A little more than a decade ago Jim Simons was driving to Boston to give a speech at his alma mater, MIT. He had retired a year before. He was 72 years old.
He was then and remains the most successful hedge fund manager of all time.
His wife was in the car and she asked him if he was going to talk about the guiding values that made him successful. At first he thought, “I don’t know that I have any.”
Upon reflection, he wrote down five principles that are as pithy as they are profound.
-Don’t Run With The Pack
-Surround Yourself With The Smartest People
-Be Guided By Beauty
-Don’t Give Up Easily
-Hope For Good Luck!
Simons arrived at his list organically after building his business. It doesn’t feel artificial. It’s not derived from some acrynomn. It reflects what worked for him over the course of a remarkable life.
Simons career consists of following one passion to the next. It wasn’t a succession of five-year plans. It was ten-year building blocks stacked one on the other.
After Simons graduated with his Phd, he worked as a code breaker for the government during the Cold War. He was fired for publicly voicing opposition to the Vietnam War. Next, he spent a decade running the math department at Stony Brook University.
At about 40, his life takes a serious left turn. Simmons becomes so interested in markets and convinced he can build a better system that he quits his prestigious, steady job to trade stocks in an office over a strip mall. (DON’T RUN WITH THE PACK)
Having never worked in the financial industry, he proceeds by hiring a group of physicists and astronomers to build something new, a quant trading firm. (HIRE THE SMARTEST PEOPLE)
He spends 10 years building a trading platform based on data that didn’t work that well until all of a sudden it did. It becomes a flywheel that mints money. (DON’T GIVE UP EASILY.)
He builds the most successful financial firm in history without hiring anyone from Wall Street. He regards doing something really well, whether it’s a mathematical equation or managing a business, as a form of art. (BE GUIDED BY BEAUTY)
The Medallion Fund, launched in 1988, goes on to return 66% a year and generate more than $100 billion in trading profits. (HOPE FOR GOOD LUCK.)
Simon’s professional life roughly breaks down like this:
–10 years getting a PhD and working as a cryptologist and doing math.
–10 years heading the math department at Stony Brook University
–10 years struggling to build a trading algorithm
–10 years minting money from the trading algorithm
–10 years running a foundation to fund basic science
–10 years being “retired”.
He’s not celebrity famous like Warren Buffet. He doesn’t tweet his principles like Ray Dalio. He doesn’t own a sports team like Steve Cohen. Aside from running a hedge fund, he’s perhaps best known for his habit of not wearing socks.
Simons rarely gives interviews. There are perhaps a dozen videos of him on the Internet from the past two decades. They are all worth watching.
One is a 90-minute chalkboard presentation of a complex geometry problem he solved called the Chern-Simons theory.
It will disabuse you of any illusion that you could have done what he did.
Click here to watch: https://www.youtube.com/watch?v=8VipIKLg6-k
Simons’ success lay mainly in combining his mathematical prowess and insights with a passion to build and inspire teams of people.
In the MIT speech, he lays out his recipe: “Great people. Great infrastructure. Open environment. Get everyone compensated roughly based on the overall performance… That made a lot of money.”
Gregory Zuckerman wrote the definitive book on Simons called The Man Who Solved the Market. Simons didn’t want it written. Now, he says its “pretty good.” Ironically, it has done more than anything to cement his reputation as the best performing hedge fund manager.
If you are pressed for time, read Trung T. Phan Phan’s Twitter thread