Littlefish Legends: #3 Jim Simons

Welcome to the next instalment of our new series lauding the brightest minds, greatest achievers and biggest inspirations in the worlds of trading, finance and business. Each month we’ll bring you a true Littlefish hero – someone whose individual achievements and successes have inspired us here at LFX HQ to do what we do.

This month, we’ve chosen the father of quant trading and owner of a $25 billion hedge fund firm – a man who the Financial Times hail as “the world’s smartest billionaire”, but who remains something of a Wall Street enigma, deliberately maintaining a low profile. It’s time to introduce our third Littlefish Legend… James Harris Simons

#3 Jim Simons

“There is no real substitute for common sense except for good luck, which is a perfect substitute for everything.”

James Harris Simons puts his enormous success and “reputation for genius” down to nothing more than a bout of good luck. “I don’t walk into the office and say ‘Am I smart today?'” he says. “I walk in and wonder ‘Am I lucky today?”

But despite his modest and self-depracating character, there’s no doubt that Simons has earned the title “the world’s smartest billionaire”. Growing up, he was a mathematical prodigy who went on to become a decorated academic in the field, boasting a BSc in mathematics from the Massachusetts Institute of Technology and a PHD from Berkeley among his many accomplishments.

Screen Shot 2015-01-27 at 15.40.57Simons knew from a very young age that he never wanted to do anything but mathematics. And that desire was cemented when he saw two MIT mathematicians, Isadore Singer and Warren Ambrose, having a deep discussion in a cafe late at night. To the young Simons, going out at 2 a.m. with friends to do math over coffee seemed like “the world’s greatest career”.

But eventually, the lure of the finance world would draw Simons away from academia. In 1978, he founded what would go on to become one of the world’s most successful hedge funds in a strip mall close to Stony Brook University, where he had been math chairman.

He hired professors, code breakers and statistically minded scientists and engineers who’d worked in astrophysics, language recognition theory and computer programming to build a hedge fund that would use computer-based models to predict price changes in financial instruments. This approach is now credited with validating the entire field of quantitative investing, and won Simons the nicknames ‘The Quant Father’ and ‘The Quant King’.

Screen Shot 2015-01-28 at 12.01.52Renaissance Technologies has been described as resembling a high-powered think tank or graduate school in maths or science. Simons shuns employees with financial experience – very few RenTec employees are Wall Street veterans – in favour of mathematicians, physicists, signal processing experts and statisticians. RenTec aim for an open atmosphere, an environment where it’s easy to be creative, and “minimal bullshit”. And this unconventional approach has paid dividends: Renaissance Technologies currently has over $15 billion under its belt, while Simons’ own net worth is estimated at $12.5 billion.

And now? Simons stepped down as CEO of Renaissance Technologies in 2009, though he remains nonexecutive chairman. He shuns the limelight and rarely gives interviews, citing Benjamin the Donkey from George Orwell’s Animal Farm: “God gave me a tail to keep off flies. But I’d rather have had no tail and no flies.”

Nowadays, Simons dedicates much of his time to philanthropic work. He and his wife Marilyn were among the first billionaires to sign the Giving Pledge, promising to devote the “great majority” of their wealth to philanthropy. To that end, the couple formed the Simons Foundation (of which Marilyn is president), one of the largest funds for science and math research. Around a third of their giving is in the form of large grants to autism research (a cause very close to the couple’s hearts, since their daughter was diagnosed with a mild form of autism spectrum disorder). The rest goes to math and physics research, particularly projects that are less tangible, long-term and therefore struggle to find funding elsewhere.

Simons is said to have made the largest donations to New York state public universities in history, is estimated to be the 88th richest person in the world and has been described as “the most generous man on Wall Street”, “a man who would make a great fairy godmother” and “the world’s smartest billionaire”. That’s quite a legacy. 

 “Successful trading is a teachable science, not an innate talent.”

Littlefish on Jim Simons…

On Jim Simons, Littlefish FX CEO Sam Barry says:

Jim Simons and Renaissance Capital are the reason I got into trading. Obviously, all of our Littlefish Legends are my heroes, but if I had to pick one, it would be Simons.

His trading strategy seems so perfect because of the idea that it is based purely on the mathematics of the market and the market participants. The pure concept that real world mathematics can be applied to the markets is a wonderfully exciting concept to me and is entirely what drives me. Although I have no direct idea of what Renaissance are up to, my mind can easily comprehend how pattern recognition, or advanced search/data mining and artificially intelligent techniques could be applied to the trading environment, and it adds an incredible dimension to something often considered so black and white or linear. 

I love the line ‘successful trading is a teachable science, not an innate talent’. I think that applies not just to trading but to so many of life’s challenges – there is very little that humans are not capable of if we are taught it the right way and have the right attitude. 

Oh, and he’s a bit of a poker god, apparently.