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Comparing Renaissance to any other firm is like comparing Berkshire-Hathaway to an average value-investment fund, or PIMCO to any other fixed income trading fir

Comparing Renaissance to any other firm is like comparing Berkshire-Hathaway to an average value-investment fund, or PIMCO to any other fixed income trading firm. James Simons (founder of Renaissance) was so smart he _co-founded a field of mathematics [differential co-homology] with Chern. Not only does the fund have a huge head-start (they were purely algorithmic trading in the 80s), but their commitment to academic pursuit over monetary gain is unparalleled. I.e., when asked who an ideal hire was for Renaissance, Simons said "anyone who has a PhD [in the applied or pure sciences, statistics, mathematics]" (you get a PhD because you love the field, you go to HBS or Wharton to make money). These guys are trained professionals who've dedicated literally decades to graduate level pure & applied mathematics, and are simply of another a caliber. I can read JAMA all I want, quite fun indeed, but if I practice surgery, I'm certainly going to slice an artery. You have a better chance of going to Atlantic City and putting 100k on black than successfully making money in trading any set of securities, whether its Asian fixed-income, blue chip Wall Street equities, or CME pork belly futures. Just because you back-tested something successfully doesn't mean you should throw your hat into the ring, the sharks will bite till there's nothing left.

melling 11y ago
I never said that it was easy or that it took a little math. I said that it has been done before and that we are here to learn. I also can't figure out why I get all kinds of "it's really hard" and "be very afraid" comments on HN.
- mahyarm 11y ago
  If you fuck up a computer, short of messing with BIOS voltage configurations, you can reset at no cost. It's near costless to make mistakes most of the time. With finance, high voltage electronics, and explosive chemistry, you can have very high cost consequences if you screw up. And people often delude themselves in finance. There is a also a return aspect in finance. You need a large amount of starting capital until 80hrs/wk of work will outpace what you make 80hrs/wk in your job. For example, lets say you make $250k/yr as a smart engineer. We assume best case scenarios and say you make %10/APR (very generous) over the index fund return. You would need $2.5million in starting capital before you can start matching your working self in returns. Most people don't have $2.5 million lying around. You would get better returns starting a business or investing in yourself and leaving your savings into index funds.
  - melling 11y ago
    Once again I'm not asking for someone to explain the pros and cons of investing. Why do you insist on answering a different question? Maybe I don't want to invest but simply want to understand how math is used to make trades without human decision making involved once the algorithms are written.
  - melling 11y ago
    Once again I'm not asking for someone to explain the pros and cons of investing. Why do you insist on answering a different question?

melling 11y ago

I never said that it was easy or that it took a little math. I said that it has been done before and that we are here to learn. I also can't figure out why I get all kinds of "it's really hard" and "be very afraid" comments on HN.

mahyarm 11y ago
If you fuck up a computer, short of messing with BIOS voltage configurations, you can reset at no cost. It's near costless to make mistakes most of the time. With finance, high voltage electronics, and explosive chemistry, you can have very high cost consequences if you screw up. And people often delude themselves in finance. There is a also a return aspect in finance. You need a large amount of starting capital until 80hrs/wk of work will outpace what you make 80hrs/wk in your job. For example, lets say you make $250k/yr as a smart engineer. We assume best case scenarios and say you make %10/APR (very generous) over the index fund return. You would need $2.5million in starting capital before you can start matching your working self in returns. Most people don't have $2.5 million lying around. You would get better returns starting a business or investing in yourself and leaving your savings into index funds.
- melling 11y ago
  Once again I'm not asking for someone to explain the pros and cons of investing. Why do you insist on answering a different question? Maybe I don't want to invest but simply want to understand how math is used to make trades without human decision making involved once the algorithms are written.
- melling 11y ago
  Once again I'm not asking for someone to explain the pros and cons of investing. Why do you insist on answering a different question?