In 1982, Jim Simons, a former code-breaker for the U.S. government and a brilliant mathematician, founded Renaissance Technologies. In decades since, Simons' average of 39 percent gains have made Renaissance the world's most successful investment firm in history.
How does Simons do it? Everyone knows his firm helped pioneer "quantitative investing" — the act of relying on sophisticated computer programs rather than human judgment to make trading decisions. And that's about all anyone knows. Simons can be engaging personally, but when it comes to his investing success, he's secretive to the point of paranoia.
In his best-selling book, "The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution," Wall Street Journal writer Gregory Zuckerman reveals much more than anyone has before in a surprisingly captivating story.
Simons, now 81, first began investing as a young man after receiving $5,000 as a wedding gift. A few years later, he and several colleagues were pondering how to create a computerized stock trading system that could search for a minute number of variables capable of predicting the market's short-term behavior.
Simon and his nerdy mathematicians and programmers did indeed detect those variables while amassing bizarre amounts of historical data, stocks and bonds, currencies, commodities, weather patterns, and all sorts of market-driving events. Missteps were many, but eventually, they had computers equal to the task.
Those elusive short-term variables Simons and his fellow quants chased down exist because humans have always acted emotionally. It's those tiny human inefficiencies that cold, inhuman computers recognize, validate, then report to Simons and his quants.
As Gregory Zuckerman concludes, Renaissance Technologies just happens to be more proficient at finding them than any other firm.
Publisher: Portfolio/Penguin
Pages: 359
