How Jim Simons Became the Man Who Solved the Market

Featured Events | Mar 12, 2020 | Gabelli School of Business

Two compelling stories unfolded at the McNally Amphitheater on Wednesday evening, March 4th. 

One was how Jim Simons and his colleagues at the firm Renaissance Technologies became “the greatest money makers in the history of modern finance.” The other: the experiences of Wall Street author Greg Zuckerman during the writing of his bestseller, “The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution” (Portfolio/Penguin, 2019).

During the event, sponsored by the Gabelli Center for Global Security Analysis in partnership with the Museum of American Finance, Zuckerman explained his reasons for writing the book.  

For one, he was intrigued by Renaissance’s “ridiculous and impressive track record.” Yet, Simons and his colleagues could not be described as traditional Wall Street investors. Their success, in part, resulted from pioneering quantitative investing. They’ve become hugely successful by using mathematical models to select winning investments, rather than through the traditional intuition, judgment and research approach. 

Simons and his colleagues also pioneered data. They acquired, digested and cleansed data years before the phrase “big data” was even thought of.  In addition, they developed predictive algorithms, which are now used daily by business behemoths like Amazon, Netflix and Facebook.

On a visceral level, Zuckerman felt it necessary to address a theme he characterized as “so important to many of us and one that we wrestle with, to a large extent: how really wealthy people have this outsized impact on society.”

Unraveling a Paradox

Part of Zuckerman’s intention for the book was to explore the intriguing paradox that existed with Simons and Renaissance. “Renaissance is a group of mathematicians and scientists who don’t care about business. They don’t hire from Wall Street and they aren’t the people you’d expect to develop the greatest track record in financial history.”

Zuckerman acknowledged that writing this book “was the hardest project of my life because Renaissance is the most secretive firm I’ve ever experienced,” a characteristic that was also part of the allure for writing it. 

Telling the Story of Jim Simons and Renaissance

Zuckerman spent a good part of the evening telling the story of Jim Simons: his background, his unapologetic drive to make billions; his perspective relative to trading and the traits that made him the success he has been. 

Although Simons was enormously successful, his “Achilles Heel” was his inability to physically handle the ups and downs of the market. This eventually led him to return to building models

Zuckerman attributes the firm’s success in part, to “having the best talent in the industry when it comes to quantitative trading.” He noted, “these are people who have done remarkably impressive work in the fields of physics, math, statistics and astronomy. They don’t hire for need. Instead, they just want super-smart people that are accomplished and can impress them,” explaining that in this type of environment, “you will be compelled and motivated to do really good work and find some way to improve the firm.”

Life Lessons Learned from the Renaissance Experience

Zuckerman concluded his presentation by sharing four life lessons he has taken away from his experience in writing this book:

1. It’s hard to be a quant – Even they fight the temptation to trade using their instinct, intuition and judgment.
2. Perseverance – It took Renaissance 12 years to make any headway. A lot of people would have given up before then. 
3. Importance of Systems – As a society, we should be making data-based decisions, the scientific methods that underlie Renaissance’s success. We all need systems and rules in our lives. It’s unsettling when you look at important decisions that have such an impact on our lives that are not based on data.
4. Life – Although Simons’ success is based in large part on his ability to predict the future, he has suffered family tragedies and personal illness. His experience underscores the fragility of life because of our inability to predict what’s going to happen.