Thanks to Greg Zuckerman’s recent blockbuster book “The Man Who Solved the Market” we learned a lot of fresh facts previously unknown about Jim Simons and Renaissance Technologies.
In our conversation with Greg, we explore critical softer factors behind Jim Simons’ success. During the next several blogs, we plan to share what we learned.
PEOPLE SKILLS
Question:
Greg, how would you describe, Jim's personality, his strengths and what makes him unique and different compared to typical investment managers?
Greg:
I think what distinguishes him is that he's actually a good people person. He's a good manager. A lot of what I took from my own research and from the book, are management lessons and I was sort of surprised by that. When I think of Jim, I think of him as being a quant, but he's just as much a manager of people.
Someone internally said to me, “his genius is managing genius”. And I sort of got that, I understood that after doing my research. So, I think that's what sets him apart— that he could do both. He can manage people and understands how to motivate them and create incentives in very unique ways and create a structure and a culture that's really distinct from others. But he also understands how to create algorithms and to be a quant.
CULTURE OF COLLABORATION and URGENCY
Question:
Can you tell us more about that? I'm really interested in the culture aspect. How does he do it? What's unique about those aspects? Why he can keep doing it and others can not?
Greg:
Simons believes that the best scientific work is done when people work together in cooperation, they're collegial. And it's kind of unique on Wall Street, especially in the quant and elsewhere too. People often work in silos and there's competition and sometimes competition can bring out the best. But Simons would argue that he wants people when they get stuck in a problem to leave it for other people to see and work on.
And they as a result have this open code where anybody, literally a junior employee to a senior employee, can see their code and see what other people are working on. So inevitably when someone gets frustrated and leaves a problem and moves on to something else, somebody else can take a look at what they're up to, what they did, and see a way to improve it.
Simons creates this culture also with incentives. They have one Medallion fund and one P&L tally and the returns of Medallion is how everyone's paid. So people realize there a message sent that whatever you do: if it helps improve the fund's performance, you're going to get rewarded. And that could be very unsexy endeavors such as collecting data, coming up with new data, cleaning data. I mean in most other places, making sure the data is accurate is not the most prestigious of positions, but it can be a Renaissance. You find some glitch and you've really helped help out your colleagues. You get to get rewarded. Basically if a fund does well you get rewarded no matter what it is.
There's also a certain sense of urgency and it's kind of surprising because the returns are ridiculous. They're up 66% a year on average before fees since 1988 and I sort of expected that to mean that “we're all okay, they come in, turn on the computer, sit back, go get a cup of coffee and let the computers run”. There's a little bit of an element of that because there's a lot of machine learning, but a lot of it is just being nervous about the future and the markets are changing and can they keep up. So there's a certain sense of urgency that I think helps them as well.
Quotes from the Book
“Simons created a culture of unusual openness. Staffers wandered into colleagues’ offices offering suggestions and initiating collaborations.”
““The chemistry is important,” says a current executive. “It’s like joining a family.””
““If you didn’t make much progress, you’d feel pressure” ”