Jim Simons’s Success at Renaissance Took Twelve Years

I’m finishing up reading The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution by Gregory Zuckerman. The book gives readers insights into Jim Simons’s life and how he built Renaissance Technologies into a $130 billion investment firm.

As I shared yesterday, Simons racked up accomplishments early in his career. He was an Ivy League professor and started a manufacturing company in Colombia, among other things. When he started RenTech in 1978, Simons was forty. His success at RenTech was anything but up and to the right.

Simons knew that to succeed, he had to build an environment of original thinking and exploration and also one of collaboration and great ideas that could serve as a foundation for other people’s future ideas.

To do this, he recruited mathematicians, let them develop mathematical models, and gave them capital to trade using their models. Some worked for RenTech, and others Simons seeded as independent firms. He encouraged everyone associated with RenTech to collaborate and share learnings.

Simons closely monitored the models’ progress and returns. Some took several years to reach production and longer to become profitable. Simons merged the most promising models into a single model at his flagship Medallion fund. And once a model was incorporated into the fund’s model, it was part of RenTech’s core investment approach and something others could continually improve upon.

Navigating this journey was far from easy for Simons. He went through a divorce, two of his sons died in separate freak accidents, and he struggled with self-doubt. Professionally, he endured crushing losses at times. Some key employees and fund managers whom he’d seeded jumped ship. Simons pushed through.

In 1990, twelve years after launching, RenTech was finally on solid footing. A reliable statistical model that could generate above-average returns was in place. RenTech had only $30 million in assets but generated a pre-fee profit of $23 million that year (the year before, it was $0). Three years later, the firm had $122 million in assets and generated $66 million in pre-fee profits. By 1998, the firm had $1.1 billion in assets and generated $628 million in pre-fee profits.

Simons’s early career was characterized by rapid success and many accolades. Then he became a founder. Twelve years of pain followed before he saw consistent and accelerating results. Every founder’s journey is different, but Simons’s reminds us that sometimes things take longer than we planned: persistence is key. You have to stay in the game long enough to win!

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