I recently had the opportunity to chat with John Siracusa, host of the Bank On It podcast. John talks with fintech founders & investors who are building the future of fintech. We had a fun discussion about my journey from engineering to a PhD in astrophysics, getting into the finance industry at the beginning of the quant era, working at Goldman Sachs and JP Morgan, and eventually founding Beacon.

Moving from astrophysics to Wall Street

During the derivatives boom of the 1990s, Wall Street was hiring a lot of people like me because of the math involved in pricing and managing risk for a portfolio of derivatives. The mathematical techniques are similar to what we use in physics, and both also require a lot of programming.

One of the similarities between physics and financial engineering or quantitative finance that I really enjoy is taking a real-world problem and figuring out how to build a model that represents the expected behavior. Which bits of the super-complicated reality are necessary to build an acceptable model? Then running these models against very large datasets – in the case of derivatives, risk management on big portfolios of complex structured products with hundreds of thousands or millions of options and exotic derivatives.

Building fintech for capital markets

I was at Goldman with Beacon co-founder Kirat Singh during the early days of Goldman’s derivatives trading risk management platform, SecDB. Quants like me could build and evaluate models at enterprise scale and get them into the hands of traders and risk managers quickly. We worked on similar systems at JP Morgan and Bank of America, and over beers one day thought it would make for a great fintech startup. We took what we had learned in our earlier jobs but brought it into the modern era, with automated cloud infrastructure and development tools, and added foundational models and analytics so our customers don’t have to start from scratch.

Beacon is going on 9 years old, and one of the things we’ve learned is the challenges involved in selling services from a small startup to a large company. We were very fortunate that our first big enterprise customer, Global Atlantic, had been spun out of Goldman and had to find a replacement for SecDB. We were consulting with them as project managers, while also building the first version of Beacon. They were willing to take the plunge and have been an amazing partner to us over the years, and really helped launch our business.

Shifting from on premise to cloud computing

I was at Goldman and JP Morgan before the cloud era, so our options for running these massive calculations were limited. We only had so much computer time and had to manage trade-offs between running time and data size. We couldn’t just grab thousands of computers away from the business. Now, with the infinitely deep ocean of compute, you can dip into as much or as little as you want, rent it while you’re using it, and then release it back when you’re done.

We had a client at Beacon during the beginning of the pandemic who looked at their portfolio and thought “we don’t know what’s going to happen in the markets right now, but it’s going to be weird.” They wanted to run a whole bunch of different scenarios of market actions and see how they affected the portfolios. Because they were using our platform, they could quickly define all those scenarios, spin up thousands of computers for an hour or two, and get their results. And this cost them about $100. They couldn’t have done this at all with their on-premise data center.

To hear more about our fintech journey, how fintech helped one company profitably navigate the Argentine peso crisis, and why I like playing backgammon, listen to the full discussion.