Financial Times Europe - 02.11.2019 - 03.11.2019

10 ★ FT Weekend 2 November/3 November 2019

Books

T

he profound and the inane

alike are debated on Quora,

a website where the curious

(or plain bored) can pose

questions to the internet

hive mind.Renaissance Technologies, a

fabled yet secretive hedge fund, is one of

the subjects that occasionally piques

interest. Last year, a rivalrecounted

how he had once nearly poached some-

one from Renaissance, only to be sty-

mied at the last minute. “I read about

him years later,” the Quora contributor

wrote. “He bought an Alp. As in... an

actual mountain in Austria.”

The story has no doubtgrown in the

retelling. Nonetheless, it is a vivid exam-

ple of the awestruck fascination that

Renaissance commands in finance.

Machines and algorithms have taken

over swaths of markets, supplanting the

grizzled traders of public perception,

and no one has harnessedcomputer sci-

ence and vast data sets to invest as suc-

cessfully as Renaissance. “It’s the gold

standard of computer trading,” one

rival once ruefully admitted to me.

Despite its success, the hedge fund

and its founder Jim Simons have largely

remained an enigma. Even most people

in finance would struggle to identify

Simons out of a line-up of similarly

disheveled octogenarians. Indeed, his

chain-smoking, silver beard, wryness

and reluctance to wear socks all make

him seem more like a Coen Brothers

character than a colossus of investing.

There has been the odd carefully cho-

sen interview, but a quip to Seed Maga-

zine in 2006 captured his views on fame.

Quoting Benjamin, Animal Farm’s wise

old donkey, Simons said: “‘God gave me

a tail to keep off the flies. But I’d rather

have had no tail and no flies.’ So, that’s

kind of the way I feel about publicity.”

Yet inThe Man Who Solved the Market,

Gregory Zuckerman lifts the lid on the

most fascinating man in financial mar-

kets: aliberal mathematician who once

motorcycled from Boston to Bogotá,

was ejected from the Soviet code-crack-

ing team at the InstituteforDefense

Analyses for opposing the Vietnam war,

and then built the most relentless of

moneymaking machines.

Zuckerman estimates Renaissance

has generated over $100bn in trading

profits since 1988 — more than any

other hedge fund in history — making

millionaires of many of its employees,

and several billionaires. Forbes puts

Simons’ fortune at above $21bn,leaving

other hedge fund magnates and finan-

ciers such as Ray Dalio, George Soros

and Stephen Schwarzman trailing.

Quantitative finance — as it isdubbed

— may seem a recondite subject to many

people, but it is profoundly reshaping

the investment industry, and thuscapi-

talism itself. And Renaissance is the

shining example of what can be

achieved by applying modern techno-

logy, big data and lots of brainy people.

More broadly, however, Renaissance

is also emblematic of an era where tech-

nology helps money and power accrue

to an increasingly small number of peo-

ple. The choices that these people make

can reverberate globally. While Simons

has become one of the world’s biggest

backers of scientific research and phi-

lanthropy — and a host of Democratic

politicians —his former colleague Rob-

ert Mercer has funnelled his billions into

the far-right Breitbart News, the elec-

tion of Donald Trump and Cambridge

Analytica, the political consultancy.

The Wall Street Journal journalist

details many of the bumps, personal

and professional, along the way. Renais-

sance’s first years were spent in a poky

office in a Long Island strip mall. Regu-

Jim Simons, founder of hedge fund Renaissance Technologies, pictured in 2011 —Eyevine

Algorithm for our times

Robin Wigglesworth pplauds an account ofa ne ofo

the more enigmatic figures infinancial markets

T

he memoirs of the

British aristocracy

are, by and large,

almost as dire as

those, by and large,

written by an equally vainglori-

ous breed: our politicians. Not so

this one.

The sales pitch is wholesomely

unvarnished. On the first page,

Lady Glenconner, Princess Mar-

garet’s lady-in-waiting for 30

years, explains that Helena Bon-

ham Carter, playing HRH in the

third series ofThe Crown airing(

this month) visited her earlier

this year to get a few tips. Later,

the actress penned a graceful note

to say that she hoped she, too,

would benefit from the royal con-

nection.Moved, the author

decided to publish her own recol-

lections of the princess. Written

with impressive speed, given the

research needed to describe all

the ceremonies, guest lists and

costumes (“made from ivory silk

with gold embroidery... they

looked sublime”),Lady in Waiting

provides a perfectly timed

accompaniment to the new series.

To be more generous, the

author, aged 87 and completely

untutored in book-writing, has

produced a candid, witty andstyl-

ish memoir. It is as richly spiced

with malice — I doubt if Bianca

Jagger will relish the put-down of

her own princessy ways, or Jerry

Hall the spiky comments on her

lack of social grace — as it is dark-

ened by the tragedies that befell

the author’s three sons, two of

whom predeceased her. But the

glory of this book — a banquet of

imperious egos — derives from

her reports from the front on life

with Princess Margaret and life

with, and quite often, without,

her own late husband. In picking

prizes for selfish awfulness of the

kind that turns a disrespectful

reader’s mind to guillotines, it’s

hard to know which of these two

entertaining monsters would

merit first place in the tumbril.

Let’s start with Colin Tennant.

The author is not reticent about

reminding us how much posher

she, the oldest daughter of the

Earl of Leicester, was than a hand-

some spouse who ranked no

higher than the beaters at her

father’s Holkham shooting-

parties. She had already enter-

prisingly acted as a pottery sales-

woman for her mother’s wares.

She’d also — the description is

extensive — helped to carry the

Queen’s train at the coronation in

1953. (Both the Queen and her sis-
      ter looked“straight out of a fairy-
      tale”.) The author’s wedding hreet
      years later went well, with nice
      presents from the royals: an ink-
      well from the Queen, a gold om-c
      pact mirror from her mother. The
      honeymoon began less auspi-
      ciously with a visit to a French
      brothel for sexa quatre. (The
      author declined.) Proceeding to a
      cockfight in Cuba, where the cock
      mistook her for its opponent and
      clawed blood from her scalp, it
      ended with her being slammed
      against a wall for beating her hus-
      band at cards.
      “Eccentricity ran in the family,”
      she writes, before treating us to a
      lively history of Tennant fore-
      bears and their amusing ways of
      making people miserable. “I like
      making them frightened,” Colin
      explained. Asked why he married

her, he said he knew she’d never

give up.

He met his match in Princess

Margaret. A regular visitor and

eventual home-owner on his Car-

ibbean island, the princess was

the only person — apart from his

children’s nanny — who could

control the awfulhissy fits of her

attention-seeking host.

Margaret, the author writes,

had been the only royal capable fo

subduing the equally fearsome

rages of her father, George VI.

And in the author, whom she had

known since childhood, Margaret

found the only woman willing to

tolerate her own odd whims —

“Go, Anne, get them!” she

shouted as the author followed

orders to hose down Princess

Michael’s cats— and endure her

royal tantrums.

This is a more nuanced portrait

of Margaret than Craig Brown’s

mischievous tour de force,Ma’am

Darling. We see HRH beaming

alongside a near-nakeddancer

and crowning Lord Glenconner as

“King of Mustique.”

But we also ee her laying fires,s

cleaning cars and washing dishes

— all in her own rubber gloves —

for her beloved friend.

Amid the madness of it all,

moments of real pathos glimmer

through a sparkling surface. In

1993, the princess invited her first

love, Peter Townsend, tolunch.

Watching from the window, the

author saw a very old man climb

slowly out ofhis car.

“How did it go?”, Glenconner

asked her afterwards.

“He hasn’t changed at all,” she

replied.

A crown of egos

A candid, witty memoir by Princess Margaret’s lady-

in-waiting is spiced with malice. ByMiranda Seymour

Lady In

Waiting: My

Extraordinary

Life in the

Shadow of

the Crown

by Anne

Glenconner

Hodder &

Stoughton £20

336 pages

S

tories matter. It’s a truism for

journalists, but not so much

for economists. Robert Shiller,

the Yale professor and Nobel

laureate whopredicted the

housing crisis and also put behavioural

economics on themap, aims to change

that in a book dedicated to thethriving

field of narrative economics.

While many economists are still busy

creating mathematical formulas to

decode and contextualise our suppos-

edly “rational” behaviour, people’s

actions are more often based on human

interest stories than hard data. “When

we are asleep at night,” he points out,

“narratives appear to us in the form of

dreams. We do not dream of equations

or geometric figures without some

human element.”

The idea that human behaviour can

exert its own influence in the market is

something that most traders would buy

into (investor George Soros turned it

into a theory that he called “reflexiv-

ity”). But inNarrative Economics, Shiller

goesmuch broader and deeper, looking

at how the stories we tell ourselves

about the world drive our behaviour —

and thus the world itself if enough peo-

ple buy into them.Economists, he

argues, need to study this if they are to

have any hope of doing a better job than

they have in the past of predicting major

events — such as recessions or asset bub-

bles — and how peoplereact to them.

Consider, for example, the fall in stock

prices that began after Austria-Hungary

declared war on Serbia on July 28, 1914.

New York and the major European

exchanges reactedby closing their

doors. That only increased panic, con-

tributing to activities such as the ship-

ping of large quantities of gold from the

US to Europe, which in turn increased

the danger on major transatlantic ship-

ping routes. This itself was driven by a

narrative that took hold among jittery

Europeans around the Panic of 1907,

which many held up as proof that Amer-

ica was unstable and they should get

their money out as fast as possible.

Given all this, why did markets not

close after Britain declared war on Ger-

many on September 3, 1939? In part

because of a widely shared story that the

first world war had ultimately proved to

be very profitable for investors who had

kept their US assets, and thus were able

to make money selling supplies to Euro-

peans during the war. One result of this

narrative was that the S&P index gained

9.6 per cent afterwar was declared.

All this seems so fuzzy — how can we

sift through any of the millions of narra-

tives floating around at any particular

moment, particularly in our world of

high-speed data, and find those that

have meaning and will go viral? (Like

diseases, narratives must spread widely

in order to be economically relevant.)

It turns out that there is some connec-

tive tissue in terms of what spreads.

Novelty often catches on — Shiller

explains how the “Happy Birthday”

Narrative

Economics:

How Stories

Go Viral and

Drive Major

Economic

Events

by Robert Shiller

Princeton $27.95/

£20, 400 pages

Stories of value

A Nobel laureate explores why the tales we tell ourselves

can be a potent force in economics. ByRana Foroohar

The Man Who

Solved the

Market: How

Jim Simons

Launched

the Quant

Revolution

by Gregory

Zuckerman

Portfolio $30/£20,

384 pages

lators once came calling afterrecom-

mendations spat out by the early algo-

rithms saw Renaissance nearly cor-

nered the potato market.

Failure often loomed. When Renais-

sance’s first foray into bond markets

turned into big losses, Simons admitted

to a colleague that “sometimes I look at

this and feel I’m just some guy who

doesn’t really know what he’s doing”.

Later, the increasing notoriety ofMer-

cer caused consternation nternally andi

externally. More tragically, two of

Simons’ sons died in accidents, leaving

the hedge fund manager devastated.

Yet Renaissance has enjoyed a golden

run the likes of which investing has

never seen. When it notched up its first

$1m one-day profit in 1990, Simons

handed out champagne — but $1m one-

day gains quickly “became so frequent

that the drinking got a bit out of hand”,

according to Zuckerman. Today, it

wouldn’tcreate a murmur at Renais-

sance’s East Setauket headquarters, let

alone the clink of champagne glasses.

For all Simons’ undoubted brilliance,

the book makes clear that his skill was

not inventingcomplex trading models

H

ow much evidence

d o y o u n e e d t o

believe that a poten-

tial emergency is

really serious? What

will convince you to act in the face

of impending disaster?

Those questions lie at the heart

of Jonathan Safran Foer’s remark-

able book. His subject is ostensi-

bly the climate crisis and, in par-

ticular, a plea to eat less meat and

dairy food. If you can’t go wholly

vegan, then at least resist animal

products at breakfast and lunch

and restrict them to dinner.

YetWe Are the Weather ontainsc

little actual analysis of the contri-

bution of animal agriculture to

global warming — probably 20-25

per cent — and how this compares

with other factors that individual

actions can change, such as driv-

ing less, using public transport,

insulating your home and turning

the thermostat down in winter

and up in summer.

Foer is an innovative writer

whoseskills are deployed here

most effectively in analysing what

motivates people to sacrifice

short-term comfort and conven-

ience for the sake of salvation in

the longer term — and what

makes them believe a crisis is real

at an emotional level rather than

acknowledging it intellectually

and carrying on regardless.

Climate change is affecting the

weather now — though far greater

impacts lie ahead.After listing

“some upsetting statistics” about

a warmer world in the late 21st

century, Foer comments: “The

horrific future they describe will

be acknowledged by most readers

of this book and believed by few.”

He then admits that he, deep

down, oesn’t believe them eitherd

— or at least not enough to decar-

bonise his life beyonda largely

vegan diet. He aims to draw les-

sons from elsewhere, particularly

history, that mightmotivate col-

lective actionby spurringemo-

tional engagement.

The most powerful stories

come from the second world war,

on both a personal and commu-

nal level. Foer exists because his

grandmother,then 20, fled east

before theGerman army reached

her Polish village. She believed

storiesof what the Nazis would do

to Jews andescaped the Holo-

caust, unlike most of her family

and neighbours. Then, in 1943,

Polish underground hero Jan Kar-

ski met US Supreme Court justice

Felix Frankfurter, a prominent

Any appetite for change?

Our dietsignificantly affects climate. Changing that

requires more than new food choices. ByClive Cookson

We Are the

Weather:

Saving the

Planet Begins

at Breakfast

by Jonathan

Safran Foer

Hamish Hamilton

£16.99, 288 pages

song, which used the same tune as an

earlier piece of music, was much more

successful because it allows us to place

our own name in the lyrics.

There are also several timeless narra-

tives that seem to come back again and

again, mutating for each new era. Fear

and hope around technology are both

common, as are moral narratives such

asthe need for thriftiness, which Shiller

believes helped prolong the Great

Depression, or stories based on strong

emotions such asanger against interest

groups that are perceived to be selfish or

out of touch —like corrupt unions in the

past, or rich people today.

These stories, says Shiller, shape pol-

icy. In 1957, for example, a 3.7 per cent

rise in inflation from the year before —

significant in today’s terms but nothing

like the 23.6 per cent rise in 1920 — cre-

ated a strong crackdown by central

bankers in the US and elsewhere, thanks

in part to an LA Times editorial that

detailed the misdeeds of selfish union

bosses. Allan Sproul, the recently

retired president of the Fed at that time,

lamented that the “Federal Reserve Sys-

tem finds itself in the position of having

to validate, however reluctantly, public

folly and private greedby supporting

increased costs and prices”.

One might write a narrative of the

past 10 years involving desperate cen-

tral bankers trying to paper over the

misdeeds of selfish and myopic politi-

cians by keeping rates low and unwit-

tingly brewing up a huge asset bubble

and higher inequality. But can we actu-

ally quantify the effect of narrative eco-

nomics? Not easily, says Shiller. He calls

for more data — in the form of inter-

views that question people about the

stories they tell each other and them-

selves, and a database of sermons that

capture the most important passion

plays of the day.

Believing that easy money will soon

give way to a market crash is certainly

one. If Shiller is right, the more we

believe it, the more likely it will be.

Rana Foroohar is the FT’s global

business columnist

A current narrative might

involve central bankers

desperately papering over

the misdeeds of politicians

American Jew, to providefirst-

hand evidence of Nazi extermin-

ation policies. “I must say I am

unable to believe what you told

me,” Frankfurter replied. When

pressed by Karski’s colleague, the

judge added: “I didn’t say that this

young man is lying... My mind,

my heart, they are made in such a

way that I cannot accept it.”

Yet most Americans signed up

with enthusiasm for the war

itself. Foer is interesting on the

measures taken to immerse civil-

ians in a conflict whose horrors

were far out of sight ut whereb

victory would require collective

action. Nightly blackouts were

practised across the US in places

where enemy aircraft could not

reach, and people accepted food

rationing, high taxes and a 35mph

national speed limit — and they

responded with huge increases in

productivity, while16m Ameri-

cans enlisted in a military effort

that drove the Allies to victory.

Sadly,Foer’s rather disjointed

jumble of brilliance does notcon-

clude with a sparkling idea for

how to engage everyone emotion-

ally in the world war against

warming. There has been some

progress ince Foer finisheds writ-

inghis book, with the emergence

of Extinction Rebellion and cli-

mate strikes inspired by Greta

Thunberg. But the majority of

people who accept the idea that

human activity iscausing climate

change will need to do far more on

the home front than forsaking

meat and milkuntil dinner.

Clive Cookson is the FT’s

science editor

Renaissance shows what

you can do by applying

technology, big data and

lots of brainy people

and algorithms himself. His talent was

to spot, nurture and harness beautiful

but often combustible minds such as

James Ax, Lenny Baum, Elwyn Berle-

kamp, Henry Laufer, Peter Brown and

Mercer. One person describes Renais-

sance’s motley group of scientists and

mathematicians as “a bunch of Shel-

dons”, a reference to the socially inept

but brainy star ofThe Big Bang Theory.

The book has some imperfections —

primarily thatZuckerman does not

usehis detailed reporting as a scaffold-

ing to tell an even bigger story of how the

business of investing has evolved over

the past half-century.

While Simons was still toiling away as

a codebreaker and frustrated academic,

a bunch of brilliant financial economists

werelaying the groundwork for today’s

era of algorithmic markets. Simons may

be the quant industry’s paragon, but he

is far from its only giant. Yet aside from a

sprinkling of historical context,The Man

Who Solved the Market s overwhelm-i

ingly focused on Simons, Renaissance

and its eclectic eggheads. An occasional

nod to the broader perspective would

have enhanceda vivid tale of one of the

biggest actors in one of the biggest sto-

ries of our time: how machines con-

quered financial markets.For years

Simons has been the white whale of

many financial reporters. In Zucker-

man he has met his Ahab.

Robin Wigglesworth is the

FT’s global finance correspondent

Lady Anne Glenconner

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