- Format: Kindle Edition
- File Size: 7301 KB
- Print Length: 353 pages
- Page Numbers Source ISBN: 0593086317
- Publisher: Penguin (5 November 2019)
- Sold by: Amazon Asia-Pacific Holdings Private Limited
- Language: English
- ASIN: B07NLFC63Y
- Text-to-Speech: Enabled
- Word Wise: Enabled
- Customer Reviews: 732 customer ratings
- Amazon Bestsellers Rank: #4,438 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
Enter your mobile number or email address below and we'll send you a link to download the free Kindle App. Then you can start reading Kindle books on your smartphone, tablet, or computer - no Kindle device required.
To get the free app, enter mobile phone number.
The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution SHORTLISTED FOR THE FT & MCKINSEY BUSINESS BOOK OF THE YEAR AWARD 2019 Kindle Edition
Customers who bought this item also bought
Excerpt. © Reprinted by permission. All rights reserved.
You do know— no one will speak with you, right?”
I was picking at a salad at a fish restaurant in Cambridge, Massachusetts, in early September 2017, trying my best to get a British mathematician named Nick Patterson to open up about his former company, Renaissance Technologies. I wasn’t having much luck.
I told Patterson that I wanted to write a book about how James Simons, Renaissance’s founder, had created the greatest moneymaking machine in financial history. Renaissance generated so much wealth that Simons and his colleagues had begun to wield enormous influence in the worlds of politics, science, education, and philanthropy. Anticipating dramatic societal shifts, Simons harnessed algorithms, computer models, and big data before Mark Zuckerberg and his peers had a chance to finish nursery school.
Patterson wasn’t very encouraging. By then, Simons and his representatives had told me they weren’t going to provide much help, either. Renaissance executives and others close to Simons—even those I once considered friends—wouldn’t return my calls or emails. Even archrivals begged out of meetings at Simons’s request, as if he was a Mafia boss they dared not offend.
Over and over, I was reminded of the iron-clad, thirty-page nondisclosure agreements the firm forced employees to sign, preventing even retirees from divulging much. I got it, guys. But come on. I’d been at the Wall Street Journal for a couple of decades; I knew how the game was played. Subjects, even recalcitrant ones, usually come around. After all, who doesn’t want a book written about them? Jim Simons and Renaissance Technologies, apparently.
I wasn’t entirely shocked. Simons and his team are among the most secretive traders Wall Street has encountered, loath to drop even a hint of how they’d conquered financial markets, lest a competitor seize on any clue. Employees avoid media appearances and steer clear of industry conferences and most public gatherings. Simons once quoted Benjamin, the donkey in Animal Farm, to explain his attitude: “ ‘God gave me a tail to keep off the flies. But I’d rather have had no tail and no flies.’ That’s kind of the way I feel about publicity.”
I looked up from my meal and forced a smile.
This is going to be a battle.
I kept at it, probing defenses, looking for openings. Writing about Simons and learning his secrets became my fixation. The obstacles he put up only added allure to the chase.
There were compelling reasons I was determined to tell Simons’s story. A former math professor, Simons is arguably the most successful trader in the history of modern finance. Since 1988, Renaissance’s flagship Medallion hedge fund has generated average annual returns of 66 percent, racking up trading profits of more than $100 billion (see Appendix 1 for how I arrive at these numbers). No one in the investment world comes close. Warren Buffett, George Soros, Peter Lynch, Steve Cohen, and Ray Dalio all fall short (see Appendix 2).
In recent years, Renaissance has been scoring over $7 billion annually in trading gains. That’s more than the annual revenues of brand- name corporations including Under Armour, Levi Strauss, Hasbro, and Hyatt Hotels. Here’s the absurd thing— while those other companies have tens of thousands of employees, there are just three hundred or so at Renaissance.
I’ve determined that Simons is worth about $23 billion, making him wealthier than Elon Musk of Tesla Motors, Rupert Murdoch of News Corp, and Laurene Powell Jobs, Steve Jobs’s widow. Others at the firm are also billionaires. The average Renaissance employee has nearly $50 million just in the firm’s own hedge funds. Simons and his team truly create wealth in the manner of fairy tales full of kings, straw, and lots and lots of gold.
More than the trading successes intrigued me. Early on, Simons made a decision to dig through mountains of data, employ advanced mathematics, and develop cutting- edge computer models, while others were still relying on intuition, instinct, and old- fashioned research for their own predictions. Simons inspired a revolution that has since swept the investing world. By early 2019, hedge funds and other quantitative, or quant, investors had emerged as the market’s largest players, controlling about 30 percent of stock trading, topping the activity of both individual investors and traditional investing firms.2 MBAs once scoffed at the thought of relying on a scientific and systematic approach to investing, confident they could hire coders if they were ever needed. Today, coders say the same about MBAs, if they think about them at all.
Simons’s pioneering methods have been embraced in almost every industry, and reach nearly every corner of everyday life. He and his team were crunching statistics, turning tasks over to machines, and relying on algorithms more than three decades ago— long before these tactics were embraced in Silicon Valley, the halls of government, sports stadiums, doctors’ offices, military command centers, and pretty much everywhere else forecasting is required.
Simons developed strategies to corral and manage talent, turning raw brainpower and mathematical aptitude into astonishing wealth. He made money from math, and a lot of money, at that. A few decades ago, it wasn’t remotely possible.
Lately, Simons has emerged as a modern- day Medici, subsidizing the salaries of thousands of public- school math and science teachers, working to cure autism and expand our understanding of the origins of life. His efforts, while valuable, raise the question of whether one individual should enjoy so much influence. So, too, does the clout of his senior executive, Robert Mercer, who is perhaps the individual most responsible for Donald Trump’s presidential victory in 2016. Mercer, Trump’s biggest financial supporter, plucked Steve Bannon and Kellyanne Conway from obscurity and inserted them into the Trump campaign, stabilizing it during a difficult period. Companies formerly owned by Mercer and now in the hands of his daughter Rebekah played key roles in the successful campaign to encourage the United Kingdom to leave the European Union. Simons, Mercer, and others at Renaissance will continue to have broad impact for years to come.
The successes of Simons and his team prompt a number of challenging questions. What does it say about financial markets that mathematicians and scientists are better at predicting their direction than veteran investors at the largest traditional firms? Do Simons and his colleagues enjoy a fundamental understanding of investing that eludes the rest of us? Do Simons’s achievements prove human judgment and intuition are inherently flawed, and that only models and automated systems can handle the deluge of data that seems to overwhelm us? Do the triumph and popularity of Simons’s quantitative methods create new, overlooked risks?
I was most fascinated by a striking paradox: Simons and his team shouldn’t have been the ones to master the market. Simons never took a single finance class, didn’t care very much for business, and, until he turned forty, only dabbled in trading. A decade later, he still hadn’t made much headway.
Heck, Simons didn’t even do applied mathematics, he did theoretical math, the most impractical kind. His firm, located in a sleepy town on the North Shore of Long Island, hires mathematicians and scientists who don’t know anything about investing or the ways of Wall Street. Some are even outright suspicious of capitalism. Yet, Simons and his colleagues are the ones who changed the way investors approach financial markets, leaving an industry of traders, investors, and other pros in the dust. It’s as if a group of tourists, on their first trip to South America, with a few odd- looking tools and meager provisions, discovered El Dorado and proceeded to plunder the golden city, as hardened explorers looked on in frustration.
Finally, I hit my own pay dirt. I learned about Simons’s early life, his tenure as a groundbreaking mathematician and Cold War code- breaker, and the volatile early period of his firm. Contacts shared details about Renaissance’s most important breakthroughs as well as recent events featuring more drama and intrigue than I had imagined. Eventually, I conducted more than four hundred interviews with more than thirty current and former Renaissance employees. I spoke with an even larger number of Simons’s friends, family members, and others who participated in, or were familiar with, the events I describe. I owe deep gratitude to each individual who spent time sharing memories, observations, and insights. Some accepted substantial personal risk to help me tell this story. I hope I rewarded their faith.
Even Simons spoke with me, eventually. He asked me not to write this book and never truly warmed to the project. But Simons was gracious enough to spend more than ten hours discussing certain periods of his life, while refusing to discuss Renaissance’s trading and most other activities. His thoughts were valuable and appreciated.
This book is a work of nonfiction. It is based on first- person accounts and recollections of those who witnessed or were aware of the events I depict. I understand that memories fade, so I’ve done my best to check and confirm every fact, incident, and quote.
I’ve tried to tell Simons’s story in a way that will appeal to the general reader as well as to professionals in quantitative finance and mathematics. I will refer to hidden Markov models, kernel methods of machine learning, and stochastic differential equations, but there also will be broken marriages, corporate intrigue, and panicked traders.
For all his insights and prescience, Simons was blindsided by much that took place in his life. That may be the most enduring lesson of his remarkable story.
*Mercer no longer is Renaissance’s co‑CEO but he remains a senior employee of the firm.
A terrific book, a terrific read... I recommend it highly... It's a hell of a story (Lou Dobbs, Tonight, Fox News)
Tells a surprisingly captivating story. It 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 (Joe Nocera, New York Times)
Gregory Zuckerman lifts the lid on the most fascinating man in financial markets...superb reporting (Robin Wigglesworth, Financial Times)
Zuckerman brings the reader so close to the firm's inner workings that you can almost catch a whiff of the billionaire's Merit cigarette (Brandon Kochkodin, Bloomberg)
A gripping biography of investment game changer Jim Simons... readers looking to understand how the economy got where it is should eat this up (Publishers Weekly)
Worthwhile reading for budding plutocrats and numerate investors alike (Kirkus)
Zuckerman vividly tells the story of how Jim Simons and his team of scientists developed the most successful quantitative trading operation in history. . . . Immensely enjoyable (Edward O. Thorp, author of A Man for All Markets)
An extremely well-written and engaging book . . . a must read, and a fun one at that (Mohamed A. El-Erian, author of The Only Game in Town)
Leave it to the Wall Street Journal's Greg Zuckerman to lay open the golden mysteries of quantitative investing. With this fine, humane, and eye-opening book, he's well and truly broken the code (James Grant, Grant’s Interest Rate Observer)
Would you like to tell us about a lower price?
Customers who viewed this item also viewed
Review this product
There was a problem filtering reviews right now. Please try again later.
Treat to the brain
Inspiring at times.
Starts of with a bang but slows down towards end when politics take charge over other things.
Top international reviews
The key insight of the book is that Jim Simons and his colleagues realised that markets were not efficient, in contrast to the mainstream view of market efficiency, and that the inefficiency could be exploited for profit. Lots of it. And they were right.
So this book is well worth reading. It’s well written and it skips along at a relatively decent pace. I don’t think it’s a five star book on my scale, and I doubt it will quite make the top step in the FT Business Book of the Year, but it is still a book you probably do want to read sometime soon if you work in and around trading financial markets.
What I liked - Useful biographies of key team players that advanced the success of Jim Simons's Medallion hedge fund and the Renaissance technologies founder. Good index enabling links and cross reference of hedge fund events - Global Alpha Cliff Asness and the Quant quake (refer Greg Smith's why I left Goldman Sachs). Capital and VC involvement described from David Sussman's refusal to GAM's agreement.
What is missing - Old style hold strategy with long event lines was robbable by the quant funds whose techniques was to reduce the event time lines and increase the number of trades. Profitability per trade would diminish but the task was to increase exponentially the number of trades in managed pattern moves - page 223 Medallion was trading up to 300,000 contracts a day. Simplification graphics would help to better grasp essential features of machine managed control like event line time reduction: page 101 halts long term trades, page 113 reduction from 1 week and 1/2 to 1 day and 1/2, page 190 trades average hold 2 days, page 271 hold time 1 or 2 days increases to 1 or 2 weeks. Sorting the Sharpe ratio and evidencing its shape change through a year eventually pushes the ratio out to 7.5 needs illuminating.
The future - investor nervousness. Retrenchment trades and fake chaff news leading to daily 100 point volatility swings in the Dow, Nikkei, Dax, are good for quant funds but negative for investor confidence and micro second entry and exit decisions - IPO management becomes precarious and issues are pulled.
I didn't know Jim Simons smoked heavily; which will be why his voice resonates the way it does and his laugh is often followed by a cough. And Bob Mercer whistles a lot, maybe more than he talks, and was one of the main financial contributors to the 2016 Trump campaign. And how this connects with Brexit and goodness knows what else is quite eye opening.
As with all worthwhile stories the book is about people, and how they relate to each other and their world.
What made the Renaissance Medallion Fund work was obviously in part the shrewd harnessing of the various individuals exceptional intellectual abilities, and the exponential growth of computers processing power. Creative and curious minds meet mathematical modelling and data analysis on a massive scale.
The real success of the company seems to come from the ability and willingness of a handful of principal players to work together, despite extraordinarily different social, political and personal alliances. Motivated by money, for sure, but the theme that much more was intrinsically involved is a strong thread which I think makes the book a 4 star read. Most pleasing of all was throughout there were no goodies or baddies!
Investors like Soros have given up a lot more of their methods - in part because their strategies relied on directional views of macroeconomic factors are harder to replicate in the future. You would assume that if you had knowledge of the code used at Renissance today you could rack up some pretty mean trading profits - since that is exactly what they are doing!
Still I think this is a must for any mathematician, and offers insight to one (of many) ways that mathematics can be applied to the world we live in.
Personal highlight? The joke at the start of Ch 2:
Q: What's the difference between a PhD in mathematics and a large pizza?
A: A large pizza feeds a family of 4.
Furthermore, the main character, Jim Simons stays quite elusive in this story and really just pops in and out of the narrative. Again, this is mainly due to his reluctance to talk much to the author.
So you are left with a slightly strange overview, with some characters probably given more prominence than they were due, probably because they were willing to talk.
It's a light read but you'll come out of it really feeling none the wiser about the man or the company