The Scoop

At the same time it made its staff cuts, the firm also announced that it was seeking to sell several of its tech-driven subsidiaries. In March 1999, it sold DESoft (also known as D.E. Shaw Financial Technology) to Merrill Lynch, and FarSight Financial Services (its online brokerage) to Platinum Online International. However, also in March, the firm's subsidiary, Juno Online Services, filed for an IPO. In June, the firm announced that it was in negotiations to sell a large part of its software development operation in Hyderabad, India (called D.E. Shaw India Software). That same month the firm announced the $107 million sale of D.E. Shaw Financial Products (a convertible bond and equity derivative trading and market making business) to KBC Bank, one of Belgium's largest banks. When finalized, the deal will shrink the size of the firm and the number of offices.

Getting Hired

"They have these really elitist-sounding recruiting philosophies, like, 'If you're brilliant we'll hire you,'" says one insider about D.E. Shaw's hiring process. Indeed, the firm founded by a Computer Science professor boasts that it includes a disproportionate amount of computer scientists and systems architects, and that it extends an offer to only one out of about 150 of the candidates it considers. It's even harder to get an offer at the firm these days than in boom times; insiders report that the firm is in a deep hiring freeze.

Unlike most financial firms, D.E. Shaw does not salivate when it sees an MBA next to one's name. Reports one insider: "They hire almost no MBAs, they're not really interested in MBAs. They do interview them, but they don't really recruit them heavily. The people they recruit very heavily are graduate students in computer science, math, and physics, but also any graduate students." These graduate students need not be successfully receiving their PhDs. Reports one insider: "The philosophy is if you can get them before the doctorate, that's even better, because it means they're smart enough, but they don't yet have the complete drive to be theoretical. Other things drive them -- like money."

For undergraduate recruiting, the firm generally has a screening round on campus, followed by a visit to the firm's New York headquarters. "When you come back [for interviews] it's usually a range of people, not real senior people, but usually a lot of vice presidents, senior vice presidents who are very young," reports one contact. Perhaps surprisingly, recruits won't necessarily be grilled with intense math questions. "Recruiting is sort of free-form, so each interviewer has their own style. They don't coach you how to interview you before you do it," says one insider who has helped with the recruiting effort. "Some people will ask you quant questions, some people won't, some will depending on your background." Undergrads with humanities backgrounds are not necessarily out of the running. "They had a psychology major make partner six years after graduating from Brown," notes one insider. "But you can't be any English major, you've got to have a really logical, mathematical head."

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Welcome nerds

Almost as well known on the Street as D.E. Shaw's strong performance (previous to its 1998 collapse) are the firm's idiosyncrasies: a super-lax dress code ("jeans, shorts, people walk around without shoes on"), a secretive and somewhat paranoid partnership ("they're very hyper about confidentiality") and super-smart finance whizzes who are often more like your stereotypical graduate student than your stereotypical back-slapping, steak-eating, cigar-smoking banker. Says one insider diplomatically: "There are definitely some folks who would not really be socially well-adjusted in a normal company, and yet could function fine at D.E. Shaw." The banter at the firm is also apparently a bit more cerebral than the fare served up at most banks. Reports one former employee: "If it was quiet or we were bored, somebody would throw out a brainteaser and we'd all try to sit around and try to figure it out."

Amazingly short hours and extensive bonuses

D.E. Shaw employees also work "way way less" than their Wall Street counterparts. "Some groups tend to work longer than others, but on average it's maybe 50 hours a week," says one insider. "There were no weekends. I never worked a weekend. There was one tight-knit group who were workaholics -- and they'd work 70 to 80 hours, they were definitely an exception." As for pay: "They claim to pay a little better than standard, but I would say it's about even," says one insider, "but it can go up really really fast." As an example of the "really really fast" increases, that contact cites one trader who received a $1 million bonus in his fourth year out of undergraduate college. "That's the exception," that source says, "but that's also the possibility."

But perhaps a more important mark of the culture at the firm is a conscious attempt to level hierarchy. For example, the firm has quarterly firm-wide meetings at which any employee can pose questions to firm leaders. Reports one insider: "You're on a first-name basis with everyone." That contact continues: "Basically there's associate, vice president, senior vice president and partner. Those are the only four titles -- they have very young people in the senior vice president level. They have no problems having young people take over."

Freestyle

This flat organization structure has drawbacks -- it means that "everybody does their own crap. There are no secretaries until you get to the very top level (senior VP)." The career path at D.E. Shaw is about as chaotic as it gets. Most undergrads start in what is called the general associates program. The firm places them in positions, and from there, it's up to the associate. Unlike most other financial services firm, new hires are not initiated through a group training program. "They don't have any training program. It's totally free-form -- everybody's experience is totally different at D.E. Shaw," says one insider. "Ideally, as you work there for a while, you also figure out what people are doing, and they keep it pretty mobile." Says that contact: "It's sort of up to you, to say 'Oh wait, I'm really interested in that and blah blah blah.'" This free-market system is still more structured than D.E. Shaw's past practice. "They used to throw all general associates into the mailroom," says one insider about the firm's training program about five years ago. "You would deliver people's mail and figure out what they did, and talk to them -- and based on your motivation, you'd figure out what you'd want to do."

The firm also has made traditions of firm-wide bonding events, like Friday happy hours featuring "some kind of food -- wings, quesadillas -- and then beer, wine and soda." In past years, the firm also indulged annual retreats. For example, says one insider, "they sent us all to Florida for a weekend. They used to try to do a trip every year. They had gone to Jamaica before, once it was upstate at Sagamore." Says that insider: "They paid for airfare, gave us meals, rented out a dance club place at a resort one night, and they gave us free tickets to Disney World." Unlike at some I-banking or law firms, where retreats are reserved for just bankers or lawyers, the D.E. Shaw retreats were for "every single person in the company."

Shocking layoffs

Of course, those happy days at D.E. Shaw should be over for a while, because of the firm's major losses and layoffs in 1998. Insiders say that while in the summer there was a "vague sense" that the firm was losing money, the losses were officially addressed at one of the firm's quarterly meetings. "From the time of that meeting to the time of the layoffs, there was no word from management about what was going to happen." However, among colleagues, "there were constant discussions." "It was always a discussion of how many they would lay off," says one contact, "but it's really hard to think that there will be layoffs without anyone saying it directly. So people were talking but no one was looking (for other jobs)." Layoffs occurred the week after Thanksgiving; they were announced and occurred on the same day. Reportedly, the cuts were "larger then most people anticipated." And while the firm officially reported laying off only 25 percent of its staff, insiders say the cuts were more severe -- some employees were told that they would be kept on for several months but eventually laid off.

The firm is reportedly settling down after the layoffs. "There are always cases of people whose lives have gotten better because of this sort of thing," notes one insider, alluding to promotions. "I know of one case where that happened." And although D.E. Shaw has consciously worked to fend off the stilted hierarchy that marks many Wall Street firms, its size and success had birthed a hierarchy nonetheless. No more. One contact describes a formerly removed executive: "Suddenly that person is now talking to lower-downs. They've gone back to the earlier company -- it's less of a hierarchy because there are fewer people." Says another contact: "[D.E. Shaw is] basically going back to their hedge fund days, going back to what they were. They were branching out into all these customer-related businesses. They're going to go back to just proprietary trading."

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