Smart money is on the science

You may never have heard of him, but James Simons is a very very good mathematician. He has had a long and distinguished career in differential geometry (a modern form of geometry, where calculus is the main tool), and he even has a mathematical object named after him. However, the Simons Cone is a 7-dimensional ‘cone’ in 8-dimensional space, so it has probably escaped your notice.

James Simons is the purest of pure mathematicians. And what does such a pure fellow do after a successful mathematical career? He establishes and runs the most successful hedge fund in the world. Simons is founder and President of Renaissance Technologies Corporation, which controls more than $14 billion, and has averaged after-fees returns of 37% over the past 18 years. Simons himself is a multi-billionaire, and has been donating much of his new-found wealth to medical research and education.

It may seem surprising that a pure mathematician could be so successful at the most applied enterprise of making money. However, Simons makes it clear that, much less than being an impediment, the ability and desire to think abstractly is the key to his company's success.

Simons describes his company as a research organization. He treats the financial market as an academic puzzle, and he concentrates upon hiring young mathematicians and scientists and programmers to help him solve it. He consciously hunts for promising young academics.

Some of this puzzling involves the direct application of mathematical models, the implementation of sophisticated algorithms, and the use of Brownian motion to analyse huge amounts of financial data. But in the main, scientific and mathematical theories do not apply to financial markets, and it is not the primary manner in which Simons chooses his team. What is important is ‘the sense and the sophistication of doing science’, the ability to think theoretically and abstractly about the problem at hand. Simons and his academic team prove how pure thought can be most impressively applicable. .

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