Smell the glove is here

Yesterday, Bloomberg columnist Matt Levine noted the recent death of Jim Simons, who pioneered quantitative analysis in finance and founded a hedge fund called Renaissance Technologies that, in general, made lots of money by trading on data patterns that it identified but could not explain. As Levine explains:

Every obituary of Simons mentions the key facts of his career, which are that he knew (1) a lot about math and (2) nothing about finance. This seems to have been a very fruitful combination. If you can program computers to analyze data with, as it were, an open mind, they will pick out signals from the data that work, and then you can trade on those signals and make an enormous fortune. If you insist on the signals making sense to you, you will just get in the way.

You don’t need to understand why some strategy makes money; money is self-justifying. More money is even more so — the clarifying simplicity of living in a capitalist world.