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This is only half of it. If you look at all their early employees, Robert Frey/James Patterson have profiles, they were people who knew the maths AND knew how t

This is only half of it. If you look at all their early employees, Robert Frey/James Patterson have profiles, they were people who knew the maths AND knew how to apply it. If you look at AHL, they have lots of people who know the maths. They have their own institute at Oxford ffs (the number of people who don't have PHds from Oxbridge there is small), and they have crap performance, year-in, year-out. It is a typical flaw of human nature to assume that when someone else does something extraordinary that they have some secret knowledge you don't. People on here talking about discrete topology and all kinds of craziness...read the book, one of the big early advantages that RenTech had was they sent some guy down to the Fed to transcribe by hand data that no-one else had. Another example is their stat arb strategy didn't work for years, until they worked out how to get good execution. I am not saying that it is only this but if you read the book, there are several instances where RenTech try to apply something complex and it doesn't work...and the success they have is after doing something simple, marginally better than anyone else...again, to a certain kind of person, this simplicity is offensive but it is also why most people with technical backgrounds get destroyed by the market. Also, one thing that is kind of unclear. Simons had almost nothing to do with the perf. By the early 90s, he wasn't personally active anymore (he was spending most of his time on venture capital). The step change was hiring Brown and Mercer (again, two guys who clearly knew the maths but had spent most of their time in industry). Ppl assume that Simons is in the boiler room doing all kinds of crazy technical stuff...he wasn't (most of the time that he ran the fund, it didn't do well at all).

perl4ever 7y ago
"this simplicity is offensive but it is also why most people with technical backgrounds get destroyed by the market" Figuring out things nobody else can is the hard way to achieve. Figuring out what you don't know and never betting on it is an alternative way that doesn't require being a genius.
- hogFeast 7y ago
  Just my 2c, and this is more based on my experience academically, almost no-one figures things out that nobody else can. Innovation is largely a combination of circumstance and timing. Some ideas just have their time. Having unrealistic expectations around this is part of the problem (AHL went in thinking they could just hire a bunch of "boffins"...but they are all average, they just have PHds or whatever). I don't think it is only knowing what you don't know either. That is a component but people from academia are rarely overconfident, the opposite is usually true (they tend to react badly under pressure). These people have a "circle of competence", they know what they don't know...but they don't really have anything else. All these places are churning massive resources into education, into human capital...is that working? It clearly works in some places and not others. I am just very cautious of the "know what you don't know" argument because it tends towards thinking everyone should be specialists...and I don't think the world works that way.
  - perl4ever 7y ago
    Knowing what you don't know doesn't correspond to a level of confidence or humility, in the way I meant it. You can have low confidence and discount the value of things you know, while still assuming you know things you don't.

perl4ever 7y ago

"this simplicity is offensive but it is also why most people with technical backgrounds get destroyed by the market" Figuring out things nobody else can is the hard way to achieve. Figuring out what you don't know and never betting on it is an alternative way that doesn't require being a genius.

hogFeast 7y ago
Just my 2c, and this is more based on my experience academically, almost no-one figures things out that nobody else can. Innovation is largely a combination of circumstance and timing. Some ideas just have their time. Having unrealistic expectations around this is part of the problem (AHL went in thinking they could just hire a bunch of "boffins"...but they are all average, they just have PHds or whatever). I don't think it is only knowing what you don't know either. That is a component but people from academia are rarely overconfident, the opposite is usually true (they tend to react badly under pressure). These people have a "circle of competence", they know what they don't know...but they don't really have anything else. All these places are churning massive resources into education, into human capital...is that working? It clearly works in some places and not others. I am just very cautious of the "know what you don't know" argument because it tends towards thinking everyone should be specialists...and I don't think the world works that way.
- perl4ever 7y ago
  Knowing what you don't know doesn't correspond to a level of confidence or humility, in the way I meant it. You can have low confidence and discount the value of things you know, while still assuming you know things you don't.