People that think that numbers can ever replace reality are not only ineffective--they are downright dangerous. As Nicholas Nassim Taleb has said with an aeronautical analogy:
"Give a pilot a broken altimeter and he'll crash the plane into a mountain. Give him no altimeter and he'll look out the window."
This is why if I was running a quantitative hedge fund, I'd never hire some poor-English immigrant from an overseas technical school who doesn't know left from right or up from down in terms of rational (or the lack thereof) human behavior. I don't care how many derivatives you stack up on top of one another, in the end, that tower of derivatives is built upon the foundation of some real security, and if that goes south, then your tower of complexity built upon a thousand lines of code will crash down all the same. And not only did you get paid for X hours you spent coding BS, but you also just lost the firm X millions of dollars.
It's also why I subscribe to NNT's beliefs that "take a street-smart kid with a thick Brooklyn accent and teach him the technicals and he'll be a strong statistical arbitrageur. But take someone with a phD--especially in the physical sciences--and try to have them do stat arbitrage and they become reckless speculators..." or something along those lines.
I honestly think that the age of the "idiot savant" quant, as NNT describes them, as these people with no real world experience but amazing textbook skills, is over. I think that quants will still very much be in demand. With all of the raw computing power and all of the numbers whirling around Wall Street, those who can play the numbers and program the algorithms will still be EXTREMELY important. What I believe is on its way OUT is the idea that a phD replaces 5 years of in-the-trenches experience.
In fact, this is what I am banking on. I'd rather learn on the job and replace the phD with E-X-P.
Clearly, there are exceptions to the rule, such as Renaissance, but even King Simons's RIEF is lagging the S&P by 3%. Hopefully the old man isn't losing his touch...because we need someone to continue to be a crusader for MfA, and I don't have a seat on that board yet!
So no, I don't think that quants are going out of style. I just think that the job role will change drastically, requiring far more real-world smarts to actually formulate the foundations of the models, rather than "black magic" which, if anybody plays any sorts of role playing games, completely backfires if handled recklessly.
