The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution

by Gregory Zuckerman

How the firm wagered was at least as important as what it wagered on. If Medallion discovered a profitable signal, for example that the dollar rose 0.1 percent between nine a.m. and ten a.m., it wouldn’t buy when the clock struck nine, potentially signaling to others that a move happened each day at that time. Instead, it spread its buying out throughout the hour in unpredictable ways, to preserve its trading signal. Medallion developed methods of trading some of its strongest signals “to capacity,” as insiders called it, moving prices such that competitors couldn’t find them. It was a bit like hearing of a huge markdown on a hot item at Target and buying up almost all the discounted merchandise the moment the store opens, so no one else even realizes the sale took place. “Once we’ve been trading a signal for a year, it looks like something different to people who don’t know our trades,” an insider says. Simons summed up the approach in a 2014 speech in South Korea: “It’s a very big exercise in machine learning, if you want to look at it that way. Studying the past, understanding what happens and how it might impinge, nonrandomly, on the future.”5