1 00:00:02,279 --> 00:00:06,840 Speaker 1: This is Masters in Business with Barry Ridholts on Boomberg Radio. 2 00:00:07,240 --> 00:00:09,840 Speaker 1: This week on the podcast, I have a special guest. 3 00:00:10,039 --> 00:00:12,840 Speaker 1: His name is Greg Zuckerman. He is a reporter for 4 00:00:12,840 --> 00:00:15,560 Speaker 1: The Wall Street Journal and an author of numerous books. 5 00:00:16,160 --> 00:00:18,800 Speaker 1: The one we spend the better part of two hours 6 00:00:18,840 --> 00:00:22,919 Speaker 1: discussing is the Man who Solved the Market, How Jim 7 00:00:22,960 --> 00:00:27,080 Speaker 1: Simons launched the quant revolution. If you are at all 8 00:00:27,240 --> 00:00:31,880 Speaker 1: interested in so many things Renaissance technologies and Jim Simon's 9 00:00:32,400 --> 00:00:37,560 Speaker 1: quantitative investing, hedge funds, how difficult it is to beat 10 00:00:37,600 --> 00:00:43,760 Speaker 1: the market, and how astonishing the performance of Renaissance technologies 11 00:00:43,800 --> 00:00:47,080 Speaker 1: has been. Let me tease you a little bit. Thirty 12 00:00:47,159 --> 00:00:53,320 Speaker 1: years sixty a year. That is just mind blowing. Nobody 13 00:00:53,360 --> 00:00:55,639 Speaker 1: in the universe comes close. There wasn't anybody who does 14 00:00:55,720 --> 00:00:59,000 Speaker 1: half of that. That's what makes this so just completely 15 00:00:59,240 --> 00:01:04,000 Speaker 1: mind boggling ing. Uh. They are absolutely a unique entity. 16 00:01:04,240 --> 00:01:07,479 Speaker 1: You will find this to be an absolutely fascinating conversation. 17 00:01:07,560 --> 00:01:10,120 Speaker 1: I really enjoyed the book. I plowed through it in 18 00:01:10,160 --> 00:01:12,360 Speaker 1: a day and a half on the beach over the 19 00:01:12,400 --> 00:01:16,959 Speaker 1: holiday weekend, and it's not out until November five, So 20 00:01:17,120 --> 00:01:20,440 Speaker 1: by the time you're hearing this it will be available 21 00:01:20,480 --> 00:01:23,559 Speaker 1: for pre order. All I can say is I enjoyed 22 00:01:23,600 --> 00:01:26,080 Speaker 1: the book and I had a fascinating conversation with Greg, 23 00:01:26,400 --> 00:01:28,920 Speaker 1: and I'm sure you will enjoy it. So, with no 24 00:01:29,040 --> 00:01:35,759 Speaker 1: further ado, my conversation with Greg Zuckerman. This is Masters 25 00:01:35,800 --> 00:01:40,319 Speaker 1: in Business with Very Ridholts on Boomberg Radio. My extra 26 00:01:40,400 --> 00:01:43,120 Speaker 1: special guest this week. I've been looking forward to this 27 00:01:43,160 --> 00:01:46,880 Speaker 1: conversation for a long time. Greg Zuckerman, Wall Street Journal 28 00:01:46,920 --> 00:01:51,280 Speaker 1: reporter and author, two time winner of the Geralds Lobe 29 00:01:51,280 --> 00:01:54,960 Speaker 1: Award for Outstanding Business Reporting. He is the author of 30 00:01:55,000 --> 00:01:58,920 Speaker 1: The Frackers, The Outrageous inside story of the new Billionaire Wildcats, 31 00:01:59,480 --> 00:02:03,360 Speaker 1: and The Greatest Trade Ever, How John Paulson defied Wall 32 00:02:03,360 --> 00:02:07,320 Speaker 1: Street and made history. But his newest and most fascinating 33 00:02:07,320 --> 00:02:11,760 Speaker 1: book is Jim Simons, The man who solved the markets 34 00:02:11,840 --> 00:02:16,520 Speaker 1: and launched a quant revolution. Greg Zuckerman, Welcome to Bloomberg. 35 00:02:16,600 --> 00:02:19,040 Speaker 1: Great to be here. I think I sort of retitled 36 00:02:19,120 --> 00:02:22,920 Speaker 1: the book for you. Um So I'm I'm fascinated by 37 00:02:23,000 --> 00:02:26,320 Speaker 1: Jim Simon's ever since I was a high school student 38 00:02:26,360 --> 00:02:30,400 Speaker 1: applying to Stonybrook Math department, where he turned out to 39 00:02:30,440 --> 00:02:35,600 Speaker 1: be the chairman that plus six annual returns for thirty years. 40 00:02:35,639 --> 00:02:39,880 Speaker 1: Those are just astonishing numbers. What was it that made 41 00:02:39,919 --> 00:02:43,640 Speaker 1: you decide to write a book about the most reclusive 42 00:02:43,680 --> 00:02:47,960 Speaker 1: hedge fund manager ever? So? I've always wanted to. He's 43 00:02:48,040 --> 00:02:50,800 Speaker 1: sort of if you're a financial journalist, and I focused 44 00:02:50,840 --> 00:02:53,320 Speaker 1: on the Bye side to a large extent, there's no 45 00:02:53,360 --> 00:02:55,840 Speaker 1: one more impressive. He's the white whale, isn't he? He 46 00:02:56,040 --> 00:02:58,600 Speaker 1: is the white whale. And yet he's also got this 47 00:02:58,680 --> 00:03:02,440 Speaker 1: mystique about him, part because they're such a secretive firm. Um, 48 00:03:02,560 --> 00:03:05,560 Speaker 1: others have tried. That was part of the allure as well, 49 00:03:05,760 --> 00:03:08,920 Speaker 1: that others had reached out to him, he didn't want 50 00:03:08,919 --> 00:03:11,640 Speaker 1: to work with them. I myself had tried. He didn't 51 00:03:11,680 --> 00:03:15,160 Speaker 1: want to cooperate. Uh. For whatever reason, that created an 52 00:03:15,200 --> 00:03:18,280 Speaker 1: added a level of mystique allure for me. So I 53 00:03:18,320 --> 00:03:22,040 Speaker 1: took the challenge on. So, in pursuit of this, you 54 00:03:22,120 --> 00:03:26,519 Speaker 1: spoke to over forty current and former Renaissance employees. What 55 00:03:26,600 --> 00:03:30,320 Speaker 1: was that like? Well, early on it was quite difficult. Um, 56 00:03:30,400 --> 00:03:32,920 Speaker 1: no one wanted to talk to me. And why was that? 57 00:03:33,000 --> 00:03:36,080 Speaker 1: I know, there's a little bit of paperwork involved as 58 00:03:36,080 --> 00:03:38,880 Speaker 1: to why some people were hesitants to speak with you right. 59 00:03:39,160 --> 00:03:42,920 Speaker 1: So Jim Simmons and his colleagues at the firm have 60 00:03:43,080 --> 00:03:48,200 Speaker 1: everyone signed forty page nondisclosures non competes and they're serious 61 00:03:48,240 --> 00:03:51,480 Speaker 1: about them. Um. I was warned early on, don't waste 62 00:03:51,480 --> 00:03:54,440 Speaker 1: your time, Greg, both by people internally, people that used 63 00:03:54,440 --> 00:03:57,560 Speaker 1: to work there. Simons himself said he wouldn't talk to me. 64 00:03:58,280 --> 00:04:01,440 Speaker 1: It got worse than that. Simon started telling people I 65 00:04:01,480 --> 00:04:03,840 Speaker 1: wanted to talk to not to talk to me, not 66 00:04:03,920 --> 00:04:06,400 Speaker 1: to cooperate with me. Another word, you would set up 67 00:04:06,800 --> 00:04:09,200 Speaker 1: a conversation with someone and he would get wind of 68 00:04:09,240 --> 00:04:12,200 Speaker 1: it and and quash it. Yeah. I had meetings set 69 00:04:12,280 --> 00:04:15,760 Speaker 1: up with senior people in the industry, in the quant world, 70 00:04:15,920 --> 00:04:20,280 Speaker 1: billionaires who you wouldn't think would care what Jean Simon's 71 00:04:20,320 --> 00:04:25,279 Speaker 1: would think, these arrivals of renaissance. And yet right before 72 00:04:25,320 --> 00:04:28,120 Speaker 1: we were supposed to sit down, they said, sorry, I 73 00:04:28,120 --> 00:04:31,640 Speaker 1: can't talk to you, Greg. Jim asked me not to 74 00:04:32,360 --> 00:04:37,280 Speaker 1: the family. It's you describe very much like the mafia. Right. Yes, 75 00:04:37,480 --> 00:04:39,760 Speaker 1: we're competing, but you still are things you don't do. 76 00:04:40,120 --> 00:04:41,920 Speaker 1: And one thing you don't do in the quant world 77 00:04:42,320 --> 00:04:46,680 Speaker 1: is get Jim Simon's upset. So here I was being told, 78 00:04:47,080 --> 00:04:49,760 Speaker 1: don't waste your time, Simon isn't gonna work with you. 79 00:04:50,400 --> 00:04:52,279 Speaker 1: I'm not gonna work with you because Jim asked me 80 00:04:52,320 --> 00:04:55,840 Speaker 1: not to. I had I literally had um my advance 81 00:04:56,279 --> 00:04:59,960 Speaker 1: and not insignificant advance from my publisher on my death 82 00:05:00,440 --> 00:05:03,039 Speaker 1: in my basement in my home in suburban New Jersey, 83 00:05:03,120 --> 00:05:05,880 Speaker 1: and I wouldn't cash it because I wanted the ability 84 00:05:05,920 --> 00:05:08,480 Speaker 1: to hand it back because you were concerned you wouldn't 85 00:05:08,480 --> 00:05:12,680 Speaker 1: be able to get anything done without any cooperation. Right. Um, 86 00:05:12,760 --> 00:05:15,400 Speaker 1: If you talk to my wife, she doesn't. She can 87 00:05:15,440 --> 00:05:17,520 Speaker 1: give you all kinds of conversations where I was whining 88 00:05:17,520 --> 00:05:21,359 Speaker 1: and complaining and just frustrated and concerned that I wouldn't 89 00:05:21,360 --> 00:05:23,800 Speaker 1: be able to pull this thing off. Um. And at 90 00:05:23,880 --> 00:05:27,479 Speaker 1: one point the accounting department from Penguin, they were like, 91 00:05:27,839 --> 00:05:31,560 Speaker 1: what this has in this check? Something's wrong because who what? 92 00:05:31,560 --> 00:05:35,279 Speaker 1: What author doesn't cash a check? You know? We don't 93 00:05:35,279 --> 00:05:38,159 Speaker 1: do so well. What was the turning point where you felt, Oh, 94 00:05:38,200 --> 00:05:41,000 Speaker 1: now I'm starting to at least get a little traction 95 00:05:41,040 --> 00:05:43,360 Speaker 1: with these guys. Right. So I went out to California 96 00:05:43,440 --> 00:05:46,760 Speaker 1: and I spoke to some former colleagues of Simons who 97 00:05:46,760 --> 00:05:50,160 Speaker 1: worked with Jim back in the day, back in the 98 00:05:50,240 --> 00:05:54,159 Speaker 1: eighties and nineties, right, and their story was just too 99 00:05:54,200 --> 00:05:57,760 Speaker 1: fascinating not to do the book and too compelling. I mean, 100 00:05:57,800 --> 00:06:00,760 Speaker 1: these are interesting characters. As a or, you look for 101 00:06:01,000 --> 00:06:06,760 Speaker 1: just colorful color, colorful, intriguing individuals, characters you could write about, 102 00:06:06,760 --> 00:06:09,359 Speaker 1: and they you couldn't do better than these people. They 103 00:06:09,520 --> 00:06:12,440 Speaker 1: um were temperamental, they were high strung, they were fascinating, 104 00:06:12,480 --> 00:06:14,960 Speaker 1: they were smart. They had accomplished all kinds of things 105 00:06:15,000 --> 00:06:18,039 Speaker 1: in academia, and then they took on this challenge of 106 00:06:18,080 --> 00:06:21,240 Speaker 1: trying to conquer the markets. So and there was all 107 00:06:21,320 --> 00:06:23,480 Speaker 1: kinds of intrigue that I wasn't really aware of behind 108 00:06:23,520 --> 00:06:28,680 Speaker 1: the scenes. Um anger, fights, disputes, screaming matches, things that 109 00:06:28,760 --> 00:06:31,720 Speaker 1: you know when you think of a quant and you know, mathematics, 110 00:06:31,839 --> 00:06:36,120 Speaker 1: mathematicians maybe just I did. I didn't really think they 111 00:06:37,040 --> 00:06:42,760 Speaker 1: lend like you and not yes, exactly scientific. Right. So 112 00:06:42,800 --> 00:06:46,880 Speaker 1: when I learned about the early story of Renaissance, and 113 00:06:46,960 --> 00:06:49,120 Speaker 1: it's quite fascinating, I said, you know what, how do 114 00:06:49,160 --> 00:06:51,400 Speaker 1: I not write this book? It was a bit of 115 00:06:51,400 --> 00:06:53,680 Speaker 1: a leap. So I had the early part, but then 116 00:06:53,720 --> 00:06:55,520 Speaker 1: what do I do about the middle of the later 117 00:06:55,520 --> 00:06:58,640 Speaker 1: parts where people. There weren't as many people who had retired, 118 00:06:58,680 --> 00:07:01,320 Speaker 1: who were academics who might speak to me. These are 119 00:07:01,320 --> 00:07:04,280 Speaker 1: more recent types of individuals, some still there. I had 120 00:07:04,279 --> 00:07:06,360 Speaker 1: to I had to work somehow get them to talk. 121 00:07:06,480 --> 00:07:08,600 Speaker 1: So what was the turning point? When did you start 122 00:07:08,680 --> 00:07:11,800 Speaker 1: to have these folks speak with you? When I got 123 00:07:11,880 --> 00:07:15,240 Speaker 1: a good sense for the story? Um, I got some 124 00:07:15,360 --> 00:07:18,680 Speaker 1: people who work there to open up to me. And 125 00:07:18,960 --> 00:07:21,520 Speaker 1: why they spoke to me. I'm as a writer, you're 126 00:07:21,560 --> 00:07:25,040 Speaker 1: never a hundred percent sure. I believe that good stories 127 00:07:25,640 --> 00:07:27,960 Speaker 1: want to come out. And this is a great story. 128 00:07:28,080 --> 00:07:33,640 Speaker 1: This is the greatest financial um investor in modern history. 129 00:07:33,720 --> 00:07:37,640 Speaker 1: Jim Simmons. His firm is the most impressive money making 130 00:07:38,200 --> 00:07:42,640 Speaker 1: operation in Wall Street history. So some of them were proud, 131 00:07:42,800 --> 00:07:45,320 Speaker 1: and some of them actually wanted to share and talk 132 00:07:45,360 --> 00:07:49,160 Speaker 1: to extent that they could, they kind of wouldn't tell me. Usually, 133 00:07:49,400 --> 00:07:52,520 Speaker 1: no secret source came out. Well, it leaked out so 134 00:07:52,560 --> 00:07:54,559 Speaker 1: here and there. So that's my job as a writer. 135 00:07:54,760 --> 00:07:56,960 Speaker 1: You get a little snippet, they drop a little crumb 136 00:07:57,240 --> 00:07:59,200 Speaker 1: here and there. It's my job to kind of put 137 00:07:59,200 --> 00:08:01,040 Speaker 1: it together into some thing of a loafer, at least 138 00:08:01,040 --> 00:08:03,440 Speaker 1: a half a loaf for for the readers, so they 139 00:08:03,440 --> 00:08:06,480 Speaker 1: gave me enough to give me encouragement. Yes, they weren't 140 00:08:06,560 --> 00:08:08,880 Speaker 1: laying out all the algorithms for me, not that I 141 00:08:08,920 --> 00:08:11,080 Speaker 1: would understand a mena or anyway. When when I finally 142 00:08:11,280 --> 00:08:14,440 Speaker 1: and then I finally got Sigmons to speak, so discussed 143 00:08:14,480 --> 00:08:18,120 Speaker 1: that because for the longest time he said, no, I 144 00:08:18,160 --> 00:08:19,800 Speaker 1: want nothing to do with this, so I'm never gonna 145 00:08:19,800 --> 00:08:22,280 Speaker 1: speak to you. How did you finally get him to 146 00:08:22,320 --> 00:08:24,400 Speaker 1: sit down with you? And and how long did you 147 00:08:24,440 --> 00:08:27,080 Speaker 1: talk to him for? So we had and still have 148 00:08:27,200 --> 00:08:30,679 Speaker 1: a complicated relationship. He didn't want the book to be written. 149 00:08:30,720 --> 00:08:33,800 Speaker 1: He still, as of a few months ago, asked, do 150 00:08:33,880 --> 00:08:36,200 Speaker 1: we do I really have to write this book? Um? 151 00:08:36,360 --> 00:08:38,719 Speaker 1: Part of it is the guy makes a billion and 152 00:08:38,760 --> 00:08:42,520 Speaker 1: a half dollars hardly going into the office and doesn't 153 00:08:42,520 --> 00:08:45,559 Speaker 1: want to rock the boat. These are hard working individuals, 154 00:08:45,840 --> 00:08:49,599 Speaker 1: scientists he's hired or helped hire or have joined subsequently, 155 00:08:49,920 --> 00:08:51,760 Speaker 1: and he doesn't want to get them angry. He says, 156 00:08:51,800 --> 00:08:54,320 Speaker 1: he's a generally a pretty good guy, and here they 157 00:08:54,320 --> 00:08:57,280 Speaker 1: are working, slaving away. And if the guy making a 158 00:08:57,320 --> 00:09:00,360 Speaker 1: billion and a half dollars is talent secrets, um, they 159 00:09:00,360 --> 00:09:03,679 Speaker 1: wouldn't be thrilled with him. Um, So he didn't really 160 00:09:03,679 --> 00:09:07,240 Speaker 1: want this book being told. And but at some point 161 00:09:07,840 --> 00:09:11,439 Speaker 1: he got the message that I wasn't going away, and 162 00:09:11,520 --> 00:09:13,800 Speaker 1: he realized I was doing serious research. So I was 163 00:09:13,880 --> 00:09:17,320 Speaker 1: talking to academics he worked with back in the day, 164 00:09:17,840 --> 00:09:21,439 Speaker 1: Um code breakers. He's got this really rich, fascinating life 165 00:09:21,640 --> 00:09:24,640 Speaker 1: even before he got to Renaissance. If he had never 166 00:09:24,679 --> 00:09:28,120 Speaker 1: started Renaissance, he never even invested, he'd still be so 167 00:09:28,679 --> 00:09:32,040 Speaker 1: of ample sub be ample um opportunity to write a book, 168 00:09:32,040 --> 00:09:35,360 Speaker 1: there'd be reason to write about him. So UM. I 169 00:09:35,400 --> 00:09:38,480 Speaker 1: think when he started hearing from these seventy and eight 170 00:09:38,600 --> 00:09:42,600 Speaker 1: year old academics uh, from Princeton and other kinds of 171 00:09:42,640 --> 00:09:45,000 Speaker 1: places he worked with back in the seventies and in 172 00:09:45,040 --> 00:09:47,840 Speaker 1: the sixties, even uh, he got the message I wasn't 173 00:09:47,880 --> 00:09:51,200 Speaker 1: going away, And I think he realized, while better to 174 00:09:51,240 --> 00:09:55,040 Speaker 1: talk to Zuckerman than um not share any perspective in 175 00:09:55,080 --> 00:09:57,480 Speaker 1: a book about him. In his firm, the joke I 176 00:09:57,559 --> 00:10:01,520 Speaker 1: used to hear from people who had Lucked in interviewees 177 00:10:01,600 --> 00:10:04,360 Speaker 1: and other books was well, who do you want to 178 00:10:04,400 --> 00:10:06,720 Speaker 1: shape the story? Do you want do you want to 179 00:10:06,920 --> 00:10:09,040 Speaker 1: shape the narrative or do you want to let your 180 00:10:09,040 --> 00:10:11,920 Speaker 1: competitors and enemies shape the narrative, right, And that's a 181 00:10:11,960 --> 00:10:15,120 Speaker 1: lot of my approach in my day to day writing 182 00:10:15,120 --> 00:10:17,920 Speaker 1: at the Wall Street Journal. UM I called the haircut approach. 183 00:10:18,559 --> 00:10:20,480 Speaker 1: I'm gonna give you a haircut. You can sit still 184 00:10:20,559 --> 00:10:22,160 Speaker 1: or you can move around, but I'm gonna give you 185 00:10:22,200 --> 00:10:24,040 Speaker 1: a haircut. And it's not to say that it's a 186 00:10:24,120 --> 00:10:27,480 Speaker 1: threat in any way. It's being it's just honest, right, 187 00:10:27,679 --> 00:10:31,959 Speaker 1: a little blond, but yeah, And Simon's realized that there's 188 00:10:31,960 --> 00:10:34,160 Speaker 1: something to be said for working with me. But I 189 00:10:34,160 --> 00:10:37,320 Speaker 1: do want to make it clear that he wouldn't share 190 00:10:38,080 --> 00:10:42,720 Speaker 1: UM inside UM secrets, secret sauce, as you describe it. 191 00:10:42,880 --> 00:10:44,920 Speaker 1: So I don't want to suggest that he kind of 192 00:10:44,920 --> 00:10:48,000 Speaker 1: opened the kimono. That was still difficult to the end. 193 00:10:48,120 --> 00:10:51,600 Speaker 1: So it was so we sat down together multiple times 194 00:10:51,679 --> 00:10:54,319 Speaker 1: for how many hours we add it all up was 195 00:10:54,400 --> 00:10:58,080 Speaker 1: over ten hours. Really, that's a lot of Jim Simon's FaceTime. 196 00:10:58,160 --> 00:11:00,720 Speaker 1: It was a lot of time, and the top ranged 197 00:11:00,840 --> 00:11:04,240 Speaker 1: and included his recent life, which is also quite interesting 198 00:11:04,240 --> 00:11:07,359 Speaker 1: what he's trying to do an autism research, science education, 199 00:11:07,679 --> 00:11:12,359 Speaker 1: subsidizing teachers around the city of New York City, UM politics, 200 00:11:12,360 --> 00:11:15,000 Speaker 1: a little bit too. He's a big funder of democratic 201 00:11:15,000 --> 00:11:18,120 Speaker 1: causes and in candidates, so the topics ranged. He was 202 00:11:18,200 --> 00:11:21,840 Speaker 1: generous with his time and though and regarding some of 203 00:11:21,880 --> 00:11:25,160 Speaker 1: those subjects, his early life and his mathematics. A guy 204 00:11:25,200 --> 00:11:28,679 Speaker 1: like me needed help understanding. So I appreciate the help 205 00:11:28,720 --> 00:11:31,680 Speaker 1: he gave me there And in terms of there you 206 00:11:31,760 --> 00:11:34,719 Speaker 1: are you saying Jim Simons tutored you in in mathematics 207 00:11:34,720 --> 00:11:38,440 Speaker 1: to some extent. Yeah, Um, he was quite helpful, because 208 00:11:38,760 --> 00:11:40,600 Speaker 1: I listen, I had a lot of people helping me. 209 00:11:40,920 --> 00:11:44,120 Speaker 1: But he is a professor at heart, and I could 210 00:11:44,200 --> 00:11:48,000 Speaker 1: see him, even though he is objecting to your purpose, 211 00:11:48,080 --> 00:11:50,400 Speaker 1: I could see him kind of saying, no, no, let 212 00:11:50,440 --> 00:11:53,040 Speaker 1: me explain the math here and and bring you along right. 213 00:11:53,080 --> 00:11:55,480 Speaker 1: And part of it is and I've learned this something 214 00:11:55,480 --> 00:12:00,600 Speaker 1: about mathematicians. Uh, little mistakes really bothered them more than 215 00:12:01,040 --> 00:12:05,160 Speaker 1: they do me or people that come from a different perspective. 216 00:12:05,559 --> 00:12:08,640 Speaker 1: So I think it would have just bothered him had 217 00:12:08,679 --> 00:12:13,800 Speaker 1: there been significant um errors in the book, be in 218 00:12:13,800 --> 00:12:16,199 Speaker 1: regard to his early life, other parts of his life. 219 00:12:16,440 --> 00:12:19,160 Speaker 1: And I get that. You know, I would send small sections. 220 00:12:19,240 --> 00:12:22,560 Speaker 1: We don't send large sections, but small sections to various 221 00:12:22,840 --> 00:12:25,760 Speaker 1: top mathematicians, and they would get angry, Greg, this is 222 00:12:25,800 --> 00:12:29,120 Speaker 1: all wrong. How can you write this? It's overstayed as wrong. 223 00:12:29,120 --> 00:12:30,760 Speaker 1: You got you gotta change everything, and you know you're 224 00:12:30,760 --> 00:12:33,319 Speaker 1: taken aback. Early on, I was taken aback. Eventually I 225 00:12:33,640 --> 00:12:35,719 Speaker 1: learned not to be. And then you drill into it 226 00:12:36,000 --> 00:12:38,160 Speaker 1: and I don't know, they're five percent was wrong, but 227 00:12:38,200 --> 00:12:40,680 Speaker 1: those that five percent really bothers them. So I got that. 228 00:12:40,720 --> 00:12:43,120 Speaker 1: So I think, if you're Jim Simons, this guy's writing 229 00:12:43,120 --> 00:12:46,000 Speaker 1: a three fifty page book about you and your life. Um, 230 00:12:46,320 --> 00:12:49,680 Speaker 1: if they were glaring dumb errors, it would have bothered him, 231 00:12:49,800 --> 00:12:51,720 Speaker 1: really would have would have said him, said him off. 232 00:12:52,160 --> 00:12:56,920 Speaker 1: Let's talk a little bit about um, the book and 233 00:12:56,960 --> 00:13:00,679 Speaker 1: what's revealed in it. I've kind of been Jim Simon's 234 00:13:00,679 --> 00:13:04,160 Speaker 1: groupie for a few decades. I think I know about 235 00:13:04,280 --> 00:13:10,040 Speaker 1: everything that was public about him and Renaissance technologies and 236 00:13:10,080 --> 00:13:13,080 Speaker 1: who worked there and there their approaches. But I found 237 00:13:13,080 --> 00:13:17,120 Speaker 1: the book filled with so many surprises and so many 238 00:13:17,400 --> 00:13:21,280 Speaker 1: unknown things in the past. Um, tell us what you 239 00:13:21,440 --> 00:13:25,480 Speaker 1: thought was the most surprising thing you learned, and how 240 00:13:25,559 --> 00:13:30,920 Speaker 1: much of this is fresh new information that was never 241 00:13:31,440 --> 00:13:35,360 Speaker 1: publicly known before. Sure, So I've read everything that's been 242 00:13:35,360 --> 00:13:39,040 Speaker 1: written about Jim and his firm. I've watched every interview 243 00:13:39,320 --> 00:13:42,320 Speaker 1: on YouTube. Are a few here and there. Uh, And 244 00:13:42,360 --> 00:13:45,920 Speaker 1: I would say about nine of what's in my book 245 00:13:46,000 --> 00:13:48,199 Speaker 1: is fresh and new. I think that's about right. I 246 00:13:48,520 --> 00:13:51,880 Speaker 1: felt like almost everything, like every now and then I 247 00:13:51,880 --> 00:13:54,640 Speaker 1: would recognize something. Oh, I kind of knew that, but 248 00:13:55,240 --> 00:13:57,559 Speaker 1: every page it was a new revelation that was something 249 00:13:57,640 --> 00:13:59,920 Speaker 1: previously unknown to me. And as a writer, that's sort 250 00:14:00,000 --> 00:14:02,040 Speaker 1: of why I did it, to learn I didn't know 251 00:14:02,200 --> 00:14:04,960 Speaker 1: enough about this world and about Jim, and each of 252 00:14:05,000 --> 00:14:07,600 Speaker 1: these characters is potentially a book on their own right. 253 00:14:07,640 --> 00:14:09,320 Speaker 1: There were so many. I think that was one surprise. 254 00:14:09,640 --> 00:14:12,200 Speaker 1: There's so many rich characters at their firm. It's not 255 00:14:12,240 --> 00:14:14,240 Speaker 1: sort of Jim and Okay, you hear a Bob Mercer 256 00:14:14,280 --> 00:14:20,520 Speaker 1: and and Peter Brown. Time after time. I ran into fascinating, accomplished, quirky, 257 00:14:20,760 --> 00:14:25,680 Speaker 1: colorful characters. And the other surprise is how hard it 258 00:14:25,760 --> 00:14:28,880 Speaker 1: is to be a quant So you think of these 259 00:14:28,880 --> 00:14:32,920 Speaker 1: guys are mathematicians, they're scientists. You would think that instinctively 260 00:14:33,360 --> 00:14:37,040 Speaker 1: they would want to pursue a quantitative approach, the scientific method. 261 00:14:37,320 --> 00:14:39,960 Speaker 1: That's where they come from. And yet from the beginning 262 00:14:40,000 --> 00:14:42,640 Speaker 1: from Simons and his early colleagues, guys like Lennie Boum, 263 00:14:43,240 --> 00:14:46,520 Speaker 1: Jim Max, Ellen, Burla Camp others, you see that there's 264 00:14:46,600 --> 00:14:48,800 Speaker 1: they're fighting their instinct there. Really their instinct is to 265 00:14:48,920 --> 00:14:51,280 Speaker 1: kind of just trade like you and I do, just 266 00:14:51,280 --> 00:14:53,840 Speaker 1: sort of look at the news and anticipate where the 267 00:14:53,840 --> 00:14:56,280 Speaker 1: world is going and the markets are going. And they 268 00:14:56,360 --> 00:14:59,640 Speaker 1: sometimes fall back into that pattern, even they that was 269 00:14:59,680 --> 00:15:02,520 Speaker 1: shot can. Uh. The early parts of the book describe 270 00:15:02,600 --> 00:15:06,520 Speaker 1: Jim Simons as the derogatory term I use. He's a 271 00:15:06,560 --> 00:15:12,280 Speaker 1: macro tourist. He's like every day trader, watching TV, looking 272 00:15:12,280 --> 00:15:15,600 Speaker 1: for news, trading in and out of stuff, doing good 273 00:15:15,640 --> 00:15:19,240 Speaker 1: some days, losing money the other days. But there's nothing 274 00:15:19,480 --> 00:15:23,160 Speaker 1: special or unique about that. He was every newbie trader, 275 00:15:23,320 --> 00:15:26,440 Speaker 1: wasn't he listen? He had unique approaches what he thought 276 00:15:26,440 --> 00:15:29,520 Speaker 1: were unique approaches. I get into them. At one point 277 00:15:29,520 --> 00:15:34,920 Speaker 1: he consulted with this early economist named Alan Greenspan, and Uh, 278 00:15:34,960 --> 00:15:37,400 Speaker 1: they had different ways. They thought they had an edge, 279 00:15:37,400 --> 00:15:39,000 Speaker 1: but no, they didn't have an edge. Not only that, 280 00:15:39,120 --> 00:15:41,760 Speaker 1: but it tore him up inside and made it literally 281 00:15:42,160 --> 00:15:44,600 Speaker 1: physically made him ill. That he'd come into the office 282 00:15:44,800 --> 00:15:48,360 Speaker 1: just unsure of himself. Um, some days up, some days down. 283 00:15:48,640 --> 00:15:50,440 Speaker 1: They made a lot of money. At one point the 284 00:15:50,560 --> 00:15:53,120 Speaker 1: name gave back a lot of money. They were fallings 285 00:15:53,120 --> 00:15:55,240 Speaker 1: out with different types of people. But it's not just 286 00:15:55,440 --> 00:15:59,120 Speaker 1: early days. Even last year. End of last year. The 287 00:15:59,160 --> 00:16:04,720 Speaker 1: market is loading, as we recall and Q four exactly. 288 00:16:04,720 --> 00:16:07,760 Speaker 1: And Jim Simons and I write the story. I tell 289 00:16:07,760 --> 00:16:10,600 Speaker 1: this anecdote in the book. He's on vacation on his 290 00:16:10,800 --> 00:16:15,120 Speaker 1: huge ship somewhere and he starts panicking about the market 291 00:16:15,160 --> 00:16:17,520 Speaker 1: and he calls his wealth manager. The guy's managing his money. 292 00:16:17,520 --> 00:16:19,640 Speaker 1: I mean, Jim Simmons were twenty three billion dollars, so 293 00:16:19,680 --> 00:16:23,000 Speaker 1: he's quite the portfolio. And he's like, maybe we should 294 00:16:23,000 --> 00:16:26,680 Speaker 1: be buying some insurance here. That's like me panicking in 295 00:16:26,680 --> 00:16:30,600 Speaker 1: the markets down? Hey, should I be selling? Like like, 296 00:16:30,720 --> 00:16:32,560 Speaker 1: that's a big deal. I guess when it's twenty three 297 00:16:32,600 --> 00:16:34,960 Speaker 1: billion dollars, it is a big deal. It is. But 298 00:16:35,440 --> 00:16:38,600 Speaker 1: he's a guy who made his twenty three billion dollars 299 00:16:38,600 --> 00:16:42,120 Speaker 1: on the scientific approach on, not on testing ideas and 300 00:16:42,440 --> 00:16:46,960 Speaker 1: having systematic approach to investing, not on these narratives and 301 00:16:47,320 --> 00:16:51,040 Speaker 1: nervousness and reacting all these behavioral mistakes that we all make. 302 00:16:51,280 --> 00:16:54,720 Speaker 1: He was about to make too. So even an eight 303 00:16:54,840 --> 00:16:57,120 Speaker 1: year old, the genius, the guy who solved the market, 304 00:16:57,200 --> 00:17:00,560 Speaker 1: as I call it, he is apt to um to 305 00:17:00,720 --> 00:17:03,800 Speaker 1: trade like everybody else. And the point being, it's not 306 00:17:03,880 --> 00:17:06,560 Speaker 1: easy being a quant You have to fight your instincts 307 00:17:06,560 --> 00:17:09,360 Speaker 1: to some extent, even when you're a scientist and a mathematician. 308 00:17:09,800 --> 00:17:12,520 Speaker 1: So let's talk about that a sec. In the early 309 00:17:12,640 --> 00:17:17,400 Speaker 1: days when renaissance was starting to become who Who, they 310 00:17:17,440 --> 00:17:22,639 Speaker 1: eventually become their big secret. They were really big data. 311 00:17:22,760 --> 00:17:26,280 Speaker 1: Before big data was a thing, before crisp Ereuters or 312 00:17:26,400 --> 00:17:32,880 Speaker 1: Dow Jones or Bloomberg made commercial database of market prices available, 313 00:17:33,480 --> 00:17:37,720 Speaker 1: they were effectively assembling their own. That was fairly unique, 314 00:17:37,760 --> 00:17:40,399 Speaker 1: wasn't it. That's exactly right, and that was one of 315 00:17:40,440 --> 00:17:43,560 Speaker 1: the early edges. And frankly, they were collecting data when 316 00:17:43,600 --> 00:17:45,680 Speaker 1: no one cared about it, no one saw a need 317 00:17:45,760 --> 00:17:49,200 Speaker 1: for it. This is pre Bloomberg, pre everything else. They 318 00:17:49,200 --> 00:17:53,160 Speaker 1: were going down to the Fed collecting obscure pieces of data, 319 00:17:53,240 --> 00:17:57,359 Speaker 1: economic and other. They were going back in history, so um, 320 00:17:57,400 --> 00:17:59,080 Speaker 1: it was a several years later, but they were collecting 321 00:17:59,119 --> 00:18:02,200 Speaker 1: stuff from like the late eighteen hundreds and they didn't 322 00:18:02,240 --> 00:18:04,520 Speaker 1: really have a purpose for a lot of that data 323 00:18:04,720 --> 00:18:08,720 Speaker 1: at the time. They had this instinct instinct that maybe 324 00:18:08,720 --> 00:18:12,119 Speaker 1: it's because they were scientists, that the more data the better, 325 00:18:12,200 --> 00:18:15,000 Speaker 1: and any kind of data could be helpful and maybe 326 00:18:15,000 --> 00:18:17,640 Speaker 1: not right now, but at some point down the road. 327 00:18:17,720 --> 00:18:20,080 Speaker 1: And yet that gave them a complete advantage because then 328 00:18:20,080 --> 00:18:21,919 Speaker 1: they could test, they could create models, they could do 329 00:18:21,960 --> 00:18:25,240 Speaker 1: scenarios that others couldn't. And the way I like in 330 00:18:25,320 --> 00:18:27,240 Speaker 1: it is too a little bit like if you wanted 331 00:18:27,280 --> 00:18:31,639 Speaker 1: to create a library, Um, how long would it take you? Okay, 332 00:18:31,720 --> 00:18:34,000 Speaker 1: like your public library or local library probably take you, 333 00:18:34,040 --> 00:18:35,680 Speaker 1: I don't know, a few months to collect all the books. 334 00:18:35,760 --> 00:18:38,040 Speaker 1: But what if you wanted to create the Library of Congress. 335 00:18:38,119 --> 00:18:40,439 Speaker 1: It would be pretty impossible. Some of that stuff you 336 00:18:40,480 --> 00:18:42,880 Speaker 1: just can't get your hands. And that's what Renaissance still 337 00:18:42,920 --> 00:18:46,560 Speaker 1: has today and and it does help them. So the 338 00:18:46,720 --> 00:18:50,840 Speaker 1: cost of building that database, and they were fastidious about 339 00:18:50,880 --> 00:18:54,120 Speaker 1: making sure the data was clean and up to date 340 00:18:54,200 --> 00:18:58,800 Speaker 1: and accurate. How to be substantial. The typical hedge fund 341 00:18:58,920 --> 00:19:03,879 Speaker 1: charges too, and twenty two percent management feed of the profits. 342 00:19:03,920 --> 00:19:07,119 Speaker 1: But Simon thought the cost of the database needs to 343 00:19:07,160 --> 00:19:10,800 Speaker 1: be passed along. Two investors. So instead of charging two 344 00:19:10,800 --> 00:19:16,200 Speaker 1: and twenty, he charged brace yourself five and forty four. 345 00:19:17,000 --> 00:19:19,880 Speaker 1: Who the hell would pay that sort of fee when 346 00:19:19,960 --> 00:19:23,520 Speaker 1: you're making a lot of money and LP how will 347 00:19:23,760 --> 00:19:27,439 Speaker 1: have pay that kind of fee? And they their their returns, 348 00:19:27,640 --> 00:19:31,040 Speaker 1: which for the first time ever have been released, because 349 00:19:31,040 --> 00:19:34,240 Speaker 1: it's only always been a rumor. You're appendix one or 350 00:19:34,240 --> 00:19:37,120 Speaker 1: Appendix B, I don't remember which. The end of the book, 351 00:19:37,200 --> 00:19:44,359 Speaker 1: you note since the medallion has averaged annual returns of 352 00:19:44,560 --> 00:19:48,879 Speaker 1: sixty but that's before those five and thirty six or 353 00:19:48,880 --> 00:19:53,640 Speaker 1: five and forty four fees. Afterwards, it's only thirty nine 354 00:19:53,680 --> 00:19:57,160 Speaker 1: point one percent a year for thirty years. Those are 355 00:19:57,240 --> 00:20:02,919 Speaker 1: just eye popping astonishing returns, right uh, and right as 356 00:20:02,960 --> 00:20:06,080 Speaker 1: you suggest, you will pay for those kind of returns. 357 00:20:06,080 --> 00:20:08,159 Speaker 1: You pay almost any feed. They kept raising the fees 358 00:20:08,720 --> 00:20:12,760 Speaker 1: partly to discourage investors from sticking in the funds, and 359 00:20:12,800 --> 00:20:15,040 Speaker 1: eventually they kicked out all the investors. And that's part 360 00:20:15,040 --> 00:20:17,880 Speaker 1: of their secret to that they kept it. They kept 361 00:20:17,960 --> 00:20:20,960 Speaker 1: medallion as they realized it couldn't return these sort of 362 00:20:21,040 --> 00:20:24,119 Speaker 1: numbers beyond what is it, seven billion or eight billion 363 00:20:24,160 --> 00:20:26,600 Speaker 1: dollars seven eight billion a year, So you know, you 364 00:20:26,720 --> 00:20:28,679 Speaker 1: got to give Jim Simons all kinds of credit and 365 00:20:28,720 --> 00:20:31,320 Speaker 1: his colleagues, and they are the greatest modern day investors 366 00:20:31,320 --> 00:20:34,240 Speaker 1: in history. But you also want to um note that 367 00:20:34,320 --> 00:20:36,480 Speaker 1: they didn't they weren't able to grow it, and they 368 00:20:36,560 --> 00:20:39,199 Speaker 1: knew they couldn't grow it beyond what it is right now, 369 00:20:39,200 --> 00:20:41,880 Speaker 1: we're talking about the Medallion Fund ten billion dollars, So 370 00:20:42,240 --> 00:20:45,760 Speaker 1: it's not like they kept growing its fifty billion dollars. 371 00:20:45,760 --> 00:20:48,000 Speaker 1: They knew they could not get those kinds of returns 372 00:20:48,080 --> 00:20:52,359 Speaker 1: and and they currently keep the Medallion funds or actually 373 00:20:52,440 --> 00:20:55,399 Speaker 1: it's been that way for fifteen twenty years. Is that 374 00:20:55,440 --> 00:21:00,560 Speaker 1: about right for just Simon's and the employees of Renaissance, right, 375 00:21:00,560 --> 00:21:04,800 Speaker 1: Which is a wonderful way of keeping talent, recruiting in retention. Yeah, 376 00:21:04,840 --> 00:21:06,800 Speaker 1: you don't even have to pay people there. I mean, 377 00:21:06,800 --> 00:21:10,120 Speaker 1: they do pay nicely, but just the ability to invest 378 00:21:10,200 --> 00:21:14,560 Speaker 1: in Medallion retains top talent. It also makes them so 379 00:21:14,680 --> 00:21:17,080 Speaker 1: wealthy quite frankly, that a lot of these guys when 380 00:21:17,119 --> 00:21:19,320 Speaker 1: they leave, and the few women they're working there, when 381 00:21:19,359 --> 00:21:21,720 Speaker 1: they leave, they're not going to another Wall Street firm. 382 00:21:21,760 --> 00:21:24,080 Speaker 1: They've made so much money, they're doing philanthropy, They're going 383 00:21:24,119 --> 00:21:27,800 Speaker 1: back to academia other interesting things. So it's a it's 384 00:21:27,840 --> 00:21:30,280 Speaker 1: a great way to retain talent, and it's also a 385 00:21:30,280 --> 00:21:32,879 Speaker 1: great way to make sure people aren't gonna quit and 386 00:21:32,880 --> 00:21:36,120 Speaker 1: start rivals. So let's talk a little bit about one 387 00:21:36,119 --> 00:21:40,520 Speaker 1: of the most significant people in the book other than 388 00:21:40,640 --> 00:21:44,000 Speaker 1: Jim Simons, and that would be Bob Mercer. He uh. 389 00:21:44,080 --> 00:21:48,119 Speaker 1: By the time he joins Renaissance, Simmons has figured out 390 00:21:48,320 --> 00:21:50,600 Speaker 1: how to trade bonds, how to trade currencies, how to 391 00:21:50,680 --> 00:21:56,439 Speaker 1: trade commodities, but he hasn't cracked equities. So Renaissance is 392 00:21:56,480 --> 00:22:01,199 Speaker 1: a small, unimportant firm generating some nice returns, helping to 393 00:22:01,240 --> 00:22:07,040 Speaker 1: make Simon's conventionally rich, not a billionaire, but rich. But 394 00:22:07,160 --> 00:22:11,280 Speaker 1: Mercer comes along, how important to see to the Renaissance story. 395 00:22:11,600 --> 00:22:18,640 Speaker 1: That's exactly right. So around nine Renaissance was okay, middling 396 00:22:18,880 --> 00:22:21,840 Speaker 1: kind of firm, respected by those who knew it. Most 397 00:22:21,880 --> 00:22:24,400 Speaker 1: people had no clue who they were. They were doing 398 00:22:24,480 --> 00:22:28,240 Speaker 1: nicely as you suggest, in commodities and currencies, uh futures, 399 00:22:28,280 --> 00:22:31,680 Speaker 1: but couldn't make it happen in equities. And for some 400 00:22:31,720 --> 00:22:33,840 Speaker 1: of the people internally that was fine. They were getting 401 00:22:33,880 --> 00:22:37,479 Speaker 1: wealthy who cares, but no scale, no influence. No, they 402 00:22:37,520 --> 00:22:39,600 Speaker 1: don't leave a mark on Wall Street. And that's what 403 00:22:39,640 --> 00:22:41,600 Speaker 1: Simon's wanted. You want to leave a mark on the 404 00:22:41,600 --> 00:22:45,320 Speaker 1: world broadly and make a lot of money use that money. 405 00:22:45,320 --> 00:22:48,520 Speaker 1: And you couldn't do that unless they could crack equities because, 406 00:22:48,560 --> 00:22:52,160 Speaker 1: as we know, um equities, you can manage much more 407 00:22:52,240 --> 00:22:55,520 Speaker 1: money um in the in the equity world and relative 408 00:22:55,600 --> 00:22:58,360 Speaker 1: to the other types of world's fixed income in commodities, etcetera. 409 00:22:58,640 --> 00:23:00,840 Speaker 1: So they were frustrating, and there were a bunch of 410 00:23:00,880 --> 00:23:05,159 Speaker 1: turning points within the Renaissance story. They almost fell apart 411 00:23:05,240 --> 00:23:07,240 Speaker 1: a number of times, more than I would have expected. 412 00:23:07,280 --> 00:23:10,720 Speaker 1: That's another kind of surprise from my research. There were 413 00:23:10,760 --> 00:23:13,320 Speaker 1: several times where they really it was it was touch 414 00:23:13,400 --> 00:23:15,280 Speaker 1: and go whether they would keep going or not. So 415 00:23:16,440 --> 00:23:18,880 Speaker 1: there were people within the firm and said give it up, Jim, 416 00:23:19,119 --> 00:23:22,520 Speaker 1: stop trying to figure out equities. And they almost gave 417 00:23:22,600 --> 00:23:24,960 Speaker 1: it up. And then this guy's you suggest. Bob Mercer 418 00:23:25,000 --> 00:23:29,640 Speaker 1: came along and Peter Brown to speech recognition experts from IBM, 419 00:23:29,680 --> 00:23:33,400 Speaker 1: and they built an improved equities trading system, much improved. 420 00:23:33,760 --> 00:23:37,000 Speaker 1: The engineering that technologies was much better. They combined all 421 00:23:37,160 --> 00:23:40,280 Speaker 1: kinds of different signals and factors into one system, which 422 00:23:40,359 --> 00:23:42,480 Speaker 1: is one of their great advantages too, as opposed to 423 00:23:42,480 --> 00:23:45,240 Speaker 1: different models. A lot of different quant firms have multiple 424 00:23:45,280 --> 00:23:47,520 Speaker 1: different models. They have one system and it's hard to 425 00:23:47,520 --> 00:23:49,280 Speaker 1: pull that off. And that's what it took somebody like 426 00:23:49,320 --> 00:23:51,200 Speaker 1: Bomb Mercer to figure that out. So so one of 427 00:23:51,240 --> 00:23:54,360 Speaker 1: the things we haven't talked about, it would be important 428 00:23:54,400 --> 00:23:59,080 Speaker 1: to bring this up. Simmons isn't recruiting people from Wall Street. 429 00:23:59,160 --> 00:24:03,720 Speaker 1: He's not rating Morgan Stanley or Goldman Sachs. He's rating 430 00:24:03,800 --> 00:24:08,800 Speaker 1: the IBM Watson team. He's rating academic math and computer 431 00:24:08,880 --> 00:24:13,399 Speaker 1: science and physics department. He's taking former ns A codebreakers 432 00:24:13,760 --> 00:24:17,320 Speaker 1: and hiring them. This is not the usual team of 433 00:24:17,359 --> 00:24:22,200 Speaker 1: wool Street whiz kids. These are really brilliant scientists, academicians 434 00:24:22,200 --> 00:24:25,880 Speaker 1: and others, but no one is coming out of of 435 00:24:26,400 --> 00:24:30,399 Speaker 1: Lower Manhattan. They're They're really a different cud, aren't they, Barry. 436 00:24:30,440 --> 00:24:34,000 Speaker 1: That speaks to the paradox of the whole Jim Simons 437 00:24:34,040 --> 00:24:38,679 Speaker 1: and Renaissance story. The very people who figured out the market, 438 00:24:38,720 --> 00:24:41,520 Speaker 1: who conquered the market are pretty much the last people 439 00:24:41,560 --> 00:24:43,879 Speaker 1: you would have expected, because they were people that didn't 440 00:24:43,920 --> 00:24:47,000 Speaker 1: know anything about the market. It's about you didn't know 441 00:24:47,040 --> 00:24:48,760 Speaker 1: the white investing, not only that some of them were 442 00:24:48,760 --> 00:24:51,840 Speaker 1: aren't even capitalists internally when you talk to them. So 443 00:24:51,920 --> 00:24:54,320 Speaker 1: let's let's let's stick with that issue. We'll come back 444 00:24:54,320 --> 00:24:59,040 Speaker 1: to the academic nature. I'm kind of fascinated by Bob Mercer. 445 00:24:59,680 --> 00:25:02,960 Speaker 1: The uxtaposition with him is, here's a guy who by 446 00:25:03,000 --> 00:25:10,239 Speaker 1: all measures, brilliant, rational, completely mellow and even tempered, just 447 00:25:10,320 --> 00:25:15,480 Speaker 1: a data driven mathematician professionally. But then I guess that's 448 00:25:15,520 --> 00:25:19,080 Speaker 1: his uh Dr Jekyl. But the Mr Hyde is his 449 00:25:19,200 --> 00:25:23,840 Speaker 1: personality when it comes to his personal politics is the 450 00:25:23,880 --> 00:25:29,200 Speaker 1: polar opposite. He's a wild eyed conspiracy theorist. He trolls 451 00:25:29,400 --> 00:25:34,840 Speaker 1: the other Renaissance Technology employees. Simons is a big democrat. 452 00:25:35,080 --> 00:25:38,720 Speaker 1: A lot of the other academics at Renaissance are certainly 453 00:25:38,840 --> 00:25:42,800 Speaker 1: left of center, if not Democrats, or or even further left. 454 00:25:43,600 --> 00:25:48,399 Speaker 1: How does Bob Mercer play in that environment? Yeah, so, 455 00:25:48,480 --> 00:25:53,879 Speaker 1: Bob Mercer as a scientist who demanded internally that everyone 456 00:25:53,960 --> 00:25:57,560 Speaker 1: stick to the scientific method, and it's a data driven firm. 457 00:25:57,600 --> 00:26:02,200 Speaker 1: Everything has to be approved ever, no intuition exactly. And yet, 458 00:26:02,240 --> 00:26:05,280 Speaker 1: as you suggest, when it comes to his personal beliefs, 459 00:26:05,840 --> 00:26:10,960 Speaker 1: he believes every insane conspiracy theory out there. It's so 460 00:26:11,040 --> 00:26:14,640 Speaker 1: shocking compared to who he is professionally. What I'm really 461 00:26:14,640 --> 00:26:21,240 Speaker 1: trying to emphasize is how different personally his beliefs are. Yeah, 462 00:26:21,240 --> 00:26:27,680 Speaker 1: I mean, everything he argues against doing professionally he does personally. 463 00:26:28,280 --> 00:26:31,639 Speaker 1: It seems just so odd. He demands proof when it 464 00:26:31,640 --> 00:26:34,080 Speaker 1: comes to work and not so much outside of work. 465 00:26:34,119 --> 00:26:35,960 Speaker 1: I mean, for a long time he was treated as 466 00:26:35,960 --> 00:26:39,600 Speaker 1: a curiosity within Renaissance. He again to go into the 467 00:26:39,680 --> 00:26:43,879 Speaker 1: lunch room get under people's skin by talking, by sharing 468 00:26:43,920 --> 00:26:47,080 Speaker 1: some of these conspiracy theories about Hillary or somebody else, 469 00:26:47,440 --> 00:26:50,480 Speaker 1: and people weren't sure internally whether he really believed in 470 00:26:50,520 --> 00:26:52,440 Speaker 1: it or not. He was the boss, they didn't want 471 00:26:52,440 --> 00:26:54,119 Speaker 1: to challenge him too much, so for a while they 472 00:26:54,160 --> 00:26:55,960 Speaker 1: didn't take him seriously. They didn't think they needed to. 473 00:26:56,280 --> 00:26:58,359 Speaker 1: And then lo and behold as he as the firm 474 00:26:58,520 --> 00:27:01,960 Speaker 1: grew and he became a multi billionaire, they realized that 475 00:27:02,000 --> 00:27:05,639 Speaker 1: he was funding all kinds of causes that many people, 476 00:27:05,640 --> 00:27:09,199 Speaker 1: if not most people at Renaissance are really uncomfortable with, 477 00:27:09,359 --> 00:27:11,520 Speaker 1: unhappy about, and they were they were stuck. They don't 478 00:27:11,520 --> 00:27:13,600 Speaker 1: know what to do. We're talking about everything from Brexit. 479 00:27:13,640 --> 00:27:16,840 Speaker 1: He was helpful in terms of Brexit. Bright bart he 480 00:27:16,920 --> 00:27:20,159 Speaker 1: was funding bright bart Um and then he got behind 481 00:27:20,280 --> 00:27:23,160 Speaker 1: the Trump campaign. He's the one who put Kelly Anne 482 00:27:23,160 --> 00:27:26,240 Speaker 1: Conway and Steve Bannon in the Trump campaign. And one 483 00:27:26,240 --> 00:27:28,760 Speaker 1: can argue, and people have said that there may not 484 00:27:28,880 --> 00:27:31,640 Speaker 1: have been a Trump presidency were it not for this guy, 485 00:27:31,680 --> 00:27:35,800 Speaker 1: Bob Mercer, which made everyone internally uncomfortable. And and let's 486 00:27:35,800 --> 00:27:38,959 Speaker 1: set the stage for that. It's August of two thousand 487 00:27:38,960 --> 00:27:42,919 Speaker 1: and sixteen. The Trump campaign is in the midst of imploding. 488 00:27:42,920 --> 00:27:45,840 Speaker 1: There have been a series of scandals. Back when scandals 489 00:27:45,920 --> 00:27:50,360 Speaker 1: actually resonated, the whole Access Hollywood tape comes out. I mean, 490 00:27:50,480 --> 00:27:54,080 Speaker 1: the Trump campaign was circling the drain before Robert Mercer 491 00:27:54,160 --> 00:27:57,480 Speaker 1: stepped in with a few handpicked people and a little 492 00:27:57,480 --> 00:28:00,720 Speaker 1: bit of cash. Right. So what happened was Bob Mur's daughter, 493 00:28:00,760 --> 00:28:04,000 Speaker 1: Rebecca Mercer, who kind of runs the political side of 494 00:28:04,000 --> 00:28:07,000 Speaker 1: things in the family, she ran up to to Trump 495 00:28:07,600 --> 00:28:10,760 Speaker 1: at an event campaign event and say you better turn 496 00:28:10,840 --> 00:28:14,479 Speaker 1: things around or else we're done. And they've been funding 497 00:28:14,560 --> 00:28:18,439 Speaker 1: him financially. First they were Cruise, they were backing Take Cruise, 498 00:28:18,480 --> 00:28:22,200 Speaker 1: and they after a lunch between Avanca and Rebecca Mercer. 499 00:28:22,840 --> 00:28:26,160 Speaker 1: The Mercers switched gears and also CRUs lost. He got 500 00:28:26,160 --> 00:28:28,800 Speaker 1: out of the race. Then they switched gears. They became 501 00:28:28,880 --> 00:28:30,560 Speaker 1: one of the top funders. I think that they eventually 502 00:28:30,680 --> 00:28:33,960 Speaker 1: hime the top funder for for Trump. Sobca Rebecca Mercer 503 00:28:34,040 --> 00:28:37,960 Speaker 1: runs up to Donald Trump at an event says you're 504 00:28:37,960 --> 00:28:41,600 Speaker 1: gonna lose unless you drastically change things, and Trump kind 505 00:28:41,600 --> 00:28:43,840 Speaker 1: of acknowledge. He's like, yeah, what do I do? And 506 00:28:43,880 --> 00:28:46,400 Speaker 1: Rebecca said, You've got to work with this guy, Steve Bannon. 507 00:28:46,760 --> 00:28:48,920 Speaker 1: So Steve in Trump's like, all right, I'll meet with him. 508 00:28:48,960 --> 00:28:51,480 Speaker 1: So Steve Bennon goes out to the the country club 509 00:28:51,480 --> 00:28:54,240 Speaker 1: in New Jersey to talk to Trump, has to wait 510 00:28:54,440 --> 00:28:58,000 Speaker 1: through Trump goes through a couple of hot dogs, Um 511 00:28:58,160 --> 00:29:02,920 Speaker 1: ice cream Sunday, Um, plays golf and and you know, 512 00:29:03,040 --> 00:29:06,120 Speaker 1: Bannon's waiting and waiting, and finally he gets an audience 513 00:29:06,240 --> 00:29:10,280 Speaker 1: with Trump and he lays out strategically what he should 514 00:29:10,280 --> 00:29:13,120 Speaker 1: be doing, and Trump listens to him. To his credit 515 00:29:13,280 --> 00:29:15,440 Speaker 1: and the rest of this history. So if we're not 516 00:29:15,480 --> 00:29:17,640 Speaker 1: for Rebecca Mercer and Bob Mercer, it's not clear Trump 517 00:29:17,640 --> 00:29:20,000 Speaker 1: would have won. I can't get a good read on 518 00:29:20,240 --> 00:29:23,600 Speaker 1: Rebecca Mercer in the book. She's really very minor character 519 00:29:24,040 --> 00:29:27,600 Speaker 1: relative to all these other scientists. Who is she and 520 00:29:27,600 --> 00:29:31,000 Speaker 1: and and what was she doing before the election. So 521 00:29:31,120 --> 00:29:35,840 Speaker 1: Rebecca Mercer, like her father, is very conservative. Rebecca homeschools 522 00:29:35,840 --> 00:29:41,840 Speaker 1: her children and believes in small government, low taxation, hates 523 00:29:41,880 --> 00:29:46,080 Speaker 1: the Clintons like Bob Mercer um and but they also 524 00:29:46,120 --> 00:29:49,080 Speaker 1: believe in data. And they also believe in the fact 525 00:29:49,120 --> 00:29:53,080 Speaker 1: that they got really frustrated with mainstream Republicans and they 526 00:29:53,080 --> 00:29:55,200 Speaker 1: didn't think anybody was going to shake things up like 527 00:29:55,240 --> 00:29:57,920 Speaker 1: they thought it should be shaking up. And frankly, as 528 00:29:57,960 --> 00:30:00,080 Speaker 1: an outsider, as a writer, I look at these two 529 00:30:00,080 --> 00:30:02,960 Speaker 1: bowl and I see too that people that never really 530 00:30:02,960 --> 00:30:06,200 Speaker 1: contributed to broader society. It's not like I volunteered their 531 00:30:06,200 --> 00:30:10,280 Speaker 1: time to do something to run to support to fund 532 00:30:10,720 --> 00:30:14,560 Speaker 1: um broader society. By Mercer spent his whole life trying 533 00:30:14,600 --> 00:30:16,440 Speaker 1: to make money, or was first first trying to do 534 00:30:16,520 --> 00:30:19,360 Speaker 1: science and then trying to do to make money. Is 535 00:30:19,440 --> 00:30:21,280 Speaker 1: nothing wrong with that, But then all of a sudden 536 00:30:21,640 --> 00:30:23,440 Speaker 1: he becomes he and his daughter become the ones who 537 00:30:23,520 --> 00:30:27,040 Speaker 1: really have such a remarkable shift on society, on you 538 00:30:27,120 --> 00:30:30,640 Speaker 1: and I I I find that a little distasteful. Frankly, Now, 539 00:30:30,680 --> 00:30:33,560 Speaker 1: weren't they though, on a bunch of philanthropic boards in 540 00:30:33,600 --> 00:30:35,960 Speaker 1: the Museum and Natural History in New York and elsewhere? 541 00:30:36,160 --> 00:30:38,160 Speaker 1: But they had to be throwing some money around. Yes, 542 00:30:38,280 --> 00:30:41,120 Speaker 1: that that was That was pre election though, wasn't it. Uh, 543 00:30:41,160 --> 00:30:43,200 Speaker 1: that's a good question, Wenkley, go on the board. I mean, 544 00:30:43,720 --> 00:30:45,680 Speaker 1: come back to that, because it was only after the 545 00:30:45,720 --> 00:30:48,840 Speaker 1: election that the pressure started coming up to put Wait, 546 00:30:48,920 --> 00:30:51,520 Speaker 1: he's a climate denialist and he's on the board of 547 00:30:51,520 --> 00:30:56,560 Speaker 1: the Natural Museum of Is is she on? Am my? Confusing? 548 00:30:56,720 --> 00:30:59,160 Speaker 1: Who's on which board? Rebecca was on the board of 549 00:30:59,520 --> 00:31:03,280 Speaker 1: Natural um boar of of Museum and National History in 550 00:31:03,320 --> 00:31:08,360 Speaker 1: New York, But she's also a climate denial Yes, Mercer 551 00:31:08,400 --> 00:31:12,320 Speaker 1: is a climate denialist. Um. They he believes that nuclear 552 00:31:12,400 --> 00:31:15,320 Speaker 1: war may not be as harmful as we all believe. 553 00:31:15,520 --> 00:31:18,640 Speaker 1: Less should get past the radioactive cloud. It's really not 554 00:31:18,720 --> 00:31:22,560 Speaker 1: that bad. That's the argument. There you go. Um again, 555 00:31:22,640 --> 00:31:25,320 Speaker 1: not based on science. There's like some stray he picked 556 00:31:25,360 --> 00:31:29,720 Speaker 1: up on some stray he sees on a stray scientific 557 00:31:29,720 --> 00:31:33,320 Speaker 1: paper that was since discredited. Um, which is again goes 558 00:31:33,360 --> 00:31:35,920 Speaker 1: back to the irony that a guy who demands science 559 00:31:35,960 --> 00:31:37,920 Speaker 1: when it comes to his day to day work, when 560 00:31:37,960 --> 00:31:41,840 Speaker 1: it comes to his personal outside interests, he's less demanding. 561 00:31:42,280 --> 00:31:45,640 Speaker 1: And and then the other question that's so interesting is 562 00:31:46,400 --> 00:31:50,400 Speaker 1: how is Robert Mercer forced to step down as CEO 563 00:31:50,560 --> 00:31:53,560 Speaker 1: at Renaissance Technologies and and what is his role currently. 564 00:31:54,080 --> 00:31:58,440 Speaker 1: So Bob Mercer was at Renaissance throughout the campaign through 565 00:31:58,480 --> 00:32:02,640 Speaker 1: the election, and many internally were unhappy about that, but 566 00:32:02,760 --> 00:32:05,520 Speaker 1: not everyone. Others thought he was a good leader. He 567 00:32:05,880 --> 00:32:10,600 Speaker 1: formed a really impressive partnership with a guy named Peter Brown. 568 00:32:11,120 --> 00:32:15,520 Speaker 1: Peter Brown is tempestuous, He's always got great, crazy, interesting ideas. 569 00:32:15,720 --> 00:32:18,640 Speaker 1: Some work, some don't, and Bob Mercer was the calm 570 00:32:18,720 --> 00:32:20,640 Speaker 1: one that was being in the yang and they worked 571 00:32:20,680 --> 00:32:23,680 Speaker 1: really well together. So internally some people were like, what 572 00:32:23,720 --> 00:32:25,720 Speaker 1: do we do here? Our CEO is still doing a 573 00:32:25,760 --> 00:32:28,640 Speaker 1: great job, We're still making six a year in the market. 574 00:32:28,880 --> 00:32:33,200 Speaker 1: But for the destroying democracy thing, he's fantastic and society 575 00:32:33,240 --> 00:32:37,160 Speaker 1: potentially um and even Jim Simons was was torn. So 576 00:32:37,280 --> 00:32:40,400 Speaker 1: Jim Simons was the largest, one of the largest funders 577 00:32:40,560 --> 00:32:43,960 Speaker 1: of Hillary Clinton and his top employee, he Bob Mercer, 578 00:32:44,080 --> 00:32:47,920 Speaker 1: was the top funder for for Donald Trump, so he 579 00:32:48,080 --> 00:32:51,440 Speaker 1: was in a bind. Jim Simons, he couldn't fire his 580 00:32:51,520 --> 00:32:54,320 Speaker 1: employee for his political beliefs, and he also liked him. 581 00:32:54,320 --> 00:32:56,760 Speaker 1: He likes some one individual basis. And to Simon's credit, 582 00:32:56,840 --> 00:32:58,960 Speaker 1: he says in the book, who am I to tell 583 00:32:59,080 --> 00:33:00,880 Speaker 1: him how to spend his own money? It's not my 584 00:33:01,000 --> 00:33:04,080 Speaker 1: decision exactly. And many were torn internally, but it got 585 00:33:04,080 --> 00:33:07,640 Speaker 1: to the point where morale was being affected and they 586 00:33:07,640 --> 00:33:10,440 Speaker 1: were worried about their ability to recruit. And that's the 587 00:33:10,480 --> 00:33:14,000 Speaker 1: lifeblood for that of that place. What what about outside investors? 588 00:33:14,320 --> 00:33:17,320 Speaker 1: A lot of big institutions are not especially happy with Trump. 589 00:33:17,400 --> 00:33:22,160 Speaker 1: How were they dealing with Bob Mercer as CEO of Renaissance. 590 00:33:22,200 --> 00:33:25,480 Speaker 1: So by then, um they had started a few outside 591 00:33:25,800 --> 00:33:28,880 Speaker 1: hedge funds for institutions and others. They still had them dwing, 592 00:33:29,000 --> 00:33:31,840 Speaker 1: which is only for internal employees. But right by the 593 00:33:31,880 --> 00:33:35,560 Speaker 1: time the election, they had outside investors and many were unhappy. 594 00:33:35,600 --> 00:33:38,160 Speaker 1: But that said, the returns were still really good. So 595 00:33:38,280 --> 00:33:40,320 Speaker 1: it wasn't clear to me that how many we're really 596 00:33:40,320 --> 00:33:44,200 Speaker 1: gonna pull out over Bob Mercer's politics. The bigger issue 597 00:33:44,240 --> 00:33:46,680 Speaker 1: is that they were worried about their ability to keep 598 00:33:46,680 --> 00:33:49,120 Speaker 1: attracting talent, and that's what they worry about. That is 599 00:33:49,160 --> 00:33:52,680 Speaker 1: their biggest concern because they're not competing necessarily with PDT 600 00:33:53,120 --> 00:33:56,920 Speaker 1: and two Sigma only, they're also competing with Google and Facebook. 601 00:33:56,960 --> 00:34:00,320 Speaker 1: These are scientists who could go work somewhere else, and 602 00:34:00,440 --> 00:34:04,160 Speaker 1: they were concerned about their ability to keep recruiting them. 603 00:34:04,360 --> 00:34:07,200 Speaker 1: And at some point Jim Simons said, Bob, we've got 604 00:34:07,200 --> 00:34:09,400 Speaker 1: to talk. And I talked about that scene. I described 605 00:34:09,440 --> 00:34:12,640 Speaker 1: that scene in the book, and it was difficult for 606 00:34:12,680 --> 00:34:15,759 Speaker 1: both of them. Bomb Mercer was effectively told to step down, 607 00:34:16,200 --> 00:34:19,160 Speaker 1: and Jim Simons was telling his old friends who who 608 00:34:19,239 --> 00:34:22,320 Speaker 1: helped make him a multibillionaire, that he could no longer 609 00:34:22,360 --> 00:34:26,640 Speaker 1: help run the firm. The secret source of anything is 610 00:34:26,680 --> 00:34:32,360 Speaker 1: that ability to attract incredible talent from all manner of 611 00:34:32,360 --> 00:34:35,840 Speaker 1: of academia and technology and science, isn't it. They have 612 00:34:35,880 --> 00:34:40,319 Speaker 1: a lot of sauces that are secret and impressive. Um 613 00:34:40,600 --> 00:34:44,239 Speaker 1: the collaborative. They're much more collaborative than most firms. They 614 00:34:44,239 --> 00:34:46,839 Speaker 1: don't try to predict where the market is going. It's 615 00:34:46,880 --> 00:34:49,600 Speaker 1: all relationships. It's groups of stocks versus groups of stocks. 616 00:34:49,640 --> 00:34:52,480 Speaker 1: Four thousand or so long, four thousands or so short UM. 617 00:34:52,520 --> 00:34:56,320 Speaker 1: They have many but among the most impressive. Most impressive 618 00:34:56,600 --> 00:34:59,720 Speaker 1: things about that firm is they still can recruit almost 619 00:34:59,760 --> 00:35:03,000 Speaker 1: any one for any area, and they get superstars from 620 00:35:03,080 --> 00:35:07,520 Speaker 1: academia and other places. Quite fascinating. One of the things 621 00:35:07,560 --> 00:35:11,279 Speaker 1: I found so fascinating from the book that I did 622 00:35:11,360 --> 00:35:16,160 Speaker 1: not previously put together in my head but should have, 623 00:35:17,840 --> 00:35:21,640 Speaker 1: but the book made it clear. Jim Simons is really 624 00:35:21,840 --> 00:35:27,400 Speaker 1: an outstanding builder of teams. He was deputy director at 625 00:35:27,440 --> 00:35:33,040 Speaker 1: the subdivision of the UM National Security Agency Code Group. 626 00:35:33,080 --> 00:35:35,319 Speaker 1: I'm I'm during a blank on their name c RD, 627 00:35:35,400 --> 00:35:38,120 Speaker 1: it was called at the time CRD. Then at sunny 628 00:35:38,160 --> 00:35:42,480 Speaker 1: Stony Brook, he takes what was essentially a modest state 629 00:35:42,560 --> 00:35:46,560 Speaker 1: school in New York, builds it into a powerhouse mathematics department, 630 00:35:46,800 --> 00:35:49,640 Speaker 1: like a world class math department, filled with Nobel laureates 631 00:35:49,640 --> 00:35:55,080 Speaker 1: and others. And then at Renaissance he builds another spectacular team. 632 00:35:55,280 --> 00:35:58,840 Speaker 1: Is it fair describe to describe him as an architect 633 00:35:59,200 --> 00:36:02,479 Speaker 1: more than anything? I think that's fair, So listen. Jim 634 00:36:02,480 --> 00:36:05,719 Speaker 1: Simons has his faults. UM, He's not a perfect individual, 635 00:36:06,120 --> 00:36:09,160 Speaker 1: but he's quite impressive in his ability to both do 636 00:36:09,360 --> 00:36:13,120 Speaker 1: the math and the science, and when he wants through 637 00:36:13,120 --> 00:36:15,480 Speaker 1: a needs two. He can do the algorithms, but more 638 00:36:15,520 --> 00:36:19,560 Speaker 1: importantly his ability to manage talents. And someone internally said 639 00:36:19,560 --> 00:36:22,320 Speaker 1: to me, Greg, it's not his genius, but his ability 640 00:36:22,560 --> 00:36:25,160 Speaker 1: to manage genius, which is not easy to do. It's 641 00:36:25,239 --> 00:36:29,320 Speaker 1: really not easy. And you think about these really quirky personalities, 642 00:36:29,400 --> 00:36:31,319 Speaker 1: which really jumps out of you. I think when you 643 00:36:31,320 --> 00:36:36,480 Speaker 1: read the book, how many unusual, odd headstrong, um stubborn 644 00:36:37,239 --> 00:36:41,719 Speaker 1: um top top scientists they've hired, and you know they're 645 00:36:41,719 --> 00:36:45,000 Speaker 1: pretty wealthy. They could leave and go somewhere else, and 646 00:36:45,040 --> 00:36:47,920 Speaker 1: he was able to create this incentive for them to 647 00:36:48,000 --> 00:36:50,839 Speaker 1: stay and work together. Not just stay there, but they 648 00:36:50,880 --> 00:36:53,440 Speaker 1: work together. And like you suggest, you can see that 649 00:36:53,480 --> 00:36:56,319 Speaker 1: pattern early on in his career. He was great as 650 00:36:56,320 --> 00:36:59,320 Speaker 1: a department chair at keeping people happy, all the different 651 00:36:59,360 --> 00:37:01,520 Speaker 1: personalities and kind of thing. Or you can't really force 652 00:37:01,560 --> 00:37:04,480 Speaker 1: someone who's a professor to do what what you'd like 653 00:37:04,600 --> 00:37:07,239 Speaker 1: them to do. You've got to create incentives. And that's 654 00:37:07,280 --> 00:37:09,840 Speaker 1: exactly what he's done at Renaissance. And I think in 655 00:37:09,880 --> 00:37:12,399 Speaker 1: some ways you can learn management skills from him as 656 00:37:12,480 --> 00:37:15,040 Speaker 1: much as you can learn how to create algorithms. So 657 00:37:15,080 --> 00:37:18,920 Speaker 1: one of the interesting parts of the development of Renaissance 658 00:37:19,680 --> 00:37:23,759 Speaker 1: was um what took place in the mid nineties. So 659 00:37:23,840 --> 00:37:27,960 Speaker 1: he's uh, Mercer and Brown, Peter Brown are working on 660 00:37:28,000 --> 00:37:31,640 Speaker 1: the equities portion. Uh, and they're not making a whole 661 00:37:31,640 --> 00:37:35,799 Speaker 1: lot of progress. It's expensive, it's time consuming, and it's 662 00:37:35,880 --> 00:37:40,799 Speaker 1: simply not delivering the sort of returns that everybody has 663 00:37:40,840 --> 00:37:45,560 Speaker 1: hoped for. And so in Simon says to Brown and Mercer, quote, 664 00:37:45,680 --> 00:37:48,080 Speaker 1: get your system to work in the next six months, 665 00:37:48,520 --> 00:37:51,759 Speaker 1: or I'm pulling the plug unquote. How close was the 666 00:37:51,960 --> 00:37:58,680 Speaker 1: entire equities portion of Renaissance to um never becoming what 667 00:37:58,760 --> 00:38:01,799 Speaker 1: it became. Oh, it was very close. And one has 668 00:38:01,800 --> 00:38:05,360 Speaker 1: to also call or remember or note that Jim Simons 669 00:38:05,400 --> 00:38:09,520 Speaker 1: had remarkable patience. So he has this optimism that most 670 00:38:09,600 --> 00:38:13,319 Speaker 1: most people don't share. He encourages his people. People were 671 00:38:13,320 --> 00:38:16,520 Speaker 1: giving up internally about trying to figure out equities. People 672 00:38:16,520 --> 00:38:19,839 Speaker 1: were saying, it's a waste of our resources. Stopped distracting us, 673 00:38:20,080 --> 00:38:24,000 Speaker 1: and Simmons kept encouraging his team. And yet, as you know, 674 00:38:24,480 --> 00:38:27,759 Speaker 1: even he was at his wits end and ready to 675 00:38:27,800 --> 00:38:30,800 Speaker 1: move on and gave his employees, his staff, Bomb Mercer 676 00:38:30,840 --> 00:38:33,080 Speaker 1: and Peter Brown a matter of months to figure it 677 00:38:33,080 --> 00:38:35,640 Speaker 1: out because they had tried and failed over and over again, 678 00:38:36,040 --> 00:38:38,920 Speaker 1: and there was a quirk, there was um, there was 679 00:38:38,960 --> 00:38:40,759 Speaker 1: an error in the code. There was an error in 680 00:38:40,800 --> 00:38:44,400 Speaker 1: the code that a guy named David Magerman, who's colorful, 681 00:38:44,640 --> 00:38:47,040 Speaker 1: and you have to tell so, so let's I was 682 00:38:47,080 --> 00:38:50,400 Speaker 1: fascinated by that part of the book. So everything seems 683 00:38:50,440 --> 00:38:53,440 Speaker 1: to make sense substractly, but it's losing money. It's not 684 00:38:53,480 --> 00:38:56,640 Speaker 1: making money. And one day one of the more junior 685 00:38:56,680 --> 00:39:00,359 Speaker 1: guys decides to literally go through the algorithm, him through 686 00:39:00,400 --> 00:39:03,680 Speaker 1: the actual lines of code, line by line by line 687 00:39:03,680 --> 00:39:07,759 Speaker 1: by line, and ultimately finds an error where one of 688 00:39:07,800 --> 00:39:11,239 Speaker 1: the SMP prices is fixed, meaning it's supposed to update 689 00:39:11,280 --> 00:39:14,600 Speaker 1: automatically and it doesn't. It's a it's an entry number 690 00:39:14,719 --> 00:39:18,879 Speaker 1: instead of a variable that pulls the data inaccurately. That's 691 00:39:18,880 --> 00:39:22,160 Speaker 1: exactly right. So this guy, David Maggerman, was had just 692 00:39:22,239 --> 00:39:25,839 Speaker 1: been hired a few years earlier from IBM. Early on 693 00:39:26,000 --> 00:39:29,880 Speaker 1: he got some had some accomplishments, and got some respect internally, 694 00:39:29,920 --> 00:39:32,120 Speaker 1: but then he blew it. He made a series of 695 00:39:32,280 --> 00:39:36,400 Speaker 1: dumb error's mistakes. Basically, he was doing things he should 696 00:39:36,440 --> 00:39:39,400 Speaker 1: have been doing. At one point he almost pulled the 697 00:39:39,400 --> 00:39:42,560 Speaker 1: plug on the whole system. It was embarrassing. He was embarrassed. 698 00:39:42,600 --> 00:39:45,600 Speaker 1: He was close to getting h really getting pushed out 699 00:39:45,600 --> 00:39:47,560 Speaker 1: of there. And he's the one who said, you know what, 700 00:39:47,680 --> 00:39:51,160 Speaker 1: maybe I can look at this system and find what 701 00:39:51,360 --> 00:39:54,600 Speaker 1: the bug is. And as you suggest, there was it 702 00:39:54,640 --> 00:39:57,400 Speaker 1: was static. They were there, it wasn't updating, and the 703 00:39:57,440 --> 00:40:01,680 Speaker 1: system wasn't updating incorporating the new way SMP five hundred prices, 704 00:40:01,680 --> 00:40:04,240 Speaker 1: which sort of you know, it's a surprise in itself. 705 00:40:04,280 --> 00:40:07,720 Speaker 1: You think of these top giants in science, they should 706 00:40:07,719 --> 00:40:10,120 Speaker 1: have made this kind of dumb mistake and thousands of 707 00:40:10,239 --> 00:40:12,840 Speaker 1: lines of code. Those mistakes happen, right, Yeah, but you 708 00:40:12,880 --> 00:40:16,040 Speaker 1: think a Renaissance and Medallion and Jim Simmons, and who 709 00:40:16,080 --> 00:40:18,000 Speaker 1: are they? They're like you and I, or at least 710 00:40:18,000 --> 00:40:21,000 Speaker 1: not like this was before they became Renaissance. This was 711 00:40:21,040 --> 00:40:23,759 Speaker 1: really when they were also rents. Yes, but you know 712 00:40:23,800 --> 00:40:26,239 Speaker 1: it also is a reminder that even the giants make 713 00:40:26,360 --> 00:40:31,000 Speaker 1: dumb right. And yes, so magerman Um picked up on 714 00:40:31,040 --> 00:40:35,120 Speaker 1: the mistake. Internally, he finally got some respect because he 715 00:40:35,200 --> 00:40:37,600 Speaker 1: brought her over to bomb Mercer and it was Mercer's math. 716 00:40:38,080 --> 00:40:39,799 Speaker 1: He kind of got it wrong, and he kind of 717 00:40:39,800 --> 00:40:43,120 Speaker 1: to to his credit by Mercer, there's some appealing aspects 718 00:40:43,120 --> 00:40:45,040 Speaker 1: to his personality as well. He said he owned up 719 00:40:45,040 --> 00:40:46,839 Speaker 1: to it and said, yeah, I screwed this up. Let's 720 00:40:46,880 --> 00:40:48,960 Speaker 1: fix it, and they're off to the races. It Literally, 721 00:40:49,000 --> 00:40:51,560 Speaker 1: as soon as that's fixed, the things becomes a money 722 00:40:51,560 --> 00:40:55,560 Speaker 1: printing machine. It's remarkable. And they went from managing Medallion 723 00:40:55,600 --> 00:40:57,879 Speaker 1: was about eight hundred million dollars or so at the time, 724 00:40:57,920 --> 00:41:02,399 Speaker 1: and Equities was like thirty four million dollars to ten 725 00:41:02,440 --> 00:41:06,920 Speaker 1: billion dollars of the greatest hedge fund in man's mankind 726 00:41:06,960 --> 00:41:10,280 Speaker 1: modern financial history. So there was a small, tiny error 727 00:41:10,280 --> 00:41:13,560 Speaker 1: that he picked up on and the rest is history. 728 00:41:13,600 --> 00:41:16,719 Speaker 1: So other firms that are in the quant space, like 729 00:41:16,880 --> 00:41:20,560 Speaker 1: d E. Shaw, they had a big head start over Renaissance. 730 00:41:21,120 --> 00:41:24,440 Speaker 1: What was it about Jim Simons that allowed him to 731 00:41:24,600 --> 00:41:27,719 Speaker 1: catch up to people like David Shaw? There are a 732 00:41:27,719 --> 00:41:30,160 Speaker 1: lot of things they do better. Renaissance does a lot 733 00:41:30,200 --> 00:41:33,080 Speaker 1: of things better than everybody else. There's a certain urgency 734 00:41:33,280 --> 00:41:35,279 Speaker 1: within the firm that you feel when you're there and 735 00:41:35,320 --> 00:41:38,840 Speaker 1: you talk to people that you don't really necessarily get elsewhere. 736 00:41:38,840 --> 00:41:42,719 Speaker 1: There's a collaboration that you see internally. One model that 737 00:41:42,760 --> 00:41:46,799 Speaker 1: other firms don't share. There's a sense of humility. They 738 00:41:46,840 --> 00:41:50,560 Speaker 1: don't um They don't take too much risk. They pull 739 00:41:50,640 --> 00:41:54,280 Speaker 1: back risk during crisis, when things are are even internally 740 00:41:54,320 --> 00:41:56,000 Speaker 1: when people are saying heads put on more risk, they 741 00:41:56,040 --> 00:41:59,800 Speaker 1: generally speaking pull back. They use leverage. They use heavy leverage. 742 00:42:00,040 --> 00:42:02,319 Speaker 1: People don't really focus on how much leverage. But they 743 00:42:02,320 --> 00:42:04,319 Speaker 1: are a ten billion fund that can get over a 744 00:42:04,360 --> 00:42:08,239 Speaker 1: hundred billion dollars when they see the opportunities. Um, I 745 00:42:08,280 --> 00:42:10,160 Speaker 1: could go on and on. They really have the best 746 00:42:10,320 --> 00:42:13,200 Speaker 1: trading ability to see what their impact on the overall 747 00:42:13,280 --> 00:42:16,240 Speaker 1: market is, meaning they have the ability to execute trades 748 00:42:16,360 --> 00:42:19,560 Speaker 1: without moving prices. That and they know when they'll move 749 00:42:19,600 --> 00:42:21,600 Speaker 1: the prices and when they won't, so they can play 750 00:42:21,640 --> 00:42:24,200 Speaker 1: with their signals and try to make them uh and 751 00:42:24,440 --> 00:42:26,839 Speaker 1: try to make sure their activity isn't picked up on 752 00:42:27,040 --> 00:42:29,640 Speaker 1: by rivals. They have some signals that they are internally 753 00:42:29,640 --> 00:42:32,800 Speaker 1: are proud of and think people aren't aware of. And 754 00:42:32,800 --> 00:42:36,080 Speaker 1: and there's sophisticate stuff where these are mathematical relationships. And 755 00:42:36,120 --> 00:42:38,320 Speaker 1: it's one thing that one thing I think everyone should 756 00:42:38,320 --> 00:42:40,720 Speaker 1: realize that it's not like they've got some secret sauce 757 00:42:40,760 --> 00:42:44,000 Speaker 1: about you know, when IBM goes up every day. These 758 00:42:44,040 --> 00:42:48,680 Speaker 1: are mathematical relationships between groups of stocks and and their 759 00:42:48,719 --> 00:42:52,080 Speaker 1: relationship to indexes, relationships to each other, relationships to factors. 760 00:42:52,280 --> 00:42:56,800 Speaker 1: It's complex, complicated stuff, um, but they have certain unique 761 00:42:56,800 --> 00:43:00,160 Speaker 1: insights that others don't. Just like seeing the world just 762 00:43:00,200 --> 00:43:03,120 Speaker 1: a little bit with a better um with glasses when 763 00:43:03,120 --> 00:43:05,799 Speaker 1: everybody else isn't isn't wearing them. They can see things 764 00:43:05,800 --> 00:43:10,120 Speaker 1: that others can quite interesting. There's a quote from one 765 00:43:10,160 --> 00:43:14,480 Speaker 1: of the researchers. Am I pronouncing this right? Panific? I 766 00:43:14,520 --> 00:43:17,960 Speaker 1: love this quote. Quote. Our entire premise was that human 767 00:43:18,000 --> 00:43:20,840 Speaker 1: actors will react the way humans did in the past, 768 00:43:21,280 --> 00:43:24,320 Speaker 1: and we have learned to take advantage of that. How 769 00:43:24,440 --> 00:43:29,440 Speaker 1: much of that is reflected in their algorithms? Yes, so 770 00:43:29,680 --> 00:43:32,440 Speaker 1: almost all of what they do is based on predictive 771 00:43:32,480 --> 00:43:39,400 Speaker 1: models that incorporate historic returns, historic moves in the market, 772 00:43:39,480 --> 00:43:41,520 Speaker 1: and they could be recent returns, they could be from 773 00:43:41,560 --> 00:43:44,080 Speaker 1: the late eight They don't usually use those, but they're 774 00:43:44,080 --> 00:43:45,880 Speaker 1: there if they want them to. So they've gotten the 775 00:43:45,920 --> 00:43:48,439 Speaker 1: better data, and it's cleaner than other people, and they 776 00:43:48,440 --> 00:43:50,719 Speaker 1: were cleaning it way before anybody else, and they cared 777 00:43:50,719 --> 00:43:54,080 Speaker 1: about this stuff more. But right, the genius of renaissance 778 00:43:54,320 --> 00:43:59,840 Speaker 1: is that we as investors, our behavior is somewhat repetitive, 779 00:44:00,040 --> 00:44:02,600 Speaker 1: and it maybe and it rhymes. Now, it's not clear 780 00:44:02,640 --> 00:44:05,560 Speaker 1: going forward whether that will continue. So things have changed. 781 00:44:05,600 --> 00:44:08,800 Speaker 1: We've got as we all know, um, passive investing is changing, 782 00:44:08,800 --> 00:44:11,319 Speaker 1: is dominating the market. Active investors don't play the same 783 00:44:11,400 --> 00:44:16,359 Speaker 1: role factor investing, etcetera. So will Medallion's models. Will renaissances 784 00:44:16,440 --> 00:44:20,000 Speaker 1: models continue to trounce the market even internally. They're not 785 00:44:20,840 --> 00:44:24,880 Speaker 1: sure and most of what they they're doing, they're not 786 00:44:25,000 --> 00:44:29,239 Speaker 1: high frequency traders. They're not long term investors. But they'll 787 00:44:29,280 --> 00:44:32,680 Speaker 1: buy and sell almost a pair, trade in groups of 788 00:44:32,719 --> 00:44:35,720 Speaker 1: stocks and hold it for days or weeks. That's pretty 789 00:44:36,080 --> 00:44:38,080 Speaker 1: that's a good way to look at it. Generally speak 790 00:44:38,160 --> 00:44:40,520 Speaker 1: on average is about a two day holding period, but 791 00:44:40,560 --> 00:44:43,640 Speaker 1: they'll get two weeks too. They'll do fast trading. They'll 792 00:44:43,680 --> 00:44:46,799 Speaker 1: do what looks like high frequency but really isn't. In 793 00:44:46,920 --> 00:44:49,400 Speaker 1: that they're doing that usually to break up their trade, 794 00:44:49,440 --> 00:44:52,440 Speaker 1: so the rapid fire within seconds. But they're not in 795 00:44:52,520 --> 00:44:57,360 Speaker 1: and out necessarily. No, they're not flashboys. Their medium frequency 796 00:44:57,440 --> 00:44:59,960 Speaker 1: is what people call it in the industry. They frankly, 797 00:45:00,000 --> 00:45:02,879 Speaker 1: their technology is good, but it's not great. You would 798 00:45:02,880 --> 00:45:04,480 Speaker 1: think they would have the best of everything, and they 799 00:45:04,480 --> 00:45:06,960 Speaker 1: sort of poke fon it at each other internally that 800 00:45:07,000 --> 00:45:09,880 Speaker 1: they've got good technology, but it's not cutting edge necessary. 801 00:45:09,920 --> 00:45:12,120 Speaker 1: They're not co locating and all that kind of stuff. 802 00:45:12,120 --> 00:45:14,040 Speaker 1: Well they don't have to though. They're not sniffing out 803 00:45:14,160 --> 00:45:18,360 Speaker 1: other trades and front running them. They're executing their own strategies. 804 00:45:18,400 --> 00:45:20,480 Speaker 1: That's exactly right. So people do get them confused with 805 00:45:20,600 --> 00:45:23,600 Speaker 1: kind of the flashboys. But yeah, generally speaking about two 806 00:45:23,680 --> 00:45:25,799 Speaker 1: days or so as a holding period, And and we 807 00:45:25,920 --> 00:45:29,439 Speaker 1: talked about in the early days, Jim Simons was sort 808 00:45:29,440 --> 00:45:34,680 Speaker 1: of a macro tourist. He still occasionally overrides the system. 809 00:45:34,800 --> 00:45:37,759 Speaker 1: Tell us about when that happens and and why does 810 00:45:37,800 --> 00:45:42,359 Speaker 1: he think his flawed human instinctual judgment is better than 811 00:45:42,400 --> 00:45:45,160 Speaker 1: the system. It is unusually a little bit surprising. They 812 00:45:45,200 --> 00:45:48,759 Speaker 1: generally speaking never override their models, and they take they 813 00:45:48,800 --> 00:45:52,759 Speaker 1: never can. We generally speak exactly in times of crisis. 814 00:45:53,080 --> 00:45:56,000 Speaker 1: The firm will pull back when they're not sure, when 815 00:45:56,000 --> 00:45:58,560 Speaker 1: they're worried, and that's part of that humility. So they 816 00:45:58,600 --> 00:46:02,160 Speaker 1: don't have this arrogance that our models will survive. The 817 00:46:02,320 --> 00:46:05,000 Speaker 1: ltc M kind of things. They're not. They're not you 818 00:46:05,080 --> 00:46:08,920 Speaker 1: know John mary um Weather and that team at all. Right, 819 00:46:09,000 --> 00:46:11,919 Speaker 1: they get scared like you and I. And even though 820 00:46:11,920 --> 00:46:14,680 Speaker 1: internally there are people that say, don't ever mess at 821 00:46:14,719 --> 00:46:17,000 Speaker 1: the models. People like Simons. He doesn't run things day 822 00:46:17,000 --> 00:46:19,480 Speaker 1: to day. But in terms of crisis I describe in 823 00:46:19,520 --> 00:46:22,080 Speaker 1: the book there were there's panic. There was panic. They're 824 00:46:22,160 --> 00:46:24,439 Speaker 1: like any other kind of trading firm. And in those 825 00:46:24,520 --> 00:46:28,759 Speaker 1: kind of times he overruled his colleagues and he said, yes, 826 00:46:29,040 --> 00:46:31,880 Speaker 1: we'll probably make money here if we stick with our models, 827 00:46:32,080 --> 00:46:34,520 Speaker 1: but I'm worried about surviving. And if you think about it, 828 00:46:34,560 --> 00:46:37,280 Speaker 1: they also borrow a lot of money, so they've got lenders, 829 00:46:37,320 --> 00:46:40,440 Speaker 1: banks and others, and those banks get nervous if they 830 00:46:40,440 --> 00:46:42,760 Speaker 1: pull back on them. That will affect things. So Simon's 831 00:46:42,880 --> 00:46:45,200 Speaker 1: that's part of Simon's his genius that again he can 832 00:46:45,400 --> 00:46:48,440 Speaker 1: manage really well too, and and and deal with investors 833 00:46:48,440 --> 00:46:51,440 Speaker 1: and borrowers as well. How much leverage do they use, 834 00:46:51,920 --> 00:46:54,520 Speaker 1: It depends. It ranges if they're excited about the market 835 00:46:54,600 --> 00:46:56,920 Speaker 1: and opportunities if they're not. But they can do ten 836 00:46:56,960 --> 00:47:00,600 Speaker 1: times or even more. It depends what opportunities and times 837 00:47:00,880 --> 00:47:03,960 Speaker 1: sounds like a lot. Long term capital management was a 838 00:47:04,040 --> 00:47:07,920 Speaker 1: hundred x. The big Wall Street banks in in the 839 00:47:08,080 --> 00:47:11,200 Speaker 1: sub prime era were fort x, so ten x almost 840 00:47:11,200 --> 00:47:14,560 Speaker 1: sounds modest. Also, you gotta remember they're long and short 841 00:47:14,600 --> 00:47:17,239 Speaker 1: all the time. Everything is hedged, and they're long again 842 00:47:17,280 --> 00:47:21,560 Speaker 1: about four thousand and short about four thousand on average equities. 843 00:47:21,840 --> 00:47:24,160 Speaker 1: So them leveraging up is not like you and I 844 00:47:24,520 --> 00:47:28,080 Speaker 1: going along Microsoft and leveraging up. It's it's different. It's 845 00:47:28,080 --> 00:47:31,520 Speaker 1: pretty balanced than the odds are against anything untoward happening. 846 00:47:31,840 --> 00:47:34,879 Speaker 1: And the thing to remember about renaissance is they only 847 00:47:34,920 --> 00:47:38,759 Speaker 1: get right barely more than fifty of the time, and 848 00:47:38,800 --> 00:47:41,200 Speaker 1: they're aware of that. So on the one hand, their 849 00:47:41,200 --> 00:47:45,080 Speaker 1: sharp ratio is crazy great, which allows them to leverage 850 00:47:45,200 --> 00:47:48,279 Speaker 1: up and borrow this money, and it's pretty impressive in 851 00:47:48,280 --> 00:47:51,080 Speaker 1: its own right, but also as a reminder, they realize 852 00:47:51,120 --> 00:47:53,959 Speaker 1: they're they're not they're not hitting home runs every single day. 853 00:47:54,280 --> 00:47:58,360 Speaker 1: It's like a casino. They're making small amounts all the time, 854 00:47:59,080 --> 00:48:02,880 Speaker 1: quite quite interest in and it's sort of laughable today. 855 00:48:02,920 --> 00:48:07,120 Speaker 1: But you listed in the book a number of fairly 856 00:48:07,360 --> 00:48:12,239 Speaker 1: famous UH investors and hedge fund managers today who in 857 00:48:12,280 --> 00:48:17,640 Speaker 1: the early days of renaissance. Jim Simons went saying, Hey, 858 00:48:17,640 --> 00:48:19,600 Speaker 1: I'm raising this fund and I'd like to have you 859 00:48:19,640 --> 00:48:23,759 Speaker 1: being an investor, and they pretty much across the board 860 00:48:23,800 --> 00:48:26,800 Speaker 1: said no, left him out of the office. Bruce Covernor 861 00:48:26,920 --> 00:48:31,200 Speaker 1: pulled Tutor Jones, who else famously said not to Simon's 862 00:48:31,480 --> 00:48:33,759 Speaker 1: Donald Sussman is the key one. Donald Sussman is one 863 00:48:33,800 --> 00:48:37,440 Speaker 1: of the most respected investors on Wall Straight. He backed 864 00:48:37,520 --> 00:48:41,680 Speaker 1: the Shaw, He's backed a lot of um famous investors 865 00:48:41,719 --> 00:48:44,719 Speaker 1: over the years, and he's a really well impressive guy 866 00:48:44,719 --> 00:48:46,839 Speaker 1: in his own right, got a great track record. And 867 00:48:46,920 --> 00:48:51,080 Speaker 1: Simmons came to him, hat in hand saying I think 868 00:48:51,080 --> 00:48:53,840 Speaker 1: I've got it, I think I've figured it out. I'd 869 00:48:53,840 --> 00:48:58,560 Speaker 1: like some backing from you. And it wasn't that Sussman disagreed. 870 00:48:58,600 --> 00:49:01,719 Speaker 1: It wasn't that he was necessary really skeptical of Jim Simons, 871 00:49:01,920 --> 00:49:04,279 Speaker 1: but he had already invested in d SHAW. I didn't 872 00:49:04,320 --> 00:49:07,839 Speaker 1: want to invest in a competitor, and there wasn't much 873 00:49:07,840 --> 00:49:11,560 Speaker 1: of a track record at that point. Is really when 874 00:49:11,600 --> 00:49:16,080 Speaker 1: they decided to go all in on quantitative investing UM, 875 00:49:16,200 --> 00:49:19,920 Speaker 1: using big data, using algorithms as opposed to using some 876 00:49:20,080 --> 00:49:23,640 Speaker 1: of the instinctive intuition type trading, and so there wasn't 877 00:49:23,719 --> 00:49:26,919 Speaker 1: much of a track record in when Jim Simons went 878 00:49:27,000 --> 00:49:29,160 Speaker 1: to speak to Donald sssman, So you can't blame him 879 00:49:29,200 --> 00:49:31,520 Speaker 1: too much. But yeah, there were a number of pretty 880 00:49:31,560 --> 00:49:34,359 Speaker 1: well respected investors I talked about in the book who 881 00:49:34,400 --> 00:49:37,480 Speaker 1: had an opportunity to invest in Medallion and passed on it. 882 00:49:37,800 --> 00:49:40,920 Speaker 1: And then a few years later, or maybe it's fifteen 883 00:49:41,000 --> 00:49:47,160 Speaker 1: years later, Simmons goes to the outside Medallion investors and says, hey, 884 00:49:47,160 --> 00:49:50,319 Speaker 1: thanks for the capital, but here, we're gonna give this 885 00:49:50,400 --> 00:49:53,000 Speaker 1: back to you. We we can't use it anymore. What 886 00:49:53,680 --> 00:49:57,120 Speaker 1: a What was the thinking there? And be what was 887 00:49:57,200 --> 00:50:00,440 Speaker 1: the reaction of the investors. They must have been pretty 888 00:50:00,640 --> 00:50:06,319 Speaker 1: you know, stunt. So they again have these remarkable models 889 00:50:06,360 --> 00:50:09,279 Speaker 1: that allow them to know how much they can make 890 00:50:09,840 --> 00:50:13,759 Speaker 1: in certain size, how much they impact the market, pretty sophisticated, 891 00:50:13,960 --> 00:50:16,439 Speaker 1: and they realized that a ten billion or more they're 892 00:50:16,440 --> 00:50:18,359 Speaker 1: going to really not be able to have those kind 893 00:50:18,360 --> 00:50:20,640 Speaker 1: of returns. Now, you and I would probably say fine, 894 00:50:20,680 --> 00:50:22,919 Speaker 1: instead of being up sixty six percent a year, will 895 00:50:22,960 --> 00:50:25,200 Speaker 1: be up thirty five percent a year, and we'll grow this, 896 00:50:25,239 --> 00:50:27,319 Speaker 1: say U m here and make the money. But no, 897 00:50:27,480 --> 00:50:30,319 Speaker 1: they wanted this hedge funds to be just for them 898 00:50:30,400 --> 00:50:34,440 Speaker 1: and to have these outstanding, remarkable returns. So they proceeded 899 00:50:34,440 --> 00:50:36,799 Speaker 1: to kick, as you suggest, kick their LPs out, kick 900 00:50:36,840 --> 00:50:39,560 Speaker 1: their investors out. And they were not happy. They weren't 901 00:50:39,640 --> 00:50:41,520 Speaker 1: they weren't thrilled. Some of them said, you know, I 902 00:50:41,600 --> 00:50:44,279 Speaker 1: stuck with you, Jim, through the difficult times, and here 903 00:50:44,320 --> 00:50:46,360 Speaker 1: you are kicking me out. And he kicked out his 904 00:50:46,440 --> 00:50:49,280 Speaker 1: friends too. He kicked everybody out, really, and he basically 905 00:50:49,360 --> 00:50:52,000 Speaker 1: was just a little cold. You know, Jim Simmons is 906 00:50:52,280 --> 00:50:55,840 Speaker 1: uh an fascinating guy. He's a scientist, he cares about society, 907 00:50:56,200 --> 00:50:59,040 Speaker 1: he's a huge philanthropist, um does all kinds of really 908 00:50:59,080 --> 00:51:02,680 Speaker 1: interesting things in education and science. He also really really 909 00:51:02,719 --> 00:51:06,719 Speaker 1: loves money and he as a tool for what it 910 00:51:06,760 --> 00:51:09,040 Speaker 1: can do, or just loves it. Let's not go overboard here. 911 00:51:09,040 --> 00:51:12,520 Speaker 1: Look for an academic that it comes across that he 912 00:51:12,760 --> 00:51:18,400 Speaker 1: is much more motivated by accumulating cash than the typical academy. 913 00:51:18,480 --> 00:51:21,720 Speaker 1: Oh my god, it's no comparison. Quite honestly. He always 914 00:51:21,719 --> 00:51:23,640 Speaker 1: had one foot in the world of academia and one 915 00:51:23,680 --> 00:51:26,560 Speaker 1: foot out. He was always doing businesses and they're quite interesting. 916 00:51:26,600 --> 00:51:28,760 Speaker 1: I read about him in the book. He pursued trading 917 00:51:28,800 --> 00:51:32,359 Speaker 1: and business, not full time, and it never really worked 918 00:51:32,360 --> 00:51:34,799 Speaker 1: out completely, but he always had his outside interest. So yeah, 919 00:51:34,840 --> 00:51:39,080 Speaker 1: he always really was focused on getting rich and he 920 00:51:39,200 --> 00:51:41,120 Speaker 1: wanted to change the world with that money. But he 921 00:51:41,160 --> 00:51:43,839 Speaker 1: also just playing like getting wealthy. So here they were 922 00:51:44,200 --> 00:51:47,120 Speaker 1: with staring at the possibility of seeing the return slow down, 923 00:51:47,480 --> 00:51:50,719 Speaker 1: and he said, I'd rather kick out my investors than 924 00:51:51,280 --> 00:51:55,719 Speaker 1: risk the possibility of our returns. Uh dropping. And you 925 00:51:56,160 --> 00:52:01,360 Speaker 1: described earlier lots of colorful characters in the book, Simmons 926 00:52:01,480 --> 00:52:05,400 Speaker 1: is really one of the most colorful characters of everybody. 927 00:52:05,719 --> 00:52:10,240 Speaker 1: He's a chain smoking two packs of Merits a day. 928 00:52:10,280 --> 00:52:15,960 Speaker 1: There's a hilarious story about a group of institutional investors 929 00:52:16,000 --> 00:52:21,240 Speaker 1: from a healthcare company that are there for some um, 930 00:52:21,560 --> 00:52:26,279 Speaker 1: just kicking guitars to give Renaissance money. And there's also 931 00:52:26,360 --> 00:52:29,840 Speaker 1: a birthday kick involved. Tell that story. Sure, that's the 932 00:52:29,960 --> 00:52:34,200 Speaker 1: Robert Wood Johnson Foundation there, dedicated to public health, and 933 00:52:34,239 --> 00:52:38,520 Speaker 1: they came by Renaissances Long Island Offices to talk about 934 00:52:38,680 --> 00:52:41,799 Speaker 1: investing in Reef. That's one of their outside funds. This 935 00:52:41,920 --> 00:52:43,920 Speaker 1: was early on when they were raising money for it. 936 00:52:44,320 --> 00:52:47,400 Speaker 1: They were impressed. They were having a nice launch. People 937 00:52:47,440 --> 00:52:50,760 Speaker 1: around the table. Simon's comes in to finish off the sale. 938 00:52:50,920 --> 00:52:54,560 Speaker 1: Everyone's all excited. The salesman at Renaissance can see their commissions. 939 00:52:54,560 --> 00:52:56,279 Speaker 1: They can imagine how much they're gonna be making from 940 00:52:56,280 --> 00:53:00,440 Speaker 1: this big investment. And Simmons, as you suggest, is change smoking. 941 00:53:00,520 --> 00:53:03,279 Speaker 1: He doesn't care. He doesn't care. He's smoked, always a 942 00:53:03,480 --> 00:53:06,920 Speaker 1: cigarette in his hand. And he's also, you know, almost 943 00:53:06,960 --> 00:53:09,920 Speaker 1: eighty two, so it hasn't really impacted his life. So 944 00:53:09,960 --> 00:53:14,400 Speaker 1: he's in this meeting and Simons looks around the no ashtras. 945 00:53:14,440 --> 00:53:16,000 Speaker 1: He's looking for an ash tray, but he needs to 946 00:53:16,040 --> 00:53:20,040 Speaker 1: ash somewhere, and he sees this big fancy cake that 947 00:53:20,080 --> 00:53:24,080 Speaker 1: have been wheeled in uh to to to end the dinner, 948 00:53:24,160 --> 00:53:26,520 Speaker 1: to the lunch, and everyone's gonna have a piece of it. 949 00:53:26,840 --> 00:53:30,840 Speaker 1: So he reaches over and he sticks his cigarette deep 950 00:53:30,880 --> 00:53:33,839 Speaker 1: into that cake and he's Jim time. He just gets 951 00:53:33,920 --> 00:53:38,319 Speaker 1: up and raves goodbye, and that thing is sizzling as 952 00:53:38,400 --> 00:53:41,080 Speaker 1: he exits the room, and everyone just looking at each other. 953 00:53:41,200 --> 00:53:46,560 Speaker 1: And the Renaissance salesman are just um dumbfounded, apoplectic because 954 00:53:46,560 --> 00:53:48,800 Speaker 1: they've lost their commission. They're sure these are this is 955 00:53:48,840 --> 00:53:52,960 Speaker 1: the Robert Johnson Foundation dedicated to public health. So obviously 956 00:53:53,080 --> 00:53:57,480 Speaker 1: this guy just ashed and a sizzling vanilla cake right 957 00:53:57,560 --> 00:53:59,359 Speaker 1: in front of them. They're not gonna write a check. 958 00:53:59,400 --> 00:54:04,440 Speaker 1: But they did nonetheless speak for themselves, right. And in 959 00:54:04,480 --> 00:54:08,120 Speaker 1: the book, I was shocked to read this. Someone says 960 00:54:08,160 --> 00:54:10,960 Speaker 1: to Simon's your scientists, don't you know about the dangers 961 00:54:11,000 --> 00:54:14,640 Speaker 1: of smoking? What was his response? He said to them, 962 00:54:14,680 --> 00:54:17,320 Speaker 1: it's not clear. This his tongue in cheek. It probably wasn't. 963 00:54:17,360 --> 00:54:22,520 Speaker 1: But he researched his genes and according to his his work, 964 00:54:22,600 --> 00:54:26,080 Speaker 1: his research, he was is one of these unique people 965 00:54:26,160 --> 00:54:30,719 Speaker 1: that can actually withstand um, all the chain smoking that 966 00:54:30,800 --> 00:54:33,200 Speaker 1: he does, he inflicts on his body. He claims his 967 00:54:33,400 --> 00:54:38,399 Speaker 1: predisposition is to not get lung cancer. Genetically, he has 968 00:54:38,440 --> 00:54:42,520 Speaker 1: the lucky whatever it is gene that that means you 969 00:54:42,560 --> 00:54:45,920 Speaker 1: can smoke without ill effects. Yes, and he fooling himself 970 00:54:45,960 --> 00:54:48,600 Speaker 1: a little bit like bom Mercer with his pseudo signs 971 00:54:48,600 --> 00:54:50,960 Speaker 1: outside of the office. Um. And that's one thing that's 972 00:54:51,000 --> 00:54:52,480 Speaker 1: kind of jumped out in the book, that these guys 973 00:54:52,480 --> 00:54:54,560 Speaker 1: are like you and I in so many ways. They've 974 00:54:54,600 --> 00:54:58,000 Speaker 1: got their foibles and they get emotional Um. In their lives, 975 00:54:58,000 --> 00:55:00,720 Speaker 1: and they get fights with their wives and scream matches 976 00:55:00,719 --> 00:55:03,880 Speaker 1: with their colleagues. And Jim Simmons, yes, has convinced himself 977 00:55:04,280 --> 00:55:06,839 Speaker 1: that he won't be impacted by smoking in it into 978 00:55:06,880 --> 00:55:09,560 Speaker 1: his credit. It hasn't impacted him, so you know, once 979 00:55:09,600 --> 00:55:12,719 Speaker 1: again he may be right. Uh, Greg, can you stick 980 00:55:12,719 --> 00:55:15,120 Speaker 1: around a bit? I have a bunch more questions. Happy, 981 00:55:15,440 --> 00:55:18,560 Speaker 1: We have been speaking with Greg Zuckerman, author of the 982 00:55:18,560 --> 00:55:22,080 Speaker 1: Man Who Solved the Market? How Jim Simon's launched the 983 00:55:22,239 --> 00:55:26,480 Speaker 1: quant revolution. If you enjoy this conversation, be sure and 984 00:55:26,600 --> 00:55:29,279 Speaker 1: come back for our podcast extras. Will we keep the 985 00:55:29,280 --> 00:55:34,200 Speaker 1: tape rolling and continue discussing all things renaissance technologies related. 986 00:55:34,640 --> 00:55:39,200 Speaker 1: You can find that at iTunes, Google podcast, Stitcher, Spotify, 987 00:55:39,280 --> 00:55:43,240 Speaker 1: wherever your finer podcasts are sold. We love your comments, 988 00:55:43,280 --> 00:55:46,520 Speaker 1: feedback and suggestions. You can write to us at m 989 00:55:46,560 --> 00:55:49,400 Speaker 1: IB podcast at Bloomberg dot net or give us a 990 00:55:49,440 --> 00:55:53,160 Speaker 1: review over at Apple iTunes. Check out my weekly column 991 00:55:53,160 --> 00:55:56,520 Speaker 1: on Bloomberg dot com. Sign up for my daily reads 992 00:55:56,640 --> 00:55:59,560 Speaker 1: at Rid Halts dot com. Follow me on Twitter at 993 00:55:59,640 --> 00:56:03,279 Speaker 1: Rid Halts. I'm Barry Retults. You're listening to Masters in 994 00:56:03,320 --> 00:56:09,759 Speaker 1: Business Radio. Welcome to the podcast. Greg, thank you so 995 00:56:09,840 --> 00:56:12,879 Speaker 1: much for doing this. I have to tell you I 996 00:56:12,960 --> 00:56:15,719 Speaker 1: really really enjoyed the book, not just because I'm a 997 00:56:16,239 --> 00:56:19,880 Speaker 1: you know, fascinated by Renaissance and I've had a handful 998 00:56:20,120 --> 00:56:24,719 Speaker 1: of dealings with Jim Simon's without his involvement. He he no, 999 00:56:24,840 --> 00:56:28,200 Speaker 1: I have never met, but um, when I was a 1000 00:56:28,280 --> 00:56:30,000 Speaker 1: high school student trying to figure out where to go 1001 00:56:30,080 --> 00:56:34,000 Speaker 1: to school, like towards Stony Brook, and there goes the 1002 00:56:34,040 --> 00:56:39,080 Speaker 1: outgoing math uh department chairman. If you would have met him, 1003 00:56:39,120 --> 00:56:41,319 Speaker 1: you would never have given him a penny. The joke 1004 00:56:41,360 --> 00:56:43,680 Speaker 1: about all these people who passed on him. He had 1005 00:56:43,680 --> 00:56:47,800 Speaker 1: the scruffy beard and you know, yellow fingers from nobody. 1006 00:56:47,920 --> 00:56:50,160 Speaker 1: I could see how people wouldn't have taken him seriously. 1007 00:56:50,520 --> 00:56:52,680 Speaker 1: But I have to tell you why I um. And 1008 00:56:52,719 --> 00:56:56,080 Speaker 1: there's a funny story that I can't verify about the 1009 00:56:56,120 --> 00:56:59,759 Speaker 1: alumni department. It's Stony Brook. Um. I can't even share 1010 00:56:59,760 --> 00:57:01,960 Speaker 1: publicly because I don't know if it's true, but if 1011 00:57:01,960 --> 00:57:05,080 Speaker 1: it is, it's pretty hilarious. I really enjoyed the book. 1012 00:57:05,160 --> 00:57:08,000 Speaker 1: I normally take a ton of notes, and the books 1013 00:57:08,000 --> 00:57:11,680 Speaker 1: are always marked up and underlined and with post its, 1014 00:57:11,719 --> 00:57:14,520 Speaker 1: and oh, here's the question, and here's the topic. There 1015 00:57:14,640 --> 00:57:17,880 Speaker 1: really is zero writing in the book because I read 1016 00:57:17,920 --> 00:57:22,800 Speaker 1: it like a thriller. It's a fascinating tale about really 1017 00:57:23,520 --> 00:57:27,240 Speaker 1: an amazing story with really interesting people. You did really 1018 00:57:27,320 --> 00:57:30,760 Speaker 1: nice job on this, um, thank you. What What was 1019 00:57:30,840 --> 00:57:33,600 Speaker 1: the process like writing this? This gotta be quite quite 1020 00:57:33,600 --> 00:57:36,320 Speaker 1: a monstrousity to put together. It's hard, the hard thing 1021 00:57:36,320 --> 00:57:39,080 Speaker 1: I ever did in my life. Really, I could. I 1022 00:57:39,120 --> 00:57:42,480 Speaker 1: could totally see that the challenges We're getting people to talk, 1023 00:57:42,520 --> 00:57:45,320 Speaker 1: and even when they started talking, understanding what they were 1024 00:57:45,320 --> 00:57:47,360 Speaker 1: telling me, and I'm not a math guy, I had 1025 00:57:47,360 --> 00:57:50,040 Speaker 1: to understand this is a different language quant to some extent, 1026 00:57:50,240 --> 00:57:52,800 Speaker 1: and even at that point, trying to make it into 1027 00:57:52,800 --> 00:57:55,040 Speaker 1: a narrative, as you suggest, I tried to appeal. I 1028 00:57:55,040 --> 00:57:57,400 Speaker 1: want to try to appeal to everyone, um, the quantity 1029 00:57:57,440 --> 00:58:04,440 Speaker 1: type people, mathematicians, scientists, but also just the average nonfiction readers. 1030 00:58:05,320 --> 00:58:07,960 Speaker 1: I did. There were there were a few times where 1031 00:58:08,000 --> 00:58:11,000 Speaker 1: I'm working all night in my basement and I hear 1032 00:58:11,040 --> 00:58:13,640 Speaker 1: some sound upstairs and I'm like, oh, my kids left 1033 00:58:13,680 --> 00:58:15,720 Speaker 1: the TV on again, And then I go up to 1034 00:58:15,760 --> 00:58:17,480 Speaker 1: turn it off and there's no TV on. Then I 1035 00:58:17,520 --> 00:58:20,480 Speaker 1: realized that sound, those sounds are the birds getting up 1036 00:58:20,480 --> 00:58:23,360 Speaker 1: in the morning, went through the night. And part of 1037 00:58:23,360 --> 00:58:26,880 Speaker 1: it is because I was fascinated by the story myself, 1038 00:58:26,920 --> 00:58:30,040 Speaker 1: and these characters are interesting and intriguing and what they accomplished, 1039 00:58:30,080 --> 00:58:32,280 Speaker 1: and the challenges they overcame, and the drama behind the 1040 00:58:32,320 --> 00:58:35,160 Speaker 1: scenes that I wasn't aware of. So it was the 1041 00:58:35,160 --> 00:58:38,040 Speaker 1: hardest thing ever did, but also it was rewarding and 1042 00:58:38,080 --> 00:58:41,080 Speaker 1: fascinating to me in the In the early phases of this, 1043 00:58:41,200 --> 00:58:44,200 Speaker 1: did you ever reach a point where you said, uh, 1044 00:58:44,480 --> 00:58:47,080 Speaker 1: this is just going now, where I have to pull 1045 00:58:47,080 --> 00:58:49,880 Speaker 1: the plug on this? Many times? I came close too 1046 00:58:49,920 --> 00:58:52,200 Speaker 1: many times? He really, Yeah. I mean I wasn't close 1047 00:58:52,280 --> 00:58:55,200 Speaker 1: to given up, but I couldn't figure out how I 1048 00:58:55,240 --> 00:58:57,560 Speaker 1: was going to make it happen. And then I would 1049 00:58:57,600 --> 00:59:00,360 Speaker 1: have a breakthrough. Someone would be kind enough to share 1050 00:59:00,400 --> 00:59:02,200 Speaker 1: with me and and talk to me. Maybe would maybe 1051 00:59:02,200 --> 00:59:04,320 Speaker 1: be on the record, maybe it wouldn't, but that would 1052 00:59:04,400 --> 00:59:06,439 Speaker 1: keep me going now, would give me encouragement and deal 1053 00:59:06,520 --> 00:59:10,200 Speaker 1: with all the people slamming the door on my face subsequently, 1054 00:59:10,480 --> 00:59:13,600 Speaker 1: because then there'll be somebody kind enough to to share 1055 00:59:13,840 --> 00:59:17,400 Speaker 1: right after that. When you spoke to people off the record, 1056 00:59:18,240 --> 00:59:20,880 Speaker 1: how do you use that if you're telling somebody. I'm 1057 00:59:20,920 --> 00:59:22,360 Speaker 1: not gonna quote you. I'm not going to use this. 1058 00:59:22,840 --> 00:59:25,080 Speaker 1: How do you work that into the story. Does it 1059 00:59:25,200 --> 00:59:28,760 Speaker 1: just give you enough background? Or what do you do 1060 00:59:28,880 --> 00:59:33,120 Speaker 1: with off the record um conversations and with Simon's on 1061 00:59:33,280 --> 00:59:35,120 Speaker 1: or off the record with you? Right? So I don't 1062 00:59:35,160 --> 00:59:37,000 Speaker 1: do off the record. Off the record the way we 1063 00:59:37,040 --> 00:59:38,880 Speaker 1: define at the Wall Street Journal means you can't use 1064 00:59:38,920 --> 00:59:41,160 Speaker 1: that information. But I was up front with with all 1065 00:59:41,200 --> 00:59:43,160 Speaker 1: these people and saying, I'd like to use your information 1066 00:59:43,200 --> 00:59:46,600 Speaker 1: on background, meaning use it, right, but I won't name you, 1067 00:59:46,640 --> 00:59:49,680 Speaker 1: won't quote you, won't cite you. And I um, I said, 1068 00:59:49,720 --> 00:59:51,160 Speaker 1: you know, I've been around a little bit, so I 1069 00:59:51,240 --> 00:59:53,120 Speaker 1: have a certain reputation. And I said, I'm not gonna 1070 00:59:53,120 --> 00:59:54,680 Speaker 1: burn you. There's no incentive for me to burn you. 1071 00:59:54,680 --> 00:59:56,680 Speaker 1: I'm not gonna name you. I'm not gonna tell anybody 1072 00:59:56,760 --> 00:59:59,920 Speaker 1: Rento Science that we're talking. UM. So I got people 1073 01:00:00,120 --> 01:00:05,400 Speaker 1: sufficiently comfortable, and Jim Simons was pretty darn open and 1074 01:00:05,520 --> 01:00:08,200 Speaker 1: frank and transparent. I have to tell you about what 1075 01:00:08,320 --> 01:00:10,400 Speaker 1: he wanted to speak about. Again, I want to make 1076 01:00:10,400 --> 01:00:12,760 Speaker 1: clear that he wasn't opening the kimono and telling me 1077 01:00:12,760 --> 01:00:14,320 Speaker 1: all his signals. I had to get that stuff on 1078 01:00:14,360 --> 01:00:17,200 Speaker 1: my own, uh and his and how he dealt with 1079 01:00:17,240 --> 01:00:19,360 Speaker 1: certain things, and the setbacks and the narrative and the 1080 01:00:20,160 --> 01:00:24,400 Speaker 1: drama behind the scenes. But he was quite cooperative about 1081 01:00:24,480 --> 01:00:26,680 Speaker 1: other things, and I have to thank them for that. 1082 01:00:27,000 --> 01:00:32,080 Speaker 1: So the early cancelations, the Cosa Nostra, Simon's don't say 1083 01:00:32,080 --> 01:00:35,400 Speaker 1: anything after you speak with Simmons? Do you circle back 1084 01:00:35,440 --> 01:00:38,320 Speaker 1: with the early cancelors And were they a little more 1085 01:00:38,360 --> 01:00:40,920 Speaker 1: open at that point? No, they still wouldn't talk to me. 1086 01:00:41,000 --> 01:00:43,600 Speaker 1: So I had to keep even after Simon says, all right, 1087 01:00:43,640 --> 01:00:45,360 Speaker 1: I'll finally talk to you. You know why there because 1088 01:00:45,360 --> 01:00:48,040 Speaker 1: they were even concerned about the possibility that Jim might 1089 01:00:48,080 --> 01:00:50,439 Speaker 1: get angry with him. Oh yeah, well you say that 1090 01:00:50,520 --> 01:00:52,400 Speaker 1: Jim is talking to you about How do I know 1091 01:00:52,480 --> 01:00:55,720 Speaker 1: that's true? Jim? Yeah, But it just got too busy. 1092 01:00:55,760 --> 01:00:57,560 Speaker 1: This guy's it's got a lot going on, and you're 1093 01:00:57,560 --> 01:00:58,800 Speaker 1: not gonna call him up and say, can I talk 1094 01:00:58,880 --> 01:01:01,080 Speaker 1: to Greg? Already? Did you told me I can't talk 1095 01:01:01,120 --> 01:01:03,280 Speaker 1: to Greg? But now can I talk to Greg? It 1096 01:01:03,360 --> 01:01:05,240 Speaker 1: wasn't worth their while. So I had to keep finding 1097 01:01:05,600 --> 01:01:07,600 Speaker 1: other people and and quite honestly, a lot of the 1098 01:01:07,600 --> 01:01:10,280 Speaker 1: people early on at the firm and in his life 1099 01:01:10,640 --> 01:01:14,560 Speaker 1: were old and um, and you're eighty something, You're like, 1100 01:01:14,600 --> 01:01:16,280 Speaker 1: I'll say, who I what I want to who I 1101 01:01:16,280 --> 01:01:18,240 Speaker 1: want one. They've accomplished a lot in their own right. 1102 01:01:18,280 --> 01:01:21,360 Speaker 1: I mean, these these are scientists that are big names, 1103 01:01:21,360 --> 01:01:23,800 Speaker 1: hollid names, and some of these fields. It's harder. You 1104 01:01:23,800 --> 01:01:25,360 Speaker 1: have to you have to focus on the fact that, 1105 01:01:25,720 --> 01:01:28,320 Speaker 1: even setting aside when it came to Wall Street and investing, 1106 01:01:28,320 --> 01:01:30,920 Speaker 1: these people are really accomplished in their own right. So 1107 01:01:30,960 --> 01:01:32,840 Speaker 1: they're proud of what they've done. And some of these 1108 01:01:32,880 --> 01:01:36,160 Speaker 1: people don't mind talking. Huh that that's really that's really 1109 01:01:36,240 --> 01:01:40,360 Speaker 1: quite fascinating. UM. I have a quibble with you. Is 1110 01:01:40,440 --> 01:01:43,680 Speaker 1: Jim Simons really the man who solved the markets? Or 1111 01:01:43,840 --> 01:01:46,840 Speaker 1: is he the guy who just figured out, here's how 1112 01:01:46,880 --> 01:01:51,280 Speaker 1: to apply mathematics as a way to extract profits from 1113 01:01:51,280 --> 01:01:55,880 Speaker 1: the markets. I didn't get the sense that he figured 1114 01:01:55,920 --> 01:01:59,360 Speaker 1: out the markets. The markets are just an a means 1115 01:01:59,400 --> 01:02:01,520 Speaker 1: to an end for him. Yeah, to the extent that 1116 01:02:01,600 --> 01:02:08,680 Speaker 1: he's um recorded these remarkable to that extent he saw 1117 01:02:08,760 --> 01:02:14,200 Speaker 1: the market. But right, there's no hidden understanding that jumps 1118 01:02:14,200 --> 01:02:15,680 Speaker 1: out of you that he knows that you and I 1119 01:02:15,760 --> 01:02:18,360 Speaker 1: don't know he's as flum mixed by the day to 1120 01:02:18,440 --> 01:02:21,040 Speaker 1: day moves as anyone else. What he does and his 1121 01:02:21,040 --> 01:02:25,520 Speaker 1: his colleagues really UM do understand is that what impacts 1122 01:02:25,760 --> 01:02:28,280 Speaker 1: prices is a lot more than you and I are 1123 01:02:28,320 --> 01:02:32,080 Speaker 1: aware of. Now They've got whole levels of factors that 1124 01:02:32,400 --> 01:02:34,240 Speaker 1: aren't included in the a q R s and the 1125 01:02:34,280 --> 01:02:36,520 Speaker 1: stuff that you can buy off the shelf, etcetera. So 1126 01:02:36,800 --> 01:02:39,240 Speaker 1: they are they have a better understanding of the market, 1127 01:02:39,280 --> 01:02:43,200 Speaker 1: I would argue than anyone else, But maybe it's overstated 1128 01:02:43,240 --> 01:02:46,640 Speaker 1: to say they completely solved it. So the other thing 1129 01:02:46,720 --> 01:02:49,960 Speaker 1: that I thought was really intriguing UM in the book 1130 01:02:50,960 --> 01:02:55,560 Speaker 1: is despite these guys making boat tons of money, just 1131 01:02:55,880 --> 01:02:58,960 Speaker 1: so much compared to what they would have made had 1132 01:02:59,000 --> 01:03:03,480 Speaker 1: they stayed either IBM or Academia, they're making four and 1133 01:03:03,560 --> 01:03:06,200 Speaker 1: five and ten x plus whatever the Medallion Fund is 1134 01:03:06,240 --> 01:03:12,160 Speaker 1: strowing off some of the um squabbles about money, especially 1135 01:03:12,200 --> 01:03:16,280 Speaker 1: in the later history of the firm. So I described 1136 01:03:16,320 --> 01:03:21,640 Speaker 1: the firm as having four phases. The early macro tourism phase, 1137 01:03:22,280 --> 01:03:27,000 Speaker 1: then there's a later phase where they figure out um 1138 01:03:27,120 --> 01:03:31,440 Speaker 1: how to trade currencies, commodities and futures uh, and then 1139 01:03:31,480 --> 01:03:35,600 Speaker 1: when Mercer and Brown cracked the equity code is the 1140 01:03:35,640 --> 01:03:37,840 Speaker 1: third phase, and then the fourth phase they started bringing 1141 01:03:37,880 --> 01:03:44,400 Speaker 1: a lot of UM Russian computer scientists and other UM academicians. 1142 01:03:45,600 --> 01:03:51,280 Speaker 1: This like fourth generation of of the company really degenerates 1143 01:03:51,280 --> 01:03:57,080 Speaker 1: into this petty, jealous, backbiting envy to the point where 1144 01:03:57,080 --> 01:03:59,560 Speaker 1: a bunch of them go to Simon's and say, you're 1145 01:03:59,640 --> 01:04:02,880 Speaker 1: making too much money. We demand some of it. How 1146 01:04:03,080 --> 01:04:05,480 Speaker 1: the hell did does anyone get away with that? Yeah, 1147 01:04:05,600 --> 01:04:08,720 Speaker 1: they were people telling Jim Simmons he made too much money. 1148 01:04:08,760 --> 01:04:10,680 Speaker 1: There were people saying he should step down. There were 1149 01:04:10,720 --> 01:04:13,760 Speaker 1: people it was something of a coup. They tried to 1150 01:04:13,960 --> 01:04:16,640 Speaker 1: how does he not just say you you and you 1151 01:04:16,640 --> 01:04:19,800 Speaker 1: you're fired. Go back to making nine dollars as a 1152 01:04:19,840 --> 01:04:22,960 Speaker 1: teaching assistant. Because I keep coming back to the point 1153 01:04:23,000 --> 01:04:27,280 Speaker 1: that Jim Simmons loves money, and they were really valued employees, 1154 01:04:27,320 --> 01:04:29,680 Speaker 1: so they could have been jerks, but he gets past that, 1155 01:04:29,680 --> 01:04:31,960 Speaker 1: and he's a great manager. He wasn't insulted by that. Listen, 1156 01:04:32,000 --> 01:04:34,520 Speaker 1: if you're gonna hire some of the top scientists in 1157 01:04:34,560 --> 01:04:37,720 Speaker 1: the world, you're gonna get the personalities that come with that, 1158 01:04:37,920 --> 01:04:41,720 Speaker 1: and he embraced that, so he wasn't insulted. He doesn't 1159 01:04:41,720 --> 01:04:44,560 Speaker 1: take himself so seriously, and he actually gave back some 1160 01:04:44,640 --> 01:04:47,080 Speaker 1: equity and he and he said, maybe you guys are 1161 01:04:47,200 --> 01:04:49,880 Speaker 1: right and I'm talking too much of a cut. And 1162 01:04:49,880 --> 01:04:52,200 Speaker 1: I give him credit for that. So it was amazing. 1163 01:04:52,640 --> 01:04:56,040 Speaker 1: In the book, I'm like, I just don't know, because 1164 01:04:56,120 --> 01:05:01,000 Speaker 1: normally employees like that are so cancerous they could destroy 1165 01:05:01,080 --> 01:05:07,000 Speaker 1: a company with the sort of petty, envious jealousies that 1166 01:05:07,000 --> 01:05:09,520 Speaker 1: that you described in the book. I found that to 1167 01:05:09,640 --> 01:05:13,800 Speaker 1: be just completely shocking. Um and his I guess he 1168 01:05:13,880 --> 01:05:18,840 Speaker 1: resolved in a way that was pretty uh, pretty reasonable. Yeah. Um. 1169 01:05:19,120 --> 01:05:21,560 Speaker 1: He again has a great instinct when it comes to people. 1170 01:05:21,640 --> 01:05:25,560 Speaker 1: So it's not he's not just like this um quant 1171 01:05:26,040 --> 01:05:30,240 Speaker 1: uh focused on money and numbers and algorithms. He understands 1172 01:05:30,280 --> 01:05:33,360 Speaker 1: people and what what drives them. And he thought he 1173 01:05:33,360 --> 01:05:35,960 Speaker 1: could work with some of the people leading the coup. Yes, 1174 01:05:35,960 --> 01:05:40,000 Speaker 1: they were headstrong and tempestuous and difficult, but they had 1175 01:05:40,040 --> 01:05:43,920 Speaker 1: potential as managers and he was right. He actually created 1176 01:05:43,960 --> 01:05:47,360 Speaker 1: he turned them into pretty good managers. So, for for 1177 01:05:47,400 --> 01:05:50,120 Speaker 1: whatever reason, he's got these talents on both sides the equation. 1178 01:05:50,240 --> 01:05:53,320 Speaker 1: So who's running Renaissance Technologies Now, it's not Jim Simon's 1179 01:05:53,320 --> 01:05:56,120 Speaker 1: the CEO, and it's not Robert Mercer who's running the 1180 01:05:56,160 --> 01:05:59,080 Speaker 1: day to day. It's Peter Brown, who's a former IBM 1181 01:05:59,120 --> 01:06:02,560 Speaker 1: scientists just to work closely with Mercer and was considered 1182 01:06:02,680 --> 01:06:06,800 Speaker 1: the more wild of the two. Yes, and when he 1183 01:06:06,840 --> 01:06:10,040 Speaker 1: took over, when Bob Mercer stepped down, people internally were 1184 01:06:10,080 --> 01:06:14,680 Speaker 1: concerned because, as I said, Peter Brown is a little 1185 01:06:14,680 --> 01:06:18,600 Speaker 1: bit tempestuous and gets emotional sometimes. I describe a couple 1186 01:06:18,600 --> 01:06:21,960 Speaker 1: of scenes in my book where he panicked, he got nervous, 1187 01:06:21,960 --> 01:06:23,520 Speaker 1: and he got scared. This was years ago, and he 1188 01:06:23,600 --> 01:06:27,520 Speaker 1: learned from those lessons, and later on when main market difficulties, 1189 01:06:27,560 --> 01:06:30,280 Speaker 1: he didn't react that same way. But people worried about 1190 01:06:30,280 --> 01:06:33,480 Speaker 1: Peter Brown taking over. And to his credit, he's aware 1191 01:06:33,520 --> 01:06:36,400 Speaker 1: of his flaws and his weaknesses, and he's been leaning 1192 01:06:36,440 --> 01:06:38,400 Speaker 1: and we're talking the last few years, last couple of years, 1193 01:06:38,440 --> 01:06:41,080 Speaker 1: he's been leaning on his colleagues, his senior colleagues, much 1194 01:06:41,120 --> 01:06:44,200 Speaker 1: more than anyone had expected, and it's worked out nicely. 1195 01:06:44,360 --> 01:06:49,080 Speaker 1: I imagine Brown is Mercer without the politics, um at 1196 01:06:49,160 --> 01:06:52,960 Speaker 1: least in actuality, because he's still working closely with Mercer. Yeah, 1197 01:06:53,040 --> 01:06:56,520 Speaker 1: but very different person now. Um, Bob Mercer is this 1198 01:06:56,640 --> 01:06:59,400 Speaker 1: cool customer. You don't really can't read him. Even his 1199 01:06:59,520 --> 01:07:02,760 Speaker 1: colleagues don't really understand. He's so on emotional. They don't 1200 01:07:02,800 --> 01:07:05,320 Speaker 1: stand where he stands on certain issues. You do not 1201 01:07:05,760 --> 01:07:08,680 Speaker 1: wonder when it comes to Peter Brown. So in some 1202 01:07:08,720 --> 01:07:11,840 Speaker 1: ways they offset each other. They worked really melded, and 1203 01:07:11,840 --> 01:07:14,480 Speaker 1: they messed really well together. And what is Jim Simon's 1204 01:07:14,560 --> 01:07:18,640 Speaker 1: doing today day to day at Renaissance? So he barely 1205 01:07:18,680 --> 01:07:20,560 Speaker 1: goes in the office and yet he makes about a 1206 01:07:20,600 --> 01:07:24,080 Speaker 1: billion and a half dollars a year gig. Yeah, but 1207 01:07:24,160 --> 01:07:26,400 Speaker 1: really he's But it's not to say he's not very 1208 01:07:26,440 --> 01:07:29,880 Speaker 1: hard at work. He runs a foundation and it's really active. 1209 01:07:29,920 --> 01:07:33,000 Speaker 1: One of the biggest supporters of science in the country. 1210 01:07:33,040 --> 01:07:35,480 Speaker 1: They're very active when it comes to things like autism research, 1211 01:07:35,840 --> 01:07:38,120 Speaker 1: and they're cutting edge the back all kinds of cutting 1212 01:07:38,200 --> 01:07:43,040 Speaker 1: edge approaches. Um he supports, he funds. He he subsidizes 1213 01:07:43,080 --> 01:07:46,000 Speaker 1: the salaries of high school math and science teachers in 1214 01:07:46,040 --> 01:07:48,360 Speaker 1: New York City, ten thousand of them because he doesn't 1215 01:07:48,360 --> 01:07:52,480 Speaker 1: want so many leaving. What does that to subsidize, Well, 1216 01:07:52,480 --> 01:07:54,919 Speaker 1: it depends how many each year, but oh yeah, it's huge, 1217 01:07:55,000 --> 01:07:57,120 Speaker 1: like millions of dollars. I mean, he's worth twenty three 1218 01:07:57,160 --> 01:07:59,640 Speaker 1: billion dollars. But to his credit, he's on the cutting 1219 01:07:59,680 --> 01:08:01,920 Speaker 1: edge of all kinds of different approaches when it comes 1220 01:08:01,960 --> 01:08:05,560 Speaker 1: to science education. UM. They published Planta, which is a 1221 01:08:05,600 --> 01:08:11,120 Speaker 1: basic fundamental science and mathematics magazine, which really who else 1222 01:08:11,160 --> 01:08:13,920 Speaker 1: covers that sort of stuff. And he's also trying to 1223 01:08:13,960 --> 01:08:16,640 Speaker 1: subsidize the work, and he isn't subsidizing the work of 1224 01:08:16,680 --> 01:08:20,120 Speaker 1: scientists trying to get at the beginning of life and 1225 01:08:20,200 --> 01:08:24,440 Speaker 1: how this world began, in the first moments of our existence, 1226 01:08:24,479 --> 01:08:28,439 Speaker 1: of this universe existence. UM. They're trying to build out 1227 01:08:28,439 --> 01:08:32,160 Speaker 1: in Chile a UM all kind of massive array exactly 1228 01:08:32,400 --> 01:08:35,240 Speaker 1: of of ability to see, UM, go back in history 1229 01:08:35,280 --> 01:08:38,679 Speaker 1: and see through the massive telescopes to see what happened. 1230 01:08:38,680 --> 01:08:40,200 Speaker 1: So he's on the cutting edge of all kinds of 1231 01:08:40,240 --> 01:08:43,280 Speaker 1: different science, and he's just as focused on that as 1232 01:08:43,280 --> 01:08:45,799 Speaker 1: he was trying to crank out the sixty six percent 1233 01:08:45,840 --> 01:08:50,040 Speaker 1: returns at at the Medallion Fund. The current theory of 1234 01:08:50,080 --> 01:08:53,519 Speaker 1: the Big Bang is under assault because some of it 1235 01:08:53,560 --> 01:08:56,360 Speaker 1: doesn't seem to work, and some of the work that 1236 01:08:56,479 --> 01:09:00,160 Speaker 1: Simon's is doing is to try and figure out if 1237 01:09:00,200 --> 01:09:02,639 Speaker 1: not the Big Bang, then then how did the universe 1238 01:09:02,720 --> 01:09:05,600 Speaker 1: come into existence? Simons himself isn't a believer in the 1239 01:09:05,600 --> 01:09:08,840 Speaker 1: Big Bang, and yet he's funding efforts to test if 1240 01:09:08,880 --> 01:09:11,559 Speaker 1: it actually there's some proof to it, because deep down 1241 01:09:11,560 --> 01:09:14,680 Speaker 1: inside he's a scientist. And show me the day to 1242 01:09:14,680 --> 01:09:17,240 Speaker 1: show me the evidence, and if you can't disprove it, 1243 01:09:17,280 --> 01:09:19,160 Speaker 1: then that's the best we have to work with, right 1244 01:09:19,240 --> 01:09:21,640 Speaker 1: The Renaissance story, that Jim Simon story really is a 1245 01:09:21,680 --> 01:09:24,840 Speaker 1: story about the scientific method. If you think about society 1246 01:09:24,880 --> 01:09:27,040 Speaker 1: today and you think about the White House, it's all 1247 01:09:27,040 --> 01:09:29,160 Speaker 1: about narratives. And if you think about Wall Street to 1248 01:09:29,400 --> 01:09:33,040 Speaker 1: Pharaos and we work and people get carried away with 1249 01:09:33,200 --> 01:09:36,280 Speaker 1: the narrative and it leads to problems. It leads to 1250 01:09:36,320 --> 01:09:39,200 Speaker 1: real issues. Whereas there's something that he said, I I've 1251 01:09:39,200 --> 01:09:41,920 Speaker 1: become a believer in the scientific method, where it's about data, 1252 01:09:41,960 --> 01:09:45,280 Speaker 1: it's about proof, and this that is to me one 1253 01:09:45,280 --> 01:09:47,960 Speaker 1: of the lessons of the Renaissance. Jim Simon's story quite 1254 01:09:48,040 --> 01:09:50,599 Speaker 1: quite fascinating. So we only have you for a finite 1255 01:09:50,600 --> 01:09:54,040 Speaker 1: amount of time. Let's jump to our favorite questions. We 1256 01:09:54,080 --> 01:09:56,680 Speaker 1: ask this of all of our guests, sort of our 1257 01:09:56,760 --> 01:09:59,799 Speaker 1: speed rounds. Tell us the first car you ever owned 1258 01:10:00,080 --> 01:10:03,840 Speaker 1: you're making model. Never owned a car at least, grew 1259 01:10:03,960 --> 01:10:06,840 Speaker 1: up in Providence, Rhode Allen outside of my dad, taught 1260 01:10:06,840 --> 01:10:10,200 Speaker 1: at Brown University. Nothing really going on. The most exciting 1261 01:10:10,240 --> 01:10:12,400 Speaker 1: thing was we walked to campus, my high school friends 1262 01:10:12,439 --> 01:10:15,920 Speaker 1: and I and try to hit on girls and usually unsuccessfully. 1263 01:10:16,000 --> 01:10:19,600 Speaker 1: So that required legs and not automobiles. So yeah, I 1264 01:10:19,600 --> 01:10:22,840 Speaker 1: didn't really have a car. What's the most important thing 1265 01:10:23,000 --> 01:10:26,679 Speaker 1: people don't know about, Greg Dockerman. I've got this separate 1266 01:10:26,720 --> 01:10:29,080 Speaker 1: life where I write books for young people with my 1267 01:10:29,120 --> 01:10:31,400 Speaker 1: two sons. So we wrote two books called Rising Above, 1268 01:10:31,479 --> 01:10:35,120 Speaker 1: where we've interviewed sports stars who overcame challenges in their 1269 01:10:35,160 --> 01:10:40,439 Speaker 1: youth racism, sexual abuse, um, physical abuse, all kinds of 1270 01:10:40,479 --> 01:10:43,240 Speaker 1: different emotional and other types of challenges, and we asked 1271 01:10:43,280 --> 01:10:45,479 Speaker 1: them how they did it, and to us it was 1272 01:10:45,520 --> 01:10:48,479 Speaker 1: really inspirational and we share those stories in our books. 1273 01:10:49,479 --> 01:10:52,080 Speaker 1: Tell us who your early mentors were in the field 1274 01:10:52,120 --> 01:10:59,160 Speaker 1: of journalism. Uh? Yeah, so I never really had great mentors, 1275 01:10:59,240 --> 01:11:02,160 Speaker 1: quite frank, have had a series of bad bosses early 1276 01:11:02,240 --> 01:11:06,760 Speaker 1: in my life before gaming. No, now, my my must 1277 01:11:06,880 --> 01:11:09,720 Speaker 1: a great early on. I'm talking so early on, I wasn't. 1278 01:11:09,880 --> 01:11:12,280 Speaker 1: I stumbled into this profession. Oh really, what were the 1279 01:11:12,320 --> 01:11:14,400 Speaker 1: original plans? I was gonna go work on Wall Street. 1280 01:11:15,040 --> 01:11:19,040 Speaker 1: I was reading books like Adam Smith and Ray Dirk's 1281 01:11:19,080 --> 01:11:22,680 Speaker 1: You just got Ray Dirk's vaguely familiar. He had this 1282 01:11:22,720 --> 01:11:24,519 Speaker 1: famous case. It went to Supreme court. He was an 1283 01:11:24,520 --> 01:11:29,840 Speaker 1: insurance analyst who UM were shorting and and it was 1284 01:11:29,880 --> 01:11:32,439 Speaker 1: a famous case, went Supreme court and he won, and 1285 01:11:32,520 --> 01:11:34,800 Speaker 1: he left an impression on me with a book. I 1286 01:11:34,880 --> 01:11:37,280 Speaker 1: was buying barrens as. At a young age in camp, 1287 01:11:37,320 --> 01:11:39,760 Speaker 1: I was trading stocks. Um, I was a guy was 1288 01:11:39,760 --> 01:11:43,360 Speaker 1: gonna go work on Wall Street. And I didn't really 1289 01:11:43,520 --> 01:11:45,200 Speaker 1: do any summer kind of job. I was working in 1290 01:11:45,280 --> 01:11:47,559 Speaker 1: camps and I didn't have an experience, didn't know any mine. 1291 01:11:47,600 --> 01:11:50,040 Speaker 1: My dad was an academic, and I graduated and it 1292 01:11:50,120 --> 01:11:52,000 Speaker 1: did well, went to Brandon's University, did well, and I 1293 01:11:52,000 --> 01:11:55,040 Speaker 1: couldn't even get an interview on Wall Street. Was nine. 1294 01:11:55,280 --> 01:11:57,479 Speaker 1: It was after the market had crashed a couple years earlier, 1295 01:11:57,479 --> 01:12:01,600 Speaker 1: and um, I stumbled around. I start some some businesses 1296 01:12:01,640 --> 01:12:04,080 Speaker 1: and some work, some didn't. And then I went in 1297 01:12:04,160 --> 01:12:07,840 Speaker 1: one day and interviewed to be a financial journalist. I'm like, wait, 1298 01:12:07,880 --> 01:12:10,639 Speaker 1: I love writing and I love Wall Street They're gonna 1299 01:12:10,720 --> 01:12:14,760 Speaker 1: pay me to write about Wall Street? How great is that? So? 1300 01:12:14,840 --> 01:12:18,400 Speaker 1: What writers influenced the way you think about writing, either 1301 01:12:18,600 --> 01:12:23,280 Speaker 1: articles or books? So James Stewart first and foremost, Um, everything, 1302 01:12:23,320 --> 01:12:25,960 Speaker 1: he's long standing Wall Street Journal reporter, right, and then 1303 01:12:26,240 --> 01:12:27,920 Speaker 1: then he went he's at the New York Times. Now 1304 01:12:28,000 --> 01:12:31,320 Speaker 1: book author Um Danna Thieves. He wrote a book called 1305 01:12:31,360 --> 01:12:34,559 Speaker 1: Follow the Story, which is about writing. And I've read 1306 01:12:34,600 --> 01:12:40,000 Speaker 1: and reread that book numerous times, so that guides me. Um. 1307 01:12:40,040 --> 01:12:42,639 Speaker 1: There's a editor at the Journal named Mike sikon Alfie 1308 01:12:42,640 --> 01:12:46,200 Speaker 1: who I've learned a lot from. He's an investigative editor. 1309 01:12:46,320 --> 01:12:49,160 Speaker 1: He had we had a Poulterer a package that we 1310 01:12:49,200 --> 01:12:51,240 Speaker 1: won this past year, and he was the editor of 1311 01:12:51,280 --> 01:12:54,320 Speaker 1: that group and he has left a big influence on me. 1312 01:12:54,840 --> 01:12:57,040 Speaker 1: Since you mentioned a couple of books, tell us about 1313 01:12:57,120 --> 01:12:59,920 Speaker 1: your favorite books. What do you enjoy to read Wolf 1314 01:13:00,000 --> 01:13:04,040 Speaker 1: Street related or not when you're not researching your own books? Oh? So, 1315 01:13:05,040 --> 01:13:08,800 Speaker 1: Paul Auster, Philip Roth, you know the fiction there? Give 1316 01:13:08,840 --> 01:13:11,479 Speaker 1: us some titles. When you say Philip Roth, I immediately 1317 01:13:11,520 --> 01:13:13,760 Speaker 1: think of Portnoy's Complaint. But what else do you read? 1318 01:13:14,040 --> 01:13:17,679 Speaker 1: You know? American pastoral is great? Um, there's really nothing 1319 01:13:17,800 --> 01:13:19,960 Speaker 1: much that from him that I don't love and and 1320 01:13:20,000 --> 01:13:23,639 Speaker 1: won't read. Um. I'm reading Patti Smith right now, her 1321 01:13:23,640 --> 01:13:27,280 Speaker 1: autobiography Kids. Yeah, all right, that's them reading the earlier one. 1322 01:13:27,360 --> 01:13:31,080 Speaker 1: But she's brilliant in her own right, Um. Catch her 1323 01:13:31,120 --> 01:13:33,280 Speaker 1: in the Ride at a young age left a huge 1324 01:13:33,360 --> 01:13:36,040 Speaker 1: influence in me in terms of being an outsider. And 1325 01:13:36,120 --> 01:13:39,160 Speaker 1: that's what as a journalist I see myself. My job 1326 01:13:39,240 --> 01:13:41,439 Speaker 1: is to kind of polke halls and look at the 1327 01:13:41,439 --> 01:13:46,559 Speaker 1: foibles and mistakes and and and accomplishments of others people 1328 01:13:46,640 --> 01:13:48,839 Speaker 1: in the world of finance. That's sort of my position 1329 01:13:48,840 --> 01:13:52,960 Speaker 1: in some ways. I saw myself in that character, the 1330 01:13:53,040 --> 01:13:55,960 Speaker 1: holding coffeil character to some extent. What was the first 1331 01:13:56,000 --> 01:14:00,400 Speaker 1: author you mentioned before, Philip Paul Auster. Paul Auster's fiction 1332 01:14:00,400 --> 01:14:02,960 Speaker 1: writer who's brilliant in his own way. He's got gets 1333 01:14:02,960 --> 01:14:06,719 Speaker 1: into some give us a book to Uh. Brooklyn Diary 1334 01:14:06,800 --> 01:14:10,120 Speaker 1: is a good one. He's so many Brooklyn, All right, 1335 01:14:10,160 --> 01:14:12,400 Speaker 1: well we'll go with that. Tell us about a time 1336 01:14:12,439 --> 01:14:16,120 Speaker 1: you failed and what you learned from the experience. So many. So. 1337 01:14:16,240 --> 01:14:18,720 Speaker 1: I got a tip that there was a guy who 1338 01:14:18,760 --> 01:14:22,200 Speaker 1: was running a fraud named Bernie Madoff, and that was 1339 01:14:22,800 --> 01:14:25,760 Speaker 1: probably two thousand and three. Al right, so there was 1340 01:14:25,840 --> 01:14:30,200 Speaker 1: already the Baron story, but nobody really picked up on 1341 01:14:30,240 --> 01:14:32,160 Speaker 1: it in a big way. Exactly right when did that? 1342 01:14:33,880 --> 01:14:37,000 Speaker 1: Maybe two one? And good source for the tip. It 1343 01:14:37,040 --> 01:14:39,280 Speaker 1: was a good source in the industry, but didn't have 1344 01:14:39,360 --> 01:14:42,880 Speaker 1: firsthand knowledge. So I started making some calls and it 1345 01:14:42,960 --> 01:14:45,040 Speaker 1: was early in the process. I got a call from 1346 01:14:45,280 --> 01:14:48,200 Speaker 1: Bernie madoffs right hand person, and they said, he here, 1347 01:14:48,200 --> 01:14:50,000 Speaker 1: are you making calls on Bernie? Why don't you come 1348 01:14:50,000 --> 01:14:52,400 Speaker 1: in and meet with him? And I was torn. At 1349 01:14:52,400 --> 01:14:54,479 Speaker 1: that point. I hadn't done enough research, so I said, 1350 01:14:55,000 --> 01:14:57,000 Speaker 1: I want to meet Bernie, but let's do it in 1351 01:14:57,040 --> 01:15:00,160 Speaker 1: a week or two. Well, Greg, he travels a there 1352 01:15:00,160 --> 01:15:02,479 Speaker 1: aren't gonna be many opportunities. If our you, I'd really 1353 01:15:02,520 --> 01:15:05,479 Speaker 1: take advantage. So I went in met with Bernie. Was 1354 01:15:05,520 --> 01:15:08,880 Speaker 1: he charming? He was charming, but not convincing. I asked 1355 01:15:08,960 --> 01:15:11,400 Speaker 1: him a series of tough questions. I came out of 1356 01:15:11,439 --> 01:15:14,240 Speaker 1: it unconvinced that it was legit, but I thought he 1357 01:15:14,280 --> 01:15:17,200 Speaker 1: was front running. I didn't think it was a complete fraud, 1358 01:15:17,439 --> 01:15:20,200 Speaker 1: not a ponzi, but he was. Because they were a 1359 01:15:20,280 --> 01:15:23,040 Speaker 1: legitimate trading operation, weren't they right, and I thought they 1360 01:15:23,040 --> 01:15:25,000 Speaker 1: were front running that legitimate trading and that's how you 1361 01:15:25,000 --> 01:15:28,160 Speaker 1: get the smooth returns. And I wasn't the only one 1362 01:15:28,200 --> 01:15:30,960 Speaker 1: on Wall Street who had that thought. And that's no excuse. 1363 01:15:31,000 --> 01:15:33,240 Speaker 1: I should have pursued that story and I blew it. 1364 01:15:33,280 --> 01:15:35,080 Speaker 1: I should have kept working on it. So what was 1365 01:15:35,160 --> 01:15:39,040 Speaker 1: the lesson? The lesson is to keep pushing and and 1366 01:15:39,120 --> 01:15:41,240 Speaker 1: if you've got an instinct, and to keep pursue it. 1367 01:15:41,240 --> 01:15:43,880 Speaker 1: And you listen, some of my best stories, quite frankly, 1368 01:15:43,960 --> 01:15:46,880 Speaker 1: are those that editors were luke warm on and I 1369 01:15:46,960 --> 01:15:49,680 Speaker 1: kind of kept going at it. You know. UM, give 1370 01:15:49,760 --> 01:15:52,479 Speaker 1: us an example. I wrote. I wrote a front page story. 1371 01:15:52,520 --> 01:15:54,559 Speaker 1: It became a front page story about John Paulson and 1372 01:15:54,720 --> 01:15:58,120 Speaker 1: his tremendous trade, uh the sun probably trade. And people 1373 01:15:58,160 --> 01:16:01,719 Speaker 1: internally were kind of like, well, um, he must have cheated. 1374 01:16:01,800 --> 01:16:03,439 Speaker 1: There's no ray he could have done it in a 1375 01:16:03,520 --> 01:16:07,640 Speaker 1: legitimate way. Um. I I wrote it. I broke the 1376 01:16:07,680 --> 01:16:10,920 Speaker 1: story on the London Whale. And even internally they're like 1377 01:16:11,240 --> 01:16:14,240 Speaker 1: Jamie Diamond, JP Morrigan, there's no way they could have 1378 01:16:14,280 --> 01:16:16,960 Speaker 1: that kind of embrace that kind of risk. Um. I 1379 01:16:17,240 --> 01:16:21,040 Speaker 1: did a story about a family, about a brother of 1380 01:16:21,120 --> 01:16:23,920 Speaker 1: a of a woman in cancer FitzGeralds who died on 1381 01:16:24,040 --> 01:16:26,920 Speaker 1: nine eleven, and I wanted to tell the story of 1382 01:16:26,960 --> 01:16:29,559 Speaker 1: how he wanted to tell the story how his his 1383 01:16:29,680 --> 01:16:32,960 Speaker 1: sister died on nine eleven. And I started researching, and 1384 01:16:32,960 --> 01:16:35,360 Speaker 1: people like you're never gonna find out exactly how she died. 1385 01:16:35,800 --> 01:16:38,120 Speaker 1: And you know what, you work hard enough, and that's 1386 01:16:38,120 --> 01:16:40,960 Speaker 1: the lesson. Sometimes you can actually piece things together. All right. 1387 01:16:41,000 --> 01:16:44,400 Speaker 1: So let's go back to our our speed round. Um, 1388 01:16:44,439 --> 01:16:46,280 Speaker 1: what do you do for fun when you're not researching 1389 01:16:46,320 --> 01:16:48,120 Speaker 1: and writing books? What what do you do to kick 1390 01:16:48,160 --> 01:16:51,120 Speaker 1: back and relax? I obsess over the New York Yankees 1391 01:16:51,360 --> 01:16:54,479 Speaker 1: with my son Eli, and play a lot of sports. 1392 01:16:54,479 --> 01:16:57,719 Speaker 1: So I'm on a softball team, I'm on a basketball team. Um, 1393 01:16:57,720 --> 01:17:01,560 Speaker 1: still playing basketball? Yeah, not as well as I used to. 1394 01:17:01,680 --> 01:17:05,080 Speaker 1: I've learned to come off the bench. It's been humbling. Yeah, 1395 01:17:05,680 --> 01:17:08,760 Speaker 1: I'm a short, Like forty is where that all goes 1396 01:17:08,800 --> 01:17:10,519 Speaker 1: to hell, right at the point where you have a 1397 01:17:10,520 --> 01:17:12,880 Speaker 1: good run, workout and you're kind of happy about that. 1398 01:17:12,920 --> 01:17:15,880 Speaker 1: But I'm pretty competitive, so you listen. If I can contribute, 1399 01:17:16,120 --> 01:17:18,880 Speaker 1: then I'm proud. At this point, I don't need to 1400 01:17:18,920 --> 01:17:22,840 Speaker 1: start and dominate like I was a quick, good past, 1401 01:17:22,960 --> 01:17:25,720 Speaker 1: first point guard back in the day. And if I 1402 01:17:25,720 --> 01:17:28,040 Speaker 1: can come off the bench and help, that's fine. Today 1403 01:17:28,280 --> 01:17:30,920 Speaker 1: that that's kind of kind of fun. Let's talk about 1404 01:17:31,000 --> 01:17:34,439 Speaker 1: journalism a little bit. What are you most optimistic about today? 1405 01:17:34,520 --> 01:17:36,920 Speaker 1: And what are you most pessimistic about? I'll start with 1406 01:17:36,920 --> 01:17:40,000 Speaker 1: the most pessimistic. It's an easy question, right, I guess 1407 01:17:40,080 --> 01:17:43,840 Speaker 1: it's a difficult time in some ways for journalists. We're 1408 01:17:43,840 --> 01:17:46,960 Speaker 1: in a time where it's more, um, it's open season 1409 01:17:47,080 --> 01:17:49,080 Speaker 1: some extent. You can criticize, you can be opening your 1410 01:17:49,479 --> 01:17:52,639 Speaker 1: your criticism. So I wrote a story about Jeff Gunlack 1411 01:17:52,920 --> 01:17:56,280 Speaker 1: a couple of years ago, Double Line fastest growing mutual 1412 01:17:56,320 --> 01:18:00,439 Speaker 1: funds UM ever, two hundred billion dollars um, the new 1413 01:18:00,520 --> 01:18:03,479 Speaker 1: bond Kings. People don't know who he is. And my 1414 01:18:03,640 --> 01:18:07,080 Speaker 1: story was sort of obvious. It was they had piqued 1415 01:18:07,120 --> 01:18:10,559 Speaker 1: in a m they lost some money. People were coming out. 1416 01:18:10,600 --> 01:18:12,879 Speaker 1: It wasn't like a flood of money, and the returns 1417 01:18:13,160 --> 01:18:16,080 Speaker 1: were good, but they're no longer great. And I wrote 1418 01:18:16,120 --> 01:18:19,960 Speaker 1: the story and they were. They came back hard at me, 1419 01:18:20,439 --> 01:18:24,480 Speaker 1: both privately and publicly. So he gets on this conference 1420 01:18:24,520 --> 01:18:29,880 Speaker 1: call and he starts insulting me, he calls. He says, um, 1421 01:18:30,000 --> 01:18:34,040 Speaker 1: um mother zucker. He calls me publicly mother mother Zucker. 1422 01:18:34,080 --> 01:18:36,760 Speaker 1: It was kind of amusing. Yeah, I kinda like, yeah, 1423 01:18:36,760 --> 01:18:39,320 Speaker 1: I gotta like that. Um So, so there won't be 1424 01:18:39,479 --> 01:18:43,240 Speaker 1: the greatest bond trader ever. The man who solved the 1425 01:18:43,479 --> 01:18:46,080 Speaker 1: bond markets not coming anytime. So through that book, sure, 1426 01:18:46,120 --> 01:18:48,559 Speaker 1: if he does something special, I have a new challenge. 1427 01:18:48,560 --> 01:18:50,840 Speaker 1: I like the challenge. Um but I do think there's 1428 01:18:50,840 --> 01:18:54,880 Speaker 1: a new freedom that people have again not just on 1429 01:18:54,960 --> 01:18:58,880 Speaker 1: Wall Street but in society, to be critical of the 1430 01:18:58,920 --> 01:19:02,439 Speaker 1: media and and and me included. The flip side is 1431 01:19:02,760 --> 01:19:06,120 Speaker 1: there's a new appreciation to there's a new appreciation of 1432 01:19:06,160 --> 01:19:08,800 Speaker 1: what we do. And I sense that as well. Readership 1433 01:19:08,840 --> 01:19:10,920 Speaker 1: is up both at the Wall Street Journal where I am, 1434 01:19:10,960 --> 01:19:14,400 Speaker 1: and elsewhere Washington Post, New York Times, all the Atlantic, 1435 01:19:14,479 --> 01:19:17,080 Speaker 1: New York or all their subscriptions are through the roof 1436 01:19:17,200 --> 01:19:20,400 Speaker 1: because they've been covering the new new thing, which is 1437 01:19:21,040 --> 01:19:24,240 Speaker 1: the Trump administration calling journalists the enemy of the people. 1438 01:19:25,000 --> 01:19:27,439 Speaker 1: And and to some extent, he's right. We are going 1439 01:19:27,479 --> 01:19:29,880 Speaker 1: to miss him. He brings news, He creates news every 1440 01:19:29,880 --> 01:19:33,559 Speaker 1: single day. It's exhausting, it's emotionally draining for us but 1441 01:19:33,680 --> 01:19:36,360 Speaker 1: it does sell papers and we are going to miss that. 1442 01:19:36,800 --> 01:19:41,839 Speaker 1: So we had an interesting conversation about politics and the election, 1443 01:19:42,400 --> 01:19:45,479 Speaker 1: and a bunch of people were talking about what could 1444 01:19:45,560 --> 01:19:51,040 Speaker 1: lead to Trump losing his reelection campaign, and my position 1445 01:19:51,120 --> 01:19:55,320 Speaker 1: was Trump fatigue. You know, I was praying after the election, 1446 01:19:55,560 --> 01:19:57,880 Speaker 1: all right, now that's over, we can get back to normal. 1447 01:19:58,240 --> 01:20:02,519 Speaker 1: I think it's used exhausting. People just want to get 1448 01:20:02,560 --> 01:20:05,760 Speaker 1: back to normal. It's it's never ending, and it's too much. Yes, 1449 01:20:06,080 --> 01:20:08,000 Speaker 1: whether you agree with it or disagree with it, it's like, 1450 01:20:08,040 --> 01:20:09,920 Speaker 1: you know what I'd like to go through a day 1451 01:20:09,960 --> 01:20:15,040 Speaker 1: where the president is not three front page stories every day. Yeah. 1452 01:20:15,040 --> 01:20:16,960 Speaker 1: The question is do people feel that way in the 1453 01:20:17,000 --> 01:20:20,799 Speaker 1: swing states? And in our country it's Pennsylvania and Ohio, 1454 01:20:21,600 --> 01:20:28,200 Speaker 1: basically even Ohio. I don't think. I think Trump's got Ohio. Florida, Pennsylvania, Wisconsin, 1455 01:20:28,200 --> 01:20:32,160 Speaker 1: and Michigan are going the other way. It's Pennsylvania, Ohio, 1456 01:20:32,360 --> 01:20:34,920 Speaker 1: and I'm sure maybe a toss up at this point, small, 1457 01:20:35,000 --> 01:20:36,920 Speaker 1: but it doesn't mean it's But if you look at 1458 01:20:37,000 --> 01:20:40,920 Speaker 1: he won three states by seventy seven thousand votes and 1459 01:20:40,960 --> 01:20:43,360 Speaker 1: that put him over the top. So whatever we talk 1460 01:20:43,400 --> 01:20:46,120 Speaker 1: about nationally is a relevant. How how those three states 1461 01:20:46,120 --> 01:20:50,400 Speaker 1: going to vote? That's Pennsylvania, Ohio, Florida, plus Michigan and Wisconsin. 1462 01:20:50,400 --> 01:20:52,800 Speaker 1: The real question to me is if he loses, what 1463 01:20:52,840 --> 01:20:57,000 Speaker 1: does he do and what happens? Um does he leave 1464 01:20:57,280 --> 01:21:00,160 Speaker 1: and what happens with Oh no, So my wife is 1465 01:21:00,160 --> 01:21:03,080 Speaker 1: in the same camp as you. There's no way on 1466 01:21:03,120 --> 01:21:07,520 Speaker 1: God's green earth he stays if he loses and PS 1467 01:21:07,840 --> 01:21:10,280 Speaker 1: I think the Secret Service would march him out of 1468 01:21:10,280 --> 01:21:12,400 Speaker 1: the White House. Our job is to protect you, but 1469 01:21:12,479 --> 01:21:16,640 Speaker 1: also to uphold the constitution, and most people agree with you. 1470 01:21:16,680 --> 01:21:19,200 Speaker 1: I agree. I don't do that straight talk to people 1471 01:21:19,200 --> 01:21:20,400 Speaker 1: in d C. I was just down in d C. 1472 01:21:20,720 --> 01:21:26,360 Speaker 1: I think that's a really far fetched threat. I know 1473 01:21:26,400 --> 01:21:28,639 Speaker 1: people there's there are a bunch of people who wonder 1474 01:21:28,720 --> 01:21:31,800 Speaker 1: that something to listen. If you're a macro tourist as 1475 01:21:31,920 --> 01:21:35,880 Speaker 1: as I am, and someone extend looking at world of politics, right, 1476 01:21:36,040 --> 01:21:39,120 Speaker 1: you've got to at least consider all kinds of possibilities 1477 01:21:39,160 --> 01:21:43,840 Speaker 1: nowadays more than ever, right to to say the just, 1478 01:21:43,920 --> 01:21:45,719 Speaker 1: to say the least, and and what are you most 1479 01:21:45,760 --> 01:21:49,559 Speaker 1: optimistic about with journalism? I just spoke to a group 1480 01:21:49,640 --> 01:21:53,800 Speaker 1: down in the DC area students, and it's easier to 1481 01:21:53,880 --> 01:21:56,479 Speaker 1: have a voice. You can start a podcast, you can 1482 01:21:56,520 --> 01:21:59,800 Speaker 1: start a blog, you can break news locally, you can 1483 01:22:00,080 --> 01:22:06,479 Speaker 1: on Twitter, right right, you can do any of those things. Yeah, 1484 01:22:06,439 --> 01:22:09,360 Speaker 1: there are new ways ways to have a voice that 1485 01:22:09,400 --> 01:22:11,320 Speaker 1: in the past there weren't. You don't have to be 1486 01:22:11,320 --> 01:22:14,200 Speaker 1: in the mainstream meeting necessarily to have influence and have 1487 01:22:14,240 --> 01:22:17,120 Speaker 1: an impact. So and you still can't have impact and 1488 01:22:17,800 --> 01:22:20,160 Speaker 1: improve things and write about people. And that's one thing 1489 01:22:20,200 --> 01:22:22,599 Speaker 1: I always tell journalists. Focus on the people. You can 1490 01:22:22,640 --> 01:22:26,640 Speaker 1: get at important themes through the individuals, and they make 1491 01:22:26,680 --> 01:22:28,680 Speaker 1: for the most memorable stories, at least the way I 1492 01:22:29,080 --> 01:22:31,120 Speaker 1: look at it. You know, we didn't talk about the 1493 01:22:31,240 --> 01:22:35,680 Speaker 1: John Paulson trade at all, So I'm gonna move this 1494 01:22:35,800 --> 01:22:38,479 Speaker 1: back to the earlier part. This will be the last 1495 01:22:38,560 --> 01:22:42,160 Speaker 1: question of the regular discussion, but I want to bring 1496 01:22:42,200 --> 01:22:45,439 Speaker 1: it up here. So you write a book about John Paulson, 1497 01:22:45,520 --> 01:22:49,360 Speaker 1: the greatest trade ever. But I find there's some really 1498 01:22:49,439 --> 01:22:53,960 Speaker 1: interesting oddities about the trade, not that it's not legit, 1499 01:22:55,439 --> 01:22:58,200 Speaker 1: but whether or not it was really John Paulson who 1500 01:22:58,240 --> 01:23:03,680 Speaker 1: deserves all the credit. Uh. Polo Pellegrini is his research assistant, 1501 01:23:03,720 --> 01:23:06,200 Speaker 1: seems to be the person who comes up with the 1502 01:23:06,280 --> 01:23:09,120 Speaker 1: idea brings it to Paulson has to twist his arm 1503 01:23:09,160 --> 01:23:11,960 Speaker 1: a little bit to get him behind it. The trade 1504 01:23:12,040 --> 01:23:17,640 Speaker 1: makes literally five billion, six billions for the funds Paulson, 1505 01:23:17,800 --> 01:23:19,760 Speaker 1: and I don't remember if this was your book or 1506 01:23:19,800 --> 01:23:23,600 Speaker 1: your article or somewhere else. It's all a blur. Paulson 1507 01:23:23,800 --> 01:23:29,120 Speaker 1: gives Pellegrini a bonus check for two hundred and fifty 1508 01:23:29,160 --> 01:23:32,120 Speaker 1: million dollars, and I remembering that correctly? Was it? Was 1509 01:23:32,120 --> 01:23:36,080 Speaker 1: it more? It was one seventy five story, hundred seventy 1510 01:23:36,080 --> 01:23:41,439 Speaker 1: five million dollars, and Pellegrini's responses, A hundred seventy five million? 1511 01:23:42,000 --> 01:23:45,400 Speaker 1: I quit? Is that fair? It wasn't right then? It 1512 01:23:45,439 --> 01:23:47,679 Speaker 1: was later on he quit? And how much later was it? 1513 01:23:47,680 --> 01:23:49,479 Speaker 1: It was a good six months later, And it wasn't 1514 01:23:49,520 --> 01:23:53,240 Speaker 1: necessarily Now he was okay with that hundred million. How 1515 01:23:53,240 --> 01:23:55,720 Speaker 1: do you be upset about that? Well, because it's not 1516 01:23:55,920 --> 01:24:00,559 Speaker 1: even ten percent of the six billion agreed um. He 1517 01:24:00,680 --> 01:24:02,439 Speaker 1: was fine with that. Listen, Paulson was the one taking 1518 01:24:02,479 --> 01:24:04,679 Speaker 1: the risk. If the trade had blown up, it would 1519 01:24:04,720 --> 01:24:06,559 Speaker 1: have blown up. But if if it hadn't worked out, 1520 01:24:06,600 --> 01:24:08,559 Speaker 1: then Paulson would had to close down his fun probably 1521 01:24:08,840 --> 01:24:11,439 Speaker 1: so Pellegarian was okay with that. UM. I think the 1522 01:24:11,479 --> 01:24:14,200 Speaker 1: big argument is that Paulson to I don't give him 1523 01:24:14,200 --> 01:24:17,160 Speaker 1: so much credit for being short housing. There were a 1524 01:24:17,200 --> 01:24:21,280 Speaker 1: lot of people, if you recall you probably a lot 1525 01:24:21,280 --> 01:24:23,559 Speaker 1: of people that were worried about housing. What I do 1526 01:24:23,720 --> 01:24:26,559 Speaker 1: give John Paulson credit for is figuring out a way 1527 01:24:26,600 --> 01:24:30,360 Speaker 1: to express that trade, express that bearishness, and that to 1528 01:24:30,439 --> 01:24:33,200 Speaker 1: some exent is Paul Pella GREENI I agree Pella GREENI 1529 01:24:33,680 --> 01:24:37,080 Speaker 1: told John Paulson, hey, boss, there are these things called 1530 01:24:37,120 --> 01:24:40,240 Speaker 1: CDs contracts. Really, what are they? So Paul Paulson had 1531 01:24:40,280 --> 01:24:42,680 Speaker 1: no idea what CDs contracts, and that obviously was the 1532 01:24:42,760 --> 01:24:46,240 Speaker 1: key to the greatest trade ever. So I give Pellegrini 1533 01:24:46,280 --> 01:24:49,040 Speaker 1: a lot of credit in the book and otherwise um 1534 01:24:49,120 --> 01:24:51,040 Speaker 1: for coming up with a way to express that trade. 1535 01:24:51,040 --> 01:24:53,720 Speaker 1: But I also give John Paulson tremendous credit for he 1536 01:24:53,760 --> 01:24:56,120 Speaker 1: was a fifty year old guy who didn't know anything 1537 01:24:56,160 --> 01:24:58,559 Speaker 1: about the debt markets, and he threw himself into learning 1538 01:24:58,600 --> 01:25:01,200 Speaker 1: about how to express the at trade win. Lots of 1539 01:25:01,200 --> 01:25:04,120 Speaker 1: other people were sticking with equities and shorting equities. So 1540 01:25:04,160 --> 01:25:09,480 Speaker 1: the postcript to Paulson is two subsequent hedge fund performances, 1541 01:25:10,000 --> 01:25:14,160 Speaker 1: Pellegrini launches his own fund quickly raises a billion dollars 1542 01:25:14,479 --> 01:25:17,640 Speaker 1: as the guy behind the Pulson trade. I think the 1543 01:25:17,720 --> 01:25:20,000 Speaker 1: first year he just shoots the lights out. It's like 1544 01:25:20,120 --> 01:25:25,080 Speaker 1: eight some crazy number. The second year they're barely up 1545 01:25:25,160 --> 01:25:28,400 Speaker 1: for eight percent, six percent something like that. The third 1546 01:25:28,479 --> 01:25:32,640 Speaker 1: year they're negative. They return the money and he basically 1547 01:25:32,680 --> 01:25:36,160 Speaker 1: retires to some island in the Caribbean. More or less accurate. 1548 01:25:36,920 --> 01:25:41,479 Speaker 1: So that's astonishing. Paulson, on the other hand, the fund 1549 01:25:41,600 --> 01:25:46,040 Speaker 1: scales up to forty six billion dollars. He becomes a 1550 01:25:46,040 --> 01:25:50,679 Speaker 1: macro tourist in gold and other things. It's a terrible bet. 1551 01:25:50,760 --> 01:25:54,000 Speaker 1: He's a big buyer at the peak. The fund puts 1552 01:25:54,080 --> 01:25:57,320 Speaker 1: up some pretty crappy numbers for a couple of years, 1553 01:25:57,720 --> 01:26:00,400 Speaker 1: and now the fund is back to what in little 1554 01:26:00,439 --> 01:26:03,559 Speaker 1: digit billions. It's mostly his money too, so it's become 1555 01:26:03,600 --> 01:26:06,560 Speaker 1: a family office. And he proceeded to lose twenty or 1556 01:26:06,600 --> 01:26:10,080 Speaker 1: thirty billion dollars, so someone said, and I haven't verified this, 1557 01:26:10,560 --> 01:26:15,519 Speaker 1: but career wise, net net, he's a money loser for 1558 01:26:15,600 --> 01:26:18,200 Speaker 1: his outside investors. I think it's close, and I would 1559 01:26:18,280 --> 01:26:21,200 Speaker 1: argue that he missed the lesson of the greatest trade ever. 1560 01:26:21,240 --> 01:26:22,599 Speaker 1: Why is it called why do I call the grad 1561 01:26:22,600 --> 01:26:26,559 Speaker 1: strade ever? Because it had limited downside and remarkable upside. 1562 01:26:26,560 --> 01:26:29,280 Speaker 1: And frankly, that's what he did his whole career, even 1563 01:26:29,320 --> 01:26:31,519 Speaker 1: when he was a risk arb. He was getting into 1564 01:26:31,520 --> 01:26:34,720 Speaker 1: positions little riskier than most other risk carbs, but they 1565 01:26:34,760 --> 01:26:37,479 Speaker 1: had potential for upside. A new buyer comes in in 1566 01:26:37,520 --> 01:26:40,320 Speaker 1: a merger deal and limited downside because I already had 1567 01:26:40,320 --> 01:26:42,720 Speaker 1: a deal. His whole career, he was doing those countrades 1568 01:26:42,840 --> 01:26:45,280 Speaker 1: until he did the greatest trade ever. And then he 1569 01:26:45,320 --> 01:26:47,719 Speaker 1: took on all this new money and he started betting 1570 01:26:47,720 --> 01:26:51,240 Speaker 1: on banks and on pharmaceutical companies with and gold lots 1571 01:26:51,280 --> 01:26:53,519 Speaker 1: of upside, but also lots of downside. He missed the 1572 01:26:53,960 --> 01:26:57,240 Speaker 1: act opposite of what Simons did with medallion. Hey, this 1573 01:26:57,280 --> 01:27:00,240 Speaker 1: won't scale, and we want to make sure we're are 1574 01:27:00,280 --> 01:27:06,080 Speaker 1: are upside and downside's reward is balanced. The greatest trade 1575 01:27:06,439 --> 01:27:09,439 Speaker 1: led to the man who did not solve the market 1576 01:27:10,000 --> 01:27:15,479 Speaker 1: the and that basically created what is now ostensibly a 1577 01:27:15,479 --> 01:27:18,000 Speaker 1: hedge fund but really a family office for the Paulson 1578 01:27:18,080 --> 01:27:20,559 Speaker 1: for Yeah, it's a great point that John Paulson is 1579 01:27:20,600 --> 01:27:22,760 Speaker 1: a very good investor, but he got too big And 1580 01:27:22,840 --> 01:27:25,080 Speaker 1: how many times have we seen that same store over 1581 01:27:25,120 --> 01:27:28,639 Speaker 1: and over over and over? And you know it's these 1582 01:27:28,640 --> 01:27:31,040 Speaker 1: guys are fallible like anybody else. You can be smart, 1583 01:27:31,200 --> 01:27:33,240 Speaker 1: but take on too much money and then you're going 1584 01:27:33,280 --> 01:27:35,160 Speaker 1: with your second best idea and your third best idea, 1585 01:27:35,360 --> 01:27:37,760 Speaker 1: et cetera. And he missed that lesson. Everyone thinks I'm 1586 01:27:37,800 --> 01:27:41,080 Speaker 1: the exception because I'm I did the greatest trade ever 1587 01:27:41,120 --> 01:27:44,120 Speaker 1: and I caught this one before other people and they're wrong, 1588 01:27:44,320 --> 01:27:46,160 Speaker 1: and it's tough to take on all that a O M. 1589 01:27:46,360 --> 01:27:49,240 Speaker 1: And he's as you suggest, Jim Simons capped at least 1590 01:27:49,240 --> 01:27:51,800 Speaker 1: the Medallion Fund. He capped that, so maybe he learned 1591 01:27:51,840 --> 01:27:55,880 Speaker 1: that lesson for sure. And our last two questions, what 1592 01:27:56,040 --> 01:27:58,639 Speaker 1: sort of advice would you give a recent college grad 1593 01:27:58,680 --> 01:28:02,559 Speaker 1: who was interested in either becoming a journalist or a 1594 01:28:02,600 --> 01:28:08,000 Speaker 1: book author or covering Wall Street and finance? Well, this 1595 01:28:08,120 --> 01:28:11,879 Speaker 1: is a broader recommendation for young people in general. Find 1596 01:28:12,120 --> 01:28:15,760 Speaker 1: the people. Find the individuals in whatever area you're interested in. 1597 01:28:16,280 --> 01:28:20,640 Speaker 1: Who are the pace setters, who are the key individuals 1598 01:28:20,640 --> 01:28:23,519 Speaker 1: people that you are you respect, and reach out to them. 1599 01:28:23,760 --> 01:28:25,479 Speaker 1: Send him a note, Hey, I'd love to buy a 1600 01:28:25,560 --> 01:28:28,320 Speaker 1: cup of coffee, give twenty minutes of your time. People 1601 01:28:28,360 --> 01:28:30,720 Speaker 1: are generous with their time. You'd be surprised. I'm sure 1602 01:28:30,720 --> 01:28:33,320 Speaker 1: you found the two people on Wall Street um senior. 1603 01:28:33,400 --> 01:28:35,840 Speaker 1: People want to help, want to give back, are much 1604 01:28:35,880 --> 01:28:38,320 Speaker 1: more generous with your time than you might think. Don't 1605 01:28:38,320 --> 01:28:41,680 Speaker 1: be intimidated. If you've got genuine interest, reach out to them, 1606 01:28:41,680 --> 01:28:44,080 Speaker 1: tell them why you're interested in the area, form a 1607 01:28:44,160 --> 01:28:47,960 Speaker 1: relationship and learn from them. And our final question, what 1608 01:28:48,160 --> 01:28:50,639 Speaker 1: is it that you know about the world of writing 1609 01:28:50,800 --> 01:28:54,439 Speaker 1: and journalism today that you wish you knew twenty five 1610 01:28:54,520 --> 01:28:57,120 Speaker 1: years or so ago when you were first getting started. 1611 01:28:58,120 --> 01:29:03,120 Speaker 1: That your relations tips are the most important thing you've got, 1612 01:29:03,520 --> 01:29:07,400 Speaker 1: and you've got to develop them. You've got to be 1613 01:29:07,520 --> 01:29:09,760 Speaker 1: kind to people that are kind to you. I always was, 1614 01:29:09,880 --> 01:29:13,360 Speaker 1: but it's been reinforced to me. But also the fact 1615 01:29:13,439 --> 01:29:17,400 Speaker 1: that our reputations are created and recreated almost on a 1616 01:29:17,479 --> 01:29:20,519 Speaker 1: daily basis, so you can be doing poorly at your job. 1617 01:29:20,560 --> 01:29:22,600 Speaker 1: I've had times to the Wallstreet Journal where I was 1618 01:29:22,640 --> 01:29:25,559 Speaker 1: a low man on the totem pole and people didn't 1619 01:29:25,600 --> 01:29:28,840 Speaker 1: really give me good assignments. And you can change that. 1620 01:29:28,840 --> 01:29:30,679 Speaker 1: That's the beauty of it. You go break a story, 1621 01:29:31,040 --> 01:29:36,040 Speaker 1: you can change, You can your reputation can transform. And 1622 01:29:36,040 --> 01:29:38,240 Speaker 1: and if you blow it, you know your reputation is 1623 01:29:38,439 --> 01:29:41,719 Speaker 1: impacted too. Is don't make any mistakes, but don't lose hope. 1624 01:29:41,760 --> 01:29:44,719 Speaker 1: Just tomorrow is a new day. Go break a story. Huh. 1625 01:29:44,920 --> 01:29:49,519 Speaker 1: Quite fascinating. We have been speaking with Gregory Zuckerman, the 1626 01:29:49,640 --> 01:29:52,840 Speaker 1: author of The Man Who Solved the Market How Jim 1627 01:29:52,840 --> 01:29:58,200 Speaker 1: Simon launched the quant revolution. If you enjoy this conversation well, 1628 01:29:58,280 --> 01:30:00,320 Speaker 1: be sure to look up and intro down an on 1629 01:30:00,400 --> 01:30:03,720 Speaker 1: Apple iTunes, where you could see any of our previous 1630 01:30:04,080 --> 01:30:08,240 Speaker 1: two hundred and fifty eight conversations we've had over the 1631 01:30:08,280 --> 01:30:12,439 Speaker 1: past five plus years. We love your comments, feedback and 1632 01:30:12,560 --> 01:30:16,640 Speaker 1: suggestions right to us at m IB podcast at Bloomberg 1633 01:30:16,680 --> 01:30:19,599 Speaker 1: dot net. Go to Apple iTunes and give us a review. 1634 01:30:20,360 --> 01:30:23,120 Speaker 1: I would be remiss if I did not thank the 1635 01:30:23,280 --> 01:30:27,479 Speaker 1: crack staff who helps put together this conversation each week. 1636 01:30:27,880 --> 01:30:32,000 Speaker 1: Carolin O'Brien is my audio engineer. Attica val Brunn is 1637 01:30:32,000 --> 01:30:35,599 Speaker 1: our project manager. Michael bat Nick is my reluctant head 1638 01:30:35,600 --> 01:30:40,200 Speaker 1: of research. Mike Boyle is my producer. I'm Barry Ritolts. 1639 01:30:40,560 --> 01:30:44,040 Speaker 1: You've been listening to Masters in Business on Bloomberg Radio,