The notoriously press-shy CEO of Renaissance Technologies, widely seen as one of the most successful hedge-fund firms of all time, candidly answered questions about his career during a podcast released last week.
During the nearly 45-minute-long conversation, Peter Brown shared a handful of surprising details, including his penchants for sleeping in the office and calling employees in the middle of the night.
Brown, the 68-year-old chief and longtime employee of Long Island-based Renaissance, a hedge-fund firm known for hiring scientists to develop complicated model-based trading systems, said putting in 80-hour weeks were critical, and that he often spends four straight days living at the office because his wife works in Washington, D.C.
As a result, he affirmed he had spent roughly 2,000 nights sleeping at the office when asked by his interviewer during a recent episode of Goldman Sachs Group’s Exchanges podcast.
“Productivity-wise, it is fantastic being able to spend nearly 80 straight hours each week with no interruptions except sleep thinking about work before spending three more normal days at home,” Brown told podcast host Raj Mahajan.
Brown also shared some history about how he came to work at Renaissance following a stint at IBM, where he worked on early large-language models that resembled precursors to products like ChatGPT, which helped inspire the artificial-intelligence craze that has helped lift U.S. stocks this year.
He came to focus on these issues thanks to an early fascination with using mathematics to identify and transcribe speech patterns, and noted that he was the first graduate student of an academic considered by some to be the godfather of artificial intelligence.
He ultimately departed IBM for Renaissance as one of the first hires made by firm founder Jim Simons, joining Renaissance alongside friend and IBM colleague Robert Mercer.
After arriving at Renaissance, the two set about trying to apply a systematic approach used to trade commodity futures to the U.S. equity market.
Over the course of the podcast, Brown shared several interesting anecdotes about major triumphs and crises during his time at Renaissance.
Once, Brown said Renaissance founder Simons took him to a “greasy hamburger place” to inform him about his plans to retire, and that he wanted Brown and Mercer to take over. The choice of venue was amusing to Brown, a vegetarian.
At one point, Brown managed to distill Renaissance’s investment strategy down to a single sentence.
“Our strategy is to maximize returns, which we call mu, at an acceptable level of risk, which we call sigma,” he said. “And we put a huge amount of effort into controlling sigma.”
To be sure, the firm’s focus on risk management didn’t stop it from brooking some serious losses over the years. Just as the dot-com bubble was bursting, Brown said he learned an expensive lesson when he ignored a warning from his risk-management chief. The decision cost the firm dearly, and inspired a string of stressful, sleepless nights in the office.
“It was March of 2000, we were doing extremely well back then, and at one point, the head of risk control said he was worried. I told him not to worry, and that the computer knew what it was doing.”
Shortly afterward, Brown met with Simons and said he would understand if he was let go from the firm. On the contrary, Simons surprised him by saying he was now more valuable to Renaissance than ever before.
“Now that you’ve been through such a volatile period, you’re far more valuable to me and the firm,” Brown recalled Simons telling him.
Brown described another incident where he left his family at Newark Airport to speed back to the firm’s offices on Long Island during the so-called “quant quake” of 2007.
Shortly before the outbreak of the financial crisis, Renaissance managed to avoid losses when an unnamed counterparty spooked Simons with a request for an in-person meeting to discuss a trade.
Simons said he felt the request was suspicious.
“Jim said they wouldn’t have come to our office, they wouldn’t have requested a meeting, if they weren’t in real trouble,” Brown said.
“He was right.”
Brown’s singular focus on work has inspired some tendencies that have become widely known at Renaissance, including his penchant for calling people in the middle of the night. Brown said he often only gets a few hours of sleep a night during the week.
He recalled one instance where he and Simons had a question for an employee, but it was very late. Brown wanted to call him, but Simons protested, insisted the employee didn’t earn enough to justify a late-night phone call.
So, they decided to call and tell him he would be getting a raise, before proceeding to their question.
Renaissance has a reputation as a firm run by mathematicians and scientists, and not markets professionals. Brown said this is by design, and that it is much easier to teach mathematicians about markets than vice versa. The firm’s models handle most of the trading, and while human judgment does come into play occasionally, these instances are rare, according to Brown.
“We know how to build large mathematical models and that is all we know. We don’t know economics, we don’t interfere with our trading systems.”
“We will cut back if we think the model doesn’t appreciate the risk…But those are rare.”
Renaissance has earned an almost mythical reputation in the hedge-fund industry, largely thanks to the performance of its employees-only Medallion fund. During a 30-year span from 1988 to 2018, the Medallion fund produced 66% gross annual returns.
Two other client-facing funds haven’t performed quite as well, and more volatile returns in recent years have coincided with clients pulling billions from its three funds that manage outside money, according to a Bloomberg report published last year.
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