More on this book
Community
Kindle Notes & Highlights
Do what you like in life, not what you feel you ‘should’
“I realized I might not be spectacular or the best, but I could do something good. I just had that confidence,”
Scientists and mathematicians are trained to dig below the surface of the chaotic, natural world to search for unexpected simplicity, structure, and even beauty. The emerging patterns and regularities are what constitute the laws of science.2
once, he came to work with half a beard, explaining that he had become distracted thinking about mathematics while shaving.
“I don’t want to have to worry about the market every minute. I want models that will make money while I sleep,” Simons said. “A pure system without humans interfering.”
“I like kids,” he said with a lingering Bronx accent, “once they learn algebra.”
“Truth in life is broad and nuanced; you can make all kinds of arguments, such as whether a president or person is fantastic or awful,” he says. “That’s why I love math problems—they have clear answers.”
“What you’re really modeling is human behavior,” explains Penavic, the researcher. “Humans are most predictable in times of high stress—they act instinctively and panic. Our entire premise was that human actors will react the way humans did in the past . . . we learned to take advantage.”
“We can teach you about money,” Patterson explains. “We can’t teach you about smart.”
“We make money from the reactions people have to price moves.”
“Any time you hear financial experts talking about how the market went up because of such and such—remember it’s all nonsense,” Brown later would say.
It’s not that they wanted trades that didn’t make any sense; it’s just that these were the statistically valid strategies they were finding. Recurring patterns without apparent logic to explain them had an added bonus: They were less likely to be discovered and adopted by rivals, most of whom wouldn’t touch these kind of trades.
For Patterson and his colleagues, the LTCM collapse reinforced an existing mantra at Renaissance: Never place too much trust in trading models.
D. E. Shaw and LTCM also had drifted into markets the firms didn’t fully understand or had little experience in—Danish mortgages! Online banking! It was a reminder for Simons’s team of the need to hone their approach, not enter new businesses.
Stocks and other investments are influenced by more factors and forces than even the most sophisticated investors appreciated.
