Bob Mercer was raised in New Mexico in the 1960’s. While in high school, he was able to work his way into a job at a nearby Air Force weapons lab writing computer programs. He once showed superiors at the base how to run certain computer programs a hundred times faster. But instead of saving time and money they ran a hundred times more equations.
He concluded that the goal of government-funded research was not so much to get answers as it was to consume the computer budget. The experience, he said, left him with “jaundiced view” of government.
By the early 1990s, Mercer was a computer scientist at IBM, working as part of a team programming computers to translate languages. Conventional wisdom held at the time that the way to use a computer to translate language was to teach it linguistic rules such as grammar and syntax. What mercer and a colleague by the name of Peter Brown championed was feeding computers vast amounts of information and then creating code that detected patterns in that data.
IBM treated the project as a low-priority, but the work Mercer and Brown would do in those days would lay the foundation for Google Translate and even Apple’s Siri. An executive at a company called Renaissance Technologies, tried to recruit Mercer and Brown away from IBM, but hey initially, turned him down. They were both “very happy” with their jobs at IBM.
But in the spring of 1993, two devastating tragedies struck Bob Mercer: His mother was killed in a car crash and his father, a biologist, died six weeks later. Life’s uncertainties, which were made painfully clear, and the fact that he was struggling to pay college tuition bills for his three daughters, convinced mercer to make the change. Renaissance, after all, was offering 50% more pay. Brown made the leap with him.
Renaissance
Renaissance Technologies was founded in 1982 by a mathematician and former code breaker for the Pentagon named Jim Simons. Simons was also an avid speculator in financial markets, specifically commodities. At around that time, he set out to see if he could apply the same skill set used to work on foreign signal intelligence to financial markets.
Simons realized that job is not all that different from the job of a financial analyst who has to wade through tons of market data to find patterns on when, and where, to find the best trades. The difference, a vital one, is that those patterns aren’t supposed to exist in financial markets. Financial markets are supposed to be efficient, all-knowing.
Simons would prove those theories wrong. He recruited some fellow mathematicians and codebreakers, and asked the codebreakers to look for patterns in financial markets. He then asked the mathematicians to write sophisticated computer programs that traded on the patterns the code breakers were picking up. Before they knew it, they were consistently outperforming the market.
When Mercer and Brown first arrived at Renaissance, the firms’ equities division was lagging behind other divisions. They applied their language-learning techniques and algorithms to equities trading. It took a few years, but their division would soon account for the largest share of renaissance’s profits.
Renaissance has been wildly successful. They’re not a publicly traded company so exact figures are unknown, but according to analyses, their signature fund, which is known as the Medallion fund, has an average return of 40% year over year since it was created. It’s believed to have made about $55 billion over the last 30 years or so. And they’ve made that money by looking for patterns and correlations in stock information that shouldn’t be there, like for example, fine morning weather.
Pleasant morning weather was found to be a good predictor of upward movement in its stock exchange. Buying on good weather days, early in the morning, and then selling a little bit later could produce a profit.
Signals like this one were faint, almost imperceptible, but renaissance is a technology company first and an investment company second. They were able to exploit signals like this because all of Renaissance’s trading was automated. Once the algorithms were loaded the trades were done automatically by computers. The tiny profits made from each transaction began to add up.
It’s the made the Medallion Fund very successful, and it has made the company’s executives very wealthy. Simons, the firm’s largest shareholder, is estimated to be worth nearly $16 billion. Exact figures aren’t known on Mercer’s wealth, but he along with Peter Brown, are estimated to own between 5 and 10% of Renaissance Technologies. Mercer and Peter Brown were made Co-CEO’s when Jim Simons retired in 2010.
Painfully Shy
Very little is known about Bob Mercer. He is an intensely private person. He’s been described as being painfully shy, barely able to look people in the eye when he speaks to them. He rarely gives public speeches and rarer still, grants interviews. He once reportedly told a colleague that he preferred the company of cats to humans.
By the late 2000s, Mercer, now in his mid 60s, had developed a late-in-life interest: political philanthropy. There are a lot of wealthy individuals, especially in the financial industry who have views on the government that are right-of-center, and make political donations accordingly. But Mercer’s views and the people and causes he chooses to donate to were, a little different.
He once funded an Idaho activist who brings legal challenges to environmental laws because he believes environmental laws are part of a united nations plot to depopulate rural America.
He also funded in a 68-year-old research chemist named Arthur Robinson, who lives on a sheep ranch in the mountains of Oregon. Robinson believes the key to extending the human life span lies in human urine. And so, to that end, Robinson has collected some 14,000 samples of human urine, which he freezes in vials and stores in massive refrigerators on his sheep farm.
“We need samples of your urine,” is a typical ad that reads in the newsletter Arthur periodically publishes.
In 2010, Robinson challenged incumbent Democrat Peter Anthony DeFazio for Oregon’s 4th Congressional seat. About six weeks before the election, a slew of ads began appearing locally that attacked DeFazio, as a puppet of Democratic House Majority Leader, Nancy Pelosi. Robinson had no idea where the ads were coming from. It turns out that Bob Mercer funded the group that was responsible for the ads. Arthur Robinson didn’t win but he gave DeFazio the closest race he’d had in decades.
Infuriated
The midterm elections of 2010 were successful for Republicans, but the candidates Mercer backed didn’t very far. His investments were substantial, but they didn’t buy him any victories. In the years after 2010, Mercer broadened the base of recipients of his political donations. Some of them fell into the category of more mainstream conservative causes. In 2011 Mercer found a cause in the political action committees of the Koch’s, the billionaire brothers who have been active politically for years. Mercers began giving about a million dollars a year to the Koch’s fund and eventually would wind up donating more than $25 million.
In 2012, the Mercer Foundation donated $2 million to citizens united, the right-leaning organization that advocates for smaller and limited government. Between 2011 and 2014, the foundation donated nearly $11 million to the media research center, an organization that tracks and combats left-wing bias in the mainstream media. It is around this time, that Mercer’s middle daughter, Rebekah, became more involved in the family’s political donating and activities.
The Mercer family was heavily invested in the 2012 election cycle, particularly in the election of presidential candidate Mitt Romney over the incumbent Barack Obama. They had been assured that their investments in all of these political organizations and political action committees would pay off.
When Barack Obama was reelected rather handily, it infuriated the Mercers, particularly Rebekah. She felt all the high priced pollsters, analysts and consultants were con artists, who swindled the family while not really knowing any better than anyone else what was going to happen.
After the 2012 election, it also became clear that one area where Republicans badly lagged behind Democrats was in the use of digital analytics. So fed up where the mercers with the existing Republican Party infrastructure, they decided to build their own big-data project.
Psychometircs
Psychometrics is the study of human characteristics. Information gleaned from things like personality tests, help researchers create algorithms that can help predict people’s reactions to online messaging, and ultimately, influence them. A British company, called Strategic Communication Laboratories, sought to use similar research for commercial purposes.
Specifically, the company specialized in psychological warfare, and influencing elections.
A new American affiliate of Strategic Communication Laboratories was attempting to use these scientific methods to influence elections in the US. That company was called Cambridge Analytica, and in the years after the 2012 election, Robert Mercer became the principle owner of Cambridge Analytica. Mercer reportedly screened many data-mining companies before investing, but chose Cambridge Analytica, because of its high concentration of accomplished scientists. It reminded in of his own company, renaissance.
Cambridge, reportedly, uses a person’s online behavior to come up with a personality profile of that individual, and then uses that behavior to influence behavior, such as, voting behavior. The company claimed to have collected 5,000 data points on over 220 million Americans.
Rebekah Mercer also become deeply involved in the operations of Cambridge. She was quickly gaining a reputation for aggressively involving herself in the campaigns of the politicians she backed, and she made it clear that campaigns should hire Cambridge Analytica to do their data work. One-time Trump campaign manager and soon-to-be top White House adviser Steve Bannon, also took an ownership stake and a seat on the board of the company.
Breach
Cambridge has been in the news recently because a whistleblower named Christopher Wylie, who worked at the firm at the time, says the company inappropriately harvested user data of as many 50 million people, mostly U.S. voters, in the hopes of influencing them with political messaging in the run-up to the 2016 presidential election.
“We exploited Facebook to harvest millions of people’s profiles. And built models to exploit what we knew about them and target their inner demons. That was the basis the entire company was built on,” Wylie said.
Facebook in response to the breach suspended the accounts of Cambridge Analytica, Strategic Communications Laboratories, Wylie and a Cambridge University academic named Aleksandr Kogan who built an app called thisisyourdigitallife to assist in the data recording.
Cambridge Analytica denies any wrongdoing and says any data collection conducted was done with Facebook’s knowledge and in accordance with their terms.
The revelations have led lawmakers on Capitol Hill to call for an examination into the regulation of political ads on social media. “This story is more evidence that the online political advertising market is essentially the Wild West,” Democratic Senator Mark Warner of Virginia said.
“Whether it’s allowing Russians to purchase political ads, or extensive micro-targeting based on ill-gotten user data, it’s clear that, left unregulated, this market will continue to be prone to deception and lacking in transparency,” he added.
Wylie believes the stakes are even larger than data breaches and stolen user data. “Rules don’t matter for them. For them, this is a war, and it’s all fair,” Wylie said of Cambridge Analytica’s leaders.
“They want to fight a culture war in America,” he added. “Cambridge Analytica was supposed to be the arsenal of weapons to fight that culture war.”
Sources:
Devils Bargain by Joshua Green
https://www.newyorker.com/magazine/2017/03/27/the-reclusive-hedge-fund-tycoon-behind-the-trump-presidency
https://www.cnbc.com/2014/11/07/robert-mercer-the-most-important-political-money-man-youve-never-heard-of.html
https://www.bloomberg.com/news/articles/2017-04-25/renaissance-mints-another-billionaire-with-two-more-on-the-cusp
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