1 00:00:00,817 --> 00:00:03,651 Chris Anderson: You were something of a mathematical phenom. 2 00:00:03,675 --> 00:00:06,739 You had already taught at Harvard and MIT at a young age. 3 00:00:06,763 --> 00:00:08,953 And then the NSA came calling. 4 00:00:09,464 --> 00:00:10,668 What was that about? 5 00:00:11,207 --> 00:00:15,130 Jim Simons: Well the NSA -- that's the National Security Agency -- 6 00:00:15,154 --> 00:00:17,123 they didn't exactly come calling. 7 00:00:17,465 --> 00:00:21,939 They had an operation at Princeton, where they hired mathematicians 8 00:00:21,963 --> 00:00:24,905 to attack secret codes and stuff like that. 9 00:00:25,294 --> 00:00:26,966 And I knew that existed. 10 00:00:27,315 --> 00:00:29,495 And they had a very good policy, 11 00:00:29,519 --> 00:00:33,369 because you could do half your time at your own mathematics, 12 00:00:33,393 --> 00:00:36,877 and at least half your time working on their stuff. 13 00:00:37,559 --> 00:00:39,033 And they paid a lot. 14 00:00:39,057 --> 00:00:42,108 So that was an irresistible pull. 15 00:00:42,132 --> 00:00:44,044 So, I went there. 16 00:00:44,068 --> 00:00:45,406 CA: You were a code-cracker. 17 00:00:45,430 --> 00:00:46,596 JS: I was. 18 00:00:46,620 --> 00:00:47,777 CA: Until you got fired. 19 00:00:47,801 --> 00:00:49,384 JS: Well, I did get fired. Yes. 20 00:00:49,408 --> 00:00:50,653 CA: How come? 21 00:00:51,280 --> 00:00:52,613 JS: Well, how come? 22 00:00:53,611 --> 00:00:58,567 I got fired because, well, the Vietnam War was on, 23 00:00:58,591 --> 00:01:04,329 and the boss of bosses in my organization was a big fan of the war 24 00:01:04,353 --> 00:01:08,748 and wrote a New York Times article, a magazine section cover story, 25 00:01:08,772 --> 00:01:10,542 about how we would win in Vietnam. 26 00:01:10,566 --> 00:01:13,695 And I didn't like that war, I thought it was stupid. 27 00:01:13,719 --> 00:01:16,384 And I wrote a letter to the Times, which they published, 28 00:01:16,408 --> 00:01:20,422 saying not everyone who works for Maxwell Taylor, 29 00:01:20,446 --> 00:01:25,132 if anyone remembers that name, agrees with his views. 30 00:01:25,553 --> 00:01:27,211 And I gave my own views ... 31 00:01:27,235 --> 00:01:29,399 CA: Oh, OK. I can see that would -- 32 00:01:29,423 --> 00:01:31,978 JS: ... which were different from General Taylor's. 33 00:01:32,002 --> 00:01:33,908 But in the end, nobody said anything. 34 00:01:33,932 --> 00:01:37,633 But then, I was 29 years old at this time, and some kid came around 35 00:01:37,657 --> 00:01:40,745 and said he was a stringer from Newsweek magazine 36 00:01:40,769 --> 00:01:46,136 and he wanted to interview me and ask what I was doing about my views. 37 00:01:46,160 --> 00:01:50,059 And I told him, "I'm doing mostly mathematics now, 38 00:01:50,083 --> 00:01:53,456 and when the war is over, then I'll do mostly their stuff." 39 00:01:54,123 --> 00:01:56,948 Then I did the only intelligent thing I'd done that day -- 40 00:01:56,972 --> 00:02:01,129 I told my local boss that I gave that interview. 41 00:02:01,153 --> 00:02:02,612 And he said, "What'd you say?" 42 00:02:02,636 --> 00:02:04,102 And I told him what I said. 43 00:02:04,126 --> 00:02:06,441 And then he said, "I've got to call Taylor." 44 00:02:06,465 --> 00:02:08,842 He called Taylor; that took 10 minutes. 45 00:02:08,866 --> 00:02:11,128 I was fired five minutes after that. 46 00:02:11,590 --> 00:02:12,812 CA: OK. 47 00:02:12,836 --> 00:02:13,987 JS: But it wasn't bad. 48 00:02:14,011 --> 00:02:16,504 CA: It wasn't bad, because you went on to Stony Brook 49 00:02:16,528 --> 00:02:19,661 and stepped up your mathematical career. 50 00:02:19,685 --> 00:02:22,137 You started working with this man here. 51 00:02:22,161 --> 00:02:23,325 Who is this? 52 00:02:24,352 --> 00:02:25,764 JS: Oh, [Shiing-Shen] Chern. 53 00:02:25,788 --> 00:02:28,892 Chern was one of the great mathematicians of the century. 54 00:02:28,916 --> 00:02:34,149 I had known him when I was a graduate student at Berkeley. 55 00:02:34,173 --> 00:02:36,044 And I had some ideas, 56 00:02:36,068 --> 00:02:38,515 and I brought them to him and he liked them. 57 00:02:38,539 --> 00:02:45,165 Together, we did this work which you can easily see up there. 58 00:02:45,189 --> 00:02:46,339 There it is. 59 00:02:47,198 --> 00:02:50,804 CA: It led to you publishing a famous paper together. 60 00:02:50,828 --> 00:02:54,066 Can you explain at all what that work was? 61 00:02:55,028 --> 00:02:56,186 JS: No. 62 00:02:56,210 --> 00:02:58,484 (Laughter) 63 00:02:58,966 --> 00:03:01,030 JS: I mean, I could explain it to somebody. 64 00:03:01,054 --> 00:03:03,129 (Laughter) 65 00:03:03,153 --> 00:03:05,017 CA: How about explaining this? 66 00:03:05,041 --> 00:03:07,770 JS: But not many. Not many people. 67 00:03:09,144 --> 00:03:11,958 CA: I think you told me it had something to do with spheres, 68 00:03:11,982 --> 00:03:13,844 so let's start here. 69 00:03:13,868 --> 00:03:17,468 JS: Well, it did, but I'll say about that work -- 70 00:03:17,492 --> 00:03:20,692 it did have something to do with that, but before we get to that -- 71 00:03:20,716 --> 00:03:24,256 that work was good mathematics. 72 00:03:24,280 --> 00:03:26,772 I was very happy with it; so was Chern. 73 00:03:27,910 --> 00:03:32,086 It even started a little sub-field that's now flourishing. 74 00:03:32,638 --> 00:03:37,932 But, more interestingly, it happened to apply to physics, 75 00:03:37,956 --> 00:03:42,251 something we knew nothing about -- at least I knew nothing about physics, 76 00:03:42,275 --> 00:03:44,557 and I don't think Chern knew a heck of a lot. 77 00:03:44,581 --> 00:03:48,544 And about 10 years after the paper came out, 78 00:03:48,568 --> 00:03:53,048 a guy named Ed Witten in Princeton started applying it to string theory 79 00:03:53,072 --> 00:03:57,924 and people in Russia started applying it to what's called "condensed matter." 80 00:03:57,948 --> 00:04:02,841 Today, those things in there called Chern-Simons invariants 81 00:04:02,865 --> 00:04:04,730 have spread through a lot of physics. 82 00:04:04,754 --> 00:04:05,928 And it was amazing. 83 00:04:05,952 --> 00:04:07,317 We didn't know any physics. 84 00:04:07,714 --> 00:04:10,568 It never occurred to me that it would be applied to physics. 85 00:04:10,592 --> 00:04:14,380 But that's the thing about mathematics -- you never know where it's going to go. 86 00:04:14,404 --> 00:04:15,896 CA: This is so incredible. 87 00:04:15,920 --> 00:04:20,284 So, we've been talking about how evolution shapes human minds 88 00:04:20,308 --> 00:04:22,816 that may or may not perceive the truth. 89 00:04:22,840 --> 00:04:26,153 Somehow, you come up with a mathematical theory, 90 00:04:26,177 --> 00:04:28,025 not knowing any physics, 91 00:04:28,049 --> 00:04:30,547 discover two decades later that it's being applied 92 00:04:30,571 --> 00:04:33,602 to profoundly describe the actual physical world. 93 00:04:33,626 --> 00:04:34,779 How can that happen? 94 00:04:34,803 --> 00:04:35,960 JS: God knows. 95 00:04:35,984 --> 00:04:38,094 (Laughter) 96 00:04:38,849 --> 00:04:41,999 But there's a famous physicist named [Eugene] Wigner, 97 00:04:42,023 --> 00:04:47,611 and he wrote an essay on the unreasonable effectiveness of mathematics. 98 00:04:47,635 --> 00:04:51,587 Somehow, this mathematics, which is rooted in the real world 99 00:04:51,611 --> 00:04:56,606 in some sense -- we learn to count, measure, everyone would do that -- 100 00:04:56,630 --> 00:04:58,460 and then it flourishes on its own. 101 00:04:58,976 --> 00:05:01,817 But so often it comes back to save the day. 102 00:05:02,293 --> 00:05:04,471 General relativity is an example. 103 00:05:04,495 --> 00:05:07,612 [Hermann] Minkowski had this geometry, and Einstein realized, 104 00:05:07,636 --> 00:05:11,483 "Hey! It's the very thing in which I can cast general relativity." 105 00:05:11,507 --> 00:05:14,619 So, you never know. It is a mystery. 106 00:05:15,056 --> 00:05:16,273 It is a mystery. 107 00:05:16,297 --> 00:05:19,593 CA: So, here's a mathematical piece of ingenuity. 108 00:05:19,617 --> 00:05:20,959 Tell us about this. 109 00:05:20,983 --> 00:05:26,907 JS: Well, that's a ball -- it's a sphere, and it has a lattice around it -- 110 00:05:26,931 --> 00:05:28,504 you know, those squares. 111 00:05:30,697 --> 00:05:35,603 What I'm going to show here was originally observed by [Leonhard] Euler, 112 00:05:35,627 --> 00:05:37,881 the great mathematician, in the 1700s. 113 00:05:38,223 --> 00:05:43,404 And it gradually grew to be a very important field in mathematics: 114 00:05:43,428 --> 00:05:45,762 algebraic topology, geometry. 115 00:05:47,039 --> 00:05:51,403 That paper up there had its roots in this. 116 00:05:51,427 --> 00:05:53,261 So, here's this thing: 117 00:05:53,285 --> 00:05:57,737 it has eight vertices, 12 edges, six faces. 118 00:05:57,761 --> 00:06:01,591 And if you look at the difference -- vertices minus edges plus faces -- 119 00:06:01,615 --> 00:06:02,767 you get two. 120 00:06:02,791 --> 00:06:05,010 OK, well, two. That's a good number. 121 00:06:05,034 --> 00:06:09,282 Here's a different way of doing it -- these are triangles covering -- 122 00:06:09,306 --> 00:06:13,883 this has 12 vertices and 30 edges 123 00:06:13,907 --> 00:06:18,102 and 20 faces, 20 tiles. 124 00:06:18,576 --> 00:06:23,167 And vertices minus edges plus faces still equals two. 125 00:06:23,191 --> 00:06:26,038 And in fact, you could do this any which way -- 126 00:06:26,062 --> 00:06:29,460 cover this thing with all kinds of polygons and triangles 127 00:06:29,484 --> 00:06:30,804 and mix them up. 128 00:06:30,828 --> 00:06:34,107 And you take vertices minus edges plus faces -- you'll get two. 129 00:06:34,131 --> 00:06:35,742 Here's a different shape. 130 00:06:36,480 --> 00:06:41,730 This is a torus, or the surface of a doughnut: 16 vertices 131 00:06:41,754 --> 00:06:45,998 covered by these rectangles, 32 edges, 16 faces. 132 00:06:46,530 --> 00:06:49,214 Vertices minus edges comes out to be zero. 133 00:06:49,238 --> 00:06:50,713 It'll always come out to zero. 134 00:06:50,737 --> 00:06:55,047 Every time you cover a torus with squares or triangles 135 00:06:55,071 --> 00:06:59,006 or anything like that, you're going to get zero. 136 00:07:00,514 --> 00:07:02,904 So, this is called the Euler characteristic. 137 00:07:02,928 --> 00:07:06,377 And it's what's called a topological invariant. 138 00:07:06,849 --> 00:07:08,005 It's pretty amazing. 139 00:07:08,029 --> 00:07:10,820 No matter how you do it, you're always get the same answer. 140 00:07:10,844 --> 00:07:17,143 So that was the first sort of thrust, from the mid-1700s, 141 00:07:17,167 --> 00:07:20,936 into a subject which is now called algebraic topology. 142 00:07:20,960 --> 00:07:23,943 CA: And your own work took an idea like this and moved it 143 00:07:23,967 --> 00:07:26,416 into higher-dimensional theory, 144 00:07:26,440 --> 00:07:29,528 higher-dimensional objects, and found new invariances? 145 00:07:29,552 --> 00:07:34,195 JS: Yes. Well, there were already higher-dimensional invariants: 146 00:07:34,219 --> 00:07:38,676 Pontryagin classes -- actually, there were Chern classes. 147 00:07:38,700 --> 00:07:42,248 There were a bunch of these types of invariants. 148 00:07:42,272 --> 00:07:46,407 I was struggling to work on one of them 149 00:07:46,431 --> 00:07:50,634 and model it sort of combinatorially, 150 00:07:50,658 --> 00:07:53,680 instead of the way it was typically done, 151 00:07:53,704 --> 00:07:58,063 and that led to this work and we uncovered some new things. 152 00:07:58,087 --> 00:08:01,588 But if it wasn't for Mr. Euler -- 153 00:08:01,612 --> 00:08:05,593 who wrote almost 70 volumes of mathematics 154 00:08:05,617 --> 00:08:07,348 and had 13 children, 155 00:08:07,372 --> 00:08:13,814 who he apparently would dandle on his knee while he was writing -- 156 00:08:13,838 --> 00:08:19,612 if it wasn't for Mr. Euler, there wouldn't perhaps be these invariants. 157 00:08:20,157 --> 00:08:24,254 CA: OK, so that's at least given us a flavor of that amazing mind in there. 158 00:08:24,804 --> 00:08:26,347 Let's talk about Renaissance. 159 00:08:26,371 --> 00:08:32,227 Because you took that amazing mind and having been a code-cracker at the NSA, 160 00:08:32,251 --> 00:08:35,480 you started to become a code-cracker in the financial industry. 161 00:08:35,504 --> 00:08:38,194 I think you probably didn't buy efficient market theory. 162 00:08:38,218 --> 00:08:44,605 Somehow you found a way of creating astonishing returns over two decades. 163 00:08:44,629 --> 00:08:46,300 The way it's been explained to me, 164 00:08:46,324 --> 00:08:49,823 what's remarkable about what you did wasn't just the size of the returns, 165 00:08:49,847 --> 00:08:53,730 it's that you took them with surprisingly low volatility and risk, 166 00:08:53,754 --> 00:08:55,578 compared with other hedge funds. 167 00:08:55,602 --> 00:08:57,531 So how on earth did you do this, Jim? 168 00:08:58,071 --> 00:09:02,182 JS: I did it by assembling a wonderful group of people. 169 00:09:02,206 --> 00:09:06,162 When I started doing trading, I had gotten a little tired of mathematics. 170 00:09:06,186 --> 00:09:10,109 I was in my late 30s, I had a little money. 171 00:09:10,133 --> 00:09:12,642 I started trading and it went very well. 172 00:09:13,063 --> 00:09:15,811 I made quite a lot of money with pure luck. 173 00:09:15,835 --> 00:09:17,501 I mean, I think it was pure luck. 174 00:09:17,525 --> 00:09:19,634 It certainly wasn't mathematical modeling. 175 00:09:19,658 --> 00:09:23,489 But in looking at the data, after a while I realized: 176 00:09:23,513 --> 00:09:26,066 it looks like there's some structure here. 177 00:09:26,090 --> 00:09:29,787 And I hired a few mathematicians, and we started making some models -- 178 00:09:29,811 --> 00:09:34,076 just the kind of thing we did back at IDA [Institute for Defense Analyses]. 179 00:09:34,100 --> 00:09:36,933 You design an algorithm, you test it out on a computer. 180 00:09:36,957 --> 00:09:39,123 Does it work? Doesn't it work? And so on. 181 00:09:39,443 --> 00:09:40,922 CA: Can we take a look at this? 182 00:09:40,946 --> 00:09:45,487 Because here's a typical graph of some commodity. 183 00:09:46,487 --> 00:09:50,528 I look at that, and I say, "That's just a random, up-and-down walk -- 184 00:09:50,552 --> 00:09:53,414 maybe a slight upward trend over that whole period of time." 185 00:09:53,438 --> 00:09:55,551 How on earth could you trade looking at that, 186 00:09:55,575 --> 00:09:57,901 and see something that wasn't just random? 187 00:09:57,925 --> 00:10:01,172 JS: In the old days -- this is kind of a graph from the old days, 188 00:10:01,196 --> 00:10:05,480 commodities or currencies had a tendency to trend. 189 00:10:05,504 --> 00:10:11,559 Not necessarily the very light trend you see here, but trending in periods. 190 00:10:11,583 --> 00:10:15,639 And if you decided, OK, I'm going to predict today, 191 00:10:15,663 --> 00:10:20,631 by the average move in the past 20 days -- 192 00:10:20,655 --> 00:10:23,762 maybe that would be a good prediction, and I'd make some money. 193 00:10:23,786 --> 00:10:29,394 And in fact, years ago, such a system would work -- 194 00:10:29,418 --> 00:10:31,809 not beautifully, but it would work. 195 00:10:31,833 --> 00:10:34,342 You'd make money, you'd lose money, you'd make money. 196 00:10:34,366 --> 00:10:36,564 But this is a year's worth of days, 197 00:10:36,588 --> 00:10:40,829 and you'd make a little money during that period. 198 00:10:41,884 --> 00:10:43,842 It's a very vestigial system. 199 00:10:44,525 --> 00:10:48,054 CA: So you would test a bunch of lengths of trends in time 200 00:10:48,078 --> 00:10:50,514 and see whether, for example, 201 00:10:50,538 --> 00:10:54,019 a 10-day trend or a 15-day trend was predictive of what happened next. 202 00:10:54,043 --> 00:11:00,805 JS: Sure, you would try all those things and see what worked best. 203 00:11:01,515 --> 00:11:04,865 Trend-following would have been great in the '60s, 204 00:11:04,889 --> 00:11:07,021 and it was sort of OK in the '70s. 205 00:11:07,045 --> 00:11:08,918 By the '80s, it wasn't. 206 00:11:08,942 --> 00:11:11,759 CA: Because everyone could see that. 207 00:11:11,783 --> 00:11:14,565 So, how did you stay ahead of the pack? 208 00:11:15,046 --> 00:11:21,178 JS: We stayed ahead of the pack by finding other approaches -- 209 00:11:21,202 --> 00:11:23,943 shorter-term approaches to some extent. 210 00:11:25,107 --> 00:11:28,454 The real thing was to gather a tremendous amount of data -- 211 00:11:28,478 --> 00:11:32,056 and we had to get it by hand in the early days. 212 00:11:32,080 --> 00:11:35,546 We went down to the Federal Reserve and copied interest rate histories 213 00:11:35,570 --> 00:11:38,835 and stuff like that, because it didn't exist on computers. 214 00:11:38,859 --> 00:11:40,502 We got a lot of data. 215 00:11:40,526 --> 00:11:44,686 And very smart people -- that was the key. 216 00:11:45,463 --> 00:11:49,239 I didn't really know how to hire people to do fundamental trading. 217 00:11:49,749 --> 00:11:52,698 I had hired a few -- some made money, some didn't make money. 218 00:11:52,722 --> 00:11:54,602 I couldn't make a business out of that. 219 00:11:54,626 --> 00:11:56,668 But I did know how to hire scientists, 220 00:11:56,692 --> 00:12:00,081 because I have some taste in that department. 221 00:12:00,105 --> 00:12:01,943 So, that's what we did. 222 00:12:01,967 --> 00:12:05,198 And gradually these models got better and better, 223 00:12:05,222 --> 00:12:06,557 and better and better. 224 00:12:06,581 --> 00:12:09,795 CA: You're credited with doing something remarkable at Renaissance, 225 00:12:09,819 --> 00:12:12,420 which is building this culture, this group of people, 226 00:12:12,444 --> 00:12:15,586 who weren't just hired guns who could be lured away by money. 227 00:12:15,610 --> 00:12:19,522 Their motivation was doing exciting mathematics and science. 228 00:12:19,860 --> 00:12:22,259 JS: Well, I'd hoped that might be true. 229 00:12:22,283 --> 00:12:25,863 But some of it was money. 230 00:12:25,887 --> 00:12:27,280 CA: They made a lot of money. 231 00:12:27,304 --> 00:12:29,841 JS: I can't say that no one came because of the money. 232 00:12:29,865 --> 00:12:32,118 I think a lot of them came because of the money. 233 00:12:32,142 --> 00:12:34,163 But they also came because it would be fun. 234 00:12:34,187 --> 00:12:36,675 CA: What role did machine learning play in all this? 235 00:12:36,699 --> 00:12:39,763 JS: In a certain sense, what we did was machine learning. 236 00:12:40,879 --> 00:12:47,170 You look at a lot of data, and you try to simulate different predictive schemes, 237 00:12:47,194 --> 00:12:49,376 until you get better and better at it. 238 00:12:49,400 --> 00:12:53,167 It doesn't necessarily feed back on itself the way we did things. 239 00:12:53,191 --> 00:12:55,500 But it worked. 240 00:12:56,150 --> 00:13:00,209 CA: So these different predictive schemes can be really quite wild and unexpected. 241 00:13:00,233 --> 00:13:02,147 I mean, you looked at everything, right? 242 00:13:02,171 --> 00:13:05,488 You looked at the weather, length of dresses, political opinion. 243 00:13:05,512 --> 00:13:08,349 JS: Yes, length of dresses we didn't try. 244 00:13:08,373 --> 00:13:10,430 CA: What sort of things? 245 00:13:10,454 --> 00:13:11,612 JS: Well, everything. 246 00:13:11,636 --> 00:13:14,900 Everything is grist for the mill -- except hem lengths. 247 00:13:16,852 --> 00:13:19,152 Weather, annual reports, 248 00:13:19,176 --> 00:13:23,908 quarterly reports, historic data itself, volumes, you name it. 249 00:13:23,932 --> 00:13:25,083 Whatever there is. 250 00:13:25,107 --> 00:13:27,728 We take in terabytes of data a day. 251 00:13:27,752 --> 00:13:31,876 And store it away and massage it and get it ready for analysis. 252 00:13:33,446 --> 00:13:34,828 You're looking for anomalies. 253 00:13:34,852 --> 00:13:37,805 You're looking for -- like you said, 254 00:13:37,829 --> 00:13:40,281 the efficient market hypothesis is not correct. 255 00:13:40,305 --> 00:13:43,772 CA: But any one anomaly might be just a random thing. 256 00:13:43,796 --> 00:13:47,454 So, is the secret here to just look at multiple strange anomalies, 257 00:13:47,478 --> 00:13:48,806 and see when they align? 258 00:13:49,238 --> 00:13:52,451 JS: Any one anomaly might be a random thing; 259 00:13:52,475 --> 00:13:55,514 however, if you have enough data you can tell that it's not. 260 00:13:55,538 --> 00:14:00,488 You can see an anomaly that's persistent for a sufficiently long time -- 261 00:14:00,512 --> 00:14:05,487 the probability of it being random is not high. 262 00:14:05,511 --> 00:14:10,369 But these things fade after a while; anomalies can get washed out. 263 00:14:10,393 --> 00:14:12,813 So you have to keep on top of the business. 264 00:14:12,837 --> 00:14:15,509 CA: A lot of people look at the hedge fund industry now 265 00:14:15,533 --> 00:14:19,931 and are sort of ... shocked by it, 266 00:14:19,955 --> 00:14:22,127 by how much wealth is created there, 267 00:14:22,151 --> 00:14:24,396 and how much talent is going into it. 268 00:14:25,523 --> 00:14:29,529 Do you have any worries about that industry, 269 00:14:29,553 --> 00:14:31,967 and perhaps the financial industry in general? 270 00:14:31,991 --> 00:14:34,695 Kind of being on a runaway train that's -- 271 00:14:34,719 --> 00:14:38,749 I don't know -- helping increase inequality? 272 00:14:38,773 --> 00:14:42,604 How would you champion what's happening in the hedge fund industry? 273 00:14:42,628 --> 00:14:45,236 JS: I think in the last three of four years, 274 00:14:45,260 --> 00:14:47,363 hedge funds have not done especially well. 275 00:14:47,387 --> 00:14:48,787 We've done dandy, 276 00:14:48,811 --> 00:14:52,812 but the hedge fund industry as a whole has not done so wonderfully. 277 00:14:52,836 --> 00:14:57,738 The stock market has been on a roll, going up as everybody knows, 278 00:14:57,762 --> 00:15:01,207 and price-earnings ratios have grown. 279 00:15:01,231 --> 00:15:04,294 So an awful lot of the wealth that's been created in the last -- 280 00:15:04,318 --> 00:15:07,668 let's say, five or six years -- has not been created by hedge funds. 281 00:15:08,458 --> 00:15:11,679 People would ask me, "What's a hedge fund?" 282 00:15:11,703 --> 00:15:13,963 And I'd say, "One and 20." 283 00:15:13,987 --> 00:15:17,553 Which means -- now it's two and 20 -- 284 00:15:17,577 --> 00:15:20,930 it's two percent fixed fee and 20 percent of profits. 285 00:15:20,954 --> 00:15:23,306 Hedge funds are all different kinds of creatures. 286 00:15:23,330 --> 00:15:26,569 CA: Rumor has it you charge slightly higher fees than that. 287 00:15:27,339 --> 00:15:30,420 JS: We charged the highest fees in the world at one time. 288 00:15:30,444 --> 00:15:33,670 Five and 44, that's what we charge. 289 00:15:33,694 --> 00:15:35,092 CA: Five and 44. 290 00:15:35,116 --> 00:15:38,350 So five percent flat, 44 percent of upside. 291 00:15:38,374 --> 00:15:41,157 You still made your investors spectacular amounts of money. 292 00:15:41,181 --> 00:15:42,633 JS: We made good returns, yes. 293 00:15:42,657 --> 00:15:45,657 People got very mad: "How can you charge such high fees?" 294 00:15:45,681 --> 00:15:47,308 I said, "OK, you can withdraw." 295 00:15:47,332 --> 00:15:50,150 But "How can I get more?" was what people were -- 296 00:15:50,174 --> 00:15:51,678 (Laughter) 297 00:15:51,702 --> 00:15:54,142 But at a certain point, as I think I told you, 298 00:15:54,166 --> 00:15:59,341 we bought out all the investors because there's a capacity to the fund. 299 00:15:59,365 --> 00:16:02,069 CA: But should we worry about the hedge fund industry 300 00:16:02,093 --> 00:16:07,531 attracting too much of the world's great mathematical and other talent 301 00:16:07,555 --> 00:16:10,793 to work on that, as opposed to the many other problems in the world? 302 00:16:10,817 --> 00:16:12,746 JS: Well, it's not just mathematical. 303 00:16:12,770 --> 00:16:15,449 We hire astronomers and physicists and things like that. 304 00:16:15,833 --> 00:16:18,264 I don't think we should worry about it too much. 305 00:16:18,288 --> 00:16:21,430 It's still a pretty small industry. 306 00:16:21,454 --> 00:16:27,451 And in fact, bringing science into the investing world 307 00:16:27,475 --> 00:16:29,634 has improved that world. 308 00:16:29,658 --> 00:16:33,728 It's reduced volatility. It's increased liquidity. 309 00:16:33,752 --> 00:16:36,941 Spreads are narrower because people are trading that kind of stuff. 310 00:16:36,965 --> 00:16:42,041 So I'm not too worried about Einstein going off and starting a hedge fund. 311 00:16:42,478 --> 00:16:46,642 CA: You're at a phase in your life now where you're actually investing, though, 312 00:16:46,666 --> 00:16:50,400 at the other end of the supply chain -- 313 00:16:50,424 --> 00:16:54,528 you're actually boosting mathematics across America. 314 00:16:54,552 --> 00:16:56,417 This is your wife, Marilyn. 315 00:16:56,441 --> 00:17:01,197 You're working on philanthropic issues together. 316 00:17:01,221 --> 00:17:02,384 Tell me about that. 317 00:17:02,408 --> 00:17:06,057 JS: Well, Marilyn started -- 318 00:17:06,081 --> 00:17:09,528 there she is up there, my beautiful wife -- 319 00:17:09,552 --> 00:17:12,524 she started the foundation about 20 years ago. 320 00:17:12,548 --> 00:17:13,699 I think '94. 321 00:17:13,723 --> 00:17:15,818 I claim it was '93, she says it was '94, 322 00:17:15,842 --> 00:17:18,413 but it was one of those two years. 323 00:17:18,437 --> 00:17:20,572 (Laughter) 324 00:17:20,596 --> 00:17:27,315 We started the foundation, just as a convenient way to give charity. 325 00:17:28,346 --> 00:17:30,853 She kept the books, and so on. 326 00:17:30,877 --> 00:17:37,591 We did not have a vision at that time, but gradually a vision emerged -- 327 00:17:37,615 --> 00:17:43,119 which was to focus on math and science, to focus on basic research. 328 00:17:43,569 --> 00:17:46,341 And that's what we've done. 329 00:17:46,365 --> 00:17:52,720 Six years ago or so, I left Renaissance and went to work at the foundation. 330 00:17:52,744 --> 00:17:54,315 So that's what we do. 331 00:17:54,339 --> 00:17:57,248 CA: And so Math for America is basically investing 332 00:17:57,272 --> 00:17:59,910 in math teachers around the country, 333 00:17:59,934 --> 00:18:03,736 giving them some extra income, giving them support and coaching. 334 00:18:03,760 --> 00:18:06,811 And really trying to make that more effective 335 00:18:06,835 --> 00:18:09,436 and make that a calling to which teachers can aspire. 336 00:18:09,460 --> 00:18:14,250 JS: Yeah -- instead of beating up the bad teachers, 337 00:18:14,274 --> 00:18:19,127 which has created morale problems all through the educational community, 338 00:18:19,151 --> 00:18:21,592 in particular in math and science, 339 00:18:21,616 --> 00:18:27,746 we focus on celebrating the good ones and giving them status. 340 00:18:27,770 --> 00:18:30,701 Yeah, we give them extra money, 15,000 dollars a year. 341 00:18:30,725 --> 00:18:35,192 We have 800 math and science teachers in New York City in public schools today, 342 00:18:35,216 --> 00:18:37,030 as part of a core. 343 00:18:37,054 --> 00:18:40,740 There's a great morale among them. 344 00:18:40,764 --> 00:18:43,270 They're staying in the field. 345 00:18:43,294 --> 00:18:46,189 Next year, it'll be 1,000 and that'll be 10 percent 346 00:18:46,213 --> 00:18:49,757 of the math and science teachers in New York [City] public schools. 347 00:18:49,781 --> 00:18:55,686 (Applause) 348 00:18:55,710 --> 00:18:59,120 CA: Jim, here's another project that you've supported philanthropically: 349 00:18:59,144 --> 00:19:01,541 Research into origins of life, I guess. 350 00:19:01,565 --> 00:19:03,012 What are we looking at here? 351 00:19:03,536 --> 00:19:05,418 Well, I'll save that for a second. 352 00:19:05,442 --> 00:19:07,604 And then I'll tell you what you're looking at. 353 00:19:07,628 --> 00:19:10,684 Origins of life is a fascinating question. 354 00:19:10,708 --> 00:19:12,241 How did we get here? 355 00:19:13,170 --> 00:19:14,941 Well, there are two questions: 356 00:19:14,965 --> 00:19:20,833 One is, what is the route from geology to biology -- 357 00:19:20,857 --> 00:19:22,238 how did we get here? 358 00:19:22,262 --> 00:19:24,626 And the other question is, what did we start with? 359 00:19:24,650 --> 00:19:27,752 What material, if any, did we have to work with on this route? 360 00:19:27,776 --> 00:19:30,837 Those are two very, very interesting questions. 361 00:19:31,773 --> 00:19:37,607 The first question is a tortuous path from geology up to RNA 362 00:19:37,631 --> 00:19:39,889 or something like that -- how did that all work? 363 00:19:39,913 --> 00:19:42,301 And the other, what do we have to work with? 364 00:19:42,325 --> 00:19:44,096 Well, more than we think. 365 00:19:44,120 --> 00:19:48,963 So what's pictured there is a star in formation. 366 00:19:49,836 --> 00:19:53,261 Now, every year in our Milky Way, which has 100 billion stars, 367 00:19:53,285 --> 00:19:55,780 about two new stars are created. 368 00:19:55,804 --> 00:19:58,274 Don't ask me how, but they're created. 369 00:19:58,298 --> 00:20:01,378 And it takes them about a million years to settle out. 370 00:20:02,132 --> 00:20:04,308 So, in steady state, 371 00:20:04,332 --> 00:20:08,180 there are about two million stars in formation at any time. 372 00:20:08,204 --> 00:20:11,662 That one is somewhere along this settling-down period. 373 00:20:12,067 --> 00:20:15,003 And there's all this crap sort of circling around it, 374 00:20:15,027 --> 00:20:16,525 dust and stuff. 375 00:20:17,479 --> 00:20:20,502 And it'll form probably a solar system, or whatever it forms. 376 00:20:20,526 --> 00:20:22,702 But here's the thing -- 377 00:20:22,726 --> 00:20:29,074 in this dust that surrounds a forming star 378 00:20:29,098 --> 00:20:35,133 have been found, now, significant organic molecules. 379 00:20:35,958 --> 00:20:42,097 Molecules not just like methane, but formaldehyde and cyanide -- 380 00:20:42,121 --> 00:20:48,638 things that are the building blocks -- the seeds, if you will -- of life. 381 00:20:49,136 --> 00:20:51,828 So, that may be typical. 382 00:20:52,395 --> 00:20:59,329 And it may be typical that planets around the universe 383 00:20:59,353 --> 00:21:02,965 start off with some of these basic building blocks. 384 00:21:03,830 --> 00:21:06,545 Now does that mean there's going to be life all around? 385 00:21:06,569 --> 00:21:07,933 Maybe. 386 00:21:07,957 --> 00:21:12,084 But it's a question of how tortuous this path is 387 00:21:12,108 --> 00:21:16,502 from those frail beginnings, those seeds, all the way to life. 388 00:21:16,526 --> 00:21:21,718 And most of those seeds will fall on fallow planets. 389 00:21:21,742 --> 00:21:23,151 CA: So for you, personally, 390 00:21:23,175 --> 00:21:25,897 finding an answer to this question of where we came from, 391 00:21:25,921 --> 00:21:29,579 of how did this thing happen, that is something you would love to see. 392 00:21:29,603 --> 00:21:31,389 JS: Would love to see. 393 00:21:31,413 --> 00:21:32,903 And like to know -- 394 00:21:32,927 --> 00:21:38,097 if that path is tortuous enough, and so improbable, 395 00:21:38,121 --> 00:21:42,875 that no matter what you start with, we could be a singularity. 396 00:21:43,336 --> 00:21:44,488 But on the other hand, 397 00:21:44,512 --> 00:21:47,990 given all this organic dust that's floating around, 398 00:21:48,014 --> 00:21:51,805 we could have lots of friends out there. 399 00:21:52,947 --> 00:21:54,108 It'd be great to know. 400 00:21:54,132 --> 00:21:57,612 CA: Jim, a couple of years ago, I got the chance to speak with Elon Musk, 401 00:21:57,636 --> 00:22:00,473 and I asked him the secret of his success, 402 00:22:00,497 --> 00:22:04,188 and he said taking physics seriously was it. 403 00:22:04,696 --> 00:22:08,699 Listening to you, what I hear you saying is taking math seriously, 404 00:22:08,723 --> 00:22:11,726 that has infused your whole life. 405 00:22:12,123 --> 00:22:16,686 It's made you an absolute fortune, and now it's allowing you to invest 406 00:22:16,710 --> 00:22:21,206 in the futures of thousands and thousands of kids across America and elsewhere. 407 00:22:21,567 --> 00:22:24,425 Could it be that science actually works? 408 00:22:24,449 --> 00:22:27,221 That math actually works? 409 00:22:27,245 --> 00:22:31,617 JS: Well, math certainly works. Math certainly works. 410 00:22:31,641 --> 00:22:32,839 But this has been fun. 411 00:22:32,863 --> 00:22:37,809 Working with Marilyn and giving it away has been very enjoyable. 412 00:22:37,833 --> 00:22:40,769 CA: I just find it -- it's an inspirational thought to me, 413 00:22:40,793 --> 00:22:44,800 that by taking knowledge seriously, so much more can come from it. 414 00:22:44,824 --> 00:22:47,842 So thank you for your amazing life, and for coming here to TED. 415 00:22:47,866 --> 00:22:48,617 Thank you. 416 00:22:48,651 --> 00:22:49,752 Jim Simons! 417 00:22:49,806 --> 00:22:54,186 (Applause)