Manage risk. Despite having backlogs, Agile doesn’t manage risks–explicitly. In 2007, Paul Kedrosky noticed a rather peculiar ratio. The ratio of software developers to non-developers at a major quant fund versus a major software company:
- Oracle (56,000 empl.) — 1:8 (one developer for every eight employees)
- Renaissance Technologies (178 empl.) — 2:3 (two developers for every 3 employees)
It’s not too much of a stretch to say that hedge funds are a new type of Software Company. After all, they have more developers per capita than the latter, and they generate more cash flow per capita, if they are any good. Hedge funds also provide a fantastic template for how software companies and projects could be run. Risk management separates the men from the boys. Well-run hedge funds make financial decisions quickly, consistently with the spirit of the agile manifesto. They cannot afford to let any bureaucracy get in the way of “high gamma” execution.