My Amazon Review of Gregory Zuckerman's "The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution"

Code-Breaker

Wall Street Journal reporter Gregory Zuckerman offers up a biography of Jim Simons and Renaissance Technologies, his $60 billion hedge fund colossus. It is no way a complete biography because both Simons and his firm are very secretive where employees sign very strict non-disclosure agreements. Nevertheless Zuckerman accurately portrays Simons as an M.I.T. trained math nerd who cracked the code of the financial markets without ever have taken a course in finance. Simons basically used the code breaking skills he developed at the Institute for Defense Analysis along with putting together an all-star team of math whizzes from academia and industry.

One of his hires was Robert Mercer who along with his daughter Rebekah became famous in 2016 as the big money behind Breitbart News, Cambridge Analytica  and, of course, Donald Trump’s presidential campaign. Mercer’s politics stands in sharp contrast to Simons who has long been a big donor to the Democratic Party. But what Mercer brought to Renaissance was the math behind the speech recognition technology that he was developing for IBM in the early 1970’s.

Simons approach to investing was harnessing big data analytics using Markov chains, stochastic calculus and high powered computers to develop a short term trading strategy. This was done before, but no organization has done it so successfully under the guidance of world class math geniuses. The result of this is the world-beating returns of Renaissance’s flagship Medallion Fund which from 1988-2018 generated a compounded pre-fee return of 66% and a 39% after-fee return; absolutely extraordinary. Further this was done where just over half of the millions of trades made were at a profit. So don’t do this at home. The markets are still loosely efficient, Simons found a way to notice small data anomalies that could turn into profitable trades.

Zuckerman also brings up Simon’ family tragedies where two of his sons died in freak accidents and his vast charitable giving. His charitable interests include finding cures for autism, supporting high performing math and science teachers in New York City and financing a radio telescope in the Chilean desert to study the origins of the universe.

What I would have liked to know is where Simons got his money to first start trading in size, first in the commodities markets and later in currencies. I would also like to know who staked the initial $16 million in 1988 to seed the Medallion Fund. Further a few numerical examples of some the trades would have been most helpful, but that would, of course, reveal a few trade secrets. That is because what Renaissance does is far more than a simple pair’s trade which buys Coca Cola and shorts Pepsi, for example.

Zuckerman has given us a highly readable and engrossing account of Jim Simons’ life and the rise of his firm. For any reader interested in how the quant revolution came to Wall Street this is a very good place to start.

For the full Amazon URL see: https://www.amazon.com/review/R251H7H1LFMA7I/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv