
Interview with James Simons, Billionaire Mathematician [video] - Jupe
https://www.youtube.com/watch?v=QNznD9hMEh0
======
chollida1
If anyone is interested in more reading on the history of algorithmic trading,
I've posted a screen grab of the top half of one of my book shelves.

Some of this maybe a repeat to people as I often get asked for recommendations
on how to get into algorithmic trading.

[http://imgur.com/OdzB4aW](http://imgur.com/OdzB4aW)

[http://www.amazon.ca/Fortunes-Formula-Scientific-Betting-
Cas...](http://www.amazon.ca/Fortunes-Formula-Scientific-Betting-
Casinos/dp/0809045990) The history of hte first real quant

[http://www.amazon.ca/Dark-Pools-Machine-Traders-Rigging-
eboo...](http://www.amazon.ca/Dark-Pools-Machine-Traders-Rigging-
ebook/dp/B006OFHLG6/) The history of the rise of algorithmic trading

The phyisics of wall street was mentioned by someone else, great book

[http://www.amazon.ca/Quants-Whizzes-Conquered-Street-
Destroy...](http://www.amazon.ca/Quants-Whizzes-Conquered-Street-Destroyed-
ebook/dp/B0036894XC) This profiles 4 famous traders including Simons, alos a
great book

[http://www.amazon.ca/Heard-Street-Quantitative-Questions-
Int...](http://www.amazon.ca/Heard-Street-Quantitative-Questions-
Interviews/dp/0970055234) A must read if you want to get into quantitative
finance.

As always, email if you'd like to chat.

~~~
splike
Do any of the books go into detail explaining how and why successful
strategies worked? Historically that is. I wouldn't expect any strategies
outlined in a book to be profitable today, but I would be interested in how a
strategy was formalised.

~~~
evanpw
I've found this blog to be really excellent:
[https://mechanicalmarkets.wordpress.com](https://mechanicalmarkets.wordpress.com).
Example: [https://mechanicalmarkets.wordpress.com/2015/04/30/market-
da...](https://mechanicalmarkets.wordpress.com/2015/04/30/market-data-
patterns-order-anticipation-and-an-example-trading-strategy/)

------
tfgg
What I love about Simons is that he's funding to solve _the_ problem of my
field, the Many Electron Problem:

[https://www.simonsfoundation.org/mathematics-and-physical-
sc...](https://www.simonsfoundation.org/mathematics-and-physical-science/many-
electron-collaboration/)

It's so important for physics, materials science and chemistry, but feels so
esoteric. It's wonderful that there's someone like Simons with both money and
the ability to understand the problem :)

edit: He also possibly implies that the best way to help maths and theoretical
physics is to leave the field, attempt to get rich in finance, and pump money
back in.

~~~
chii
It's sad that this is a good way to fund fundamental research. Why is it that
finance make more than what seems to be more important and useful like math or
science!?

~~~
darkmighty
Being sad about it is not so useful. You can actually help! Either becoming
rich and helping basic science (of course) or voting well and influencing
government decisions.

Simons is clearly very talented at what he does, his firm (how it is run, etc)
seems quite amazing. And he's "doing" more science this way. It makes an awful
lot of sense.

~~~
chii
> And he's "doing" more science this way.

but he's not "doing" science anymore, and if i were in love with doing
science, i really wouldn't want to go into finance, do lots of stuff i don't
personally feel passionate about, get really rich, then pay other researchers
to do science.

~~~
fleitz
And that is why people in the market get paid lots of money, no one wants to
do it, yet it's essential to the functioning of society.

Most people call this being an adult, instead of 'following your dreams'.

~~~
nmrm2
This is an intellectually and morally bankrupt sentiment that is all the more
worth calling out because it is both impractical and nonsensical.

1\. This sentiment is nonsensical. Scientific funding often funds more than
just salaries, and when it does fund salaries, those salaries are almost
always modest. Furthermore, many of the salaries it funds are for non-
scientists: technicians, software engineers, etc. The tired trope that
scientific funding is primarily funnelled to wide-eyed loners who produce
nothing but "useless" abstract ideas is demonstrably inaccurate. And to the
extent that this caricature is accurate, Simons himself is a counter-point to
the argument that this is a bad model.

2\. This sentiment is impractical. Basic science is important to society as a
whole and there's almost always no way to become ultra-rich doing basic
science(++). _All_ of society benefits when a good lot of our best and
brightest go into science (rather than e.g. consulting or finance). And the
best way to ensure that great minds go into science is to ensure science
remains funded so that it is possible to work on truly important problems.

3\. This sentiment is intellectually bankrupt. A great mind following its
dreams without prioritizing financial reward is responsible for most of the
major scientific developments that make it possible for you to bash their
would-be descendents from behind a keyboard.

4\. This sentiment is morally bankrupt. Punishing passionate people who give
up highly lucrative careers to do something that is good for humanity is
nothing short of vindictive -- _I hate my work day so everyone else has to as
well!_

(edit: As an aside, you really think CEOs don't like the rush from having lots
of power and making important decisions? They may work long hours, but I
guarantee most of them _fucking love_ their jobs. I also bet there's a pretty
strong correlation between top-of-clas software engineers who command high
salaries for their expertise, and software engineers who love their job.)

(edit2: Furthermore, science has lots of drudgery and hard, frustrating work
to it; it's not all sitting in an office and drinking coffee. The idea that
scientists unequivocally work on fun problems all day and never bash their
heads against the wall to solve problems that they're more extrinsically than
intrinsically motivated to work on is also pretty wrong.)

(++) Simons explicitly answers the question in his interview: No. Nothing we
do at Renaissance -- no matter how impressive from a finance perspective -- is
useful to science. It's just useful for making a handful of people rich.

------
dsugarman
I am from Stony Brook, he has done a lot for the community including a nice
nature preserve but I can not read his name and not be sad. Despite all this
money, his life has been very tragic, two of his three children died young,
one drowning and one in a car crash.

~~~
yownie
Not only that, they once funded the collider experiments at a physics
laboratory where I worked when NSF had cut funding drastically, we're talking
millions of dollars here.

[https://en.wikipedia.org/?title=Relativistic_Heavy_Ion_Colli...](https://en.wikipedia.org/?title=Relativistic_Heavy_Ion_Collider#Financial_information)

[http://www0.bnl.gov/newsroom/news.php?a=21314](http://www0.bnl.gov/newsroom/news.php?a=21314)

------
lmg643
Also engaged in one of the most ridiculous tax dodges of all time. Uses a
"derivative" with his brokers that allows a bunch of short term trades to be
taxed at long term capital gains rates.

[http://www.bloomberg.com/news/articles/2013-07-01/simons-
str...](http://www.bloomberg.com/news/articles/2013-07-01/simons-strategy-to-
shield-profit-from-taxes-draws-irs-ire)

~~~
vixen99
Nothing ridiculous about any legal interpretation of tax laws that allows one
to minimize one's contribution. It's common sense. Even more so given the
outrageous way in which government wastes the revenue it gets.

"No man in the country is under the smallest obligation, moral or other, so to
arrange his legal relations to his business or property as to enable the
Inland Revenue to put the largest possible shovel in his stores. The Inland
Revenue is not slow, and quite rightly, to take every advantage which is open
to it under the Taxing Statutes for the purposes of depleting the taxpayer's
pocket. And the taxpayer is in like manner entitled to be astute to prevent,
so far as he honestly can, the depletion of his means by the Inland Revenue"

Lord Clyde gave this famous quote (in taxation circles) in the case of
Ayrshire Pullman Motor Services v Inland Revenue [1929] 14 Tax Case 754, at
763,764:

------
discardorama
His Medallion Fund seems to have done really well. From another article:

 _Simon 's flagship fund, Medallion, requires aminimum investment of several
million dollars and charges a 5% management fee and a jaw-dropping 44%
performance fee. The fund is closed to new investment and has returned an
astounding annual average net of 38% (remember, that's after the high fees).
Since its 1988 launch, the fund has lost money in only one year, 1989, which
saw a drawdown of 4%._

But I have to ask: why limit the fund to multi-millionaire investors? Why not
open it to the other investors too and let them benefit for a change? This is
just the "rich-getting-richer". If anybody needs a 38% average annual return,
it's most certainly _not_ a multimillionaire; it's more likely a middle-class
person who could use the gains.

I apologize for sounding negative here, but this inequity is something that
bothers me.

~~~
nostrademons
a.) It's much easier to maintain high returns with lower amounts of invested
capital. Warren Buffett has talked about this at length; when you're investing
$5M, there are a large number of undervalued opportunities where you can gain
outsized returns, but when you're investing $500B, you _are_ the market, and
it's extremely unlikely that you'll get above-average returns.

b.) Private capital with a personal relationship to the fund manager is
usually more patient. Many public funds have a problem where all the
individual investors head for the exits at the slightest sign of trouble, but
the best investment opportunities are usually available when everybody else is
panicking.

Basically, if you want to do well in investing, you really need to do it
yourself, and you need to have an information advantage on everyone else in
the market. It's a field that rewards being smarter than everyone else, not
being more cooperative.

~~~
melling
If it was really that easy to identify undervalued companies, you'd think more
people would be doing it. I don't think many managers, or individuals, beat
the market by a lot, if at all.

~~~
nostrademons
I agree, but people who entrust their money to others to manage beat the
market by even less. Remember that on average, you should expect to earn an
average return minus fees; the one part of that equation that is given are the
fees.

------
Tycho
Information on Renaissance Technologies is so incredibly sparse. It must be a
fascinating workplace! It's fun to speculate on the nature of their success
(specifically the Medallion fund).

3 possibilitiese spring to mind: 1\. Best in class execution on winner-takes-
all strategies. Eg. 10 hedge funds all try the same arbitrage trade but only
the quickest one make money. 2\. A killer app that no one else knows about.
Like, I dunno, artificial intelligence... 3\. Medallion is just a legend built
up to lure investors into their public funds and collect the fees.

Joking on that last one.

What I drew from this interview was that while Simons is obviously incredibly
smart, they key thing was that at Stony Brook he learned how to put together a
team of other very smart people, and that more than any individual financial
insight has generated his success in investing.

------
abulman
I can also recommend the rest of the Numberphile videos
[https://www.youtube.com/channel/UCoxcjq-8xIDTYp3uz647V5A](https://www.youtube.com/channel/UCoxcjq-8xIDTYp3uz647V5A)
\- as well as the other channels by the same person.

------
melling
For people who enjoy this video, I recommend this book:

[http://www.amazon.com/The-Physics-Wall-Street-
Unpredictable/...](http://www.amazon.com/The-Physics-Wall-Street-
Unpredictable/dp/0544112431)

Simons is mentioned but he refused to be interviewed for the book. However, it
covers the history that leads up to the current day.

It's interesting that Simons' fund is pure algorithmic trading. No one decides
that a position is too big, for example. Humans are out of the process after
they write the algorithms.

~~~
dangero
That is incredibly facinating. The way he talks about the quant models in the
interview they sound simple in comparison to his prior work. My suspicion is
that mathmeticians are involved in the front end model creation purely to
create efficient ways of finding performant models but the models themselves
are pretty mundane. The idea of purely data driven models is fascinating
because it's generally rejected as too limited and inefficient. I wonder what
types of anomolies they have discovered and what data sets they find useful.
Also how does historical simulation work when the computer models you were
competing against 10 years ago are so different than now?

~~~
melling
His fund is one of the best on the street, and he has been in business since
1982.

[http://blogs.wsj.com/deals/2009/03/25/the-hedge-fund-
worlds-...](http://blogs.wsj.com/deals/2009/03/25/the-hedge-fund-worlds-
top-2008-earner-james-simons/)

[http://www.insidermonkey.com/blog/here-is-why-jim-simons-
is-...](http://www.insidermonkey.com/blog/here-is-why-jim-simons-is-beating-
the-market-this-year-4602/)

------
jgalt212
For me, James Simons, is first and foremost a tax dodger.

 _Renaissance Technologies LLC used contracts with the banks to establish the
“fiction” that it wasn’t the owner of thousands of stocks traded each day_

[http://www.bloomberg.com/news/articles/2014-07-21/renaissanc...](http://www.bloomberg.com/news/articles/2014-07-21/renaissance-
avoided-more-than-6-billion-tax-report-says)

~~~
vixen99
As elsewhere in these comments: tax dodging is an obligation for any
intelligent person.

"No man in the country is under the smallest obligation, moral or other, so to
arrange his legal relations to his business or property as to enable the
Inland Revenue to put the largest possible shovel in his stores. The Inland
Revenue is not slow, and quite rightly, to take every advantage which is open
to it under the Taxing Statutes for the purposes of depleting the taxpayer's
pocket. And the taxpayer is in like manner entitled to be astute to prevent,
so far as he honestly can, the depletion of his means by the Inland Revenue"

Lord Clyde gave this famous quote (in taxation circles) in the case of
Ayrshire Pullman Motor Services v Inland Revenue [1929] 14 Tax Case 754, at
763,764:

~~~
jgalt212
except for the fact that the tax dodging services Barclays helped enact for
Rennaissance were illegal.

~~~
gaadd33
Where does it say that in the article? Or that Rennaissance was found guilty?

~~~
jgalt212
Please don't be so naive. It's only because Renaissance is so rich and
powerful that they are not in jail. If some piker tried the same strategies,
they'd be in jail. The politicians are afraid to jail billionaires.

> The Democrat stopped short of saying that any of the activities that allowed
> Renaissance to lower its tax bills were illegal, and said it appears the
> banks stopped offering them after the IRS started to question the financial
> arrangements.

[http://thehill.com/policy/finance/212875-probe-banks-
hedge-f...](http://thehill.com/policy/finance/212875-probe-banks-hedge-funds-
used-fictions-to-skirt-capital-gains-taxes)

------
tim_sw
The full (hour long interview) is here
[https://www.youtube.com/watch?v=QNznD9hMEh0](https://www.youtube.com/watch?v=QNznD9hMEh0)

~~~
dang
Thanks. That seems covered by the original source rule, so we changed to this
from
[https://www.youtube.com/watch?v=gjVDqfUhXOY](https://www.youtube.com/watch?v=gjVDqfUhXOY).

------
mathgenius
Wow, I love his brooklyn accent. Makes him sound so grounded. I guess Feynman
has (had) a similar accent; and i was similarly enthralled hearing his voice
(recording) for the first time.

Somehow I always presume these guys should speak with an English accent, like
Penrose. Hehe.

~~~
telcal
Brooklyn accent?? No, not at all. He grew up in Brookline, Massachusetts, a
much different place... and accent!

------
argumentum
Also worth reading about is his co-founder & the former chief scientist at
renaissance, Nick Patterson. If there's anyone whose literally a "mad
scientist" he's it (in a good way). A close friend of mine at MIT collaborates
with Nick, and when we asked why he left finance to return to academia he said
"well, James is into boats and he wanted a bigger one". Nonetheless, both
great guys.

[http://www.nytimes.com/2006/12/12/science/12prof.html?pagewa...](http://www.nytimes.com/2006/12/12/science/12prof.html?pagewanted=all)

------
matthewwiese
Anyone happen to have a transcript or alternative site to view the video from?
I'm stuck behind the GFW without a VPN, and I'd love to watch this now as
opposed to waiting until I get back to the States.

~~~
orthoganol
Just sign up for a free trial for Astrill. Being in China without a VPN is
insanity.

------
mhomde
Here's another really interesting documentary about the Black-Scholes formula

[https://www.youtube.com/watch?v=lmvxZgnwwD4](https://www.youtube.com/watch?v=lmvxZgnwwD4)

------
athesyn
I always wonder if this type of success what naturally happens when someone
this highly intelligent uses all their brainpower for gaining wealth.

~~~
adventured
No, right place / right time / right choices etc still plays an overwhelming
role in the wealth generation.

For every thousand geniuses that try to get really rich, there's one Simons or
Buffett that pulls it off. You could run a simulation with a large number of
people of equal mental capability, almost all of them would fail. Just the
broader requirements alone would be enough to instantly flunk most people out
of the running (the other skills required that Simons possesses beyond his
intellect).

------
yownie
He was also part of the team that audited Lucifer an early precursor to DES,
that Steven Levy mentions in his Crypto Wars book.

