share. Let’s just talk about how you, what you’re doing dovetails with that in the long-term.

Jared: Yes, I hope I didn’t misquote him but I believe it was Gates who said that it’s better to work on becoming wealthy, and then donate to humanitarian causes. When I was younger, I wanted to try and mix the two. I actually got into algorithmic trading because my idea was that a lot of these humanitarian issues are caused by funding. Say, for example, there’s restrictions on how the donations can be used, or as artificial restrictions based on politics or things that are going on. If we just would solve a funding issue, but NGOs then I could make an algorithm, it would make lots of money in markets, and we could donate that all to NGOs. It’s very tricky to mix that business and donation path, and you’re starting to see more but now with the B corporations, yes, certified B, corps.

Shani: Yes, certified B corporations or 10% for the world. Yes.

Jared: You are starting to see more of that. That’s great and it’s awesome that the world has come to this point where we can mix the two. I think at the moment, we’re on a trajectory where we will probably do the more Bill Gates philosophy, which is it might be two separate entities, we will use the culture of openness, transparency, honesty, integrity, and build all those things into FinTech and the vehicle that we’re doing, but it might not necessarily be a financial relationship; it’ll be a separate one. It’s a challenging shift in my mindset. As I grew up, I was always working on these businesses that were trying to mix business and humanitarian projects. We’ll see. We will see what I do next. Maybe now the world has moved.

Shani: Yes. Well, that’s the thing is, we can’t be fixed and attached to the way things used to be and when the time is right, you’ll do what you’re compelled to do with the time with the resources, and the expertise that you have. I love it. We didn’t finish on the culture piece, and you just thread it, threaded it back in. I want to pick it back up because there’s another piece of your culture that you shared with me that I think is worth talking about, which is to do the hard things. Tell us what that means to you and how it plays out in the behaviors of folks in your company.

Jared: Yes. The technology that we’re building is hard, order of magnitude hard. It’s always tempting to make shortcuts in those buildings that will make it easier for the short-term but in the long-term, you’ll pay a heavy debt. The idea that if you invest today to solve the challenges that you’re working in business and in your life and in the technology, you invest today to do them the right way, that it will pay off with a much more solid foundation for the future. I try and direct the team in that way. Like, oh, but if we just put this line of code here, we can have it working today. It’s like, no, come on. Let’s do it. Right. Otherwise, we’ll pay this debt later.

Shani: Right. No band-aids.

Jared: Right. The short version of it is do the hard things. Don’t take that shortcut. Do the hard thing.

Shani: Yes. Well, it sounds like it’s another way to not get caught in short-term thinking and to think about the long-term even at the expense of time or whatever in the short term, I think it’s great. I think we probably can’t talk about your geographic shift from New York where you ended up after Chile, right? You got your funding instead of your business in New York, and then ended up within the past year moving to Seattle, with your wife. I was joking about it in the intro, and maybe this is a shift for some people that you can marry the person you met on Tinder. [laughter]

Jared: Yes, it was in New York and she tells me that I was her very first Tinder date. She was looking for some more stories and all of her friends had bad Tinder dates, and she was really looking forward to some cool stories to share with them. I met her and I was her first and I thought, this one’s too amazing. I have to marry her. I have to get off Tinder. Then immediately after the date, it was like 20 minutes later, I was like, “What are you doing tomorrow? You want coffee? What are you doing the day after?” I’m not going to give you a chance. I’m going to lock down every minute of your day. Yes, we got married pretty quick.

Shani: What was it that made you just know that she was the one? It sounds like on your first date.

Jared: We’re both ’80s babies. How we grew up with a lot of the same cultural phenomenon, but her personality and her just light, she has a lot of light. We’re just a perfect partnership because we balance each other out and when she goes away to visit family for a week, I end up working 16 hours a day and destroying myself and she comes back and I’m back in balance again. It’s just a really nice partnership and she brings a lot of light into the relationship. 

Shani: It’s such a delightful little online love story. Online dating love story rather, and so why the move to Seattle?

Jared: I think it was part of that they have a multi-generational plan again. New York is awesome and I love it and it was the right time for the company, but we are a heavy technology company that needs quiet and space to think and we solve hard problems that require hours and hours of uploading to your brain to get all the information in and when the siren goes by all the foghorn honks on the river, whatever it is that the New York has this way of interrupting you. It was I think like in 10 years where we will be, what the team will look like then and it doesn’t matter where we are. It didn’t need to be New York. It needed to be somewhere green, beautiful, high-tech with a great economy, like a great workforce that we can draw from to join the team in Seattle for the buildings.

Shani: Love it. Again, looking forward and figuring out, okay, no excuses for us not focusing as well as we need to focus to create this highly complex coding. Yes, I love it. Any last words of wisdom for listeners from the perspective of a young CEO?

Jared: Read more. I learn so much from reading these days and it’s so hard to make the time, but I have a 20-minute commute every day and so I try my best to read.

Shani: And listen to podcasts.

Jared: And listen to podcasts, exactly. Even better than learning and experiencing things on your own is learning by a secondhand experience. If you can learn it in a podcast or a book, awesome, you’ll set yourself.

Shani: Yes, exactly. We can never stop learning. If we stop learning, we’re going to stop growing and just wither away.

Jared: Yes, and I think one thing that was vital to us is that the worst consequences are never as bad as you think, so just do it. What’s the worst that can happen when you go broke? You end up on the street. That sucks, but you can get up, you can do it again. It’ll never be as bad as you know. Especially while you’re young. It’s a little harder to say that now that I have a family, but still in your 20s and 30s before you have heavy commitments, just go for it. Don’t be afraid.

Shani: Yes, I love it. Then after your kids are grown and out of college, I work with a lot of clients who are at that stage in their careers and they can amp up their risk profile again.

Jared: Yes, I have a lot of respect. I don’t know those people who start businesses when they’ve got kids and a family and that’s a different risk altogether rather than just taking personal risks, but the core of it is that people are just too afraid that there’s no reason to be and then they should just jump up.

Shani: Yes, I love it. Well, thank you so much for joining us today. It’s been so fun to hear your story and lots of really wise pieces of advice from a relatively young leader. Leadershifters, I hope you caught all of these things and can learn some lessons from this. No excuses philosophy, no excuses not to travel, no excuses not to get to Asia, no excuses not to do something open-source, even though conventional wisdom would tell me otherwise, no excuses not to marry the woman I met on Tinder. So many of the decisions have been like, you know what? Let’s just figure it out, let’s just do it, which is oddly aligned with the large message that was crafted today around long-term thinking.

It’s like we’ve got to make these short-term sometimes tough decisions in service of what we want long-term. I love how beautifully, you have already woven those two together and our role model for the people in your business as well as now anybody who has joined us today on the podcast. Again, thank you so much for joining us and if people have questions or want to reach you or are interested in contributing to lead, how would they reach you?

Jared: Yes, absolutely. Please, you can pretty email me personally. It’s Jared, J-A-R-E-D @quantconnect.com or they can come take me through the QuantConnect website. If you’re an engineer and passionate about your consults you can find lean@github/QuantConnect/lien and I will send through the link.

Shani: Excellent, okay. Leadershifters, thanks for tuning in again today. We will see you next time. In the meantime, if you need to reach me, you know how hello@theleadershiftproject.com if you need help getting your shift together until next time.