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

by Gregory Zuckerman

The gains on each trade were never huge, and the fund only got it right a bit more than half the time, but that was more than enough. “We’re right 50.75 percent of the time … but we’re 100 percent right 50.75 percent of the time,” Mercer told a friend. “You can make billions that way.” Mercer likely wasn’t sharing his firm’s exact trading edge—his larger point was that Renaissance enjoyed a slight advantage in its collection of thousands of simultaneous trades, one that was large and consistent enough to make an enormous fortune. Driving these reliable gains was a key insight: Stocks and other investments are influenced by more factors and forces than even the most sophisticated investors appreciated. For example, to predict the direction of a stock like Alphabet, the parent of Google, investors generally try to forecast the company’s earnings, the direction of interest rates, the health of the US economy, and the like. Others will anticipate the future of search and online advertising, the outlook for the broader technology industry, the trajectory of global companies, and metrics and ratios related to earnings, book value, and other variables. Renaissance staffers deduced that there is even more that influences investments, including forces not readily apparent or sometimes even logical. By analyzing and estimating hundreds of financial metrics, social media feeds, barometers of online traffic, and pretty much anything that can be quantified and tested, they uncovered ne...