YWR: Quantum Horse Girls

When daughters are young, and cute they always want a pony.

And as a father it’s impossible to say no.

But what they don’t tell you is a pony can live 20-30 years.

Long after your daughter has grown up and gone to college you will still have that pony.

Which is what happened to me, and why I often have to go to the stable to take care of Bruno, our pony.

I’m not really a horse person, but through these visits to see Bruno I started to get to know some of the other riders at the stables. And sometimes I would get invited to social events like an outdoor BBQ dinner they had this summer.

I was a little early for the dinner so the other riders were still busy untacking their horses from a polo chukka. Polo looks fun, but I’m terrible at riding and Bruno hates polo too. I loitered around chatting with everyone.

In the background was a girl cleaning out the stables. She was quietly going from stable to stable with a wheel barrow, forking the soiled hay out of the stalls. She seemed like she might be in her 20’s. I had never seen her before. Her clothes were dirty and she had her head down shovelling hay.

I asked Oliver, the owner, who she was.

‘Oh, that’s Anastasia. She’s from Latvia’.

‘Oh.’ I said and left it that.

Life must be tough in Latvia I thought. She had probably quit her job at the steel mill to come to the UK and start a new life. Yes, working at the stables was difficult, but now she had a roof over head, the pay was consistent and the stable owner was kind. It wasn’t much but it was a new life and she was grateful.

That’s what I imagined must be her story.

Oliver, the kind stable owner, called out to Anastasia, the stable girl, that as soon as she was done with the stalls she should change and join us for the BBQ dinner. How nice I thought.

When Anastasia was finally able to join us for dinner she had cleaned up nicely and was wearing a sundress. She took the last remaining seat at the table and was seated across from me.

‘Hello. Let me introduce myself. I’m Erik.’

‘Hi. I’m Anastasia’

‘Yes. I’ve heard. Are you from Latvia? That’s so interesting. I’ve never been there. How long have you been working here at the stables?’

‘Well… I don’t really work here.’

‘You don’t?’

‘No. I’m just doing a work exchange with Oliver for the summer. I work a few hours a day in exchange for riding lessons. Actually, I’m a graduate student at the Advanced Materials Laboratory at the University of Manchester.’

‘The Manchester what?’

‘Yes, I’m using AI to engineer materials which are superconductive at room temperature. It’s one of the key technologies to develop quantum computing. Advances in AI are helping us design new materials at a molecular level in a way we never could before.’

‘So you are not a refugee from Eastern Europe struggling to get by?’

‘No. I’m a Quantum computing physicist.’

‘Oh.’

And then there was Harriet. Same stable. Different day.

I was done putting Bruno in his paddock and was walking past a blond haired girl picking dirt out of her horses hooves.

She looked up as I walked by. I nodded, said ‘hi’ and kept walking to the car to go home.

‘Are you A’s dad?’ she asked.

‘Hi. Yes.’

She stood up and took a break from cleaning the hooves. She was wearing her riding outfit and was quite tall with blonde hair and green eyes.

‘Hi. I’m Harriet. I wanted to introduce myself. I heard you are A’s dad and you work in finance. I just graduated from university. I’m really interested in investments too.’

‘It’s nice to meet you Harriet. It’s good you are interested in investments. It’s never too early to start building a diversified portfolio of stocks for the long-term.’

‘Actually, I’m more interested in options.’

‘Options? Well that’s a bit more risky, so you should be careful. But equity options if done correctly can add some extra yield to your portfolio. But why are you interested in options?’

‘Well… I wasn’t thinking about equities. I’m interested using quantum computers to build pricing models for path dependent options on commodities and FX. At Exeter I built a quantum computer circuit to price European natural gas options using information from the delivery nodes across Europe.’

‘You did what???’

‘You can treat the natural gas pipeline as a simple minimum vertex cover problem (graphical problem which is also a QUBO problem in computing). We compared the efficiencies and speed of solving the minimum vertex cover problem for three methods: classical algorithms, quantum annealing using D Wave (which formulates the problem as a Hamiltonian) and also setting up a quantum circuit using IBM and using QAOA (a quantum hybrid algorithm). The aim is to find nodes that are connected to the most other nodes and using this information you can then work out which nodes to monitor if you’re limited to time and compute power.’

Harriet was done cleaning the hooves and had move on to brushing the horse’s mane.

‘Yes. It was a fun project, but I’m having a hard time finding a job. That’s what I wanted to ask you about. How to get a job in finance.’

‘You built a quantum computer which can price natural gas options across Europe and you are having a hard time job getting a job in finance? How is that possible?’

“Yes. It’s a mix of things. The feedback I’m getting from some firms is that I’m too smart to do sales, but on the other hand don’t have a Phd. I’m stuck in between. The other problem I’m having is a lot of firms aren’t interested in quantum computing. Last summer during one of my internships I was showed a Canadian bank how a quantum computer could be used to price FX options, but they said they weren’t interested in Quantum Computing and had no use for it. So now in my spare time I’m working with another scientist to publish research on quantum computing and options models, while I wait to get an interview somewhere. One hedge fund thinks maybe I can do investor relations, but they haven’t called back. The job market is tough. I was just hoping you might have some advice."

‘My advice Harriet. Keep doing what you are doing and don’t worry. I 100% guarantee in less than 5 years ‘Quantum Options Pricing Specialist’ will be a 7 figure role at every hedge fund and trading desk. You will have a stack of offers to choose from. The world is going to come to you.’

Now Harriet sends me papers and blogs on quantum computing to help me get up to speed (if that is even possible).

Option Pricing using Quantum Computers

Almost none of this makes any sense to me, but I try to see the forest for the trees and think how this could impact finance.

In the Quantum Pirates blog this post from last week stood out.

And then this:

Researchers Pablo Bermejo and colleagues have shown that Quantum Convolutional Neural Networks (QCNNs) can be efficiently simulated using classical algorithms, suggesting the need for more complex datasets in Quantum Machine Learning. Quantum Machines and Bluefors have extended their OEM agreement to integrate QCage qubit chip holders into Bluefors' cryogenic systems, enhancing research efficiency.

Do you know what that paragraph means to me? AI and Quantum computing go together.

Everyone is talking about the Goldman chart on website visits to ChatGPT and how it shows AI is a fad. We’ve all played around with ChatGPT and now we’re bored. It seemed exciting, but actually isn’t useful.

These breakthroughs in Quantum computing make me think we haven’t begun to see where AI is going. Quantum computing will be a turbo charger for AI. Most likely AI development is going to come in waves. Maybe the current wave of development is slowing, but then advances in Quantum computing will take everything to a new level.

Attention is all you need comparison.

Have you heard of the ‘Attention is all You Need’ paper by Google published in 2017? It was an obscure paper at the time about a new computer science technique called the Transformer. That technique turned into the building block for LLM’s and Generative AI. The whole AI storm we talk about dates back to that paper. Imagine if you realised the significance of it back in 2017 and it would change the world. Sam Altman did.

I wonder if this Quantum computing breakthrough by Google is the same. One of those nerdy advances nobody is paying attention to, which changes the world 5 years from now.

Running into two quantum computer experts at a horse stable and reading these blogs makes think quantum computing is going to be a thing, and sooner than we expect. Like in under 5 years.

We need to get ahead of the game and consider what this means.

How do we make money on this?

It’s early days for me on this topic so I don’t have specific ideas (and none of it is financial advice). I just don’t know. At this stage we are just brainstorming.

Give me a ticker.

IBM is big in Quantum Computing, but they are big in everything, so it’s not a pure play. But a company worth paying attention to.

Google? They seem to be leading in QC research, but do they make money on it too? Or, are they the modern day version of Bell Labs?

Question. How does Quantum computing affect semiconductors? Does it change the winners? Does it require more chips, less?

What does Quantum computing mean for data centres? Every PE firm is building millions of square feet of datacenters. Does QC mean we need less datacenter space? Do data centres become office buildings?

Does QC mean a continuation of the big get bigger with hedge funds and investment banks? Every firm is a technology firm and QC just takes this one step further? JPM will be pricing JPY options with a quantum computer and if you don’t have one too don’t even bother playing?

Does Citadel develop a QC which can make markets in securities and takes 80% market share?

I know it’s early days and I apologise for not having a clear way to monetise this, but it is a theme we will work on.

Please share your thoughts.

Have a good weekend.

Erik