The King of Chicago Trading Wants to Build a GPU Market Bigger Than Oil
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What is the main topic discussed in this episode?
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Hey there, Oddlots listeners. You are about to get a conversation with Don Wilson, founder and CEO of DRW, sometimes called the smartest man in trading. This was recorded live on stage at Chicago's Untitled Supper Club. We had a blast and we hope you'll enjoy the show. All right, Don. Well, thank you for being here. Really appreciate it.
Great to be here.
Truly the perfect guest to talk about what's next in trading. Uh but just to begin with, why GPUs?
Well, obviously AI is becoming more and more useful. And as it becomes more useful, people Use more of it, which means they need to use more GPUs to run inference or train new models. And I actually have this theory that within the next 10 years, the world will spend more per year on GPUs than it does on crude oil. And that would, of course, make GPUs compute the largest commodity in the world. So it seems like you would kind of need a market for that.
A very modest call. Just the largest market in the world.
Yeah. It's funny because you know I associate oil often coming out of, you know, sandy deserts, but now they're literally turning the sand via chips into the commodity itself, or like breathing life into the sand. Just to back up, I have a million questions about this. For those who don't know, why don't you give us the sort of, you know, the 30-second or the 45 second description of what you do or what d RW is.
Yeah, so I started off standing in the trading pit in Chicago in the Eurodollar option pit, yelling and screaming. And then I would go home and write code on my Macintosh computer and and build models. And essentially, you know, I I don't stand in the pit and yell and scream anymore. Most of the pits are gone, but but we kind of do the same thing now with computers.
I heard a story that you were once on vacation with your family and you were in Italy, I think in Florence, and instead of I don't know, eating gelato or something like that, you decided to invent a uh a a new Greek letter for derivatives trading. So
So this is cool. Yeah, so so here, I I I mean, you're confusing two stories. So actually actually, what happened was there was a new exchange that had launched an interest rate swap futures contract. It was called IDCG. And I looked at the contract and I figured out that actually they had not designed the contractor. And so although they were telling Telling everybody that it was economically equivalent to a regular interest rate swap, it wasn't, because it had this additional convexity bias in it.
Hm.
Which is we we could talk about convexity bias. Cut it goes even more in the weeds than a lot of your podcasts go into. But but so when I was in Florence, I had this idea of how you could create an interest rate swap futures contract without this convexity bias problem. And that is what I focused my time on there. Yeah. What was
the letter?
So so back to the letter. The letter was about uh after a really unpleasant period in the Eurodollar option pit where all the market makers lost tons of money because the shape of the SKU shifted dramatically as the Fed started hiking in a very predictable manner. And nobody had really developed a measure for linear skew. And so during the week I said, well, this isn't that much fun. We're losing a lot of money every day. But the good news is that that means we have something to learn. And so I spent the weekend working with the quants, and we came up with, you know, kind of a measure of the linear skew between the calls and puts.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:01–5:42
2
Why are GPUs the next big commodity compared to crude oil?
5:42–12:00
3
How did Don Wilson transition from the Eurodollar pit to building DRW’s tech platform?
12:00–18:02
4
What is the “psi” Greek‑letter solution and how did it solve the convexity bias problem?
18:02–23:13
5
How is DRW standardizing diverse GPU hardware into tradable indices?
23:13–28:32
6
Who are the natural participants in a GPU futures market and why does it matter?
28:32–35:21
7
How could a liquid GPU market lower the cost of capital for AI projects?
35:21–37:02
Speakers
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