There’s an excellent new book out about Jim Simons and Renaissance Technologies, The Man Who Solved the Market, by Gregory Zuckerman. I recommend it enthusiastically to anyone interested in the story of how a geometer ended up being worth \$23 billion. Lots of other mathematicians and physicists have also been involved in this over the years.
I first heard about Simons and his investment operation when I was a postdoc at Stony Brook in the mid-eighties, and have heard bits and pieces of this story from various sources over the years, sometimes clearly distorted in the retelling. It’s very satisfying to finally get a reliable explanation of what Simons and those working with him have been up to all this time. For those with more interest than me in the details of quant strategies, the book provides far and away the most information available about how Simons and RenTech have been making so much money so successfully. The author managed to get some degree of cooperation from Simons, and was thus able to get a lot of those involved with him to talk. As a result, while this isn’t an “authorized” biography, it’s written from a point of view rather sympathetic to Simons.
One question that keeps coming up in the book is that of motivation. Why did Simons abandon a highly successful career doing research mathematics in order to focus on making as much money as possible? Part of the answer is that, from the beginning, Simons always had one foot out of the research math world, playing poker and trading commodities even when he was a graduate student working with Chern at Berkeley. Later, while employed at the IDA in Princeton, he spent time working not just on government projects but on the mathematical analysis of stock market trading strategies. While I’ve often heard the story of how he was fired from IDA after publicly criticizing the Vietnam War, less well known is that a big problem was that he was quoted in Newsweek saying he planned to work on his own projects, not government ones, until the war was over.
Unfortunately, the book has very little to say about a question I’m fascinated by: what does Simons intend to do with the \$23 billion (and counting, the RenTech Medallion Fund that he has a large piece of continues to be an incredible money-making machine)? There’s very little in the book about his philanthropic activities, the most visible of which are at the Simons Foundation, which now has assets of nearly \$3 billion with amounts of the order of \$300 million/year coming in as income and going out as research funding. I think that on the whole Simons had made excellent choices with the math and physics that he has decided to fund, from the Simons Center for Geometry and Physics at Stony Brook to a wide array of programs funded by his foundation.
A question that keeps reappearing throughout the book is that of the social significance of RenTech. It’s a rather pure test case for the moral question about quant investing: would the world be better off without it? In the case of the main money-maker, their Medallion fund, it’s hard to argue that the short-term investment strategies they use provide important market liquidity. The fund is closed to outside investors, and makes money purely personally for those involved with RenTech, not for institutions like pension funds. So, the social impact of RenTech will come down to that of what Simons and a small number of other mathematicians, physicists and computer scientists decide to do with the trading profits (calculated by Zuckerman at over \$100 billion so far).
Simons himself has engaged in some impressive philanthropy, but one perhaps should weigh that against the effects of the money spent by Robert Mercer, the co-CEO he left the company to (Zuckerman discusses Mercer in detail). Mercer and his daughter have a lot of responsibility for some of the most destructive recent attacks on US democracy (e.g. Breitbart and the Cambridge Analytica 2016 election story). In the historical evaluation of whether the world would have been better off with or without RenTech, the fact that RenTech money may have been a determining factor in bringing Trump and those around him to power is going to weigh heavily on one side.
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