Citadel Securities' is making its ex-Goldman Sachs macro VP famous

Frank Flight has flown around. After seven years at Goldman Sachs, he spent 16 months as a portfolio manager at hedge fund Brevan Howard and then 15 months at hedge fund Soros Fund Management before joining Citadel Securities as a strategist in October last year. 

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At Citadel Securities, Flight works with Nohshad Shah, his ex-boss at Goldman Sachs and Goldman's former co-head of EMEA interest rates sales. Shah himself has long been something of a star in the markets. At Goldman Sachs he produced a popular weekly note and podcast "Some Macro Thoughts" (now deleted from Goldman's site) and at Citadel Securities he is busy doing the same thing as the EMEA head of fixed income.

However, it is Flight, Shah's loyal lieutenant and former VP who has written this week's most noteworthy note. Flight has penned a viral retort to the Citrini Research Substack suggesting that AI will displace high earning white collar workers, who will then be unable to pay their debts and mortgages, creating the mother of all financial crises.

This will not come to pass, says Flight. Mostly because we're nowhere near the level of "compute intensity" that would enable this to happen but also because if we do start nearing this level, the marginal cost of "compute" will rise. In doing so, it may well rise beyond the marginal cost of human labour and make substituting computers for humans unviable. Beyond that, Flight also observes that AI has a positive effect on productivity which will increase purchasing power and consumption and that, in any case, governments wouldn't allow the wholesale displacement of people by machines in a democratic society. Agricultural workers replaced by threshing machines in the 18th century might disagree, but their extinction preceded universal suffrage.

Citadel Securities has been building up its rates business. It hired Andrew Buonauro from Squarepoint in February and Bapstiste Duboc from BNP Paribas this month.

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