Blair Hull built his career on a single conviction: markets reward those who out-think and out-build the competition. From counting cards at Nevada casinos to constructing option valuation models to selling an automated trading empire to Goldman Sachs for $531 million, every step in his career followed the same logic. Find the edge. Build the system. Press until someone with deeper pockets buys you out.
How Blair Hull Got Started: From Blackjack to Options
Insight from Blair Hull on how he got interested in the markets, from The New Market Wizards by Jack Schwager:
Q. “How did you first get involved in the markets?”
A. My interest probably dates back to when my grandfather charted stocks. I didn’t really understand what he was doing, but the idea of having capital working for you was appealing. The desire to learn about the financial markets led me to business school at Santa Clara University. After graduating, I got a job as a security analyst at Blair and Company. Exactly 3 months after I started, the West Coast research department was eliminated during the bear market of 1969. While at my third job with Kaiser Cement, I got interested in playing blackjack by reading a book called Beat the Dealer by Ed Thorp. From 1971 to 1975, I went to the Nevada casinos regularly. During the period when I was winding down my involvement in blackjack, I started to work on some option valuation models. The paper on this model was published in 1973. I was unfamiliar with the literature, so in 1975 I was busy constructing this model, which in fact had already been developed. In late 1976, I applied to be a market maker on the Pacific Stock Exchange.
The blackjack years were not a detour. They were a training ground. Card counting demands probability thinking, discipline under pressure, and the ability to bet according to a model rather than intuition. Those same skills — applied to options pricing rather than a card deck — became the foundation of Hull Trading. Ed Thorp, whose book set Hull on that path, later built his own quantitative hedge fund using the same principles. The line from Beat the Dealer to automated market-making runs straighter than it appears.
From the Pit to the Machine: How Hull Automated Trading
“Wall Street’s 25 Smartest Players” by Ted C. Fishman of Worth Media LLC:
Hull was working as a trader in the pits at the Chicago Board Options Exchange when it dawned on him that he was in the wrong job. Pit trading isn’t just mind work; you have to shout, stand, and jump all day doing business with traders whose sole goal is to take all your money. I was one of the slowest traders, Hull admits. That’s why I left the floor. Hull left with a vow never to be slow again and began working on automating his trading on computers. That was 1989. Today, Hull’s company is one of the world’s premier market-making firms, setting the bid-ask price on stocks listed on 28 exchanges in nine countries. In some venues, the Hull Group trades nearly a quarter of the entire daily market volume. That is no small feat, considering that other American market-making firms have consistently tried and failed to set up shop overseas. Hull is an aggressive firm in this country, too; its trades account for 8 percent of the volume in U.S. equity-index options in the Standard & Poor’s 500 Stock Index, the Russell 2000, and the Dow Jones Industrial Average. And Hull buys and sells as much as 1 percent of all shares moving on the NYSE. What distinguishes Hull’s firm from other trading giants, such as Goldman Sachs, is that it does an extremely high volume of small trades that pay small amounts each, while a Goldman does fewer trades for more money. We do about 30,000 trades a day, Hull explains, involving on average about 700 shares each. Speed, of course, is essential in executing Hull’s trades efficiently. Hull has a staff top-heavy with Ph.D.’s drawn from the sciences. Lately, the firm’s massive computer network has been sorting through patterns in stocks according to genetic algorithms. Our view is that if you have a mouse in your hand you’re too late, Hull says. Indeed, his computers trade stocks faster than the human eye can see them scroll on a screen. The system is designed to predict patterns that will unfold in the market over periods as short as two minutes. In a business that isn’t normally modest about its technological savvy, Hull and his automated trading shop are the envy of Wall Street’s top firms. So much so that, in July, Goldman Sachs paid $531 million for the whole shebang. They told us they bought us because it would have taken them two years to build a similar system, Hull says, and that by then, we’d be two years ahead.
What Hull’s Career Teaches About Systematic Trading
Hull’s departure from the pit in 1989 was the defining decision of his career. He was slow relative to the floor traders around him, and he knew it. Rather than try to compete on speed in an environment that rewarded physical speed, he left to build a machine that was faster than any human. That self-assessment — identifying a limitation and responding with a structural solution rather than harder effort in the wrong direction — is the same logic that separates successful systematic traders from those who keep grinding at a method that does not suit them.
The Worth Magazine profile describes a firm running 30,000 trades a day at 700 shares each. That is not trading in any conventional sense. It is manufacturing: high volume, thin margin, high precision, with systems doing the work that humans cannot do at the required scale. The same transition from discretionary to systematic is at the heart of what the TurtleTrader experiment demonstrated. A rule-based system, applied with discipline, outperforms human discretion over the long run — not because the rules are perfect but because the system removes the errors that emotions introduce.
Goldman Sachs’s $531 million acquisition tells the rest of the story. They did not buy Hull’s track record or his relationships. They bought his infrastructure — the models, the systems, the architecture that would have taken two years to replicate. In markets, the most durable edge is not a trade idea. It is a system that generates trade ideas faster and more accurately than any competitor can build.
Blair Hull and the TurtleTrader Connection
Hull was originally profiled in the New Market Wizards. His presence in that book alongside the traders who came out of Richard Dennis’s experiment is not incidental. The thread connecting all of them is systematic thinking: the belief that markets can be understood through models, that those models can be tested, and that discipline in following a system produces better results than gut-feel trading. Hull pursued that conviction through options pricing and automated market-making. The Turtles pursued it through trend following. The tools differed. The underlying philosophy did not.
Trend Following Systems
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