Jim Simons is a mathematician and cryptographer who realized that the complex math he used to break codes could help explain financial patterns – and he made billions with those ideas in his notoriously secretive hedge fund firm, Renaissance Technologies.
Though he stepped down in 2021, I still think his legacy is fascinating, not just for its impacts on the Hedge Fund industry – but on trading as a whole.
He is famous not only for the duration of his success and the size of his results … but also for the way he made his money (with much lower volatility and risk than his peers and competitors).
His background is impressive. Simons taught at Harvard and MIT and worked with the NSA. Here is a video where he shares some thoughts in a 2015 TED talk interview. It's worth a watch.
TED via YouTube
Despite advanced math still being a mystery to many, we rely on it more than ever as the foundation of many exponential technologies.
The Heart of AI is Still in Humans
Simons built a team of mathematicians whose motivation was doing exciting mathematics and science (rather than hired guns who could be lured away by money or pure trading quants, biased by the industry).
This hits on something important.
Humans are still important … and companies that pursue exponential thinking and exponential technologies still have to champion integrity, culture, and purpose.
Better Math is a Competitive Advantage – So is More and Better Data
We stayed ahead of the pack by finding other approaches and shorter-term approaches to some extent … but the real thing was to gather a tremendous amount of data
– Jim Simons
On top of his intelligent hiring and novel approach to trading, Jim Simons recognized that an impressive data pipeline – and the technological infrastructure to digest and analyze that data was a moat to competitors.
It is hard to have an edge if you use the same process and the same data as your competitors.
As the flywheels of commerce spin faster, edges will emerge and decay faster. Finding a solution is only a step in an ongoing process.
Robust, reliable, and repeatable innovation at scale is a meaningful competitive advantage. That implies that idea factories will become as important (if not more so) than factories that produce material products. Likewise, innovation funnels will become more important than sales funnels.
The world changes at the speed of thought … and as technology continues to improve … even faster.
Onwards!
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