#108 Jim Simons (Money Printer)

**David Senra** (0:01)
Simons chose a different approach. A world-class mathematician and former code breaker, Simons had a hunch that financial markets moved in orderly ways, just not in ways that could be detected with human intuition and insight. Simons believed that collecting and analyzing data could provide an advantage and that automated trading was possible. Working from a ramshackle office in a Long Island strip mall, Simons hired mathematicians, physicists, and computer scientists to amass reams of historic records and develop algorithms to process it all. His team hunted for patterns hidden deep in the numbers that might reveal long sought rules governing markets.
After decades of struggle, his data-driven approach paid off.
Other investors began to emulate Simons' quantitative methods, inspiring a revolution that swept Wall Street, Silicon Valley, and everywhere else predictions are made. Since 1988, his company's signature fund has generated average annual returns of 66%. The firm has recorded trading gains of more than $100 billion.
Simons himself is worth $23 billion. Okay, so that's from the book that I read this week and the one I'm going to talk to you about today, which is The Man Who Solved the Market.
How Jim Simons Launched the Quant Revolution, and it was written by Gregory Zuckerman.
Okay, so I want to start with what I think is an important aspect of his personality. It's important for you to know that Jim did not want this book to be written. He is a huge aspect of his personality. He definitely prefers to move in silence. And so let me just read this excerpt to you. So, Simons and his team are among the most secretive traders Wall Street has ever encountered. Loathe to drop even a hint of how they conquered financial markets, lest a competitor sees of any clue.
Employees and Jim avoid media appearances and steer clear of industry conferences and most public gatherings. And then Simons is going to, he provides a great illustration of his opinion quoting a character from the classic book Animal Farm. He says, Simons once quoted Benjamin, the donkey in Animal Farm, to explain his attitude. God gave me a tail to keep off the flies, but I'd rather have no tail and no flies. And then Jim says, that's kind of the way I feel about publicity.
So there's something that the author says in the very beginning of the book that I think holds true for a lot of the entrepreneurs that we study in this podcast. And he says, I was most fascinated by striking paradox. Simons and his team shouldn't have been the ones to master the market. Simons never took a single finance class, didn't care very much for business, and until he turned 40, only dabbled in trading. A decade later, he still hadn't made much headway. And so whenever I read things like that, my mind always goes back to this quote from the autobiography of Henry Ford, where Henry says, wise people always know exactly why something won't work. That is why I never employ an expert in full bloom. So what Henry's saying there, and what the author is also saying is like, experts have a lot of good ideas, but they also have a lot of ideas why things won't work. And the unknown unknowns in life will always outnumber the no-knows. And the only way to discover true, like unique new knowledge is through trial and error. That's how humans learn. And so I wouldn't, even if you have a belief that something, that you can do something or that something is possible, and other people aren't telling you automatically, oh, it's impossible, the only way to see if those other people are right is to actually try. I mean, that's exactly what Jim does. That's a testament to this entire book.
Okay, so I want to start talking about his early life. I'm going to really focus on his personality, because what the author was just saying there, like that's a bizarre, like occurrence, a bizarre situation to happen, where he dabbled and he barely dabbled in trading, didn't dedicate his full attention to it until he was over 40, then struggled for more than a decade before actually being proven that his thesis was correct. Like, what kind of person is able to persist that length of time? And I think that's, if you had to summarize, if you have to summarize this book, that's a good word to summarize it. It's persistence. The entire book is a story of just Jim constantly running into a problem, doubting himself, but carrying on anyways, figuring out a solution, then he has some success, then he runs into another problem, and this just happens over and over and over again. So that's really how I think of the life of Jim Simons is really a life of persistence. So let's go to his early life, and it says, the 14-year-old was trying to earn some spending money working at a garden supply store near his home. It wasn't going well. The young man found himself so lost in thought that he had misplaced the sheep manure, planting seeds, and most everything else.