Zuckerman, a writer for The Wall Street Journal, says he became fixated with cracking the Simons code. And though he doesnt entirely succeed, he divulges much more than anyone has before. More important, despite the tendency to dot his book with such daunting phrases as combinatorial game theory and stochastic equations, he tells a surprisingly captivating story. It turns out that a firm like Renaissance, filled with nerdy academics trying to solve the markets secrets, is way more interesting than your typical greed-is-good hedge fund.

Simons first began investing as a young man after receiving $5,000 as a wedding gift. He was a commodities speculator for a short time; watching soybean futures soar was kind of a rush, he told Zuckerman. But within a few years, he and several colleagues were thinking seriously about how they might create a computerized stock trading system that could search and Im quoting Zuckerman here for a small number of macroscopic variables capable of predicting the markets short-term behavior. In 1978, Simons left Stony Brook University, where he had built its math department into one of the best in the country, to start the firm that we now know as Renaissance Technologies.

The story Zuckerman tells is about how Simons and the mathematicians and programmers he surrounded himself with found those variables. They collected incredible amounts of historical data not just about stocks and bonds, but about currencies, commodities, weather patterns and all sorts of market-moving events. They made plenty of missteps along the way. But in time, they had gathered so much data and had computers powerful enough to ingest that data that the machines found profitable correlations no human could ever suss out, much less understand.

Zuckerman does a fine job of bringing not just Simons to life but most of the other quants who played key roles in creating Renaissances system. For the politically inclined, one of the most interesting was the firms former co-chief executive, Robert Mercer, the conservative billionaire who funded Breitbart News and Cambridge Analytica. Zuckerman portrays Mercer as a peculiar but largely benign figure within the company who liked to zing his liberal colleagues, but mostly kept his own counsel. When his role in conservative politics caused an outcry, Simons felt he had to ask his longtime partner to step down as co-C.E.O. But even though Simons himself was a liberal, he wasnt happy about it. Hes a nice guy, Zuckerman quotes Simons telling a friend. Hes allowed to use his money as he wishes.

When you get right down to it, Simons makes money because human behavior will never be completely efficient. Those short-term anomalies Simons and other quants unearth exist because humans have always acted emotionally. I think the market is reasonably close to efficient, another well-known quant, Clifford Asness, once told me, but there are a lot of little inefficiencies. Those little inefficiencies are what emotionless computers take advantage of. Renaissance just happens to be better at finding them than any other firm.

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How to Beat the Market - The New York Times