According To Me, The Series: “The Man Who Solved The Market: How Jim Simons Launched the Quant Revolution” by Gregory Zuckerman
This is basically a story of Jim Simons and the rise of Renaissance Technology (RenTech), a hedge fund with nearly mystical reputation of achieving in excess of 60% return yearly since 1980. Obviously, such number implies he and all those involved must have become extremely rich. What is interesting is the story of his background, people he recruited and the dynamics of things at the firm and how it happened. For someone outside the financial world but of technical and academic background, his story is fascinating and suddenly becomes relatable. Of course, it is hard to imagine how each of us could do the same given less of a genius we are than he was. And for those hoping to find secret formula and spelled out steps to do so, you will be somewhat disappointed. RenTech’s algorithms remain as secretive as ever. But at least, given the background of each of his team, we can speculate what gave them the edge that made them so successful.
One of the ingredients for success seems to be Jim Simons’ own mathematical ingenuity. He already possessed a gifted mathematical ability from childhood, went through prestigious school studying maths, and was in academia for a long time before deciding to apply his maths ability to stock market. He started the fund Monemetrics at the age of 40! No small feat and what a conviction that he was able to convinced many similarly smart people to join in the endeavour (another lesson: surround yourself with someone smarter than you). One of them, Leonard Baum, was also in academia before joining RenTech (my discovery from this book that the inventor of Baum-Welch algorithm I used many times over during my Ph.D. study in the area of speech processing and others all over the world was an eye opening of how one can cross over to become so successful and profitable in another field using technical expertise applied in another).
The next ingredient is technology. The algorithms were the product of mathematical derivation and the minds behind it. However, it would not be practical without the use of computing technology to arrive at and deploy for execution in real time. RenTech seemed to have used technology well to gain an edge over others with automation of calculation and decision from data.
Another ingredient of success is conviction. Firstly, it was certainly not an easy decision to start a hedge fund at the age of 40 as mentioned. The belief in himself and other members of the team belief in what they are doing is certainly important. Secondly, there were many adversity along the way: the start from nothing, the people, the market crash, requires conviction to carry through. Also, even though apparently, a human intervention was employed controversially within the company when the stock market crash happened, mostly the team believed in the algorithms and let the maths do the trade with little intervention though the years.
Last ingredient worth mentioning is hard work. Nothing can replace that.
This book also talked about many colourful characters taking part along the way of RenTech. Some are simple tech nerds who enjoyed technical work. Some have big character and got involved in politics using his wealth as a means to influence political agenda. Some, Jim Simons himself, use their wealth in philanthropy. Just another angle of life outside work for these people for us to reflect on how we want our life and achievement to entail.
P.S. You don’t have to be right 100% of the time: “We’re right 50.75% of the time … but we’re 100% right 50.75% of the time” Robert Mercer
