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Decreased uncertainty, improved decisions
Global Advisors is a leader in defining quantified strategies, decreasing uncertainty, improving decisions and achieving measureable results.
We specialise in providing highly-analytical data-driven recommendations in the face of significant uncertainty.
We utilise advanced predictive analytics to build robust strategies and enable our clients to make calculated decisions.
We support implementation of adaptive capability and capacity.
Our latest
Thoughts
Global Advisors’ Thoughts: Who are you and what did you do with my team member?
By Marc Wilson
(Alternative titles could be: “Who are you and what did you do with the person I hired? “Who are you and what did you do with the boss who hired me?” “Who are you and what did you do with my client?” …)
Some years ago, a friend of many friends died tragically. I had never met Joe (not his real name) but often heard of him. He was exceptionally popular and well known. In fact, he was clearly loved by a huge group of people.
What followed Joe’s death was amazing. Hundreds of people went to a Facebook page and wrote of their sadness and memories of him. Many were personal, some merely referring to chance meetings and the incredible impression he had left on them. Some were even from people who had not met him, but were moved by his impact on people they knew.
One person wrote of meeting Joe at a party and how even though this was their first and only meeting, Joe had showed so much interest in her and interacted with her like an old friend. She had felt special – and left with an impression of how special Joe was.
Another wrote of a childhood cricket experience. He had played a blinding hook shot only to be caught by Joe at square leg in the crease of an arm. Joe had laughed and apologised repeatedly for accidentally catching him out off such good shot. Joe was secure with himself and the world and didn’t seem to need praise or undue accolades.
It was incredible. This was the type of person that most of us hope to be. Super-achiever, immensely popular, loving and loved. Years later, people still go back to that page and comment.
Joe committed suicide. It did not fit with …. Read more here: https://globaladvisors.biz/thoughts/20170601/who-are-you-and-what-did-you-do-with-my-team-member
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Strategy Tools
Strategy Tools: Profit from the Core
Extensive research conducted by Chris Zook and James Allen has shown that many companies have failed to deliver on their growth strategies because they have strayed too far from their core business. Successful companies operate in areas where they have established the “right to win”. The core business is that set of products, capabilities, customers, channels and geographies that maximises their ability to build a right to win. The pursuit of growth in new and exciting often leads companies into products, customers, geographies and channels that are distant from the core. Not only do the non-core areas of the business often suffer in their own right, they distract management from the core business.
Profit from the Core is a back-to-basics strategy which says that developing a strong, well-defined core is the foundation of sustainable, profitable growth. Any new growth should leverage and strengthen the core.
Management following the core methodology should evaluate and prioritise growth along three cyclical steps:
Focus – reach full potential in the core
- Define the core boundaries
- Strengthen core differentiation at the customer
- Drive for superior cost economics
- Mine full potential operating profit from the core
- Discourage competitive investment in the core
For some companies the definition of the core will be obvious, while for others much debate will be required. Executives can ask directive questions to guide the discussion:
- What are the business’ natural economic boundaries defined by customer needs and basic economics?
- What products, customers, channels and competitors do these boundaries encompass?
- What are the core skills and assets needed to compete effectively within that competitive arena?
- What is the core business as defined by those customers, products, technologies and channels through which the company can earn a return today and compete effectively with current resources?
- What is the key differentiating factor that makes the company unique to its core customers?
- What are the adjacent areas around the core?
- Are the definitions of the business and industry likely to shift resulting in a change of the competitive and customer landscape?
Expand – grow through adjacencies
- Protect and extend strengths
- Expand into related adjacencies
- Push the core boundaries out
- Pursue a repeatable growth formula
Companies should expand in a measured basis, pursuing growth opportunities in immediate and sensible adjacencies to the core. A useful tool for evaluating opportunities is the adjacency map, which is constructed by identifying the key core descriptors and mapping opportunities based on their proximity to the core along each descriptor. An example adjacency map is presented below:
Redefine – evaluate if the core definition should be changed
- Pursue profit pools of the future
- Redefine around new and robust differentiation
- Strengthen the operating platform before redefining strategy
- Fully value the power of leadership economics
- Invest heavily in new capabilities
Executives should ask guiding questions to determine whether the core definition is still relevant.
- Is the core business confronted with a radically improved business model for servicing its customers’ needs?
- Are the original boundaries and structure of the core business changing in complicated ways?
- Is there significant turbulence in the industry that may result in the current core definition becoming redundant?
The questions can help identify whether the company should redefine their core and if so, what type of redefinition is required:
The core methodology should be followed and reviewed on an on-going basis. Management must perform the difficult balancing act of ensuring they are constantly striving to grow and reach full potential within the core, looking for new adjacencies which strengthen and leverage the core and being alert and ready for the possibility of redefining the core.
Source: 1 Zook, C – 2001 – “Profit From The Core” – Cambridge, M.A. – Harvard Business School Press
2 Van den Berg, G; Pietersma, P – 2014 – “25 need-to-know strategy tools” – Harlow – FT Publishing
Fast Facts
There is a positive relationship between long production run sizes and OEE
- Evidence suggests that longer run sizes lead to increased overall equipment effectiveness (OEE).
- OEE is a measure of how effectively manufacturing equipment is utilised and is defined as a product of machine availability, machine performance and product quality.
- Increasing run sizes improves availability as a result of less change over time, and performance as a result of less operator inefficiency.
- North America facilities that previously ran at world-class OEE rates, have experienced lower OEE rates due to a move towards reduced lot sizes and shifting large volume production overseas1.
- Shorter run sizes resulted in increased changeover frequency which led to increased planned downtime and reduced asset utilization.
- As a result OEE rates dropped from 85% to as low as 50%1.
Selected News
Quote: Jim Simons – Renaissance Technologies founder
“In this business it’s easy to confuse luck with brains.” – Jim Simons – Renaissance Technologies founder
Jim Simons: A Mathematical Outsider Who Conquered Markets
James Harris Simons (1938-2024), founder of Renaissance Technologies, encapsulated the perils of financial overconfidence with his incisive observation: “In this business it’s easy to confuse luck with brains.” This quote underscores a core tenet of quantitative investing: distinguishing genuine predictive signals from random noise in market data1,2,4.
Simons’ Extraordinary Backstory
Born in Brookline, Massachusetts, to a film industry salesman father and a shoe factory manager relative, Simons displayed early mathematical brilliance. He earned a bachelor’s degree from MIT at 20 and a PhD from UC Berkeley by 23, specialising in topology and geometry. His seminal work on the Chern-Simons theory earned him the American Mathematical Society’s Oswald Veblen Prize1,2,3.
Simons taught at MIT and Harvard but felt like an outsider in academia, pursuing side interests in trading soybean futures and launching a Colombian manufacturing venture1. At the Institute for Defense Analyses (IDA), he cracked Soviet codes during the Cold War, honing skills in pattern recognition and data analysis that later fuelled his financial models. Fired for opposing the Vietnam War, he chaired Stony Brook University’s mathematics department, building it into a world-class institution1,2,4.
By his forties, disillusioned with academic constraints and driven by a desire for control after financial setbacks, Simons entered finance. In 1978, he founded Monemetrics (renamed Renaissance Technologies in 1982) in a modest strip mall near Stony Brook. Rejecting Wall Street conventions, he hired mathematicians, physicists, and code-breakers-not MBAs-to exploit market inefficiencies via algorithms2,3,4.
Renaissance Technologies: The Quant Revolution
Renaissance pioneered quantitative trading, using statistical models to predict short-term price movements in stocks, commodities, and currencies. Key hires like Leonard E. Baum (creator of the Baum-Welch algorithm for hidden Markov models) and James Ax developed early systems. The Medallion Fund, launched in 1988, became legendary, averaging 66% annual returns before fees over three decades-vastly outperforming benchmarks2,4.
Simons capped Medallion at $10 billion, expelling outsiders by 2005 to preserve edge, while public funds lagged dramatically (e.g., Medallion gained 76% in 2020 amid public fund losses)4. His firm amassed terabytes of data, analysing factors from weather to sunspots, embodying machine learning precursors like pattern-matching across historical market environments4,5. Dubbed the “Quant King,” Simons ranked among the world’s richest at $31.8 billion, yet emphasised collaboration: “My management style has always been to find outstanding people and let them run with the ball”3. He retired as CEO in 2010, with Peter Brown and Robert Mercer succeeding him4.
Context of the Quote
The quote reflects Simons’ philosophy amid Renaissance’s secrecy and success. In an industry rife with survivorship bias-where winners attribute gains to genius while ignoring luck-Simons stressed rigorous statistical validation. His models sought non-random patterns, acknowledging markets’ inherent unpredictability. This humility contrasted with boastful peers, aligning with his outsider ethos and code-breaking rigour1,4.
Leading Theorists in Quantitative Finance and Prediction
- Leonard E. Baum: Simons’ IDA colleague and Renaissance pioneer. Baum’s hidden Markov models, vital for speech recognition and early machine learning, adapted to forecast currency trades by modelling sequential market states2,4.
- James Ax: Stony Brook mathematician who oversaw Baum’s work at Renaissance, advancing algebraic geometry applications to financial signals2,4.
- Edward Thorp: Precursor quant who applied probability theory to blackjack and options pricing, influencing beat-the-market strategies (though not directly tied to Simons)4.
- Harry Markowitz: Modern portfolio theory founder (1952), emphasising diversification and risk via mean-variance optimisation-foundational to quant risk models4.
- Eugene Fama: Efficient Market Hypothesis (EMH) proponent, arguing prices reflect all information, challenging pure prediction but spurring anomaly hunts like Renaissance’s4.
Simons’ legacy endures through the Simons Foundation, funding maths and basic science, and Renaissance’s proof that data-driven science trumps intuition in finance3. His quote remains a sobering reminder in prediction’s high-stakes arena.
References
1. https://www.jermainebrown.org/posts/why-jim-simons-founded-renaissance-technologies
2. https://en.wikipedia.org/wiki/Jim_Simons
3. https://www.simonsfoundation.org/2024/05/10/remembering-the-life-and-careers-of-jim-simons/
4. https://fortune.com/2024/05/10/jim-simons-obituary-renaissance-technologies-quant-king/
5. https://www.youtube.com/watch?v=xkbdZb0UPac
6. https://stockcircle.com/portfolio/jim-simons
7. https://mitsloan.mit.edu/ideas-made-to-matter/quant-pioneer-james-simons-math-money-and-philanthropy
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