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.
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.
2023 was defined by two major themes, the first being geopolitical strife, and the second being the proliferation of artificial intelligence.
What geopolitical strife, you ask? Seemingly everywhere you looked (from China and Taiwan to Russia and Ukraine, the Middle East, or even the happenings in Britain and the U.S.) ... This was an interesting year.
Many of the trends we've seen in 2023 will have aftershocks in 2024. Still, the only thing constant is change ... and it will be interesting to see what changes. I think we've seen increased caution as a result of the last few years, but I think people are now getting used to the new normal.
Do you expect 2024 to be better?
Time will tell.
Don't forget the Trump trials and that it is an election year ... or that crypto is making a comeback – and AI will only accelerate.
You’re probably aware that I’m a big Dallas Cowboys fan. Unfortunately, they were crushed today by the Green Bay Packers in the first round of the NFL Playoffs.
Here is a photo I grudgingly took with a Packers fan at the game.
The Cowboys looked great all season, except when they didn’t… which was rare (but extreme). It happened three times this year. Early in the season against the Cardinals and the 49ers ...and obviously, it happened again today.
Only one team can win the Super Bowl. I know that. Yet, somehow, the Cowboys seem to have a real chance most seasons. That is probably why the NFL tries so hard to create parity ... to keep fans interested.
On a lighter note, one thing we can probably agree about is that geriatric white dudes shouldn’t rap. At least ... that’s what my kids tell me when I try.
Unfortunately, the Owner of the Cowboys, Jerry Jones, didn’t get the memo.
I met Jennifer in April of 2004. We got married in January of 2008. That means we celebrated our 16th Wedding Anniversary this week – and we're nearing 20 years together.
Wow, how time flies!
On one hand, it seems like it was just yesterday. On the other hand, portions of that decade seemed to take forever.
As an entrepreneur, I live in a weird "tense". For me, the future and the present are often blended. Meaning, that I imagine the future I want – and then I find the path to create (or manifest) that destiny. Not surprisingly, some of the things that were easy to imagine were hard to bring into reality (in a reproducible, efficient, and effective manner or process) ... And these things seem to take forever.
Other things (like relationships or the growth and maturation of my kids) seemed to happen in the blink of an eye.
I consciously try to be more mindful and grateful for the progress (and even the minor moments, wins, or curiosities) before me. The truth is that if you fail to notice them, you don't experience them.
Here is to experiencing all that you need or want ... and I hope the rest serves as raw material, learning, or fuel to get you there faster.
Mickey Mouse's predecessor, Steamboat Willie, is now public domain, despite years of litigation by Disney. It's not hard to imagine people using that to create facsimile's of Mickey Mouse that look and sound just like the contemporary version.
The nuances of what's acceptable are complicated, and I expect Disney to fight its use as much as possible...
Nonetheless, it's interesting!
Here are some of the posts that caught my eye recently. Hope you find something interesting.
Overall, markets improved, which is unsurprising after the year we had in 2022. With Energy seeing such a massive boom last year, it recessed a little, but real estate and technology both saw strong gains.
Here is a more global look at return by asset class.
Japan saw significant growth, partly driven by China’s Real Estate issues.
Oil, commodities, and Chinese equities all lost, but that loss in oil and commodities could be driven by China’s woes.
In 2022, I said it was unlikely that the trends would continue into 2023, which wasn’t much of a prediction ...
On one level, I try not to think about or predict markets, because I know better. On the other hand, it is an election year, and my opinion matters as a proxy for what people like me think or feel in an election year. So, with that in mind, I predict that we see a brief market correction blamed on various geopolitical instabilities and partisan weaknesses, followed by a long and steady push higher as we approach the November elections.
What do you expect for 2024?
Do you think the continued investment into generative AI will impact these trends?
As I wrote that article, I was reminded of my TEDx talk on my father's passing.
In finance, the "time value of money" refers to the principle that the purchasing power of money can vary over time (meaning, money today might have a different purchasing power than money later). This is partly because money's future value might be calculated by accounting for other variables (like interest earned, inflation accrued, etc.).
A similar calculation applies to life ... or living.
Live Like You Only Have a Year Left.
During the last part of my Dad's life, I think he would have done almost anything for a little more time.
Things that used to be unimportant, or even mildly irritating, took on increased importance. For example, a dinner together became almost a sacred event; a kiss goodnight was truly heart-felt; and saying good-bye meant something ... because it could be the last time.
Nevertheless, as a result of that focus, he took more life out of that time.
Shouldn't we do the same thing? Think about it ... We are never going to be younger than we are, right now. We are never going to have more time to fix a big mistake. Isn't it likely that the time value of your life, is worth maximizing?
If you realize that your time is worth more than it ever will be, what can you do differently now to get the most out of it?
For another impactful view of life, here's a great video on how you spend the time in your life – visualized using jelly beans. I think it's pretty powerful and worth watching.
So, if (after accounting for sleep, eating, work, commute, TV, chores, and more) an average person only gets 2,740 days to do what they want ... those days are precious. That's less than 8 years of "free time" for you to make the most of.
Based on the demographics of who's likely reading this, you may have half that time (or a fourth).
What are you going to focus on? Making the most money? Helping the most people? Spending the most time with your family? Relaxing? I hope you don't choose worrying.
There's never a better time than now to live a life worth living ... and only you can decide what that means!
I'd love to hear what you choose.
Best wishes for a Happy Holiday Season ... and I hope you spend your time wisely and well in 2024!
A Look At Jim Simons & Renaissance Technologies
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
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!
Posted at 06:13 PM in Books, Business, Current Affairs, Ideas, Market Commentary, Trading, Trading Tools | Permalink | Comments (0)
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