1/Today in @bopinion, I talk about the legacy and career of Jim Simons, the founder of Renaissance Technologies, who is stepping down as the hedge fund's

2/Simons' fund beat the market -- consistently, by huge percentages, after fees.

That's an astonishing accomplishment.

https://t.co/uopG6WutzU
3/How did he do it?

Basically, by being relentlessly smarter and better-managed than the competition.

https://t.co/p6ZTd7POfQ
4/So does Simons' success mean markets are inefficient?

Yes and no.

Obviously yes, since Renaissance could (and can) beat the market. But there are a few key caveats...
5/First of all, RenTech's most eye-popping and consistent returns are in its flagship Medallion Fund.

But most investors can't invest in that fund. It doesn't take your money.

https://t.co/sTXUzl09Lc
6/In fact, the Medallion Fund doesn't even take *its own* money. It makes regular profit distributions, so that the fund's total size remains small -- around $10 billion or so.

https://t.co/bhqE71eSdH
7/This means that the Medallion Fund's famous 39% annualized return (after fees) doesn't compound.

If it did, Medallion would be worth far more than all the rest of the hedge funds in the world combined, by now!
8/So a fund like Medallion isn't really comparable to, say, the return of the S&P. One compounds, the other does not.

Why? Because the market inefficiencies Medallion exploits are limited in size. And thus, Medallion's profit opportunities are limited in size.
9/To address this, Renaissance made a bunch of other funds that do different things than Medallion, and whose strategies scale up more. These have done generally well, but they're no Medallion...

https://t.co/ZsXQ4NNUI8
10/Even as Medallion racked up huge gains in 2020, Renaissance's other funds largely tanked.

This shows that consistently beating the market AT SCALE is incredibly hard, even for the smartest and best-managed people on the planet.

https://t.co/oowJd3k8GH
11/That's no knock against Renaissance, of course. They're the best in the biz.

But it does mean that Renaissance's existence doesn't prove that stock markets are inefficient. Indeed it shows us just how not-so-hugely-inefficient they are!

(end)

https://t.co/uopG6WutzU

More from Noahtogolpe 🐇

Time for panel #3: Big Tech and regulation!

I will be live-tweeting again, and you can also watch video at either the Twitter or Facebook links below!


Kaissar: Every industry gets regulated when it gets big. The question is what kind of regulation Big Tech will get,and whether the companies will be proactive in shaping it.

Kaissar: More profitable companies have higher returns. Why? Maybe it's a risk factor, because more profit = higher risk of getting regulated.

Bershidskyis showing a diagram of GDPR complaince pop-ups. What a massive ill-conceived bureaucratic mess.

Ritholtz: It's 2018 and we're still talking about Facebook privacy settings?! If you're still giving your personal data to Facebook, you just don't care about privacy!
1/Lots of tech companies and workers are making noises about leaving San Francisco, LA, NYC, and other "superstar" cities.

Some are predicting a shift to remote work and distributed companies.

Let's take a hard look at what that would actually

2/We're all familiar with the trend of tech companies and other knowledge industries (finance, biotech, etc.) piling into a few tech hubs, raising rents and house prices.

Now some think the advent of Zoom, Slack, etc. might reverse this trend.

https://t.co/nQVCJrKvrB


3/But escaping the superstar cities is going to be tough.

The forces keeping tech companies in places like SF are so strong that these regions have essentially become prisons for these companies.


4/In order to escape the prison of the superstar cities, tech companies and other knowledge industries will have to overcome the Four Jailers of Industrial Clustering:

1. In-person office productivity

2. Thick market effects

3. Knowledge spillovers

4. City life amenities

5/I'm actually pretty optimistic that companies can find ways to make remote work productive.

Studies show that working from home *some* of the time actually tends to raise

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