Some rare principles for success from hedge fund Renaissance

Would you seek life advice from a money-man? Not as a rule. Those fixated on the accumulation of wealth tend not to have too much general wisdom to impart.

There are some exceptions, though. Jim Simons passed away recently. He’s not the best-known name, but he probably made more money than virtually anyone else on Wall Street. 

He was the brains behind Renaissance Technologies, a hedge fund company so successful it made most others look like chump change. Simons didn’t just beat the market for most of his life, he pulverised it. He did this with math, data, and some very simple principles.

He was once asked to recount these principles, and his first response was that he didn’t really have any to share—a refreshingly honest answer in itself. 

On reflection, he wrote down five very simple and unusual pointers. Here they are, in a nutshell: Be beautiful, be attractive, be different, be resilient—and be lucky! They caught my attention because they are so remarkably fresh, and somewhat contrarian when it comes to life learnings. Let’s delve into them.

You must have thought, as I did, about the first one—say what? Be beautiful? That’s a principle for success? Hear him out though.

The thing to understand about Simons is that he was a mathematician at heart, and he was talking about the beauty that the most elegant mathematical theorems display. 

Not following the crowd

He felt that his money-making algorithms did not just need to be effective; they had to be works of art.

The more general lesson is to strive for simple elegance and clarity in what we do. Beauty is present everywhere: in art, in nature, in relationships, in conversations and writings. Nature is intrinsically beautiful; why can our lives not be?

The second principle is about being attractive. Not to suitors, please understand, but to talent. Simons was clear on one thing: he would always hire the smartest people he could.

He made it a point to employ people who could outthink, outwit, and even out-math him! Not for him the comfort of being the cleverest person in the room. His organisation was not a one-man show; it was a collection of some of the smartest people from very diverse fields.

I wish many more leaders could understand this one. If you surround yourself with people at your level or lower, your are setting up for continuous mediocrity. Those who challenge us and teach us raise the game for everyone. We should hire them, befriend them, learn from them.

Now let’s get to being different. Simons was resolute in not following the crowd, or running with the pack. While everyone else would follow what was being said on CNBC, Simons and his team of mathematicians, physicists, and computer scientists would be busy working on their algorithms, far away from Wall Street.

The nerds in the corner were not interested in the world of copycats and mimics. As a strategist, I applaud. The real victories always go to the originals. To copy is to diminish. 

Learning from every setback

The quieter road is always lonelier and more uncertain, but that is one in which you might discover gold. We can apply this in any aspect of our lives. What is my distinctive identity? What do I stand for? How can I stay away from the stampeding herd? Simons also knew that success does not come easily, and often requires many long years of uncertainty before any real payoffs come.

He had his share of early mistakes and false starts. But he never threw in the towel. He set out to be resilient by learning from every setback. He adjusted, refined, and iterated. This principle is about grit, but it’s also about using every reversal to your advantage. Persistence is one of the most important ingredients of success.

Lastly, and perhaps most importantly: understand the role of sheer damn luck! Even the mathematician who tried to minimise risk and uncertainty knew: there’s no beating randomness in this life.

The really clever folks also know just how lucky they are — how many of their achievements have nothing to do with them, and are just bestowed from good fortune. The reverse is also true: so often when we struggle, we should know the role of bad timing and bad economy in our failures, and forgive ourselves more.

Being lucky, though is as much about being prepared enough to seize opportunities when they spring up. You can’t control luck, but you can control your responses to it. Much humility is needed to embrace the role of exogenous variables in our lives. Randomness hangs over us every day, and we would be foolish to deny it.

I’m not here to extol Jim Simons. He was just a mortal, with mortal weaknesses. He made a tonne of money, but he made it differently from the crowd, and he seemed to think far more philosophically than most money managers you will ever meet. 

His five principles are a thoughtful person’s blueprint, and we can all reflect on them. Seek simplicity, for that is true beauty. Attract the best people. Forget the crowd, and forge your own path. Manage your luck. And stay in the race when things don’t work out.

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