James Simons ran and founded a hedge fund called Renaissance Technologies. In 1988, he established the Medallion Fund, currently famed for having the greatest track record on Wall Street — returning around 70% each year since 1988 and accumulating over $100 billion in gains since then.
Here are some of his most important pieces of advice.
Don’t run with the pack. Try to go for something original.
At several points in Simons’ own life, he went against standard norms. Whether this was in searching for beauty in geometry, or in leading the math department at Stony Brook, or in codebreaking for the government.
He didn’t originally plan to become a hedge fund manager. It materialized on its own, off of a path he didn’t intend to traverse.
You’ll always need help, but don’t settle for good people. Partner with wonderful people.
Today, Renaissance Technologies is about 300 employees of which 100 have doctoral degrees. To create the motivation to succeed, Simons started the fund by hiring the people he thought to be the best.
This is extremely important because Simons himself was a great researcher and mathematician. He was world-class. When it came to creating the right group, he knew who would work and who wouldn’t. And that didn’t end with mathematicians. Today, Renaissance Technologies has all sorts of engineers, physicists, signal processors, statisticians, and computer scientists.
He’s made all of them partners so they share in the total profits. They also have an incentive to do the best possible work. It’s the best doing their absolute best.
Be guided by beauty.
It’s always interesting to see one field’s teachings permeate into another.
Above is Euler’s identity. Benjamin Pierce, a 19th-century mathematician and professor at Harvard, solved it in a lecture once and stated that the identity “is absolutely paradoxical; we cannot understand it, and we don’t know what it means, but we have proved it, and therefore we know it must be the truth.”
Paul Nahin, a professor at the University of New Hampshire, said that the identity was “of exquisite beauty”.
Much like Euler’s identity, Simons’ identity has been interpolated in the quest for beauty. Whether that’s looking at data on stock prices or in geometry, he has chased the hidden aesthetic in life.
Persistence has a lot of value. Something that’s really worthwhile can take a lot of time to come to fruition.
According to Simons, the Medallion Fund took him about a decade to get up and running. The Medallion Fund is the company’s highest-performing portfolio, by miles. But it wasn’t always that way. In several interviews he’s given, he’s spoken about all the errors he made over the years, and the amount of times he has had to take a loss in order to get something better.
Eventually, things do pay off.
For Simons, that payoff has amounted to a net worth north of $20 billion.
Hope for good luck.
There have been many times where an interviewer has asked whether Simons had something special that others didn’t.
He’s always replied no.
In fact, he’s frequently stated that he seemed to be in the right place at the right time. He thinks that there were many talented mathematicians just like him who could have done what he did. He feels like a lot of the things that fell into place were because they happened to occur in that fashion and in that order.
As he has said many times, “Always hope for good luck.”