The Formula for Innovation: Curiosity and the Scientific Method at SDI Partners
Envision a group of SDI researchers during their lunch break, analyzing the algorithmic frenzy that leads to a pop concert selling out in mere seconds. While this situation can be exasperating for fans, it prompts a series of inquiries among the researchers: What underlying patterns contributed to the spike in demand? Could they have anticipated and modeled these patterns? How might they utilize any insights gained to better comprehend market dynamics?
Ronald, a methodical macro researcher who recently engaged in discussions about the ticketing phenomenon with his peers, perceives a connection between that lunch discussion and the development of predictive models in finance: ‘It is not unusual for us to uncover elements in the data that appear entirely enigmatic. We are convinced that there exists a cause and an effect. Furthermore, we believe that through controlled experiments, we can establish the correlation between the cause and the effect.’
At SDI Partners, we adopt an empirical approach, bolstered by state-of-the-art technology and vast datasets, to reveal concealed patterns and interconnections within information. This approach, which serves as the foundation of innovation within the organization, stems from two core elements of our culture: curiosity and the scientific method.
In this article, we will examine the significant, multiplicative relationship between these two principles and how their interplay cultivates a distinctive environment conducive to pioneering advancements.
The influence of curiosity: An enduring urge to investigate and engage
We contend that curiosity transcends mere personality traits; it serves as a formidable catalyst for exploration and advancement. Thus, we actively pursue individuals motivated by an eagerness to learn, engage, and expand the horizons of understanding.
Yu, a senior software engineering manager, contemplates his inherent curiosity: ‘I have always been a naturally inquisitive individual. If one were to analyze my contributions in meetings, it is likely that over half would consist of questions I pose throughout the day. I believe that curiosity generally leads us to more effective solutions than merely presuming we know the answers.’
This constant questioning, this desire to understand the “why” behind things, is a hallmark of as SDI scientist. Jen, head of end user services, describes a lifelong passion for figuring out how things work and finding ways to make them better. “As a kid,” she recalls, “I would take toy cars and trucks apart and go, ‘How does this work?’ and build toys out of bottle corks and whatever I could find.” This innate drive to tinker, understand, and improve, initially sparked in her childhood, continues to drive her approach in her professional life.
“[Curiosity] is why I got into electrical engineering,” she says “I always want to know how things work. Why do they work this way? How do I make them better? How do I make them the way I want them to be? SDI Partners does that, too.”
The power of a scientific mindset: empirical, experimental, and iterative
Since our earliest days as a start-up, we’ve embraced a scientific mindset, applying data-driven analysis and experimentation to every challenge, from developing novel trading algorithms to refining internal processes. A scientific approach ensures that decisions are grounded in evidence and continually optimized.
The company’s commitment to this approach is evident in the emphasis we place on:
- Data-driven decision-making: We believe in gathering and analyzing data to inform our choices and validate our assumptions.
- Hypothesis testing: We encourage a culture of experimentation, where ideas are meticulously tested and refined based on real-world results.
- Iterative process: We embrace an ongoing cycle of learning and improvement, recognizing that even the most successful strategies require continuous evaluation and adaptation.
Stan, an SDI execution trader, illustrates how his team embraces this scientific approach: “Often we’ll set up a different version of an existing algorithm and perform a randomized trial. And we’ll begin to collect data over days, weeks, and months. If there is a real difference, we’ll be able to see that in the data. We’ll be able to draw conclusions from that and decide whether the new version is better or not.”
Similarly, Morgan, a portfolio manager, explains how this data-driven approach shapes his team’s understanding of markets and guides their investment decisions: “As we do our hypothesis testing, we examine what would have happened to a strategy historically through back tests. And then, very importantly, we decide how to implement the strategy going forward. We want to ensure that our conception of reality going forward adheres to what we thought happens historically, the parameters of our back tests. And we ensure that everything follows the scientific method.”
The formula for innovation: How curiosity and the scientific method delivers breakthroughs
Throughout the years, we have consistently noted that substantial progress occurs at the convergence of inquisitiveness and the scientific method. This powerful synergy transcends individual characteristics; it involves cultivating an organizational culture that enables the entire company to transcend limits, question established beliefs, and develop genuinely innovative solutions.
Here is how this distinctive synergy propels our innovation process:
- Curiosity fosters experimentation: As it challenges the existing norms and prompts inquiries such as ‘why?’ and ‘what if?’. This inquisitive nature serves as the foundation for experimentation, with the scientific method offering a structure to transform these inquiries into testable hypotheses, thereby initiating a continuous cycle of experimentation and iterative improvement. Furthermore,
- Curiosity enhances collaboration: As intricate problems seldom have straightforward solutions and no individual possesses all the answers. Curiosity encourages the pursuit of varied perspectives and expertise. A collective dedication to the scientific method establishes a shared language and analytical framework, facilitating effective communication and teamwork across various fields. This interaction results in a cross-fertilization of ideas, often culminating in more innovative and resilient solutions.
- Scientific rigor enhances curiosity: It does this by providing a structured approach to exploring ideas, ensuring that our investigations are rooted in empirical data and thorough analysis, which leads to practical insights.
- Empowerment releases curiosity: A culture that prioritizes both curiosity and the scientific method enables individuals to take initiative in their tasks, explore novel concepts, and suggest solutions. When individuals feel trusted and supported in their intellectual pursuits — especially when these pursuits are guided by a comprehensive, data-informed methodology — it unleashes a level of creativity and motivation that is crucial for genuine innovation.
A strategy for sustained achievement
At SDI Partners, we recognize that a strong dedication to curiosity, combined with a rigorous scientific approach, creates a powerful catalyst for innovation. We cultivate an environment that honors these principles, enabling our team members to pose difficult questions, explore varied viewpoints, and utilize extensive data to develop insightful and innovative solutions to complex financial challenges.
We are in a continuous state of learning, evolving, and expanding the limits of possibility. If you are a curious scientist interested in becoming part of our team, please visit our Careers page to find out how to begin your journey!
