Silk Ties

This is a true story.

One day in [redacted], a senior trader at a certain investment bank walked on to the trading floor carrying a suitcase.

He opened it up to reveal several hundred designer silk ties – Hermes and Zegna and Armani and Ferragamo and more.

“My wife says I need a complete wardrobe refresh. So I’ve decided to sell all my ties. The reserve price is set at $20 per tie. Let the bidding begin”.

Traders started calling out their bids. $40 for the blue paisley Charvet! $50 for the gold Brioni! It got exciting.

One of the rising stars of the trading floor, a young math whiz with a reputation for extremely aggressive risk-taking, jumped up on to a desk.

“I’ll buy the entire suitcase for $100 per tie, all or nothing”.

“Done!” said the senior trader.

The ties retailed for north of $250 each so this was an amazing bargain, but it was also chunky: the total outlay was close to $30,000, real money in those days. All the losing bidders were envious and impressed.

The next day, the bank announced they were switching to a casual dress code: ties were no longer compulsory.


The senior trader gathered all his juniors and associates and analysts.

“What did we learn today, boys and girls?”

“First, we learned to be aggressive. If you want to do a trade, do it! Don’t fuck around with $20 here and $50 there.”

“Come in with an offer they can’t refuse. You don’t win if you’re not bold. Kudos to [X] for being bold and winning the deal.”

“Second, we learned that not all deals are worth winning. If a trade looks too good to be true, it probably is.”

“Your counterparties aren’t idiots. Ask yourself, why are they doing this trade? What do they know that I don’t?”

“In this case, it’s pretty obvious: I’m on the management committee, you’re not. I knew about the new dress code, you didn’t.”

“Never trade against someone who has better information than you. Our tie policy is a regulatory constraint, and sometimes regulations change.”

“Having a good model of fair value is meaningless if there’s a macro regime switch.”

It’s a lesson well learned – even at the cost of $30,000 and a suitcase full of worthless ties!