The Trillion Dollar Equation

this single equation spawned four multi-trillion dollar Industries and transformed everyone's approach to risk do you think that most people are aware of the size scale utility of derivatives no no idea but at its core this equation comes from physics from discovering atoms understanding how heat is transferred and how to beat the casino at Blackjack so maybe it shouldn't be surprising that some of the best to beat the stock market were not veter Traders but physicists scientists and mathematicians in 1988 a mathematics professor named Jim Simons set up The Medallion investment fund and every year for the next 30 Years The Medallion fund delivered higher returns than the market average and not just by a little bit it returned 66% per year at that rate of growth $100 invested in 1988 would be worth $8.4 billion today this made Jim Simons easily the richest mathematician of all time but being good at math doesn't guarantee success in financial markets just ask Isaac Newton in 1720 Newton was 77 years old and he was rich he had made a lot of money working as a professor at Cambridge for decades and he had a side hustle as the master of the Royal Mint his net worth was £30,000 the equivalent of $6 million today now to grow his fortune Newton invested in stocks one of his big bets was on the south sea company their business was shipping enslaved Africans across the Atlantic business was booming and the share price grew rapidly by April of 1720 the value of Newton's shares had doubled so he sold his stock but the stock price kept going up and by June Newton bought back in and he kept buying shares even as the price peaked when the price started to fall Newton didn't sell he bought more shares thinking he was buying the dip but there was no rebound and ultimately he lost around a third of his wealth when asked why he didn't see it coming Newton responded I can calculate the Motions of the heavenly bodies but not the madness of people so what did Simons get right that Newton got wrong well for one thing Simons was able to stand on the the shoulders of giants the pioneer of using math to model financial markets was Lou bashier born in 1870 both of his parents died when ...