Catch Hold Of The Man Who Solved The Market: How Jim Simons Launched The Quant Revolution Engineered By Gregory Zuckerman Provided As Digital Version
brilliant science, technology and business non fiction read, What an amazing read. There are so many moving parts to this book wouldve said that its a trading related boom, But its much more than that it humanizes the mind behind the machines making the money effecting the political and social discourse and the very fabric of this country.
Greg should be applauded for his ability and perseverance to collate so many interviews to publish this collage, I thoroughly enjoyed this book, It was exactly what I was looking forward to reading the growth of quantbased trading in finance through the lens of arguably the most successful firm in the field.
It's important to note what this book is NOT about, Firstly, it certainly doesn't just trace the life of Jim Simons only aboutof the book is about him, This book is about The Men Who Solved the Market and about the people who make/made RenTech, Secondly, it's definitely not about trading strategies and doesn't talk about any "quant"/math that you wouldn't know already,
It's a book about mathematicians, about scientists, about their decisions, passions and motivations and how a few unrelenting men with great intelligence came up with a good idea and worked on it for decades to create a new field, whose byproduct was large sums of money.
It seems impossible to me that anyone who is purely motivated by money could pull this off, which is what I really enjoyed about these personalities who made RenTech.
Even though its eluded to many times in the book that Simons was business minded, which was supposed to reassure the reader that Simon's priority was just making money his actions and decisions just didn't match up to that.
I really didn't care for the politics in the ending, Having to read about what Jim/Mercer did/supported politically honestly was probably the reason why I'm giving this bookand not.
Another reason would be that I really wanted to know more not just about the people but also their professional challenges and their ideas.
I'll have to go look for that in another bookif such a book exists but I'm satisfied with this read for now! Show me the money! Prove it, in other words, a major mantra in my financial services world and prove it they do.
Renaissance Technology, despite the highest fees among major hedge funds has managed to return, net, overper year after fees since.
How, you might ask, as you dive into this book to discover the secret, Yeah, good luck with that! With all the nondisclosure agreements in place you aren't likely to find out, The author has done a good job taking some bare facts and critical details and weaving a narrative around them.
Basic thrust is that Simon, a mathematician hired other accomplished mathematicians to determine patterns that could predict stock market returns.
Interestingly, despite the rapid trading, sophisticated models and wealthy drivers, the system he developed is right onlyof the time.
But that is all it takes to produce billionaires by the bushel, Some interesting side trips on the political side as Simon became a supporter of liberal causes and his partner Mercer virtually put Trump in office.
So, as much for the general interest market as it is for professionals, No need to fear any math, those details tend to not be available beyond returns and assets under management and the discussion of IRS battles.
They used bank contracts to convert ordinary income into capital gains at much lower rates, IRS lost that battle, not sure why, Anyway, well written by an experienced financial journalist so gets thestar rating, Zuckerman is a superb spinner of complex stories, his latest book is no exception, Quantitative investing developed over the lastyears as a result of increased use of mathematical formulas and large data sets.
The theory assumed that the new methods would eliminate human errors,
The book concentrates on James Simons who began life as a distinguished mathematician and evolved into a very successful investment firm.
The results of building these new models was phenomenal,
But Zuckerman also does a great job of explaining that even with taking out the human errors in investing does not eliminate the human conflict in firms.
As the firm developed the egos of the math professionals did not stop rivalries,
Where I would fault the book when he gets into the politics of one of the key players and the tax policies of how to treat the kinds of hedge investments that are critical to the Simons style of investing.
Robert Mercer, who became
coCEO of Renaissance Technologies when Simons retired became controversial because of his beliefs on a limited government and the effects of various policies including the Civil Rights Act of.
He was also a key funder of the Trumpcampaign after Ted Cruz dropped out and of the move in the UK for Brexit.
But Zuckerman's descriptions of his actions lack nuance, I would have also liked a bit more discussion of the errors of Long Term Capital Management which was another quant approach which failed horribly.
There is one other issue which some of the reviewers raise Simons assumption is that there are patterns in markets which can be discovered.
And his firm has spent several decades continuing to refine their models based on the increasing availability of data, The problem with the basic theory is that the patterns may be more apparent than real some market behavior may be genuinely irrational take a look at the last ten days of market performance at the time this review is being written.
Warren Buffet's notion of Mr, Market the irrational guy who decides market direction may actually be truer than Simons and other rationalists would believe,
Even with those limits this book is a good discussion of how quant theory developed and who some of the major players in developing the theory were.
I had always believed in the efficient market hypothesis, This book convinced me that I was wrong: it's not that there aren't inefficiencies to be exploited in financial markets, it's just that humans suck at seeing them.
The same cognitive biases that create those inefficiencies in the first place also prevent us from exploiting them, We see signal where there is only noise, we anchor our expectations, we become emotionally invested in our choices, But the machine is immune to all that,
Zuckerman gets into a lot more detail about Renaissance's models than I expected him to, I guess by now there are enough exemployees willing to share company secrets, Or maybe the company secrets they are willing to share are not that big anymore: using Markov chains to model price movements, looking for price ratios instead of absolute prices, etc.
Whatever is happening at quant funds right now is probably way beyond any of that convolutional neural networks that count cars in Walmart's parking lots, that sort of thing.
I was ready to roll up my sleeves and start modelling stuff, but fortunately I got to this point in the book first: "In the five years leading up to spring of, quantfocused hedge funds gained about.
percent a year on average, compared with a gain of,percent for the average hedge fund in the same period, " Well, the SampPyields on average,a yearafter inflation. For Simons to get his averageyearly return he had to hire a team of geniuses, I'm no genius, and I'm not in a position to hire any geniuses to work for me, so I guess I'm staying with index funds except maybe for some "fun money".
Overall this is a well written, well researched book, and I got a lot out of it, An Excellent Biography, I enjoyed reading political factions within a company, It seems that it can be applied everywhere,
I would recommend this to people who are interested in Biographies, Investment, WallStreet,
Deus Vult,
Gottfried I've always wondered what Jim Simons, the liberal leaning head of Renaissance Technologies, thought of the cohead of his firm, Robert Mercer.
I hope Simons lives long enough to see the consequences of helping Mercer to his billions,
This book, reviewed in the NYT sitelinkHow to Beat the Market, may provide some insight, to quote:
You can certainly argue, as one former Renaissance executive does, that hedge funds are “a game in which rich people play around with each other, and it doesnt do the world much good.The interview I recall Simons once did with vice, com seems to have been taken down and I regret not keeping a copy, FT article here as well: sitelinkThe Man Who Solved the Market how Jim Simons built a moneymaking machine
” You could also argue, as another former executive guiltily put it, that working for Renaissance “helped provide Mercer with the resources to put Trump in office.
”
It's not a bad book.
If you like biographies focused on year by year events you will enjoy it,
I was expecting something else, Some market knowledge, some mathematical formulas,
The whole book is like listening to grandpa's story, where he is talking about himself, missing on every interesting fact and plot.
Also, in the end, we get into politics, making this even worse, If you, like me, have already scoured the interwebs for tidbits on Jim Simons and his Long Island quant shop, then there is not too much new stuff here in terms of the history of the company, but the story is still nice to revisit, and there are insights not presented anywhere, in particular some viewpoints from Magerman that elucidate his position and why he acted like he did.
The tragic story of James Ax is also interesting, albeit unfortunately very lopsided as he wasn't around anymore to present his side, and the psychological problems underlying them are gushed over.
However, there are some weird, yet possibly not incorrect, discrepancies that seem to linger throughout the work, The most glaring is probably that Jim Simons seem to be a wholly peripheral figure in the development of RenTec he appears occasionally in shorts and sandals wielding an everpresent Merit cigarette, but other than that it seems like he really spent most of his time running his venture capital business which is never really explored only very few companies are even mentioned to be related to Simons and they're all trading related, and its pretty much impossible to google anything about it and did other things, such as the occasional math paper or founding the odd scientific laboratory anything other than being part of building the trading business, really.
Did he, for example, just show up at the office one day in the lates, told the employees to improve their equity trading, and then vanished into a cloud of tobacco smoke
Another is the toughacting Russian researcher Alexander Belopolsky that suddenly appears, is described as a bit of a problem child, apparently changes the whole atmosphere of the company, and then leaves for Izzy Englander's Millenium Capital.
We, the readers, definitely missed out on the actual story which, most likely I think, included something close to a coup.
A lone parenthesis mentions that people close to him disagree with the portrayal given in the book, but this is never explored, nor is the clearly significant changes he caused to the culture and development of the firm.
Sure, some time is spent on poor awkward Magerman feeling a bit stressed out, but that is pretty much it.
Finally, the writing is often not very smooth, and there are numerous small mistakes in the text, such as repeated words and awkward sentences.
As a more humorous example, one paragraph mentions a wife of a researcher who is a professor of speech pathology at Stony Brook, the very same paragraph ends up describing that she ends up with a PhD in speech pathology.
I'd imagine Stony Brook being a good enough university that they make people professors after they receive their PhD, not the other way around, but of course I can't be sure.
The author also occasionally inserts a weird aside in a parenthesis, they most often fall flat and appear totally out of place any decent editor would either have cut them, or at least sharpened them up.
In a sense the book is just a rehash of what everyone with a serious interest in RenTec already pretty much knew, except for a few details, but it is nice to have it all in one place and presented chronologically.
However, what we already knew about RenTec, unfortunately, is pretty close to nothing a few haphazard facts, the names of the most important people, that they run statistical arbitrage on steroids.
Of course, I don't think anyone would ever have expected any book on Jim Simons or RenTec to actually tell us all about what anyone inside the vault think.
Overall, if you don't know anything about RenTec the book is probably,stars. If you already wasted your time digging for irrelevant trivia about the Mount Olympus of quantitative finance, then this is mostly just SparkNotes.
PS: As a relevant aside, I should point out that the Medallion returns up untilare actually available, and have been for a while, in a critically underread bookratings currently on GR, Scenarios for Risk Management and Global Investment Strategies, by Rachel and Thomas Ziemba they even include an additional significant digit geeks rejoice!, and it all fits with the numbers Zuckerman provides, which is reassuring.
The latter author was a consultant for RenTec and has some insightful views on the fund as well, plus many others and the industry, in the book.
A much more recommended read than this one unfortunately, the price appears to have shifted a bit since I picked up a used copy for aroundshipped, the cheapest I can find is just under.
The story of the genius who is able to make huge profits through some foolproof formula or algorithmexcept when he is wrongis now so common that it feels like I've read this one before.
Greg Zuckerman has done a great job giving readers a peak inside the secretive world of Jim Simons and Renaissance Technologies hedge fund operations.
Jim Simons Renaissance Technologies has been the greatest money making operation in the modern financial markets, No other investor or fund has had better returns over as long a time period, not Warren Buffett, Paul Tudor Jones, Peter Lynch, Ray Dalio, or George Soros.
No one is in the same league of his funds lifetime returns on an annual and compounded basis,
Renaissances flagship Medallion fund has returned an average annual gain ofsince, His hedge fund has earned profits of overbillion, Jim Simons personal net worth isbillion dollars,
Jim Simons went from being a mathematics professor with a PhD, who operated a successful math department in a university to focusing on solving the patterns in the financial markets for profits.
Jim Simons belief system started with: “There are patterns in the market, I know we can find them.
” With this foundation he hired some of the best mathematicians, statisticians, computer programmers, and scientists to find them, He was successful, he found them,
His fund started out with a successful futures trading system and branched off into other markets including bonds, currencies, and the stock market.
Renaissance was one of the first quantitative hedge funds that compiled a huge data base of end of day and intraday price action history of financial markets and ran powerful computer backtests on the historical data to find market patterns of correlations and repeating price moves in short time frames based on relationships between catalysts and investors behavior.
His fund reduced the financial markets to a math problem and ignored the fundamentals and focuses on the way prices move.
Renaissance makes thousands of trades a day on short time frames from hours to days and makes money on a little overof their trades but their winners are bigger than their losers and the edge creates windfall profits on an astounding risk adjusted basis.
His money making fund is very similar to a casino exercising his mathematical edge over and over with small bets in relation to his total capital.
The fund does use leverage but it is for trading in smaller diversified trades in volume not making large bets on any one trade in size.
Jim Simons was a master administrator in hiring the right people for his fund and leading them in the right direction for developing robust trading systems using scientific methods.
One of the biggest edges his quant fund had was being one of the first to the market using his method, he had one of the most thorough historical price action data bases, and he removed the human weaknesses of emotions and ego out of his trading method.
If you love math and you love trading you will enjoy this book as it takes a deep dive into both.
It is an easy and enjoyable read and is written more like a novel than a trading book,
I have read several hundred trading and investing books and I would put this one on my list of the top five trading books every written.
This is a unique look into how quantitative trading works,
.