The mathematician who cracked Wall Street | Jim Simons

Translator: Zeineb Trabelsi. Auditor: Riyad Almubarak Chris Anderson: You're part of a math phenomenon. She taught at Harvard University and the Massachusetts Institute of Technology at a young age Then the National Security Agency called you. So what was the reason for that? Jim Simons: You don't really have the National Security Agency, which is the US National Security Agency Contact me physically. They had an operation in Princeton, and they were hiring mathematicians. To hack secret codes and things like that.

And I knew that this really existed. They also have a very good policy, Because you can devote half of your time to work on your mathematical research, And the rest of your time to do agency work. They also pay high wages. Their offer was very tempting. So, she went to work at the agency. Chris: If you were a blade hacker. Jim: Yes. Chris: Until you were fired. Jim Simons: Yes, I have already been fired. Chris: And how did that happen? Jim: Well, how did that happen? I was fired because, well, war broke out in Vietnam, The chief boss of my organization was very fond of war He wrote an article for the New York Times and the article was a cover story About how we're going to win the Vietnam War.

I didn't like this war, and I always thought it was a ridiculous war. So I wrote a letter for the Times, which they published, Where I mentioned that not everyone works for Maxwell Taylor, If someone still remembers that name, he agrees. And I made my views … Chris: Oh, okay. I can conclude that this is– Jim Simons: Which was different from General Taylor's views But in the end, no one said anything. After that, a young man came to me, and I was 29 years old at the time. And he told me he's a Newsweek journalist And he would like to have a dialogue with me and to ask me about my views. So I told him, "I devote most of my time to working on mathematics now And when the war is over, I will take care of the agency's business.

'' And then I did the smartest thing that I did that day– I told my boss that I did that interview. And he said to me, "What did you say?" And I told him what I said. And he said, "I have to call Taylor." He called him and the conversation lasted 10 minutes Five minutes later, I was fired. Chris: Okay. Jim: But it wasn't bad. Chris: It wasn't because you attended Stony Brook University And you focused on your maths job. And I started working with this guy. who is he? Jim: It's (Shin-Shin) Chern. Chern was one of the greatest mathematicians of the century. And I've known him since I was a graduate student in Berkeley. And I had some ideas, So I put it to him and he liked it. And we did this work together which you can clearly see there. There it is. Chris: And this work led you both to publish a popular paper.

Can you explain what this work is? Jim: No. (Laughter) Jim: What I mean, I can explain it to a specific person. (Laughter) Chris: What if you could explain what you said now? Jim: I can't explain it to many people. Chris: I think you told me that work has to do with the sphere. Tell us about it first. Jim: Well, what you said is true, but what I will say about this work – It has something to do with the spherical body, but before we talk about that – This is very helpful work. And Chern and I were very happy with it.

It even created a small sub-field that is now thriving. But, interestingly, this work is applied to physics. Something we're not aware of – and I didn't know about physics, And I don't think Chern knows either. About 10 years after this research was published, A guy named Ed Witten at Princeton University began applying it to string theory. Also, people from Russia began applying it to the so-called "condensate". Today, these things have come to be called the Chern – Simmons constants Spread through a lot of physics. And that was cool. We didn't know anything about physics. And it never occurred to me that it could be applied to physics. But this is what defines mathematics, and you cannot know what you will find out.

Chris: This is unbelievable. We've been talking about how evolution shapes human minds And that we may have found the truth or not. And somehow, I came up with a theory in mathematics. And you don't know anything about physics, And I discovered two decades later, that it is being applied in Describing the current physical world in depth. How could that happen? Jim: God knows best. (Laughter) There was a famous physicist named Wagner. He wrote an article on the unreasonable influence of mathematics. In a way, the science of mathematics is rooted in the real world Somehow – we're learning to count and measure, and everyone will – And then it develops on its own. But all too often, you come back at the last minute to save the day.

For example, General Theory of Relativity. Minkowski came up with geometry, and Einstein said: "Oh, it's the right thing that I can adopt to govern the theory of general relativity." So, you never know what will happen. Mathematics is vague. Considered a mystery. Chris: Well, that's a creative part of mathematics. Tell us about it. Jim: Well, this is a sphere – it's a sphere surrounded by a lattice – And you know, these are squares. What I'm going to show you here is Leonard Euler spotting it first. The greatest mathematician in the year 1700. And it gradually grew to be a very important field in mathematics: Algebraic topology, geometry. That paper over there has roots in this field. So, there is this thing: It has eight angles, 12 sides, and six faces. And if you calculate the difference – we subtract the number of angles from the number of sides and increase the number of faces – Then the result will be 2. Well, okay, two. This is a good number.

Here's another way to do it – These are cover triangles – These have 12 corners and 30 ribs And 20 faces, 20 tiles. If we subtract the number of angles from the number of sides and add the number of faces, the result remains 2. As a matter of fact, can this be done in any way – Cover this body with all kinds of polygons and triangles And mix them all.

And you subtract the number of angles from the number of sides and add the number of sides – you get 2. I present to you a different form. This is a hoop (a round bump), or a donut-shaped body: it has 16 angles, Covered by these rectangles, it has 32 sides and 16 faces. The result of subtracting the number of angles from the number of sides is zero. The result will always be zero. Each time you cover the bezel with rectangles or triangles Or any such geometric shape, you would get zero as a result. So, this is called the Euler feature. This is called a fixed topology. It's so amazing. Whatever method you take, you will get the same answer. So this was the first batch, from the mid 1700's, Towards a topic now called algebraic topology.

Chris: You take your business an idea like that and then move on with it To a higher level of dimension theory, Objects with higher dimensions, and find new constants? Jim Simons: Well, there are really high dimensional constants: The Pontriagen Group – In fact, the Shirn Group existed. There was a bunch of these kinds of constants. You were struggling to work on one of them And its formulation as a fusion type Rather than the way it is usually done, Which resulted in this work and we discovered some new things, But if Mister Euler hadn't– Who has written 70 volumes on mathematics And he had 13 children, And he was spoiling them on his knee while he was typing– Without Mr.

Euler, these constants would not exist. Chris: Well, it gives us a glimpse into this amazing mind out there. Let's talk about the Renaissance. Because you have this amazing mind and you were a code-breaker at the National Security Agency, She started becoming a code breaker in the financial industry. I guess you didn't buy the efficient market hypothesis. I somehow found a way to provide amazing returns over two decades. The way they explained it to me. Not only was the amount of revenue recorded, remarkable. Rather, what I took from them with surprisingly low volatility and dangers, Compared to other hedge funds. So how did you do this, Jim? Jim Simons: I did it by bringing a bunch of amazing people together. When I got into business, I was getting tired of math. I was in my late thirties. And I had a good amount of money. I started trading and everything went well. I made a lot of money with just a little luck. What I mean, I think luck was on my side. Of course, mathematical modeling had no income. But by reviewing the data, I realized after a while There are semblance of structures here.

So I hired a number of mathematicians, and we started building some models – It's similar to what we've been doing at the Institute for Defense Analytics. You write an algorithm, and then you test it on a computer. Do you do it? or not? And so on. Chris: Can you take a look at this? This is a typical graph of some commodity. I look into it and what comes to my mind is that "these are random shifts, up and down – It might see a slight increase over that time period. " How did you enter the field of commerce given that, Noticing something that was not random? Jim: In the old days – this looks like a graph from the old days, There is a tendency to trend for these commodities or currencies.

It doesn't have to be a short period of time like this but rather a long one. And if I make the decision, well, today I'm going to make some predictions, By the average of the changes that occurred over the past 20 days – Maybe that would be a good prediction, and make some money. And in fact, years ago, such a system would have functioned Not in a good way but it will work. And you would win money, lose it, and win it again. But this is the value of days in a year, And you will be collecting money during that period. It is considered a non-functional system. Chris: So you would have experienced a bunch of duration trading in a given period And see if, for example, What was 10 days or 15 days was predictive of what would happen next. Jim Simons: Sure, you're going to try all of these things and see what went well. It would have been remarkable to follow the development of commerce in the 1960s.

And it was kinda good in the seventies, By the 1980s, it was no longer. Chris: Because everyone can notice that. So how did you manage to stay on top of the group? Jim: We maintained our position by finding other approaches – Rather short-term approaches. Collecting massive amounts of data is the primary goal – And we do it ourselves in the early days. We visited the Federal Reserve and wrote the most important interest rate dates And things like that, because they were not included on the computers. We got a lot of data. And very smart people – that was the key to doing that. I really didn't know how to hire people to do basic trades. I had hired some – some of them made some money, and some of them didn't succeed.

I couldn't create a trade from that. But I know how to appoint scholars. Because I know some things related to this section. And so, that's all we did. And these models evolved to become better and better, And better and better. Chris: You're restricted to doing something gimmicky during the Renaissance. It is your position on this culture, and this elite group of people, Those whose appointment was not in vain and who could not be tempted easily, Their motivation is exciting math and science.

Jim Simons: Well, I hoped it was true. But some of them were running after money. Chris: They made a lot of money. Jim Simons: I cannot deny that none of them are pursuing the money. I think many of them coveted money. But they came because it could be fun. Chris: What role did machine learning play? Jim Simons: In a sense, what we did is machine learning.

You look at a lot of information and try to simulate various predictive charts. Until you get better. You don't have to give feedback on how we are doing things. But it worked. CA: These predictive charts can be kind of very wild and unpredictable. What I mean, did you look at everything, right? I look at the weather, length of time, and political opinions. Jim Simons: Yeah, we haven't tried for that long. Chris: What kind of things? Jim: Well, everything. Everything falls into the grinder – except the stems. Weather, annual reports, And the quarterly reports, the history of the data itself, the volume, and what you mentioned. All of them were included.

We receive terabytes of data every day. We store it, send it and prepare for your analysis. You search for anomalies. You look – like I said, If the theories of market efficiency were incorrect. Chris: But any anomaly might just be random. Consequently, is the secret just the search for several strange anomalies, And consider when they are aligned? C: Any anomaly may be random; However, you can refute this when there is enough information. Where you can notice the anomaly that has persisted for a sufficiently long time – The percentage considered random is not high. But these things will fade away after a while. Anomalies can be erased.

So you must keep the business running. CA: A lot of people are paying attention to the hedge fund And they're kind of … shocked by it, From the wealth that is collected, It is one of the talents that it contains. Do you have any concerns about this industry, And maybe about the financial services sector in general? It's like you're on a runaway train, and that's– I don't know – helps increase inequality? How did you support what is happening in the hedge fund sector? Jim: I think in the last three or four years, Hedge funds have not done well.

What we have done is amazing, But the hedge fund sector as a whole has not done well. The stock market was in a spiral, and rising, as everyone knows, The profitability bis is also on the rise. A fortune has been gathered from this over the past years– Say five or six years – and it wasn't earned by the hedge fund. Many people ask, "What is a hedge fund?" I answer "twenty-one." And that means – it's now twenty-two – It is two percent fixed fees and twenty percent profits. Hedge funds are various investment vehicles. Chris: It claims you charge a little higher than the trader. Jim Simons: We're charging the highest fees in the world at the same time. What we're charging is five and 44. Chris: Five and 44. It's five percent flat and 44 percent volatile. And it still makes investors get a huge amount of cash. Jim: We made good returns, yeah Many angered and protested: "How can you impose such high fees?" I replied, "Well, you can withdraw." But what motivates people is how they can get the most? – (Laughter) But at a certain point, I guess as I told you, We bought from all investors due to the existence of purchasing power in the fund.

Chris: But we have to be concerned about hedge funds To attract the best international talent in mathematics and others To act on it, unlike many other problems in the world? Jim: Well, it's not just math. We hire astronomers, physicists, and things like that. I don't think we should worry about that too much. Still a very young industry. And the inclusion of science in the world of investment Contribute to the betterment of the world. Contribute to reducing volatility and increasing liquidity.

The spread is considered tight because people are trading this kind of thing. I'm not worried about Einstein coming back to life and starting hedge funds. Chris: You're now at a point in your life where you're investing, though. On the other side of the supply chain – It is promoting mathematics across America. This is your wife, Marilyn. You work on humanitarian issues together. Tell me about that. Jim: Marilyn started – That's my beautiful wife over there– The foundation was launched about 20 years ago. I think in 1994. I say 1993 and it says 1994. But it happened in one of them. (Laughter) We started the Foundation, as a convenient way to do good. She committed to that, and so on. We didn't have a clear future vision at the time, but gradually it started to emerge and become clear – Of focus on mathematics and science, and focus on basic research. And that's what we did. Almost six years ago, I left and went to work for the foundation. And this is what we have done.

Chris: In America, mathematics is the basis of investment In mathematics teachers across the country, By giving them some extra income, and giving them support and training. And try to make it more effective And making it an invitation a teacher can become ambitious. Jim Simons: Yes – instead of punishing bad teachers, Who caused psychological problems throughout the educational community, Especially in mathematics and science, We focus on honoring the good and giving them prizes. Yes, we give them an additional amount of money, about $ 15,000 annually. Today there are about 800 math and science teachers in New York City in public schools. As part of the axis. There is great spirits between them. They are still in this area. By next year, that number will reach 1,000, which is 10 percent She is a math and science teacher in New York City's public schools. (clap) Chris: Jim, this is another project that I've supported with philanthropy: Looking at the origins of life, I believe. What are we looking at here? Jim Simons: Well, I'll explain that in a moment.

Then I will tell you what that is. The question about the origin of life is an interesting question. How did we get here? Well, there are two questions: The first is what is the link between geology and biology – How did we get here? The second question is what we started with? What tools, if any, have we used to make our way? These are two important questions. The first question is a tortuous path from geology to RNA Or something like that – how did it all happen? The other question is what should we use it for? Well, more than we can imagine. The one in the picture is a star in the process of forming. Now, every year in our Milky Way galaxy, there are about 100 billion stars. Two new stars are forming. Don't ask me how but it takes shape. It takes about a million years to fully form. In steady state, There are about two million stars forming at any one time. This star is in some form of complete formation. And those things are found around it, Dust and other ingredients. And it will likely shape the solar system, or whatever it is you will shape it up.

But here's this– In this dust that surrounds the formed star Important organic molecules have been found. We're not just talking about methane as molecules but formaldehyde (methanal) and cyanide – Things that are the basis for building micro-formulas – the origins, if you will – of life. Therefore, this may sound standard. And it might be normal for planets around the universe to start By morphology and some of these combinations are among its basic components. Does this mean that there will be life around? Probably. But it is a question of how twisted this path is. From flimsy beginnings and these seeds, throughout his life. Most of them will fall on fallow planets. Chris: For you, Finding the answer to a question where we come from is, And the question of how this happens, is one of the things that I want to see happen.

Jim: I'd like to see that happen. I would like to know– If that path is crooked enough, and unlikely, Whatever your beginnings, we can be unique. But on the other hand, Looking at all this organic dust hovering around, We could have a lot of friends there. It was fun to find out. Chris: Jim, a few years ago, I had the opportunity to speak with Elon Musk, I asked him about the secret of his success. And he told me the reason was his seriousness when it came to physics. Listening to you, what I conclude is take math seriously. And that this remained constant throughout your life. It made you make a fortune and opened the way for you today to invest In the future of thousands and thousands of children across America and elsewhere. Could science be useful? Could mathematics have a role? Jim Simons: Well, math definitely had a role. It sure is. But that was fun. Working with Marilyn and revealing his secret is fun. Chris: I just found out – it's an inspiring idea for me, And by taking knowledge seriously, many things can be obtained from it.

Thank you for talking about your amazing life and coming to TED. thank you. Jim Simons was with us. (clap).

test attribution text

Add Comment