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