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The INSANE Story of the GREATEST TRADER of ALL TIME | Jim Simons - YouTube
Channel: Vic
[3]
Harvard maths professor Soviets fine
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computers Whitehouse can you name one
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person who can relate to all these four
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what if I tell you on top of those this
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person also has a hedge fund that made a
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hundred and five billion dollars in
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total during his 30-year career
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with nearly 40% annual return you
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probably think such a character would be
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even to observe to exist in any
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Hollywood movies but this person is real
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and his name is Jim Simons
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the greatest trader in the entire
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history of modern finance in this video
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we will go through his incredible life
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story and most importantly how did he
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achieve all these born in 1938 to a
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middle-class American Jewish family in
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Brookline Massachusetts Jim Simon's
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loved math from the moment he understood
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what it was like many people with an
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unusual talent for numbers he began to
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show a tremendous interest in them very
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early he learned to solve complex
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problems at the age of three one day his
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parents found him dividing numbers way
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too all the way from 1024 downwards
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without knowing it the three-year-old
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Jim had started on a classic
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mathematical problem one of the problems
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the Greek philosopher Zeno had addressed
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in his famous paradox if you always have
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to travel half the remaining distance
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before reaching your destination no
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matter how small you cannot reach the
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final destination for a kid this was an
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astonishing feat after finishing high
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school he was encouraged to go into
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medicine by the family doctor who
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thought it was a good job for a bright
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Jewish boy of course Jim had other ideas
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he chose to go to MIT and study
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mathematics after struggling initially
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and failing a few tests he took out time
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one summer to really nail the complex
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theorems after that period he finally
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began to blossom
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he loved how complex formulas seemed to
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join up with other formulas across the
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whole mathematics
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realm and showing hence to solve the
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universe mystery he was often seen
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around campus lying on his back eyes
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closed
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contemplating an equation one time he
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saw two of his professors deepen their
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discussion about one math problem at
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midnight in a local cafe at that moment
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he decided this was the kind of life you
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want cigarettes coffee and maths at all
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hours after glittering academic
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achievements at MIT he soon completed
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his PhD at Berkeley in two years it's
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brilliance was enough to secure a
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teaching job at Harvard University he
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was a popular professor at Harvard with
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an informal enthusiastic style that
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matched his casual dress so casual that
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he never bothered wearing socks he was
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humble and approached teaching with a
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beginner's freshness in certain cases he
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even admitted that he knew Lille more
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than the students about particularly
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complex maths problems however after a
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couple of years Simon's was tired of
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teaching his life had begun to follow a
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predictable pattern with a cycle of
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lectures and polite academic socializing
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and he was terminally bored he
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desperately needed another challenge in
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his life
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[Music]
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in 1964 the opportunity had arrived and
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Simon's immediately jumped on it he was
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hired by a national intelligence group
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called IAD a helping to fight the Cold
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War
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ITA stands for Institute defense
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analysis an elite research organization
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funded by the government that hired
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mathematicians to help crack Soviet spy
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codes at the time the idea was
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struggling they hadn't actually cracked
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Soviet codes on a regular basis for over
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a decade because of this lack of success
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they decided to employ people like
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Symons with no code cracking experience
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but have genius brain power with a lot
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of fresh ideas the ideomotor was bad
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idea is good good idea is terrific no
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idea is bad it was there that Simon's
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learned how to develop mathematical
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models to interpret patterns and
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seemingly meaningless data and it was
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here that Simon's develop an ultra fast
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code breaking algorithm shortly after
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Simon's innovation intelligence experts
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in the CIA discovered that a coded
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message with an incorrect setting had
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been sent by the Soviets Simon and his
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colleagues sleep on this glitch and use
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Simon's new code breaking model to
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successfully exploit the enemy's
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internal messaging system this led to
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Simon's becoming a rock star at the idea
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and in the code-breaking community
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however this success wasn't enough for
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Jim Simon's ambitions he wanted more
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mathematical challenges more cryptic
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codes to unlock while trying to crack
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hoes at ITA Simon's used his spare time
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to research and ponder the world of
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global finance eager to earn more money
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he began thinking about ways to use his
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talent for numbers to crack the stock
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market rather than the tried and tested
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investment methods which took into
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account earnings and corporate news
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Simon's began to approach the market
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from a whole new perspective they look
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at the stock market the same way that he
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looked at
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math as an abstract intellectual system
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he developed a model that simply
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considered roofs and the stocks
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themselves rather than looking at the
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outside context he posited that the
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market had eight underlying states there
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was a system that wasn't interested in
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why the market entry insurgent states
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but simply observed the different states
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and allowed creators to make bets
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accordingly this approach was
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revolutionary simons was something of a
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trailblazer back in his time eventually
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until today predicted theory that is
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widely used in machine learning nowadays
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across different fields we resemble his
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original method in 1968 after revealing
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his ID a colleagues that he opposed to
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Vietnam War Jim Simons was fired he was
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thirty years old
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stunned and disappointed simons went
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back to his teaching job but this time
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at Stony Brook University in New York
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and Wall Street isn't that far away
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unlike his academic colleagues Simon's
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was attracted to money and he wanted to
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be rich very rich after ten years of
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teaching in Stony Brook University at
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the age of forty he left and founded his
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first hedge fund motto metrics he wanted
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to find the hidden patterns in the
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markets using his vast power his first
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move was to invite an old friend from
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ITA Leonard Bob to work with him as a
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partner Bob was also a math genius and
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the creator of the famous Bob Welch
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algorithm something that would go on to
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become a huge part of Simon's hedge fund
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Leonard Bob's algorithm worth by making
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educated predictions analyzing a chain
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of events and estimating probabilities
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for example without knowing the rules of
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baseball it could estimate what would
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happen next by simply analyzing patterns
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in the play it would go on to be
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enormous ly important for the future
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especially in today's speech recognition
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technology and even for Google search
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engine Simonson Baum figured that a
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predictive model like this would be very
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useful for monitoring the movements in
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the financial markets this was 1979
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before the days of digitized trading so
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to measure data they had to stick lots
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of paper graphs and charts over the
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walls in their tiny office in Long
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Island they started using their
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algorithm in the currency market at
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first and immediately they started to
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make a lot of money one day Simonson Bob
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were relaxing on a beach and suddenly
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Baum realized the algorithm said the
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British pounds will go up tonight so
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they rushed from the beach straight into
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the Long Island office with swimwear and
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brought tons of British pounds when it
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was so low magically as they predicted
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the pound began to climb rapidly even
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more interestingly neither of them know
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anything about British policies and they
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didn't even know why the British Pound
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would go up all they did was just follow
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their algorithm signals only within a
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couple of years Simon's hedge fund motto
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metrics has grown by tens of millions of
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dollars
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mana metrics with Simon's first real
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venture into the world of finance after
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seeing the success he began assembling a
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team of mathematicians around him and
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bomb also
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after he convinced a couple of
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well-known masked geniuses joining him
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he set up a new hedge fund with some new
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algorithms and also a brand new name
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named Roy inspired by Joseph Conrad
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novel Lord Jim however nothing is easy
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mana matrix algorithm encountered some
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major challenges although they were
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buying low they weren't selling high and
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one instance they had bought it to go
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and gold skyrocketed $865 & M's the
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algorithm didn't quickly sell enough and
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gold crashed very shortly to $500 an
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ounce they began to incur more and more
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losses like this reaching a point where
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the fund was losing millions of dollars
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every single day Marta metrics was at
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the brink of collapse
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[Music]
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fortunately Simon's were able to find
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new investors among his smart friends to
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back has fun although they knew money
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bought him some time Simon still had to
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develop a far more accurate algorithm to
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read market movements there was the
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early 1980s computers were still in the
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incubation stage while other fund
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managers were relying on old-fashioned
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fundamentals and Business News for their
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predictions Simon's decided to give
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computers a shot and he believed
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computers would handle data much better
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than human brains because computers have
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a much higher accuracy and zero emotions
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and he renamed modern metrics to
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renaissance technologies the legendary
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quantitative based hedge fund that
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changed the financial world forever was
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officially born he started Renaissance
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by collecting great amounts of
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historical data and feeding it directly
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into his computer Simon's bought stacks
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of books from the World Bank
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real some magnetic tape from commodity
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exchanges and records of currency prices
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going back to before World War two
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hidden all these so that he could use
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computers to analyze old market
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movements for consistent patterns that
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might apply to the present however the
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present was increasingly volatile though
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there were broad resemblances it was
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very difficult to extrapolate patterns
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that would be relevant to the present
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from this historical data so the goal
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had to be monitoring the present as
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swiftly as possible to do this
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Simon's and his partners brought lots of
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expensive computers enormous amounts of
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data storage and high-speed connections
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to the market data this provided live
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market prices that no one else in the
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hedge fund world had access to at the
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time they combined all these flood of
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data with bombs predictive mathematics
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and proved by another mathematician from
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the ROI fund James
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axe axe joined Simons and helped to
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refine
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Brahms algorithm so that it would be
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better to able predict more dynamic
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series like the wildly fluctuating
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markets of 1980 amazingly axe
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contribution improved their returns also
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by the time they have refined their
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algorithm more powerful computers became
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available improving their capacity to
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monitor new data after this point
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Simonson axe enjoyed working together
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more and more so two of them started a
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new hedge fund under Renaissance
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Technologies
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it's called medallion by leveraging
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Simonson ax combined brainpower together
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the medallion fund soon became
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Renaissance most profitable portfolio as
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Renaissance expanded its investment
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activities and attracted more money from
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more sophisticated investors they
[789]
aggressively search for more brain power
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they didn't want the good ones they
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wanted the best nuts one of this new
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high profile recruits was a man named
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Robert Mercer
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who was the key engineer for the
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computer giant IBM he had great success
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at IBM laying the crucial groundwork for
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advances in speech recognition
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technology a brilliant programmer a
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clear thinker and a burning desire to be
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rich he was exactly the last missing
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piece that Renaissance was looking for
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to level up to another success at
[825]
Renaissance his talent for programming
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helped to identify flaws and witches in
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the system boosting funds great
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successor of the 1990s Renaissance was
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unstoppable in the nineties averaging
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around 60% annual return with no single
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one losing year they are on the freeway
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to create history however their
[847]
collaboration eventually fell apart
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mostly it was because of Mercer's
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political affiliations quiet and with a
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dry sense of humor Mercer didn't
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immediately appear the sort of guys to
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have deep ideological convictions but he
[862]
did and he used his money earned from
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Renaissance to fund right-wing political
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movements and publications and later he
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was the key person who funded the
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right-wing campaign to elect Donald
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Trump as president this pissed Jim
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Simons off big-time
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who was a Democrat donating millions of
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dollars to their campaign for years
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people often say money doesn't change
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people it only amplifies who you truly
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are while working together at
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Renaissance in the early stage Simons
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and Mercer's differences were not that
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obvious they both love financial markets
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and love making money but after they
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become ultra wealthy the mercer financed
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donald trump's run at the presidency in
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2016 and beat Hillary Clinton who was
[910]
backed by Simons Mercer was forced to
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step down from his position at
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Renaissance
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[Music]
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the meta Chiefs were a powerful banking
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family who determined the course of
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politics art and royal power in medieval
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Italy and beyond today Jim Simons is
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certainly something like a modern-day
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equivalent of a member of that dynasty
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his achievements everything adds up are
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truly astonishing and inspiring first of
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all he is the most successful trader in
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the history of modern finance no one in
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the financial world even comes close to
[948]
his profits at Renaissance those
[951]
investing legends like George Soros
[953]
Steve Cohen and Warren Buffett are not
[956]
even close to what Jim Simon's have
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achieved his hedge fund made a hundred
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and five billions in total sum from 1988
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to 2018 the annual return was some
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mind-blowing 66 percent before fees and
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39 percent after fees most importantly
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his quantitative and algorithmic
[979]
approach created a huge revolution
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impacting not only the financial
[983]
industry but also other industries too
[986]
for example there is no professional
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sports team in the world nowadays that
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doesn't rely on data and quantitative
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analysis to make decisions and
[996]
predictions but Simon's legacy doesn't
[1000]
stop at industrial and political level
[1003]
later on he established the Simons
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Foundation for education and health he
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founded the mass for America initiative
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also he donated great sums of money to
[1014]
Stony Brook University from a boy that
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likes to close his eyes and dream of
[1019]
math equations Jim Simon's has come to
[1022]
be one of the most powerful and magmatic
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people and the world
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[Music]
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