Agustin Lebron - Trading, Crypto, and Adverse Selection

**Dwarkesh Patel** (0:01)
Okay, today, I have the pleasure of speaking with Agustin Lebron, who is the author of The Laws of Trading, A Trader's Guide to Better Decision Making for Everyone.
This is one of those books, you know, Tyler Cowen calls these quake books, that completely shift the models you have of the world. I really, really enjoy reading this book. So yeah, I'll let you describe your background, Agustin, but before that, let me just, let me ask this question. So Peter Thiel says that the Strossian reading of zero to one is that you shouldn't start a startup. And I think that, tell me what you think about this. I think the Strossian reading of The Laws of Trading is that you shouldn't trade, right? Because you probably don't have edge because you're not better than a marginal trader. And if you think you have edge, it's probably because you have factored in risks and other costs.
So don't trade. Is that what I should take away from this book?

**Agustin Lebron** (0:51)
I think you pretty much hit the nail on the head. Like a lot of the times that people sort of start thinking about trading seriously, they start realizing more and more how hard a job it really is to do well.
And the answer is probably, look, if you're smart enough and good enough and hardworking enough to make a go at it and make a living at it in financial markets, there's probably an easier way to make money and have a satisfying life most of the time.

**Dwarkesh Patel** (1:18)
Okay, yeah, so do you wanna talk about your background and then what you've been working on in the past and what you're working on now?

**Agustin Lebron** (1:25)
Yeah, so my background is engineering. That's kind of what I did in university. I did engineering for about six years professionally. I was a chip designer.
At the time, I was playing a lot of online poker back when that was a profitable and arguably legal thing to do. And so engineering was getting kind of boring and I wanted to do something else. And so I thought, well, what's halfway between engineering and poker? And of course, that's quant trading. So January, 2008, walked into my boss's office and I said, I want to quit.
And he said, oh, where are you going? And I said, I'm gonna go into finance. And he's like, are you sure this is a good time to be doing that? He said, yep, no, I'm dead set on it.
And a few months later, managed to get a job at Jane Street and rode out the implosion of Western civilization from the seat of a trading desk. So we did that for a few years and then left Jane Street a few years ago and started my consulting company, basically just helping tech companies with growth things like management and hiring and that sort of thing. And in the last few months, started a new company in the crypto space.

**Dwarkesh Patel** (2:35)
How much are you willing to give up your edge by telling us what this is? Or if you're not willing to talk about it, that's okay as well.

**Agustin Lebron** (2:41)
Yeah, no, I mean, big picture, we're building a crypto protocol that is kind of new and has some pretty cool cryptographic guarantees against things that people don't like when they trade in crypto.

**Dwarkesh Patel** (2:53)
Yeah, so let's get into some of the topics in the book. So yeah, first I wanna talk about adverse selection because this was the most interesting part of the book for me. So let me ask this question.
If we think of hiring workers as placing bids on them, if you're like an employer and then multiple employers can place bids on them, doesn't winner's curse imply that the average worker is probably overpaid because the true value of the employee is not the highest bid, but the average bid that they would get paid on the market?

**Agustin Lebron** (3:20)
Yeah, you're right. From the employer side, it's definitely adverse selection all around. First of all, if you're looking for, if you're just sort of posting a job at, the applicants that apply are selected against in the sense that you're selected against that pool because the people who are really, really good, probably their employers know they're really good and so they're really incentivized to keep them. And so the people who are kind of on the market are probably at the margin not as good.
Not only that, but even just the mechanics of hiring, the person who has the final say in terms of whether this happens or not is the employee. And so you're going to get adversely selected there because the people who are really, really good are gonna have lots of job offers and so they're gonna pick from one of many offers. The people who aren't so good are going to pick from few offers and so employers just systematically get adverse selected that way.