[The Stone from Other Hills] James Simons: From Mathematical Genius to King of Quantitative Investing

#CoinDesk11月报告Gate战绩来袭
"We never rely on intuition or judgment; everything is left to the model to decide. Our goal is to capture those fleeting statistical patterns among countless small opportunities."

In the world of trading, some rely on intuition, some study fundamentals, while James Simons chose a completely different path. This mathematical genius, known as the "king of quantitative investing," founded Renaissance Technologies and its famous Medallion Fund, achieving an astonishing average return of 66% per year over 30 years from 1988 to 2018, and even managed to achieve a 98% positive return during the global financial crisis of 2008, creating an unprecedented miracle in the investment world.

Legendary Career: From Mathematician to Hedge Fund Pioneer

Simmons' career has undergone an amazing transformation from the academic hall to the financial market:

1. Academic Glorious Period (1958-1978):
· Obtained a PhD in Mathematics from the University of California, Berkeley at the age of 23
· Became a professor in the Department of Mathematics at Harvard University at the age of 26
· Received the highest honor in geometry at the age of 37 – the Oppenheimer Memorial Prize from the National Academy of Sciences.
· Co-founded the Chen-Simons theory with Chen Shing-Shen, which has become one of the foundational tools of modern physics.
2. Transition Period (1978-1988):
· Founded Renaissance Technologies in 1978, shifting from academic research to the investment field.
· Initially combined traditional judgment with quantitative methods, resulting in fluctuating performance.
3. Golden Period (1988-2010):
· Established the Grand Medal Fund in 1988, completely shifting to systematic quantitative trading.
· Recruited a large number of mathematicians, physicists, statisticians, and computer scientists, rather than finance professionals.
· Developed a revolutionary quantitative trading model to achieve sustained excess returns
4. Achievement Acquisition Period (2010 to present):
· Retired in 2010, focusing on charitable work
· Personal wealth estimated to exceed $25 billion
· Become an important contributor to the fields of mathematics and physics

Revolutionary Trading Philosophy: Data-Driven Quantitative Investment

Simmons' core trading philosophy is the coexistence of market irrationality and regularity. He believes that:

There are hidden statistical patterns in price fluctuations.

· The market shows weak efficiency in the short term, but there are still statistical biases that can be captured.
· These deviations are small and short-lived, but can accumulate into significant gains through a large number of trades.
· Human emotions are disruptive factors in market regularities and must be completely eliminated from decision-making.

Three major innovative principles:

1. Dataism
The Simmons team collects and analyzes all available data—from prices and transaction volumes to weather, news sentiment, and even satellite images. They believe that "the voice of data is more trustworthy than the voice of people."
2. Algorithm Decision Priority
The trading at Renaissance Technologies is completely executed by algorithms, and human traders are strictly prohibited from intervening in the decision-making process. Simons has stated: "We don't understand the market, but the model does."
3. Focus on Short-term Trends
The Grand Medal Fund focuses on short-term trading (typically holding positions overnight), accumulating profits through thousands of small gains, avoiding dependence on long-term trends, while significantly reducing systemic risk.

The secret weapon of the Grand Medal Fund

The success of the Grand Medal Fund is built on several unique elements:

Interdisciplinary Dream Team

· More than one third of the employees in the team hold a doctorate degree.
· The profession covers mathematics, physics, statistics, computer science, linguistics, etc.
· Employees with almost no background in traditional finance, avoiding fixed mindsets.

Signal recognition technology

· Develop complex pattern recognition algorithms to mine recurring price patterns from historical data.
· Utilize natural language processing technology to analyze news and social media sentiment.
· Utilize high-frequency trading technology to execute a large number of trades in a very short period of time.

Continuous self-innovation

· Continuously develop new strategies and eliminate old models
· Strictly confidential trading strategies, employees must sign a lifetime confidentiality agreement
· Adjust the model annually to ensure it adapts to market changes.

The Revelation of Three Stones: The Modern Significance of Simmons' Wisdom

1. Discipline beats intuition
Simmons has proven that a systematic and disciplined investment approach can outperform the market in the long run. For ordinary traders, establishing and adhering to their own trading system is more important than chasing market trends.
2. Data analysis capability is a core competitive advantage.
In an age of information overload, the ability to extract signals from the noise has become increasingly valuable. Traders should learn fundamental data analysis skills and cultivate a habit of quantitative thinking.
3. Embrace the power of technology
Simmons' success largely stems from his early recognition of the potential of computers and algorithms in trading. Modern traders should make good use of technological tools to improve decision-making efficiency and accuracy.
4. Continuous Learning and Adaptation
Simmons successfully transformed from an outstanding mathematician to an investment master, demonstrating the value of interdisciplinary learning and continuous self-renewal. In today's rapidly changing market environment, continuous learning is no longer an option, but a necessity.

Three Stones Conclusion

James Simons once admitted: "We really don't know why the model works; we only know it has worked in the past, and we believe it will continue to work in the future." This statement reflects his humility and reveals his firm belief in systematic trading.

In Simmons' view, the market is not a collection of rational economic agents, but a complex system filled with irrational behaviors and statistical laws. Through mathematical and scientific methods, stable profit models can be found within this system.

He left the trading world not only with an astonishing record of returns but also with a revolution in thinking—transforming investment from an art into a science. In a financial world filled with emotions and subjective judgments, Simons proved the value of rationality, discipline, and a systematic approach.

A true trading master is not someone who predicts the market most accurately, but rather someone who builds systems that can continuously adapt to market changes. In tomorrow's series, we will continue to explore the wisdom of another trading master and see how his quantitative thinking differs from Simmons'.