Book of the week
The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution
Never mind the overstatement of the title, said Barry Ritholtz in Bloomberg.com. Though quantitative investing pioneer Jim Simons didn’t exactly “solve the market,” the investment firm he launched in 1982 is easily the most successful in history: Its flagship hedge fund has averaged returns before fees of 66 percent annually since 1988, transforming the industry by weight of its example and transforming Simons and a collection of his colleagues into multibillionaires of outsize influence. That Wall Street Journal reporter Gregory Zuckerman secured a lengthy interview with the media-shy Simons—an 81-year-old former Cold War code breaker and math professor—is itself a feat. But Zuckerman also talked to 40 other current and former Renaissance Technologies employees, and his definitive account of the firm and its Medallion Fund “reads more like a delicious page-turning novel than the usual finance tome.”
It helps that a company filled with nerdy, inquisitive academics is “way more interesting than your typical greed-is-good hedge fund,” said Joe Nocera in The New York Times. Simons, who knew little about markets when he quit his university post in 1978 and set up shop in a Long Island, N.Y., strip mall, made plenty of early mistakes. At one point, he took heavy losses when a computerized trading system he created nearly cornered the market on Maine potatoes and regulators forced him to rapidly sell off his positions. But his determination to build a system that could identify and exploit market inconsistencies eventually paid off. He and his team fed the system piles of data—interest-rate histories, weather patterns, hog head counts—and the machine spat out directives. The enormous resulting profits—$100 billion since 1988—largely wound up in the pockets of Renaissance employees. Simons, a mega-donor to liberal causes, is one beneficiary; another is former co-CEO Robert Mercer, a key backer of Breitbart News, Brexit, and Donald Trump’s presidential campaign.
Zuckerman could have told a bigger story here, said Robin Wigglesworth in the Financial Times. Renaissance, after all, is “emblematic of an era where technology helps money and power accrue to an increasingly small number of people.” And this book doesn’t even supply a full history of quant investing. But Simons himself is “the most fascinating man in financial markets,” and for years he’s been “the white whale” of many Wall Street reporters. “In Zuckerman, he has met his Ahab.” ■