Entrepreneurship

Prediction Company

In 1991 I gave up my position at Los Alamos, reunited with Norman Packard and graduate school classmate James McGill, and co-founded the Prediction Company. The prevailing view at the time was that markets were perfectly efficient, so that it was not possible to make consistent profits without inside information. Norman and I were motivated by their desire to prove this wrong. The trading strategy that was developed was an early version of statistical arbitrage, and made use of a variety of signals that derived from processing essentially all quantitative inputs related to the US stock market. It also included a high-frequency forecasting model as an overlay that reduced transaction costs. From 1996 onward, trading was completely automated. I was one of the chief architects of the trading system as it existed in 1999. Prediction Company was sold to UBS in 2006 and in 2013 was re-sold to Millenium Management, where it is their second largest fund.

Read more about the Prediction Company in The New Yorker (subscription required) or in Thomas Bass’s book, The Predictors (Penguin Science Press, 1998).

Other interests

I am a member of BMLL Technologies Ltd, a Cambridge University spin-off working in the field of limit order book data and analytics.