
Jim Simons: The Numbers King - astdb
https://www.newyorker.com/magazine/2017/12/18/jim-simons-the-numbers-king
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adenadel
The Numberphile interview with Jim Simons is a good watch/listen

Numberphile video:
[https://www.youtube.com/watch?v=gjVDqfUhXOY](https://www.youtube.com/watch?v=gjVDqfUhXOY)

Full length:
[https://www.youtube.com/watch?v=QNznD9hMEh0](https://www.youtube.com/watch?v=QNznD9hMEh0)

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mxwsn
As a computational biologist, I'm not so confident that Simons can make a huge
impact in my field. At best, I would expect his institute to find a niche and
impact on the scale of a typical lab, but this pales in comparison to, say,
the Broad institute which is a better peer with the Flatiron, what with lavish
funding and a distinctive research philosophy than following NSF/NIH grants.

He prefers problems that aren't hopelessly complicated, but I suspect this is
exactly where computational biology falls into if you don't have the ability
to perform causal experiments. And wet lab experiments aren't being funded by
the Flatiron.

~~~
ptero
Maybe he can help fix the process rather than provide some spectacular
singular breakthrough. A common complaint I heard (from the outside, I do not
work in biology) is that a large portion of scientists' productive time at
many university labs is spent on finding funding.

For example, if he establishes some initial funding streams and keeps it open
long enough to see commercial benefits (10+ years) _and_ uses those to
transition this setup to self sufficiency (as opposed to a few unicorns
spinning off), he could have a major long term impact.

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amongwhales
When a previous article on RenTec/Jim Simons was posted, I saw a comment
thread about how Renaissance couldn't possibly be making such consistent money
from Machine learning and quantitative analysis, but instead the reason they
are so secretive and consistent is that they have insider info they have to
hide. Do others agree with that theory? It makes more sense to me, due to a
conviction on efficient market hypothesis.

~~~
jandrewrogers
No, and the reality is more interesting.

Their success is based on an unusual type of information asymmetry -- they
have better mathematics than everyone else. They invest heavily in development
of novel mathematics that can be applied to find new types of patterns
analytically that are not discoverable with existing mathematical methods and
algorithms. This allows them to mine patterns that no one else has discovered
yet because the barrier to discovery is anomalously high since it requires
esoteric invention. Most firms just rearrange the existing methods in new ways
or with new data.

It is an efficient market but they are unusually profitable because they have
little competition for the patterns they exploit.

~~~
soVeryTired
As I’ve pointed out before, there are a lot of quant firms out there. I doubt
Rentech have the massive edge that people seem to think they do. I think it’s
much more likely that many firms had a small edge, and we notice the luckiest
among them.

That said, I don’t doubt that they’ve had an edge. Maybe they were doing trend
following in the 90’s, or HFT in the 2000s. Most firms’ strategies eventually
leak via lateral hires, but rentech is a small shop and no-one has managed to
nab one of their employees. So there’s no way to know for sure.

~~~
whatok
You don't notice the other firms because they've likely not been in existence
as long and do not run as much money as Rentech does. Rentech has public
pension money in it which by itself will attract more scrutiny. Chances are if
you aren't running more than a few hundred million it could be all internal
capital or a HNW individual or two.

~~~
1024core
> Rentech has public pension money in it which by itself will attract more
> scrutiny.

I thought Rentech was closed to all outsiders, and only internal money was
allowed?

~~~
whatok
Only the Medallion fund.

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melling
He’s putting some of his wealth into basic research:

[https://www.simonsfoundation.org/flatiron/](https://www.simonsfoundation.org/flatiron/)

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spot
not mentioned in the article, the institute he founded 10 years ago:
[https://en.wikipedia.org/wiki/Simons_Center_for_Geometry_and...](https://en.wikipedia.org/wiki/Simons_Center_for_Geometry_and_Physics)

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gxs
He spoke at my math commencement at cal - good guy, sharp as a tack.

Growing up he was one of my idols - leveraged what he learned in school to
make money doing something difficult, achieving success and more importantly
respect.

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soniman
It's funny how much good press Simons gets and yet he is a notorious tax
cheat. The Senate issued a report in 2014 about how his firm Rentech is a
blatant tax fraud. Rentech also got IRA rules changed so employees could avoid
more taxes.

Basically, the Senate report alleges that Rentech evaded leverage limits (6x
capital) and used the balance sheet of their broker to operate basically as an
unregulated market maker. So the two keys to Rentech's strategy were a)
illegal levels of leverage and b) evading taxes on short term gains to the
tune of $6 billion. Once you dial down the leverage and pay taxes, the alpha
disappears. One firm rejected the scheme as illegal and the emails from that
firm are in the report. The scheme uses the broker as an illegal front, which
is what the firm lawyer immediately recognized.

[https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&c...](https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwiUkOKl0oTYAhWkmeAKHTvgD2IQFggxMAE&url=https%3A%2F%2Fwww.hsgac.senate.gov%2Fdownload%2Freport-
abuse-of-structured-financial-products-misusing-basket-options-to-avoid-taxes-
and-leverage-limits&usg=AOvVaw0aByhG3Uly2-0yQc7kaiAm)

~~~
dsacco
_> Once you dial down the leverage and pay taxes, the alpha disappears._

No, it doesn’t. The first and most obvious observation: the basket options
described in the report were not utilized until 2002. Renaissance already had
14 years of ~70% average annual returns (~40% net of fees) by that point.

Second, Renaissance stopped using these derivatives in 2014 (though they’re
still fighting the IRS on back taxes, last I heard). Surprise: they’ve still
been up ~39% in 2014, ~35% in 2015 and ~22% for the first half of 2016 (again,
_net_ ).

To be clear, I’m not saying I agree with their utilization of the Deutsche and
Barclays basket options. There is a lot of creative financial engineering that
happens in the industry. But like most of the other topics that come up on
Hacker News, the reality is far too nuanced to be dismissed in the offhand way
you’ve done here.

At best, their tax maneuvering amplified the alpha already present. The basket
options provided leverage, which obviously boosted returns. However, leverage
will only improve a strategy’s returns, it cannot (on its own) improve risk
characteristics or increase win rate consistency. Leveraged beta is still
beta, and leveraged alpha remains alpha when you decrease the leverage (though
the returns will be lower).

~~~
soniman
If Rentech has a strategy which generates decent returns only with massive and
illegal levels of leverage, it does not have a viable strategy, period. There
are reasons why hedge funds have leverage limits, to prevent future LTCM
catastrophes. If Rentech wants to operate as a market maker it can get a
broker dealer license like any other firm operating as a market maker.

~~~
dsacco
_> If Rentech has a strategy which generates decent returns only with massive
and illegal levels of leverage, it does not have a viable strategy, period._

And in my previous comment to you, literally the one you replied to, I
explained that this is not the case. Re-read my comment. Their strategies have
alpha distinct from the leverage (because, again, leverage is not alpha), both
historically before the tax maneuvering began, and since the conclusion of its
use.

~~~
soniman
We don't know what the strategies are so we are not in a position to evaluate
the alpha. See the protasis of my statement, beginning with "if".

~~~
dna_polymerase
Okay, as someone else already pointed out to you: How can you be so sure about
_your_ argument?

This said, please elaborate, how exactly could they turn a strategy losing
them money around by pumping more money into that?

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valuearb
Jim Simons is a super interesting person, which makes this a very interesting
read. What doesn't is the writing.

"Simons has an air of being both pleased with himself and ready to be pleased
by others. He dresses in expensive cabana wear: delicate cotton shirts paired
with chinos that are hiked high and held up by an Indian-bead belt. He grew up
in the suburbs of Boston, and speaks with the same light Massachusetts accent
as Michael Bloomberg, with frequent pauses and imprecisions. He sometimes uses
the words “et cetera” instead of finishing a thought, perhaps because he is
abstracted, or because he has learned that the intricacies of his mind are not
always interesting to others, or because, when you are as rich as Simons,
people always wait for you to finish what you are saying"

Gawd, that was awful.

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nyc111
I wish he invested in studying the microbiome. It is a relatively new field
and requires computational powers. From the article, if I understand
correctly, they study autism only in the context of the DNA. But it is now
known that the disorders in the gut microbiome is related to autism.

~~~
Renfrew
The gut microbiome is a main focus of the Systems Biology group in the Center
for Computational Biology.

[https://www.simonsfoundation.org/flatiron/center-for-
computa...](https://www.simonsfoundation.org/flatiron/center-for-
computational-biology/systems-biology/)

~~~
nyc111
Great. I found this research
[https://www.simonsfoundation.org/2017/09/26/microbiome-
proje...](https://www.simonsfoundation.org/2017/09/26/microbiome-project/)

But do they study microbiome in relation to autism? I could not find any such
research.

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hidenotslide
I found it interesting that the employees of Renaissance finally convinced him
to boot Robert Mercer. Simons has accomplished great things in mathematics,
investing, autism research and math education. But he has also enabled a Bond
villain to undermine our social fabric with disinformation, and I don't think
he gets enough credit for that.

~~~
mjfl
From the numberphile interviews and the article above I get the impression
that Simons is a professional, wise man who doesn't let political differences
devolve into hysteria.

~~~
c128
The do what all hedge funds do - hedge. Simons put money on Hillary and Mercer
put money on Trump. :D

