Simmons was a tenured professor of mathematics before he moved to Wall Street at the age of 40. Even if he didn't take any financial courses, it didn't affect him to lead Medallion Fund to achieve an average annual return of 66. 1%, surpassing Buffett and Soros for 27 consecutive years and becoming one of the most successful traders in modern financial history.
The secret of Simmons is that he has decided to invest with the help of data mining, advanced mathematics and computer models while others are still using old-fashioned methods such as nature and intuition to make predictions.
He ignited a revolution in the investment field-by the beginning of 20 19, hedge funds and quantitative traders had become the largest participants in the market, accounting for 30% of the trading volume, far exceeding retail investors and traditional institutional investors. In the past, the management of major companies were very disdainful of using scientific and technological means and computer models to invest, but now the situation is reversed, and programmers almost lost their jobs as managers.
Simmons found a way to turn talent, brain and algorithm into wealth. Today, the Yangtze River study takes you close to Simmons, the king of quantitative investment, and his alternative management methods.
The man who conquered the market: the biography of Simmons
Author: [America] Gregory Zuckerman
Press: Zhan Lu Culture
Publication year: February, 20021.
What is quantitative investment?
Quantitative investment can be understood as relying on the powerful information processing ability of computer system when investing, and at the same time replacing people with mathematical models to maximize returns under the premise of controlling risks-simply speaking, replacing people with machines and algorithms to make investment decisions.
Quantitative investment diagram
On Wall Street, there is a mysterious quantitative trading company, which analyzes massive data through complex mathematical models and algorithms and is well-known in the market. This is the "Renaissance technology".
Medallion Fund, managed by james simons, the founder of Fuxing Technology, has an ultra-high annual rate of return of 66%, the highest handling fee of 5% in the industry, and an ultra-high frequency trading mode of over 10,000 yuan per day. The super-high profit of more than 654.38+000 billion dollars is unparalleled in the investment field, and even Warren Buffett, George Soros, Peter Lynch, Steven Cohen and even Rui Dario can't compare with this record.
Even in the case of market turmoil in 2020, the medal fund still achieved a return rate of 76%.
The comparison of annual income of major funds far exceeds that of Buffett and Daglio.
What is even more amazing is that such a fierce wealth maker really joined the investment circle at the age of 40, while Buffett, Soros and others in the same period have already made their mark on Wall Street.
But before the age of 40, Simmons was not idle, just making legends unrelated to the investment circle in the mathematical circle.
He has a talent for mathematics since he was a child, and he graduated from MIT at the age of 20. At the age of 23, he became a professor at Harvard; At the age of 26, he broke into the intelligence field and became an agent to crack passwords ... At the age of 30, james simons revived the mathematics major of the State University of New York at Stony Brook by himself and met Yang Zhenning, then a professor of physics. In his most famous "Young-Mills Theory", there is also the shadow of Simmons.
In Yang Zhenning's office in Tsinghua campus, there is a photo of him and Simmons.
At the age of 36, Simmons had a theory named after himself, "Chen-Simmons Theory"; At the age of 37, he won the veblen Prize in mathematics.
The formula of "Chen Simmons Theorem" hangs in Simmons' office.
At this point, Simmons has possessed all that a mathematical genius should have, academic status and the theory of naming himself-his academic career has reached its peak.
Although everyone in the academic circles knows it, the thirst for money of mathematical geniuses is not satisfied. In the eyes of friends, Simmons has his own unique view of wealth. He doesn't want to have luxuries. He believes that wealth can make people independent and influential. What he wants to do is change the world.
So Simmons decided to climb another mountain.
From 65438 to 0978, the elasticity of various currencies increased and began to decouple from the price of gold, and the pound also began to plummet. The 40-year-old Simmons saw this market opportunity and formally decided to leave the academic circle and join in foreign exchange trading to start his own investment company. He founded a company called Monemetrics, which is the predecessor of the famous hedge fund Fuxing Technology Company in the future.
He started a company in an ordinary town on the north shore of Long Island and hired a group of employees who knew nothing about Wall Street's investment theory.
Completely different from the thinking of investors at that time, Simmons adopted a similar strategy when cracking the code in the Institute of National Defense Analysis. He is convinced that he can use mathematical model to dig out the hidden law behind the price-"there must be a way to model the price."
"Never hire business school graduates or Wall Street people." Almost all of the company's more than 300 employees are top scientists in the fields of mathematics, physics and statistics. Even Simmons himself has never taken a formal financial course.
There is a boutique women's clothing store, a pizza shop and Xishi Railway Station near the former office of Fuxing Technology Company.
In addition to being different in employing people, Simmons' management style is also a bit weird. His secret is to create a completely different open culture: completely transparent inside and completely opaque outside.
1. Let the smartest mind cooperate with the smartest mind.
When chatting with employees at the weekly meeting, Simmons always emphasizes several principles that he always abides by. Many of these principles were summed up by Simmons from his work experience in previous years, including his password cracking work in the Institute of National Defense Analysis and his later cooperation with outstanding mathematicians at the State University of New York at Stony Brook. Now, he lets employees of Fuxing Technology Company fully apply these principles.
A key principle advocated by Simmons is that in order to produce ideal results, scientists and mathematicians need to debate and share ideas with each other.
This truth seems self-evident, but as far as the situation at that time is concerned, it can be called radical. Fuxing Technology Company has many employees with super IQ-you can imagine them as "Schell" in The Big Bang Theory. They have gained achievements and recognition early in their careers, but they are only familiar with personal research, not cooperation with others. In fact, a talented quantitative analyst may be the last person to cooperate with others. A classic industry joke: An introverted scientist will stare at your shoes while talking to you, while an extroverted mathematician will stare at your shoes.
Even the secretary of the company has access to the absolute openness of the source code.
General trading companies usually let researchers and other employees work on isolated islands, and sometimes even encourage employees to compete with each other.
However, Simmons insists on taking a different approach: Medal Fund has a single and integrated trading system, and all employees can access every line of source code behind the money-making algorithm. These codes can be read in plain text in the company intranet, and there is no code hidden in a corner that only senior managers can access. Anyone can try to modify the code to improve the trading system.
Simmons wants his researchers to exchange ideas, not just their private projects. At one time, even the company secretary could access the source code, although it proved unnecessary.
Simmons created an unusual open culture. Employees can go in and out of colleagues' offices, make suggestions and initiate cooperation. When encountering setbacks, they tend to share their work with others and ask for help instead of starting new projects to ensure that, as Simmons said, they will not waste any promising ideas.
The bonus depends on the performance of the fund, not whether your boss likes you or not.
Simmons' salary design allows employees to focus on the overall success of the company. Every six months, employees can get bonuses, but only if the profit level of the medal fund exceeds a certain standard. Fuxing technology company will postpone the bonus payment to several years to retain talents.
Whether employees find new trading signals, complete data processing or perform other lower-key tasks, as long as these employees can stand out and the Medalian Fund develops well, they will get extra points. Each reward point represents the percentage of Fuxing technology company's profit pool, which is calculated according to a clear and easy-to-understand formula.
"Employees have known their bonus formula since the beginning of the year. Except for a few coefficients depending on the level, everyone's formula is similar. " GlenWhitney, who used to be a member of the core management of Fuxing Technology Company, said,
"Do you want more bonuses? Then do everything possible to help the fund get higher returns, find data sources with predictive effects, fix loopholes to make the code run faster, and have a cup of coffee with women with good ideas downstairs ... The bonus is to see the performance of the fund, not to see if your boss likes you. "
When Simmons initially distributed the shares, he awarded 65,438+00% of the shares to Laufer, who made great contributions to the medal fund, and later gave a considerable number of shares to Brown, Mercer, Mark silber and others. These practices have reduced Simmons' shareholding ratio to a little over 50%. Other outstanding employees can buy shares representing the shares of the company. Employees can also invest in medal funds, which may be their greatest benefit.
4. Attract more talents through informal and academic working atmosphere.
Although the medal fund has considerable income, recruitment is still a difficult problem. In order to attract talents, Simmons, Nick Patterson and other executives all emphasize the positive aspects of their work.
For example, many scientists and mathematicians are natural problem solvers, so the executives of Renaissance technology companies will talk about the rewards of solving difficult trading problems, and some scholars will be attracted by the friendly atmosphere among company colleagues and the pace of hedge funds.
Scholars should struggle on academic papers for many years; In contrast, Fuxing technology companies can promote their achievements in a few weeks or even days, and this sense of urgency caters to the preferences of some scholars.
The overall atmosphere of Fuxing Technology Company is informal, academic and full of urgency. One visitor compared it to "permanent exam week".
The interview process of Fuxing technology company is usually step by step: discuss your past achievements, solve some challenging problems involving probability theory and other fields, and then see if there are suitable positions in the company. Usually, candidates will be selected by six staff members in rotation, and each interview will last for 45 minutes. Then, candidates will be asked to introduce their scientific research achievements to the whole company in the form of lectures.
Simmons usually focuses on recruiting experienced scholars, who often have many academic achievements. In addition, fresh doctoral students who can write academic papers that make them feel excellent are also favored.
However, even celebrities must pass the programming test. This requirement shows an attitude that everyone should master computer programming technology and be willing to perform some tasks that other companies may consider unimportant. They must also be able to live in harmony with each other.
Simmons said in a speech at MIT, "I think everything has its beauty, at least for me." You may ask, what are the advantages of building a trading company? Its beauty lies in doing the right thing, finding a group of right people and doing the right thing in the right way.
Like many new technologies, quantitative investment was the object of ridicule when it first appeared. No one believes that computers can invest like humans. But Simmons keenly foresaw that with the development of computer technology, "impossible" would come true one day.
With the geometric growth of trading data today, quantitative investment has become the mainstream in both futures market and stock market. In the disorderly fluctuation of stock price, you can also find real gold by boring mathematical analysis method, which is the best proof that knowledge is exchanged for wealth.
Just in June this year, 65438+ 10 1, the all-powerful "king of quantitative funds" Simmons announced his retirement and devoted himself to the foundation cause.
"My first occupation is a mathematician, my second occupation is a businessman, and my third occupation is a philanthropist in a sense," he said.
In recent years, he has sponsored thousands of math and science teachers in public schools, promoted the research and development of autism therapy, and expanded our understanding of the origin of life, which can also be described as "giving back knowledge with wealth".