Must read! Great work by @GZuckerman on Jim Simons “The Man Who Solved The Market”. pic.twitter.com/0K1HPqW6XX
— Jassim Alseddiqi (@JassimAlseddiqi) November 23, 2019
The Man Who Solved the Market employed at the IDA in Princeton ...... While I’ve often heard the story of how he was fired from IDA after publicly criticizing the Vietnam War, less well known is that a big problem was that he was quoted in Newsweek saying he planned to work on his own projects, not government ones, until the war was over.
How to Beat the Market “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by the experts.” ........ the market is so efficient that even professional investors have little chance of beating it on a regular basis. If there’s one reason index funds, which replicate the performance of market indexes like the S&P 500, now hold $4.3 trillion (yes, trillion) in assets .......
Jim Simons is not a blindfolded monkey.
A former code-breaker for the United States government and a brilliant mathematician, Simons founded the most successful investment firm the world has ever seen........ even Warren Buffett’s track record — 20.5 percent annualized returns since 1965 — doesn’t approach Simons’s average of 39 percent gains over a three-decade span. And that’s after his company has taken a 5 percent management fee and 44 percent of the profits. ....... How does Simons do it? We know that his firm, Renaissance Technologies, helped pioneer quantitative investing, relying on complex computer programs rather than human judgment, to make trading decisions. .......... on the subject of his investing success, he is secretive to the point of paranoia. Employees sign ironclad nondisclosure agreements, and are told to avoid media appearances and industry conferences. ........ “combinatorial game theory” and “stochastic equations” ....... turns out that a firm like Renaissance, filled with nerdy academics trying to solve the market’s secrets, is way more interesting than your typical greed-is-good hedge fund....... Simons first began investing as a young man after receiving $5,000 as a wedding gift. He was a commodities speculator for a short time....... a computerized stock trading system that could search — and I’m quoting Zuckerman here — “for a small number of ‘macroscopic variables’ capable of predicting the market’s short-term behavior.” ......... In 1978, Simons left Stony Brook University, where he had built its math department into one of the best in the country, to start the firm that we now know as Renaissance Technologies........ They collected incredible amounts of historical data — not just about stocks and bonds, but about currencies, commodities, weather patterns and all sorts of market-moving events. They made plenty of missteps along the way. But in time, they had gathered so much data — and had computers powerful enough to ingest that data — that the machines found profitable correlations no human could ever suss out, much less understand....... one of the most interesting was the firm’s former co-chief executive, Robert Mercer, the conservative billionaire who funded Breitbart News and Cambridge Analytica. Zuckerman portrays Mercer as “a peculiar but largely benign figure within the company” who liked to zing his liberal colleagues, but mostly kept his own counsel. When his role in conservative politics caused an outcry, Simons felt he had to ask his longtime partner to step down as co-C.E.O. But even though Simons himself was a liberal, he wasn’t happy about it. “He’s a nice guy,” Zuckerman quotes Simons telling a friend. “He’s allowed to use his money as he wishes.” ........Simons makes money because human behavior will never be completely “efficient.”
...... humans have always acted emotionally ..... “I think the market is reasonably close to efficient,” another well-known quant, Clifford Asness, once told me, “but there are a lot of little inefficiencies.” Those little inefficiencies are what emotionless computers take advantage of. ....... “For all the unique data, computer firepower, special talent and trading and risk-management expertise Renaissance has gathered, the firm only profits on barely more than 50 percent of its trades, a sign of how challenging it is to try to beat the market — and how foolish it is for most investors to try.” ....... In other words,stick to index funds.
The Man Who Solved the Market — how Jim Simons built a moneymaking machine Gregory Zuckerman’s book lifts the lid on the enimgatic founder of Renaissance who launched the quant revolution ......... The profound and the inane alike are debated on Quora, a website where the curious (or plain bored) can pose questions to the internet hive mind. ......... Renaissance Technologies, a fabled yet secretive hedge fund ......Last year, a rival recounted how he had once nearly poached someone from Renaissance, only to be stymied at the last minute. “I read about him years later,” the Quora contributor wrote. “He bought an Alp. As in . . . an actual mountain in Austria.” ....... the awestruck fascination that Renaissance commands in finance. ...... Machines and algorithms have taken over swaths of markets, supplanting the grizzled traders of public perception, and no one has harnessed computer science and vast data sets to invest as successfully as Renaissance. “It’s the gold standard of computer trading,” one rival once ruefully admitted to me......... Even most people in finance would struggle to identify Simons out of a line-up of similarly disheveled octogenarians. Indeed, his chain-smoking, silver beard, wryness and reluctance to wear socks all make him seem more like a Coen Brothers character than a colossus of investing........ Quoting Benjamin, Animal Farm’s wise old donkey, Simons said:
