Jim Simons, a mathematician who founded the most successful quantitative hedge fund of all time, passed away in New York City recently. A Wall Street legend I deeply respect has profoundly influenced my financial career, shaping my approach to market analysis.
His quote, “The secret sauce is hiring great people, providing a great infrastructure, collaborating across the board, and sharing profits with everyone,” has impacted my approach to partnership.
Simons left behind a track record at Renaissance Technologies that rivaled that of legends such as Warren Buffett and George Soros. It is estimated that over the course of its history, Renaissance Technologies has pulled over USD100 billion in trading profits out of the stock market.
His flagship Medallion Fund enjoyed annual returns of 66% between 1988 to 2018, according to Gregory Zuckerman’s book “The Man Who Solved the Market.”
During the Vietnam War, he worked as a codebreaker for US intelligence, monitoring the Soviet Union and successfully cracking a Russian code.
Simons received a bachelor’s degree in mathematics from the Massachusetts Institute of Technology in 1958 and earned his PhD in mathematics from the University of California, Berkeley at the age of 23. The quant guru founded what became Renaissance in 1978 at the age of 40 after he quit academia and decided to give a shot at trading.
Unlike most investors who studied fundamentals such as sales and earnings and profit margins to evaluate a company’s worth, Simons relied entirely on an automated trading system to take advantage of market inefficiencies and trading patterns.
Here are the five principles that are intricately woven into the fabric of his life:
1. Be guided by beauty. Getting the right kind of people, approaching the problem, and doing it right, it’s a beautiful thing to do something right.
2. Surround yourself with the smartest people you can find. When you see such a person, do all you can to get them on board. That extends your reach, and terrific people are usually fun to work with.
3. Don’t run with the pack. If everyone is trying to solve the same problem, don’t do that. Do something original.
4. Don’t give up easily. Stick with it. Stick with it not forever, but really give it a chance to get where you’re going.
5. Hope for Good Luck! One has to recognize that luck plays a meaningful role in everyone’s lives. You get born to decent parents in a good part of the world, and you’re way ahead of the game.