David E. Shaw’s investment firm was dubbed by Fortune Magazine as the “most intriguing and mysterious force on Wall Street.” When Shaw’s life and career are brought to light, it is no stretch to call him one of the most intriguing men in the world. How else would you refer to a computer scientist who made billions as a top hedge fund manager, and left that to become the world’s leading authority in molecular dynamics simulations of proteins? His firm, D.E. Shaw & Co., which he no longer manages, is still one of the top quantitative hedge funds, or “quant shops,” with more than $35 billion in assets under management (AUM). His true joy is his work as the chief scientist at D.E. Shaw Research where he conducts hands-on research in the field of computational biochemistry.

Education and Early Career

Shaw began his education at the University of San Diego where he received a bachelor’s degree summa cum laude. In 1980, he obtained his Ph.D. in computer science from Stanford University. From there, he became a faculty member in the computer science department at Columbia University. Shaw’s work at Columbia included the research and development of massive parallel computing with supercomputers. This became his entrance into the financial world.

In 1986, he was lured to Wall Street by Morgan Stanley to work in the company’s automated proprietary trading group where he began to hone his quantitative analysis skills for financial purposes. Just two years later, he left Morgan Stanley to start his own hedge fund, D.E. Shaw & Co., where he immediately employed his proprietary algorithms to trade securities. In 1996, Fortune Magazine described it as “the ultimate quant shop, a nest of mathematicians, computer scientists, and other devotees of quantitative analysis who use their arcane sciences to monitor the world's financial markets and squeeze profits out of places most people would never think of looking.” In 2002, Shaw stepped down as chief scientist at D.E. Shaw & Co. to become chief scientist at D.E. Shaw Research to focus on his new passion in computational biochemistry.

Success Stories

Shaw’s illustrious career is made up of a string of success stories, beginning with his founding of what became one of the most successful quantitative-based trading firms with more than $35 billion in AUM. He pioneered the use of high-speed quantitative trading, which transformed the financial markets and the way hedge funds and institutional investors make their money.

As a testament to Shaw’s brilliance and entrepreneurial leadership, his success spawned several other success stories. The innovative work he was doing at D.E. Shaw & Co. attracted the best and brightest mathematicians, computer scientists and engineers, including three future billionaires: Jeff Bezos, John Overdeck and David Siegel. Bezos ran the options trading desk for Shaw and was eventually charged with developing Internet-based business opportunities. This led him to the idea of online shopping and Amazon. Overdeck was a math whiz from Stanford who oversaw Shaw’s Japanese equities strategies. Overdeck later joined Bezos at Amazon. Siegel came to Shaw with a Ph.D. in computer science from MIT and helped him build the quant trading systems. Siegel worked with Shaw to create one of the first online banking and brokerage platforms, which they sold to Merrill Lynch. As of 2016, Siegel is with Tudor Investment Corporation.

Shaw is most proud of his accomplishments at D.E. Shaw Research, where he works to address the “grand challenge of biology,” which is to unlock one of the mysteries of life by simulating protein folding at the millisecond scale. To further his research, he developed the first supercomputer with the capacity to run molecular dynamics simulations faster than the world’s fastest supercomputers. Shaw is a leading authority on computational biochemistry with hopes his research leads to life-saving drugs.

Net Worth and Influence

In 2015, Shaw appeared in Forbes as the 114th richest person in the world with a $5 billion net worth. He continues to generate wealth from D.E. Shaw & Co. but is busy spending it on his research at D.E. Shaw Research where his influence in the study of molecular biology continues to spread. Shaw was the keynote speaker at the Bio-IT World Conference & Expo in 2007.

Shaw’s influence also continues to spread throughout the quantitative investment world. Traders are still trying to discover the secrets to Shaw’s proprietary algorithms, which will never be revealed, but many have succeeded in developing new quantitative systems in the process. His protégés, Overdeck and Siegel, have gone on the make billions with their own data-driven hedge fund.

Top Quotes

Shaw is a notoriously private person, shunning the media except for some interviews on his biochemistry research. The last know interview he gave regarding his investment firm was to Fortune Magazine in 1996, which included two quotes that tell a little something about this fascinating man.

“Finance is really a wonderfully pure information-processing business.”

“Our goal is to look at the intersection of computers and capital, and find as many interesting and profitable things to do in that intersection as we can.”

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