back to indexRichard Craib: WallStreetBets, Numerai, and the Future of Stock Trading | Lex Fridman Podcast #159
link |
The following is a conversation with Richard Crape, founder of Numeri, which is a crowdsourced
link |
hedge fund, very much in the spirit of Wall Street bets, but where the trading is done,
link |
not directly by humans, but by artificial intelligence systems submitted by those humans.
link |
It's a fascinating and extremely difficult machine learning competition
link |
where the incentives of everybody is aligned, the code is kept and owned by the people who
link |
develop it, the data, anonymous data is very well organized and made freely available.
link |
I think this kind of idea has a chance to change the nature of stock trading and even just money
link |
management in general by empowering people who are interested in trading stocks with the modern
link |
and quickly advancing tools of machine learning. Quick mention of our sponsors, Audible Audiobooks,
link |
ChiroLabs Machine Learning Company, Blinkist App that summarizes books and Athletic Greens,
link |
all in one nutrition drink. Click the sponsor links to get a discount and to support this
link |
podcast. As a side note, let me say that this whole set of events around GameStop and Wall
link |
Street bets has been really inspiring to me as a demonstration that a distributed system,
link |
a large number of regular people are able to coordinate and collaborate in
link |
taking on the elite centralized power structures, especially when those elites are misbehaving.
link |
I believe that power in as many cases as possible should be distributed and in this case,
link |
the internet as it is for many cases is the fundamental enabler of that power and at the core
link |
what the internet and its distributed nature represents is freedom. Of course, the thing
link |
about freedom is it enables chaos or progress or sometimes both. And that's kind of the point
link |
of the thing. Freedom is empowering, but ultimately unpredictable. And I think in the end, freedom
link |
wins. If you enjoy this podcast, subscribe on YouTube, review it on Apple Podcasts,
link |
follow on Spotify, support on Patreon or connect with me on Twitter at Lex Freedman.
link |
And now here's my conversation with Richard Kraeb. From your perspective, can you summarize the
link |
important events around this amazing saga that we've been living through of Wall Street bets,
link |
the subreddit and GameStop and in general, just what are your thoughts about it from
link |
technical to the philosophical level? I think it's amazing. It's like my favorite story ever.
link |
Like when I was reading about it, I was like, this is the best. And it's also connected with
link |
my company, which we can talk about. But what I liked about it is I like decentralized coordination
link |
and looking at the mechanisms that these are Wall Street bets users use to hype each other up,
link |
to get excited, to prove that they bought the stock and they're holding. And then also to see
link |
that how big of an impact that that decentralized coordination had. It really was a big deal.
link |
Well, you're impressed by the distributed coordination, the collaboration amongst like,
link |
I don't know what the numbers are, I know a numerized looking at the data.
link |
After all of this is over and done, it'd be interesting to see like from a large scale
link |
distributed system perspective to see how everything played out. But just from your current
link |
perspective, what we know, is it obvious to you that such incredible level of coordination
link |
could happen where a lot of people come together and distribute a sense there's an emergent behavior
link |
that happens after that? No, it's not at all obvious. And one of the reasons is the lack of
link |
kind of like credibility. To coordinate with someone, you need to kind of make credible
link |
contracts or credible claims. So if you have a username on our Wall Street bets, like some of
link |
them are like deep fucking value is one of them. That's an actual username. By the way,
link |
we're talking about there's a website called Reddit and there's subreddits on it. And a lot
link |
of people, most the anonymous, I think for the most part, anonymous can create user accounts and then
link |
can then just talk on form like style boards. You should know what Reddit is. If you don't know
link |
what Reddit is, check it out. If you don't know what Reddit is, maybe go to the subreddit first,
link |
AWW with Q pictures of cats and dogs. That's my recommendation. Anyway. Yeah, that would be a
link |
good start to Reddit. When you get into it more, go to our Wall Street bets. It gets dark quickly.
link |
We'll probably talk about that too. So yeah, so there's these users and there's no contracts,
link |
like you were saying. There's no contracts. The users are anonymous, but there are little things
link |
that do help. So for example, if you've posted a really good investment idea in the past,
link |
that exists on Reddit as well. And it might have lots of upvotes. And that's also giving
link |
credibility to your next thing. And then they are also putting up screenshots. Here's the trades
link |
I've made and here's a screenshot. Now you could fake the screenshot, but still, it seems like
link |
if you've got a lot of karma and you've had a good performance on the community, it somehow
link |
becomes credible enough for other people to be like, you know what? He actually probably did
link |
put a million dollars into this. And you know what? I can follow that trade easily.
link |
And there's a bunch of people like that. So you're kind of integrating all that information
link |
together yourself to see like, huh, there's something happening here. And then you jump it onto this
link |
little boat of behavior. We should buy the stock or sell the stock. And then another person jumps
link |
on, another person jumps on. And all of a sudden you have just a huge number of people behaving
link |
in the same direction. It's like flock of whatever birds. Exactly. What was strange with this one,
link |
it wasn't just let's all buy Tesla. We love Elon. We love the Tesla. Let's all buy Tesla.
link |
Because that we've heard before, right? Everybody likes Tesla. Now they do.
link |
So what they did with this, in this case, they're buying a stock that was bad. They're buying it
link |
because it was bad. And that's really weird, because that's a little bit too galaxy brain
link |
for a decentralized community. How did they come up with it? How did they know that was the right
link |
one? And the reason they liked it is because it had really, really high short interest. It had been
link |
shorted more than its own float, I believe. And so they figured out that if they all bought this
link |
bad stock, they could short squeeze some hedge funds. And those hedge funds would have to capitulate
link |
and buy the stock at really, really high prices. And we should say that shorted means that these
link |
are a bunch of people, when you short a stock, you're predicting that the stock is going to go
link |
down and then you will make money if it does. And then what's the short squeeze?
link |
It's really that if you are a hedge fund and you take a big short position in a company,
link |
there's a certain level at which you can't sustain holding that position. There's no limit
link |
to how high a stock can go, but there is a limit to how low it can go, right? So if you short
link |
something, you have infinite loss potential. And if the stock doubles overnight, like GameStop did,
link |
you're putting a lot of stress on that hedge fund. And that hedge fund manager might have to say,
link |
you know what? I have to get out of the trade. And the only way to get out is to buy the bad
link |
stock that they don't want, like they believe will go down. So it's an interesting situation,
link |
particularly because it's not zero sum. If you say, let's all get together and make a bubble in
link |
watermelons, you buy a bunch of watermelons, the price goes up, comes down again, it's a zero sum
link |
game. If someone's already shorted a stock and you can make them short squeeze, it's actually
link |
a positive sum game. So yes, some redditors will make a lot of money, some will lose a lot,
link |
but actually the whole group will make money. And that's really why it's such a clever thing
link |
for them to do. A couple to the fact that shorting, I mean, maybe you can push back, but to me,
link |
always from an outsider's perspective, seemed, I hope I'm not using too strong of a word,
link |
but it seemed almost unethical. Maybe not unethical. Maybe it's just an asshole thing to do.
link |
It's okay. I'm speaking not from an economics or financial perspective. I'm speaking from
link |
just somebody who loves, I'm a fan of a lot of people. I love celebrating the success of a lot
link |
of people. And this is like the stock market equivalent of like haters. I know that's not
link |
what it is. I know that there's efficient, you want to have an economy efficient mechanism for
link |
punishing sort of overhyped, overvalued things. That's what shorting is designed for. But it just
link |
always felt like these people are just because they're not just betting on the loss of the company.
link |
It feels like they're also using their leverage and power to manipulate media or just to write
link |
articles or just to hate on you on social media. Then you get to see that with Elon Musk and so on.
link |
So this is like the man, so people like hedge funds that we're shorting are like the
link |
sort of embodiment of the evil or just the bad guy, the overpowerful that's misusing their power.
link |
And here's the crowd, the people that are standing up and rising up. So it's not just that they were
link |
able to collaborate on Wall Street bets to sort of effectively make money for themselves.
link |
It's also that this is like a symbol of the people getting together and fighting the centralized
link |
elites, the powerful. I don't know what your thoughts are about that in general. At this stage,
link |
it feels like that's really exciting that people have power, just like regular people have power.
link |
At the same time, it's scary a little bit because just studying history, people can be manipulated
link |
by charismatic leaders. And so just like Elon right now is manipulating, encouraging people to
link |
buy Dogecoin or whatever. There can be good charismatic leaders and there can be bad charismatic
link |
leaders. And so it's nerve wracking. It's a little bit scary how much power a subreddit can have to
link |
destroy somebody because right now we're celebrating they might be attacking or
link |
destroying somebody that everybody doesn't like. But what if they attack somebody that is actually
link |
good for this world? And that's kind of the awesomeness and the price of freedom. It's like
link |
it could destroy the world or it can save the world. But at this stage, it feels like, I don't
link |
know, overall, when you sit back, do you think this was just a positive wave of emergent behavior?
link |
Is there something negative about what happened? Well, yeah, the cool thing is they weren't doing
link |
anything. The reddit people weren't doing anything exotic. It was a creative trade, but it wasn't
link |
exotic. It was just buying the stock. Maybe they bought some options too. But it was the hedge fund
link |
that was doing the exotic thing. So I like that. It's hard to say, well, we've got together
link |
and we've pulled all our money together and now there's a company out there that's worth more.
link |
What's wrong with that? But it doesn't talk about the motivations which is, and then we destroyed
link |
some hedge funds in the process. Is there something to be said about the humor and I don't know,
link |
the edginess, sometimes viciousness of that subreddit? I haven't looked at it too much,
link |
but it feels like people can be quite aggressive on there. So is there...
link |
What is that? Is that what freedom looks like? I think it does. Yeah, you definitely need to let
link |
people... One of the things that people have compared it to is the Occupy Wall Street, which is,
link |
let's say, some very sincere liberals, like 23 years old, whatever, and they go out with signs
link |
and they have some case to make. But this isn't sincere, really. It's a little bit more nihilistic,
link |
a little bit more YOLO, and therefore a little bit more scary because who's scared of the Occupy
link |
Wall Street people with the signs? Nobody. But these hedge funds really are scared. I was scared
link |
of the Wall Street bats people. I'm still scared of them. Yeah, the anonymity is a bit terrifying
link |
and exciting. I don't know what to do. I've been following events in Russia, for example.
link |
It's like there's a struggle between centralized power and the distributed. I mean, that's the
link |
struggle of the history of human civilization, right? But this on the internet, just that you
link |
can multiply people. Some of them don't have to be real. You can probably create bots. It starts
link |
getting me as a programmer. I start to think, hmm, me as one person, how much cast can I create by
link |
writing some bots? Yeah. And I'm sure I'm not the only one thinking that. I'm sure there's
link |
hundreds, thousands of good developers out there listening to this, thinking the same thing.
link |
And then as that develops further and further in the next decade or two, what impact does that have
link |
on financial markets on just destruction of reputations or politics, the bickering of
link |
left and right political discourse, the dynamics of that being manipulated by
link |
people talk about Russian bots or whatever. We're probably in the very early stage of that, right?
link |
Exactly. And this is a good example. Do you have a sense that most of Wall Street bets folks are
link |
actually individual people, right? That's the feeling I have is they're just individual,
link |
maybe young investors, just doing a little bit of an investment, but just on a large scale.
link |
Yeah, exactly. The reason I found out, I've known about Wall Street bets for a while, but the
link |
reason I found out about GameStop was this, I met somebody at a party who told me about it,
link |
and he was like 21 years old, and he's like, it's going to go up 100% in the next one day.
link |
That we're talking about in last year?
link |
This was probably, no, this was a few days ago. It was like maybe two weeks ago or something.
link |
So it was already high GameStop, but it was just strange to me that there was someone telling me
link |
at a party how to trade stocks who was like 21 years old, and it started to look into it.
link |
Yeah, and he did make, yeah, he made 140% in one day. He was right, and now he's
link |
supercharged. He's a little bit wealthier, and now he's going to look, wait for the next thing,
link |
and this decentralized entity is just going to get bigger and bigger.
link |
And they're going to, together, search for the next thing. So there's thousands of folks like
link |
him, and they're going to probably search for the next thing to attack. People that have power in
link |
this world that sit there with power right now in government and in finance in any kind of position
link |
are probably a little bit scared right now. And honestly, that's probably a little bit good.
link |
It's dangerous, but it's good.
link |
Yeah, it certainly makes you think twice about shorting. It certainly makes you think
link |
it's right about putting a lot of money into a short. These funds put a lot into one or two
link |
names, and so it was very, very badly risk managed. Do you think shorting is, can you speak at a
link |
high level just for your own as a person? Is it good for the world? Is it good for markets?
link |
I do think that the two kinds of shorting, evil shorting,
link |
and chill shorting, evil shorting is what Melvin Capital was doing.
link |
And it's like, you put a huge position down, you get all your buddies to also short it,
link |
and you start making press and trying to bring this company down. And I don't think,
link |
in some cases, you go out to fraudulent companies, say, this company is a fraud,
link |
maybe that's okay. But they weren't even saying games up, they were just saying,
link |
it's a bad company, and we're going to bring it to the ground, bring it to its knees.
link |
A quant fund, like Numeri, we always have lots of positions, and we never have a position that's
link |
like more than 1% of our fund. So we actually have right now 250 shorts. I don't know any of them,
link |
except for one, because it was one of the meme stocks. But we shorting them not to make them go,
link |
we don't even want them to go down necessarily. That doesn't sound a bit strange, I say that.
link |
But we just want them to not go up as much as our longs. So by shorting a little bit,
link |
we can actually go long more in the things we do believe in. So when we were going
link |
long in Tesla, we could do it with more money than we had, because we'd borrow from banks
link |
who would lend us money, because we had longs and shorts, because we didn't have market exposure,
link |
we didn't have market risk. And so I think that's a good thing, because that means
link |
we can short the oil companies and go along Tesla and make the future come forward faster.
link |
And I do think that's not a bad thing. So we talked about this incredible distributed system
link |
created by Wall Street Bets. And then there's a platform, which is Robinhood,
link |
which allows investors to efficiently, as far as you can correct me if I'm wrong, but
link |
there's those and there's others and there's numeri that allow you to make it accessible
link |
for people to invest. But that said, Robinhood was in a centralized way applied its power to
link |
restrict trading on the stock that we're referring to. Do you have a thought on actually the things
link |
that happened? I don't know how much you were paying attention to the shadiness around the whole
link |
thing. Do you think it was forced to do it? Was there something shady going on? What are
link |
your thoughts in general? Well, I think I want to see the alternate history. I want to see the
link |
counterfactual history of them not doing that. Not doing it. How bad would it have gotten for
link |
hedge funds? How much more damage could have been done if the momentum of these short squeezes could
link |
continue? What happens when there are short squeezes, even if they're in a few stocks,
link |
they affect kind of all the other shorts, too. And suddenly brokers are saying things like,
link |
you need to put a more collateral. So we had a short. It wasn't GameStop. Luckily, it was BlackBerry.
link |
And it went up like 100% in a day. It was one of these meme stocks, super bad company. The AIs
link |
don't like it. The AIs think it's going down. What's a meme stock? A meme stock is kind of a
link |
new term for these stocks that catch memetic momentum on Reddit. And so the meme stocks were
link |
GameStop, the biggest one. GameStunk, as Elon calls it, AMC. And BlackBerry was one. Nokia was one.
link |
So these are high short interest stocks as well. So these are targeted stocks. Some people say,
link |
oh, isn't it adorable that these people are investing money in these companies that are
link |
nostalgic? It's like, you're going to the AMC movie theater. It's like nostalgic. It's like, no.
link |
It's not why they're doing it. It's that they had a lot of short interest. That was the main thing.
link |
And so there were high chance of short squeeze.
link |
In saying, I would love to see an alternate history, do you have a sense that that
link |
what is your prediction of what that history would have looked like?
link |
Well, you wouldn't have needed very many more days of that kind of chaos to hurt hedge funds.
link |
I think it's underrated how damaging it could have been. Because when your shorts go up,
link |
your collateral requirements for them go up. It's similar to Robinhood. We have a prime broker
link |
that said to us, you need to put up $40 per $100 of short exposure. And then the next day,
link |
they said, actually, you have to put up all of it, 100%. And we were like, what?
link |
But if that happens to all the short, all the commonly held hedge fund shorts,
link |
because they're all kind of holding the same things, if that happens, not only do you have to
link |
cover the short, which means you're buying the bad companies, you need to sell your good companies
link |
in order to cover the short. So suddenly, all the good companies, all the ones that the hedge
link |
funds like are coming down, and all the ones that the hedge funds hate are going up in a
link |
cascading way. So I believe that if you could have had a few more days of GameStop doubling,
link |
AMC doubling, you would have had more and more hedge fund deleveraging.
link |
But so hedge funds, I mean, they get a lot of shit, but do you have a sense
link |
that they do some good for the world? First of all, Wall Street Bets itself is a kind of distributed
link |
hedge fund. Numerize a kind of hedge fund. So like a hedge fund is a very broad category.
link |
I mean, if some of those were destroyed, would that be good for the world? Or would there be
link |
coupled with the destroying the evil shorting? Would there be just a lot of pain in terms of
link |
investment in good companies? Yeah. A thing I like to tell people if they hate hedge funds is
link |
I don't think you want to rerun American economic history without hedge funds.
link |
So on mass, they're good. Yeah, they're good. Yeah, you really wouldn't want to.
link |
Because hedge funds are kind of like picking up, they're making liquidity right in stocks.
link |
And so if you love venture capitalists, they're investing in new technology, it's so good.
link |
You have to also kind of like hedge funds because they're the reason venture capitalists
link |
exist because their companies can have a liquidity event when they go to the public markets.
link |
So it's kind of essential that we have them. There are many different kinds of them.
link |
I believe we could maybe get away with only having an AI hedge fund,
link |
but we don't necessarily need these evil billions type hedge funds that make the
link |
media and try to kill companies. But we definitely need hedge funds.
link |
Maybe from your perspective, because you run such an organization and Vlad, the CEO of Robinhood,
link |
sort of had to make decisions really quickly, probably had to wake up in the middle of the
link |
night kind of thing. And he also had a conversation with Elon Musk on Clubhouse,
link |
which I just signed up for. It was a fascinating, one of the great journalistic performances of
link |
our time with Elon Musk. Pulitzer Prize for Elon. How hilarious would it be if he gets a Pulitzer
link |
Prize? And then his Wikipedia would be like journalist and part time entrepreneur. Business
link |
magnet. I don't know if you can comment on any aspects of that, but if you were with Vlad,
link |
how would you do things differently? What are your just thoughts about his interaction with
link |
Elon? How he should have played it differently? I guess there's a lot of aspects to this
link |
interaction. One is about transparency. How much do you want to tell people about really what went
link |
down? There's NDAs potentially involved. How much in private do you want to push back and say,
link |
no, fuck you to centralize power, whatever the phone calls you're getting, which I'm sure he's
link |
getting some kind of phone calls that might not be contractual. It's not contracts that are forcing
link |
him, but he was being what do you call it, pressured to behave in certain kinds of ways
link |
from all kinds of directions. What do you take from this whole situation?
link |
I was very excited to see Vlad's response. It's pretty cool to have him talk to Elon.
link |
And one of the things that struck me in the first few seconds of Vlad speaking was I was like,
link |
is Vlad like a boomer? But here we are. He seemed like a 55 year old man talking to a
link |
20 year old. Elon was like the 20 year old. And he's like the 55 year old man. You can see why
link |
Citadel are NMR buddies, right? Like you can. You can see why. It's like this is a nice,
link |
it's not a bad thing. It's like he's got a respectable professional attitude.
link |
Well, he also tried to do like a jokey thing. No, we're not being ageist here, boomer.
link |
But like a 60 year old CEO, Bank of America, would try to make a joke for the kids. That's
link |
what Vlad's talking about. Exactly. Yeah. I was like, what is this? This guy's like,
link |
what is he, 30? Yeah. And I'm like, this is weird. But I think maybe that's also what I like
link |
about Elon's kind of influence on American business is like, he's super like anti the
link |
professional. Why say 100 words about nothing? And so I liked how he was cutting in and saying,
link |
Vlad, what do you mean spill the beans, bro? Yeah. So you don't have to be courteous. It's
link |
like the first principle thinking is like, what the hell happened? Yes. And let's just talk
link |
like normal people. The problem of course is, you know, for Elon, it's cost him, what is it,
link |
tens of millions of dollars is tweeting like that. But perhaps it's a worthy price to pay,
link |
because ultimately, there's something magical about just being real and honest, and just going
link |
off the cuff and making mistakes and paying for them, but just being real. And then moments like
link |
this, that was an opportunity for Vlad to be that. And it felt like he wasn't. Do you think we'll
link |
ever find out what really went down if there was something shady underneath it all? Yeah. I mean,
link |
it would be sad if nothing shady happened, but his presence made it shady. Sometimes I feel like
link |
that would mark Zuckerberg, the CEO of Facebook. Sometimes I feel like, yeah, there's a lot of
link |
shitty things that Facebook is doing. But sometimes I think he makes it look worse, by the way,
link |
he presents himself about those things. Like I honestly think that a large amount of people at
link |
Facebook just have a huge unstable chaotic system. And they're all not all, but mass are trying to
link |
do good with this chaotic system. But the presentation is like, it sounds like there's a lot of
link |
back room conversations that are trying to manipulate people. And there's something about
link |
the realness that Elon has that it feels like CEO should have. And Vlad had that opportunity.
link |
I think Mark Zuckerberg had that too, when he was younger. Younger. And somebody said,
link |
you got to be more professional, man. You can't say, you know, lol to an interview. And then
link |
suddenly he became like this distant person that was hot. I'd like, you'd rather have him make
link |
mistakes, but be honest than be like professional and never make mistakes.
link |
Yeah. One of the difficult hires, I think, is like marketing people or like PR people,
link |
is you have to hire people that get the fact that you can say lol on an interview. Or,
link |
you know, take risks as opposed to what the PR, I've talked to quite a few big CEOs and
link |
the people around them are trying to constantly minimize the risk of like, what if he says the
link |
wrong thing? What if she says the wrong thing? It's like, what? Like, be careful. It's constantly
link |
like, ooh, like, I don't know. And there's this nervous energy that builds up over time with
link |
larger, larger teams where the whole thing, like I visited YouTube, for example, everybody I talked
link |
to at YouTube, incredible engineering, an incredible system, but everybody's scared. Like, let's be,
link |
let's be honest about this like madness that we have going on of huge amounts of video that we
link |
can't possibly ever handle. There's a bunch of hate on YouTube. There's this chaos of comments,
link |
bunch of conspiracy theories, some of which might be true. And then just like this mess that we're
link |
dealing with, and it's exciting, it's beautiful. It's a place where like democratizes education,
link |
all that kind of stuff. And instead, they're all like, sitting in like, trying to be very polite
link |
and saying like, well, we're just want to improve the health of our platform. Like,
link |
all right, man, let's just be real. Let's, let's, let's both advertise how amazing this freaking
link |
thing is. But also to say like, we don't know what we're doing. We have all these Nazis posting
link |
videos on YouTube. We don't, we don't know how to like handle it. And just being real like that,
link |
because I suppose that's just the skill. Maybe it can't be taught. But over time,
link |
the, whatever the dynamics of the company is, it does seem like Zuckerberg and others get worn
link |
down. They just get tired. They get tired of not being real, of not being real, which is sad.
link |
So let's talk about Numeri, which is an incredible company system idea, I think, but good place to
link |
start. What is Numeri and how does it work? So Numeri is the first hedge fund that gives away
link |
all of its data. So this is like, probably the last thing a hedge fund would do, right? Why would
link |
we give away a data? It's like giving away your edge. But the reason we do it is because we're
link |
looking for people to model our data. And the way we do it is by obfuscating the data. So when you
link |
look at Numeri's data that you can download for free, it just looks like a million rows of numbers
link |
between zero and one. And you have no idea what the columns mean. But you do know that if you're
link |
good at machine learning or have done regressions before, you know that I can still find patterns
link |
in this data even though I don't know what the features mean. And the data itself is a time
link |
series data. And even though it's obfuscated, anonymized, what is the source data like
link |
approximately? What are we talking about? So we are buying data from lots of different data vendors.
link |
And they would also never want us to share that data. So we have strict contracts with them.
link |
So we only can, but it's the kind of data you could never buy yourself unless you had maybe
link |
a million dollars a year of budget to buy data. So what's happened with the hedge fund industry is
link |
you have a lot of talented people who used to be able to trade and still can trade. But now
link |
they have such a data disadvantage, it would never make sense for them to trade themselves.
link |
But Numeri, by giving away this obfuscated data, we can give them a really, really high quality
link |
data set that would otherwise be very expensive. And they can use whatever new machine learning
link |
technique they want to find patterns in that data that we can use in our hedge fund.
link |
And so how much of a variety is there in underlying data? We're talking about,
link |
I apologize if I'm using the wrong terms, but one is just like the stock price. The other,
link |
there's options and all that kind of stuff like the, what are they called, order books or whatever.
link |
Is there maybe other totally unrelated to directly to the stock market data,
link |
natural language as well, all that kind of stuff?
link |
Yeah, we were really focused on data that's specific to stocks. So things like,
link |
you can have, every stock has a PE ratio. For some stocks, it's not as meaningful,
link |
but every stock has that. Every stock has one year momentum, how much they went up in the last year.
link |
But those are very common factors. But we try to get lots and lots of those factors that we
link |
have for many, many years, like 15, 20 years history. And then the setup of the problem is
link |
commonly in quant called like cross sectional global equity. You're not really trying to say,
link |
I want, I believe the stock will go up. You're trying to say the relative position of this
link |
stock in feature space makes it not a bad buy in a portfolio.
link |
So it captures some period of time and you're trying to find the patterns, the dynamics,
link |
captured by the data of that period of time in order to make short term predictions about
link |
what's going to happen. Yeah. So our predictions are also not that short. We're not really
link |
caring about things like order books and tick data, not high frequency at all. We're actually
link |
holding things for quite a bit longer. So our prediction time horizon is about one month.
link |
We end up holding stocks for maybe like three or four months. So I kind of believe that's a
link |
little bit more like investing than kind of plumbing. To go long a stock that's mispriced
link |
on one exchange and short on another exchange, that's just arbitrage. But what we're trying
link |
to do is really know something more about the longer term future of the stock.
link |
Yeah. So from the patterns, from these periods of time series data, you're trying to understand
link |
something fundamental about the stock, not about deep value, about as big in the context of the
link |
market as underpriced, overpriced, all that kind of stuff. So this is about investing. It's not
link |
about just like you said, high frequency trading, which I think is a fascinating open question for
link |
a machine learning perspective. But just to build on that, so you've anonymized the data
link |
and now you're giving away the data. And then now anyone can try to build algorithms that make
link |
investing decisions on top of that data or predictions on the top of that data.
link |
Exactly. So what does that look like? What's the goal of that? What are the underlying
link |
principles of that? So the first thing is, we could obviously model that data in house.
link |
We can make an XGBoost model on the data and that would be quite good too. But what we're trying to
link |
do is by opening it up and letting anybody participate, we can do quite a lot better
link |
than if we modeled it ourselves. And a lot better on the stock market doesn't need to be
link |
very much. It really matters the difference between if you can make 10 and 12% in an equity
link |
market neutral hedge fund because usually you're charging 2% fees. So if you can do 2% better,
link |
that's all your fees. It's worth it. So we're trying to make sure that we always have the
link |
best possible model. As new machine learning libraries come out, new techniques come out,
link |
they get automatically synthesized. If there's a great paper on supervised learning,
link |
someone on Numeri will figure out how to use it on Numeri's data.
link |
And is there an ensemble of models going on? Or is it more towards one or two
link |
or three best performing models? So the way we decide on how to weight all of the predictions
link |
together is by how much the users are staking on them, how much of the cryptocurrency that
link |
they're putting behind their models. So they're saying, I believe in my model.
link |
You can trust me because I'm going to put skin in the game. And so we can take the
link |
stake weighted predictions from all our users, add those together, average those together.
link |
And that's a much better model than any one model in the sum because
link |
assembling a lot of models together is kind of the key thing you need to do in investing too.
link |
Yeah. So you're putting, there's a kind of duality from the user from the perspective
link |
of a machine learning engineer with your, it's both a competition, just a really interesting,
link |
difficult machine learning problem. And it's a way to invest algorithmically.
link |
But the way to invest algorithmically also is a way to put skin in the game that communicates to
link |
you that you're the quality of the algorithm and also forces you to really be serious about the
link |
models that you build. So it's like everything just works nicely together. Like, I guess one
link |
way to say that is the interests are aligned. Exactly. Okay. So it's just like poker is not
link |
fun when it's like for very low stakes, the higher the stakes, the more the dynamics of the system
link |
starts playing out correctly. Like as a small side note, is there something you can say about
link |
which kind, looking at the big broad view of machine learning today or AI, what kind of algorithms
link |
seem to do good in these kinds of competitions at this time? Is there some universal thing you
link |
can say like neural networks suck, recurrent neural networks suck, transformers suck, or they're
link |
awesome, like old school, sort of more basic kind of classifiers are better. Is there some kind of
link |
conclusions so far that you can say? There is. There definitely is something pretty nice about
link |
tree models like XGBoost. And they just seem to work pretty nicely on this type of data. So out
link |
of the box, if you're trying to come a hundredth in the competition or in the tournament, maybe you
link |
would try to use that. But what's particularly interesting about the problem that not many
link |
people understand, if you're familiar with machine learning, this typically will surprise you when
link |
you model our data. So one of the things that you look at in finance is you don't want to be too
link |
exposed to any one risk. Even if the best sector in the world to invest in over the last 10 years
link |
was tech, it does not mean you should put all of your money into tech. So if you train a model,
link |
it would say put all your money into tech. It's super good. But what you want to do is actually
link |
be very careful of how much of this exposure you have to certain features. So on Numeri, what a
link |
lot of people figure out is actually if you train a model on this kind of data, you want to somehow
link |
neutralize or minimize your exposure to certain features, which is unusual because if you did
link |
train a stop light or stop street detection on computer vision, your favorite feature,
link |
let's say you have an auto encoder and it's figuring out, okay, it's got to be red and it's
link |
got to be white, that's the last thing you want to reduce your exposure to. Why would you reduce
link |
your exposure to the thing that's helping you model the most? And that's actually this counter
link |
intuitive thing you have to do with machine learning on financial data. So reducing your
link |
exposure would help you generalize the things that are, so basically financial data has a large
link |
amount of patterns that appeared in the past and also a large amount of patterns that have not
link |
appeared in the past. And so in that sense, you have to reduce the exposure to red lights,
link |
to the color red. That's interesting, but how much of this is art and how much of it is science
link |
from your perspective so far in terms of as you start to climb from the hundredth position to the
link |
95th in the competition? Yeah, well, if you do make yourself super exposed to one or two features,
link |
you can have a lot of volatility when you're playing numerite. You could maybe very rapidly
link |
rise to be high if you were getting lucky. Yes. And that's a bit like the stock market.
link |
Sure. Take on massive risk exposure, put all your money into one stock and you might make 100%,
link |
but it doesn't in the long run work out very well. And so the best users are trying to
link |
stay high for as long as possible and not necessarily try to be first for a little bit.
link |
So to me, a developer, machine learning researcher, how do I like to participate in
link |
this competition and how do others, which I'm sure there'll be a lot of others interested
link |
in participating in this competition, what are, let's see, there's like a million questions,
link |
but like first one is how do I get started? Well, you can go to numerite.ai, sign up,
link |
download the data. And on the data is pretty small. In the data pack you download,
link |
there's like an example script, Python script, that just builds a XGBoost model very quickly from
link |
the data. And so in a very short time, you can have an example model. Is that a particular
link |
structure? Like what is this model then submitted somewhere? So there needs to be some kind of
link |
structure that communicates with some kind of API. Like how does the whole, how does your model,
link |
once you've built, once you create a little baby Frankenstein, how does it then live in its...
link |
Okay, well, we want you to keep your baby Frankenstein at home and take care of it. We
link |
don't want it. Okay. So you never upload your model to us. You always only giving us predictions.
link |
So we never see the code that wrote your model, which is pretty cool, that our whole hedge fund
link |
is built from models where we've never ever seen the code. But it's important for the users because
link |
it's their IP, why they want to give it to us. That's brilliant. So they've got it themselves,
link |
but they can basically almost like license the predictions from that part. So what some users
link |
do is they set up a compute server and we call numeric compute. It's like a little AWS kind of
link |
image. And you can automate this process. So we can ping you. We can be like, we need more predictions
link |
now. And then you send it to us. Okay, cool. So that's, is that described somewhere? Like what
link |
the preferred is the AWS or whether another cloud platform, is there, I mean, is there sort of
link |
specific technical things you want to say that comes to mind that is a good path for getting
link |
started. So download the data, maybe play around, see if you can modify the basic
link |
algorithm provided in the example. And then you what set up a little server on the AWS that then
link |
runs this model and takes pings and then makes predictions. And so how does your own money
link |
actually come into play doing the stake of cryptocurrency?
link |
Yeah, so you don't have to stake. You can start without staking. And many users might try for
link |
months without staking anything at all to see if their model works on the real life data, right?
link |
And is not overfit. But then you can get numerair many different ways. You can buy it on,
link |
you can buy some on Coinbase, you can buy some on Uniswap, you can buy some on Binance.
link |
So what did you say this is? How do you pronounce it? So this is the numeri
link |
cryptocurrency. Yeah, NMR. NMR. What's, you just say NMR?
link |
It is technically called numerair. Numerair? I like it. Yeah. But NMR is simple. NMR, numerair.
link |
Okay. So, and you could buy it, you know, basically anywhere.
link |
Yeah. So it's a bit strange because sometimes people are like, is this like pay to play?
link |
Right. And it's like, yeah, you need to put some money down to show us you believe in your model.
link |
But weirdly, we're not selling you the cryptocurrency, like you can't buy the
link |
cryptocurrency from us. Right. It's like, it's also, we never, if you do badly,
link |
we destroy your cryptocurrency. Okay, that's not good, right? You don't want it to be destroyed.
link |
But what's good about it is it's also not coming to us. Right. So it's not like we win when you
link |
lose or something like, like we're the house, like we're definitely on the same team. Yes.
link |
You're helping us make a hedge fund that's never been done before.
link |
Yeah. So again, interests are aligned. There's no, there's no tension there at all, which is
link |
really fascinating. You're giving away everything and then the IP is owned by sort of the code.
link |
You never share the code. That's fascinating. So since I have you here, and you said a hundredth,
link |
I didn't ask out of how many. So we'll just, but if I, if I then once you get started and you find
link |
this interesting, how do you then win or do well, but also how do you potentially try to win if this
link |
is something you want to take on seriously from the machine learning perspective, not from a
link |
financial perspective? Yeah, I think the first of all, you want to talk to the community. People
link |
are pretty open. We give out really interesting scripts and ideas for things you might want to
link |
try. And, but you're also going to need a lot of compute probably. And so some of the best users
link |
are, are, you know, actually the very first time someone won on Numeri, I would write them a personal
link |
email. It's like, you know, you've won some money. We're so excited to give you $300. And then they
link |
said, I spend way more on the compute. So this is fundamental machine learning problem first,
link |
I think is this is one of the exciting things. I don't know full in how many ways you can approach
link |
this. But really, this is less about kind of no offense, but like finance people finance minded
link |
people. They're also I'm sure great people. But it feels like from the community that I've experienced,
link |
these are people who see finance as a fascinating problem space, the source of data. But ultimately,
link |
they're machine learning people or AI people, which is a very different kind of flavor of community.
link |
And I mean, I should say to that, I'd love to participate in this and I will participate in
link |
this. And I'd love to hear from other people, if you're listening to this, if you're a machine
link |
learning person, you should participate in it and tell me, give me some hints, how I can do
link |
well at this thing. Because this boomer, I'm not sure I still got it. But because some of it is,
link |
it's like Kaggle competitions, like some of it is certainly set up ideas like research ideas,
link |
you know, like fundamental innovation. But I'm sure some of it is like deeply understanding,
link |
getting like an intuition about the data. And then like, a lot of it will be like figuring out
link |
like what works like tricks. I mean, you could you could argue most of deep learning research
link |
is just tricks on top of tricks. But there's a, some of it is just the art of getting to know
link |
how to work in a really difficult machine learning problem.
link |
And I think what's important, the important difference with something like a Kaggle competition
link |
where they'll set up this kind of toy problem. And then they will be out of sample tests like,
link |
hey, you did well out of sample. And this is like, okay, cool. But what's cool with Nimera is
link |
you're, you're the out of sample is the real life stock market. We, we don't even know,
link |
like we don't know the answer to the problem. We don't like, you'll have to find out live.
link |
And so we've had users who've like submitted every week for, for like four years.
link |
Because it's kind of a interest. We say it's the hardest data science problem on the planet,
link |
right? And in that sense, maybe sounds like maybe a bit too much for like a marketing thing. But
link |
it's the hardest because it's the stock market. It's like literally there are like billions
link |
of dollars at stake and like no one's like letting it be inefficient on purpose. So if you can find
link |
something that works on Nimera, you really have something that, that is like working on the real
link |
stock market. Yeah, because there's like humans involved in the stock market. I mean, it's,
link |
you know, you could argue that might be harder data sets that may be predicting the weather,
link |
all those kinds of things. But the fundamental statement here is, which I like, I was thinking
link |
like, is this really the hardest data science problem? And you start thinking about that,
link |
but ultimately also boils down to a problem where the data is accessible, it's made accessible, made
link |
really easy and efficient at like submitting algorithms. So it's not just, you know, it's
link |
not about the data being out there, like the weather, it's about making the data super accessible,
link |
making the ability to community around it. Like, this is what ImageNet did. Exactly. Like, it's
link |
not just, there's always images. The point is, you aggregate them together, you give it a little
link |
title, this is community and that, that was one of the hardest, right, for a time. And most important
link |
data science problems in the world, because it was accessible because it was made sort of
link |
like, there was a mechanisms by which like standards and mechanisms by which to judge your
link |
performance, all those kinds of things and numerize access, step up from that. Is there
link |
something more you can say about why from your perspective, it's the hardest problem in the
link |
world? I mean, you said it's connected to the market. So if you can find a pattern in the market,
link |
that's a really difficult thing to do because a lot of people are trying to do it.
link |
Exactly. But there's also the, the biggest one is it's, it's non stationary time series. We've
link |
tried to regularize the data so you can find patterns by, by doing certain things to the
link |
features and the target. But ultimately, you're in a space where you don't, there's no guarantees
link |
that the out of sample distributions will conform to any of the training data. And, and every single
link |
era, which we call on the website, like every single era in the data, which is like sort of
link |
showing you the order of the time. It's, it's even the training data is has the same, same
link |
dislocations. And so, yeah, it's, and so, and then there's, you know, yeah, there's so many things
link |
that might, might, you might want to try this, this like, there's unlimited possible number
link |
of models, right? And so, by, by having it be open, we can at least search that space.
link |
Zooming back out to the philosophical, you said that numeri is very much like Wall Street Pets.
link |
Is there, I think it'd be interesting to dig in why you think so. I think you're speaking to the
link |
distributed nature of the two and the power of the people nature of the two. And so, maybe can
link |
you speak to the similarities and the differences and in which ways, numeri more powerful, in which
link |
way is Wall Street Pets more powerful? Yeah, this is why the Wall Street Pets story is so interesting
link |
to me because it's like feels like connected. Yeah. And looking at how just looking at the
link |
forum of Wall Street Pets, it's, I was talking earlier about how, how can you make credible
link |
claims? You're anonymous. Okay. Well, maybe you can take a screenshot. How, or maybe you can upvote
link |
someone. Maybe you can have karma on Reddit. And those kinds of things make this emerging
link |
thing possible. Numeri, it didn't work at all when we started. It didn't work at all. Why?
link |
People made multiple accounts. They made really random models and hope they would get lucky.
link |
And some of them did. Yes. Staking was our like solution to could we, could we make it so that
link |
we could trust, we could know which model people believed in the most. And we could weight models
link |
that had high stake more and effectively coordinate this group of people to be like, well, actually,
link |
there's no incentive to creating bot accounts anymore. Either I stake my accounts, in which
link |
case I should believe in them because I could lose my stake, or I don't. And that's a very powerful
link |
thing that having a negative incentive and a positive incentive can make, can make things a
link |
lot better. And staking is like this, is this really nice like key thing about blockchain.
link |
There's like something special you can do where they don't even trusting us with their stake
link |
in some ways. They're trusting the blockchain, right? So the incentives, like you say, it's about
link |
making these perfect incentives so that you can have coordination to solve one problem.
link |
And nowadays I, I sleep easy because I have less money in my own hedge fund than our users
link |
are staking on their models. That's powerful. In some sense, from a human psychology perspective,
link |
it's fascinating that the Wall Street bets worked at all, right? That the amidst that chaos,
link |
emerging behavior, like behavior that made sense emerged, it would be fascinating to think if
link |
numerized style staking could then be transferred to places like Reddit,
link |
you know, and not necessarily for financial investments. But like, I wish sometimes people
link |
would, you know, would have to stake something in the comments they make on the internet.
link |
Yeah. Like that's, that's the problem with anonymity is like, anonymity is freedom and power
link |
that you don't have to, you can speak your mind, but it's too easy to just be shitty.
link |
Exactly. And so this, I mean, you're making me realize from like a profoundly philosophical
link |
aspect, numerized staking is a really clean way to solve this problem. It's a really beautiful way.
link |
Of course, it only with numeri currently works for a very particular problem, right? Not for human
link |
interaction on the internet, but that's fascinating. Yeah, there's nothing for to stop people. In fact,
link |
we've open sourced like the code we use for staking in a protocol we call erasure. And any, if Reddit
link |
wanted to, they could even use that code to do have, have enable staking on our Wall Street bets.
link |
And they're actually researching now, they've had some Ethereum grants on how could they have more
link |
crypto stuff in there in Ethereum, because wouldn't that be interesting? Like imagine you could,
link |
instead of seeing a screenshot, like, guys, I promise, I will not sell my GameStop. We're just
link |
going to go huge. We're not going to sell at all. And here is a smart contract, which no one in the
link |
world, including me, can undo. That says, my, I have staked millions against this claim.
link |
That's powerful. And then what could you do? And of course, it doesn't have to be millions. It could
link |
be just very small amount, but then just a huge number of users doing that kind of stake. Exactly.
link |
That, you know, that could change the internet. It would change and the man Wall Street, it would
link |
change Wall Street. They would not, they would never have been able to, they would still be
link |
short squeezing one day after the next, every single hedge fund collapsing.
link |
If we look into the future, do you think it's possible that Numeri style infrastructure,
link |
where AI systems backed by humans are doing the trading, is what the entirety of the stock market
link |
is, or the entirety of the economy is run by basically this army of AI systems with high level
link |
humans supervision? Yeah, the thing is that some of them could be, could be bad actors.
link |
Some of the humans? No, well, these systems could be tricky. So actually, I once met a
link |
hedge fund manager. And this is kind of interesting. He said, very famous one. And he said,
link |
um, we can see, sometimes we can see things in the market where we know we can make money,
link |
but it will mess shit up. Yeah. We know we can make money, but it will mess things up.
link |
And we choose not to do those things. And on the one hand, maybe this is like, oh,
link |
you're being super arrogant. Of course you can't do this, but maybe he can. And maybe he really
link |
isn't doing things he knows he could do, but would change, you know, be pretty bad.
link |
Would the Reddit army have that kind of morality or concern for what they're doing?
link |
Probably not, based on what we've seen. The madness of crowds.
link |
There'll be like one person that says, hey, maybe, and then they get trampled over.
link |
Uh, that's, that's the terrifying thing. Actually, this, uh,
link |
a lot of people have written about this is somehow that like little voice,
link |
that's human morality gets silenced when we get in the groups and start chanting.
link |
And that's terrifying. But like, I think, uh, maybe I misunderstood. I thought that, um,
link |
you're saying AI systems can be dangerous, but you just describe how humans can be dangerous.
link |
So which is safer? So, I mean, one thing is, uh, numerite, yeah. So wall street bets,
link |
these kinds of like, these kinds of attacks, like it's not possible to, to model,
link |
numerize data and then come up with the idea from the model, let short screen just game stop.
link |
It's not even framed in that way. It's not like possible to have that idea.
link |
So, but it is possible for like kind of a bunch of humans. So I think there's,
link |
it's, numerite could get very powerful, uh, without it being dangerous.
link |
But wall street bets needs to get a little bit more powerful and it'll be pretty dangerous.
link |
Yeah. Well, I mean, uh, so this is a good place to kind of think about numerite data today,
link |
and numerite signals and what that looks like in 10, 20, 30, 50, 100 years.
link |
You know, like right now, I guess maybe you can correct me, but this,
link |
the data that we're working with is like a window. It's a, you know, anonymized,
link |
obfuscated window into a particular aspect, uh, time period of the market.
link |
And, you know, you can expand that more and more and more and more potentially,
link |
you can imagine in different dimensions to where it encapsulates all the things that, uh,
link |
where you could, uh, include kind of human to human communication that was available for,
link |
like, uh, to buy a GameStop, for example, on, on wall street bets.
link |
So maybe the step back, can you speak to what is numerite signals and, uh,
link |
what are the different data sets that are involved?
link |
So with numerite signals, um, you're still providing, uh, predictions to us, um,
link |
but you can do it from your own data sets.
link |
So numerites all, you have to model our data to come up with predictions.
link |
Numerite signals is whatever data you can find out there,
link |
you can turn it into a signal and give it to us.
link |
So it's a way for us to import signals on data we don't yet have.
link |
And, um, and that's why it's particularly valuable because it's going to be signals.
link |
You're only rewarded for signals that are orthogonal to our core signal.
link |
So you have to be doing something uncorrelated and so strange alternative data tends to have
link |
There isn't too many other signals that are correlated with, um, with, uh,
link |
you know, what's happening on wall street bets.
link |
That's not going to be like correlated with the price to earnings ratio, right?
link |
Um, and we have some users as of recently, as of like a week ago,
link |
there was a user that created, I think he's in India.
link |
He created, um, a signal that is scraped from wall street bets.
link |
Um, and now we have that signal, uh, as one of our signals in thousands that we use at numerite.
link |
And the structure of the signal is similar.
link |
So this is just numbers and time series data.
link |
And it's just like, it's kind of a, you're providing a ranking of stocks.
link |
So you just say, give a one means you like the stock, zero means you don't like the stock.
link |
And you provide that for the 5,000 stocks in the world.
link |
And they somehow converted the, the natural language that's in the wall street bet.
link |
So they've come exactly.
link |
So there's then they made, they open source this collab notebook.
link |
Uh, you can go and see it and look at it.
link |
And so yeah, it's taking that, making a sentiment score and then turning it into a
link |
rank of, uh, like this stock sucks or this stock is awesome.
link |
Uh, and then converting that's, that's fast.
link |
Just even looking at that data would be a fascinating.
link |
So on the signal side, what's the vision, this long term, what do you see that becoming?
link |
So we want to manage all the money in the world.
link |
That's Numerize mission.
link |
And to get that, we need to have all the data and have all of the talent.
link |
Like there's no way for the first principles, if you had really good modeling and really
link |
good data that you would lose, right?
link |
Um, it's just a question of how much do you need to get, to get, to get the data?
link |
To get really good.
link |
So Numerize already has some really nice data that we give out this year.
link |
We are 10 xing that.
link |
And I actually think we'll 10 x the amount of data we have on Numerize every year for
link |
at least the next 10 years.
link |
So it's going to get very big, the data we give out and signals is more data.
link |
People with any other random data set can turn that into a signal and give it to us.
link |
And in some sense, that kind of data is the edge cases, the weirdness is the,
link |
so you're focused on like the bulk, like the main data.
link |
And then there's just like weirdness from all over the place that just can enter through
link |
this backdoor of the process.
link |
And it's, it's also a little bit shorter term.
link |
So the signals are about a seven day time horizon and the on Numerize, it's like a 30 day.
link |
So it's often for faster situations.
link |
You've written about a master plan and you've mentioned, which I love,
link |
in a similar sort of style of big style thinking, you would like Numerize to manage all of the
link |
So how do we get there from, from yesterday to several years from now?
link |
Like what's, what is the plan?
link |
So you've already started to allure to it.
link |
It's like get all the data and get all the talent, humans, models.
link |
I mean, the important thing to note there is what would that mean, right?
link |
And I think the biggest thing it means is like, if there was one hedge fund,
link |
you would have not so much talent wasted on all the other hedge funds.
link |
Like it's super weird how the industry works.
link |
It's like one hedge fund gets a data source and hires a PhD and another hedge fund
link |
has to buy the same data source and hire a PhD.
link |
And suddenly a third of American PhDs are working at hedge funds and we're not even on Mars.
link |
And like, so in some ways Numerize, it's all about freeing up people who work at hedge funds
link |
to go work for Elon.
link |
Yeah. And also the people who are working on Numerize problem, it feels like a lot of the
link |
knowledge there is also transferable to other domains.
link |
One of our top users is, he works at NASA Jet Propulsion Lab.
link |
And he's like amazing.
link |
I went to go visit him there and it's like, he's got like Numerize posters and it's like,
link |
it looks like, you know, the movies, like it looks like Apollo 11 or whatever.
link |
Yeah. The point is, he didn't quit his job to join full time.
link |
He's working on getting us to Jupiter's moon.
link |
That's his mission, the Europa Clipper mission.
link |
Actually, literally what you're saying.
link |
Literally. He's smart enough that we really want his intelligence to reach the stock market.
link |
Because stock market's a good thing, hedge funds are a good thing.
link |
Our kinds of hedge funds, especially.
link |
But we don't want him to quit his job.
link |
So he can just do Numerize on the weekends.
link |
And that's what he does.
link |
He just made a model and it just automatically submits to us.
link |
And he's like one of our best users.
link |
You mentioned briefly that stock markets are good.
link |
For my sort of outsider perspective, is there a sense, do you think trading stocks
link |
is closer to gambling or is it closer to investing?
link |
Sometimes it feels like it's gambling as opposed to betting on companies to succeed.
link |
And this is maybe connected to our discussion of shorting in general.
link |
But from your sense, the way you think about it, is it fundamentally still investing?
link |
I do think, I mean, it's a good question.
link |
I've also seen lately, people say, this is like speculation.
link |
Is there too much speculation in the market?
link |
And it's like, but all the trades are speculative.
link |
Like all the trades have a horizon.
link |
Like people want them to work.
link |
So I would say that there's certainly a lot of aspects of gambling math
link |
that applies to investing.
link |
Like one thing you don't do in gambling is put all your money in one bet.
link |
You have bankroll management, and it's a key part of it.
link |
And small alterations to your bankroll management might be better than improvements to your skill.
link |
And then there are things we care about in our fund.
link |
Like we want to make a lot of independent bets.
link |
We want to make a lot of independent bets because that's going to be a higher sharp
link |
than if you have a lot of bets that depend on each other, like all in one sector.
link |
But yeah, the point is that you want the prices of the stocks to be reflective of their value.
link |
Of the underlying value.
link |
Yeah, you shouldn't have there be a hedge fund that's able to say, well,
link |
I've looked at some data and all of this stuff is super mispriced.
link |
That's super bad for society if it looks like that to someone.
link |
I guess the underlying question then is, do you see that the market often drifts away from
link |
the underlying value of companies and it becomes a game in itself?
link |
What are these derivatives options and shorting and all that kind of stuff?
link |
It's like layers of game on top of the actual what you said, which is the basic thing that
link |
the Wall Street Bets was doing, which is just buying stocks.
link |
Yeah, there are a lot of games that people play that are
link |
in the derivatives market.
link |
And I think a lot of the stuff people dislike when they look at the history of what's happened,
link |
they hate credit default swaps or collateralized debt obligations.
link |
Like these are the enemies of 2008.
link |
And then the long term capital management thing, it was like that 30 times leverage
link |
or something. You could just go to a gas station and ask anybody at the gas station,
link |
is it a good idea to have 30 times leverage?
link |
And they just say no.
link |
It's a common sense just like went out the window.
link |
I don't respect long term capital management.
link |
But Numerain doesn't actually use any derivatives unless you call shorting derivative.
link |
We do put money into companies.
link |
That does help the companies we're investing in.
link |
It's just in little ways.
link |
We really did buy Tesla and we played some role in its success.
link |
Super small, make no mistake.
link |
But still, I think that's important.
link |
Can I ask you a pothead question, which is what is money, man?
link |
So if we just kind of zoom out and look at, because let's talk to you about cryptocurrency,
link |
which perhaps could be the future of money.
link |
In general, how do you think about money?
link |
You said Numerain, the vision, the goal is to run to manage the world's money.
link |
What is money in your view?
link |
I don't have a good answer to that, but it's definitely in my personal life,
link |
it's become more and more warped.
link |
And you start to care about the real thing.
link |
What's really going on here?
link |
Elon talks about things like this, like what is a company?
link |
It's like a bunch of people who kind of show up to work together and they solve a problem.
link |
And there might be a stock out there that's trading that represents what they're doing,
link |
but it's not the real thing.
link |
And being involved in crypto, I put in crowd sale of Ethereum and all these other things,
link |
and different crypto hedge funds and things that I've invested in.
link |
And it feels like how I used to think about money stuff is just totally warped.
link |
Because you stop caring about the price and you care about the product.
link |
But the product, you mean the different mechanisms that money has exchanged?
link |
Money is ultimately a kind of, one is the store of wealth,
link |
but it's also a mechanism of exchanging wealth.
link |
But what wealth means becomes a totally different thing,
link |
especially with cryptocurrency, where it's almost like these little contracts,
link |
these little agreements, these transactions between human beings that represent
link |
something that's bigger than just cash being exchanged at 7.11, it feels like.
link |
Yeah, maybe I'll answer what is finance.
link |
It's what are you doing when you have the ability to take out a loan?
link |
You can bring a whole new future into being with finance.
link |
If you couldn't get a student loan to get a college degree,
link |
you couldn't get a college degree if you didn't have the money.
link |
But now, weirdly, you can get it with, yeah, all you have is this loan,
link |
which is like, so now you can bring a different future into the world.
link |
And that's how, when I was saying earlier about, if you rerun American history,
link |
economic history, without these things, you're not allowed to take out loans,
link |
you're not allowed to have derivatives, you're not allowed to have money,
link |
it just doesn't really work.
link |
And it's a really magic thing, how much you can do with finance,
link |
by kind of bringing the future forward.
link |
Finance is empowering, we sometimes forget this, but yeah, it enables innovation,
link |
it enables big risk takers and bold builders that ultimately make this world better.
link |
You said you were early in on cryptocurrency.
link |
Can you give your high level overview of just your thoughts about the past,
link |
present, and future of cryptocurrency?
link |
Yeah, so my friends told me about Bitcoin and I was interested in
link |
equities a lot, and I was like, well, it has no net present value,
link |
it has no future cash flows, Bitcoin pays no dividends.
link |
So I really couldn't get my head around it, that this could be valuable.
link |
And then I, but I did, so I didn't feel like I was early in cryptocurrency,
link |
in fact, because I was like, it was like 2014, it felt like a long time off the Bitcoin.
link |
And then, but then I really liked some of the things that Ethereum was doing,
link |
it seemed like a super visionary thing.
link |
Like I was reading something that was just going to change the world
link |
when I was reading the white paper.
link |
And I liked the different constructs you could have inside of Ethereum
link |
that you couldn't have on Bitcoin.
link |
Like smart contracts and all that kind of stuff.
link |
Exactly, yeah, and even spoke about different,
link |
different, yeah, different constructions you could have.
link |
Yeah, that's the cool dance between Bitcoin and Ethereum of,
link |
it's in the space of ideas.
link |
It feels so young.
link |
Like I wonder what cryptocurrencies will look like in the future.
link |
Like if Bitcoin or Ethereum 2.0 or some version will stick around
link |
or any of those, like who's going to win out,
link |
or if there's even a concept of winning out at all.
link |
Is there a cryptocurrency that you're especially
link |
really find interesting that technically financially,
link |
philosophically you think is something you're keeping your eye on?
link |
Well, I don't really, I'm not looking to like invest in cryptocurrencies anymore.
link |
But I, they are, I mean, they're, and many are almost identical.
link |
I mean, there's not, there wasn't too much difference
link |
between even Ethereum and Bitcoin in some ways, right?
link |
But there are some that I like the privacy ones.
link |
I mean, I was like, I like Zcash for its like coolness.
link |
It's actually, it's like a different kind of invention
link |
compared to some of the other things.
link |
Can you speak to just briefly to privacy?
link |
What is there some mechanism of preserving some privacy of the,
link |
so I guess everything is public.
link |
Yeah, the, yeah, none of the transactions are private.
link |
And so, you know, even like, I have some of my,
link |
I have some numeraire and you can just see it.
link |
In fact, you can go to a website and says like,
link |
you can go to like ETHIScan and it'll say like,
link |
numeraifounder and I'm like, how the hell do you guys know this?
link |
So they can reverse engine and then, you know, whatever that's called.
link |
Yeah. And so they can see me move it too.
link |
They can see me. Oh, why is he moving it?
link |
So, you know, you can see the, you know,
link |
so, but yeah, Zcash, they're also,
link |
when you can make private transactions,
link |
you can also play different games.
link |
It's like, what's quite cool about Zcash is,
link |
I wonder what games are being played there.
link |
So from a deeply analytical perspective,
link |
can you describe why Dogecoin is going to win?
link |
Which it surely will.
link |
Like it very likely will take over the world.
link |
And once we expand out into the universe,
link |
it will take over the universe.
link |
Or in a more serious note, like,
link |
what are your thoughts on the recent success of Dogecoin?
link |
Where you've spoken to sort of the meme stocks,
link |
the memetics of the whole thing,
link |
that it feels like the joke can become the reality.
link |
Like the meme, the joke has power in this world.
link |
Yeah. It's fascinating.
link |
It's like, why is it correlated with Elon tweeting about it?
link |
It's not just Elon alone tweeting, right?
link |
It's like Elon tweeting and that becomes a catalyst
link |
for everybody on the internet,
link |
kind of like spreading the joke, right?
link |
So it's the initial spark of the fire
link |
for Wall Street Bets type of situation.
link |
And that's fascinating because jokes seem to spread faster
link |
than other mechanisms.
link |
Funny shit is very effective at captivating the discourse
link |
Yeah. And I think you can have,
link |
like though I like the one meme,
link |
like Doge, I haven't heard that name in a long time.
link |
Like, I think back to that meme often.
link |
That's like funny.
link |
And every time I think back to it,
link |
there's a little probability that I might buy.
link |
Buy some Doge kind.
link |
And so I imagine you should have millions of people
link |
who have had all these great jokes told them.
link |
And every now and then they reminisce,
link |
oh, that was really funny.
link |
And then they're like, let me buy some.
link |
Wouldn't that be interesting if like the entire,
link |
if we travel in time, like multiple centuries,
link |
where the entirety of the communication
link |
of the human species is like humor.
link |
Like it's all just jokes.
link |
Like we're high on probably some really advanced drugs.
link |
And we're all just laughing nonstop.
link |
It's a weird like dystopian future of just humor.
link |
Elon has made me realize how like good it feels
link |
to just not take shit seriously every once in a while
link |
and just relieve like the pressure of the world.
link |
At the same time, the reason I don't always like
link |
when people finish their sentences with lol
link |
is like that you don't, when you don't take anything seriously,
link |
when everything becomes a joke,
link |
then it feels like that way of thinking
link |
feels like it will destroy the world.
link |
It's like, I often think it like,
link |
well, me and save the world to destroy
link |
because I think both are possible directions.
link |
Yeah. I think this is a big problem.
link |
I mean, America, I always felt that about America.
link |
A lot of people are telling jokes kind of all the time
link |
and they're kind of good at it.
link |
And you take someone aside and American,
link |
you're like, I really want to have a sincere conversation.
link |
It's like hard to even keep a straight face
link |
because everything is so, there's so much levity.
link |
So it's complicated.
link |
I like how sincere actually like your Twitter can be.
link |
You're like, I am in love with the world today.
link |
Yeah. I get so much shit for it.
link |
I'm never going to stop because I realize like,
link |
you have to be able to sometimes just be real
link |
and be positive and just be save the cliche things,
link |
which ultimately those things actually capture
link |
some fundamental truths about life.
link |
And I think Elon does a good job of that
link |
from an engineering perspective of being able to joke,
link |
but everyone's mostly to pull back and be like,
link |
here's real problems.
link |
Let's solve them and so on.
link |
And then be able to jump back to a joke.
link |
So it's ultimately, I think,
link |
I guess a skill that we have to learn.
link |
But I guess your advice is to invest everything
link |
anyone listening owns into Dogecoin.
link |
That's what I heard from this interaction.
link |
Yeah, no, exactly.
link |
Yeah, our hedge fund is unavailable.
link |
Just go straight to Dogecoin.
link |
You're running a successful company.
link |
It's just interesting because my mind has been in that space
link |
of potentially being one of the millions other entrepreneurs.
link |
What's your advice on how to build a successful startup,
link |
how to build a successful company?
link |
I think that one thing I do like,
link |
and it might be a particular thing about America,
link |
but there is something about playing,
link |
tell people what you really want to happen in the world.
link |
It's not going to make it,
link |
like if you're asking someone to invest in your company,
link |
don't say, I think maybe one day we might make a million dollars.
link |
When you actually believe something else,
link |
you actually believe you're actually more optimistic,
link |
but you're toning down your optimism
link |
because you want to appear low risk.
link |
But actually it's super high risk if your company becomes mediocre
link |
because no one wants to work in a mediocre company,
link |
no one wants to invest in mediocre people.
link |
So you should play the real game.
link |
And obviously this doesn't apply to all businesses,
link |
but if you play a venture backed startup kind of game,
link |
like play for keeps, play to win, go big, and it's very hard to do that.
link |
I've always feel like, yeah, you can start narrowing your focus
link |
because 10 people are telling you,
link |
you got to care about this boring thing
link |
that won't matter five years from now.
link |
And you should push back and do the real, play the real game.
link |
It should be bold.
link |
There's an interesting duality there.
link |
So there's the way you speak to other people about your plans
link |
and what you are privately, just in your own mind.
link |
And maybe it's connected with what you're saying about sincerity as well.
link |
If you appear to be sincerely optimistic about something
link |
that's big or crazy,
link |
it's putting yourself up to be kind of ridiculed or something.
link |
And so if you say, my mission is to go to Mars,
link |
it's just so bonkers that it's hard to say.
link |
It is, but one powerful thing, just like you said,
link |
is if you say it and you believe it,
link |
then actually amazing people come and work with you.
link |
It's not just skill, but the dreams.
link |
There's something about optimism
link |
that like that fire that you have when you're optimistic
link |
of actually having the hope of building something totally cool,
link |
something totally new,
link |
that when those people get in a room together,
link |
like they can actually do it.
link |
Yeah, there's, yeah, there's, that's,
link |
and also makes life really fun when you're in that room.
link |
So all of that together, ultimately, I don't know,
link |
that's what makes this crazy ride of a startup
link |
really, really exciting.
link |
A startup really look fun.
link |
And Elon is an example of a person who succeeded at that.
link |
There's not many other inspiring figures, which is sad.
link |
I used to be a Google and there's,
link |
there's something that happens that sometimes
link |
when the company grows bigger and bigger and bigger,
link |
where that kind of ambition kind of quits down a little bit.
link |
You know, Google had this ambition still does
link |
of making the world's information accessible to everyone.
link |
And I remember, I don't know, that's beautiful.
link |
I still love that dream of,
link |
that, you know, they used to scan books,
link |
but just in every way possible,
link |
make the world's information accessible.
link |
Same with Wikipedia.
link |
Every time I open up Wikipedia,
link |
I'm just awe inspired by how awesome humans are, man.
link |
And creating this together,
link |
I don't know what the meetings are over there,
link |
but they, it's just beautiful.
link |
Like what they've created is incredible.
link |
And I'd love to be able to be part of something like that.
link |
For that, you have to be bold.
link |
And there's, and strange to me also,
link |
I think you're right that there's
link |
how many boring companies there are.
link |
Something I always talk about, especially in fintech.
link |
It's like, why am I excited about this?
link |
Like what is, this isn't even like important.
link |
Even if you succeed, this is going to be like, terrible.
link |
This is not good. And it's just strange
link |
how people can kind of get fake enthusiastic
link |
about like boring ideas.
link |
When there's so many bigger ideas that, yeah.
link |
I mean, you read these things like,
link |
this company raises money and it's just like,
link |
that's a lot of money for the worst idea I've ever heard.
link |
Some ideas are really big.
link |
So like I worked on autonomous vehicles quite a bit.
link |
And there's so many ways in which
link |
you can present that idea to yourself
link |
to the team you work with to just, yeah.
link |
Like to yourself when you're quietly looking
link |
in the mirror in the morning,
link |
that's really boring or really exciting.
link |
Like if you're really ambitious with autonomous vehicles,
link |
there, it changes the nature of like human robot interaction.
link |
It's changing the nature of how we move.
link |
Forget all that stuff.
link |
It changes like everything about robotics and AI,
link |
It changes everything about manufacturing.
link |
I mean, the transportation is so fundamentally connected
link |
to cars and if that changes,
link |
it changes the fabric of society, of movies, of everything.
link |
And if you go bold and take risks
link |
and be willing to go bankrupt with your company
link |
as opposed to cautiously, you can really change the world.
link |
And it's so sad for me to see all these autonomous companies,
link |
autonomous vehicle companies,
link |
they're like really more focused about fundraising
link |
and kind of like smoke and mirrors.
link |
They're really afraid.
link |
The entirety of their marketing is grounded in fear
link |
and presenting enough smoke to where they keep raising funds
link |
so they can cautiously use technology of a previous decade
link |
or previous two decades to kind of test vehicles here and there
link |
as opposed to do crazy things in bold
link |
and go huge at scale, do huge data collection.
link |
So that's just an example.
link |
Like the idea can be big,
link |
but if you don't allow yourself to take that idea
link |
and think really big with it,
link |
then you're not going to make anything happen.
link |
Yeah, you're absolutely right in that.
link |
So you've been connected in your work with a bunch of amazing people.
link |
How much interaction do you have with investors?
link |
Like that whole process is an entire mystery to me.
link |
Is there some people that just have influence
link |
on the trajectory of your thinking completely?
link |
Or is it just this collective energy that they behind the company?
link |
Yeah, I mean, I came here and I was amazed how,
link |
yeah, people would, I was only here for a few months
link |
and I met some incredible investors
link |
and I'd almost run out of money.
link |
And once they invested, I was like,
link |
I am not going to let you down.
link |
And I was like, okay, I'm going to send them like an email update
link |
every like three minutes.
link |
And then they don't care at all.
link |
So they kind of want to, I don't know.
link |
So I like it when it's just like, they're always available to talk.
link |
But a lot of building a business, especially a high tech business,
link |
there's little for them to add, right?
link |
There's little for them to add on product.
link |
There's a lot for them to add on like business development.
link |
And if we are doing product research,
link |
which is for us research into the market,
link |
research into how to make a great hedge fund,
link |
and we do that for years, there's not much to tell the investors.
link |
So they're basically like, I believe in you.
link |
There's something, I like to cut your jib.
link |
There's something in your idea,
link |
in your ambition, in your plans that I like.
link |
And it's almost like a pat on the back.
link |
I was like, go get them, kid.
link |
Yeah, it is a bit like that.
link |
That's a good way to do it.
link |
I'm glad they do it that way.
link |
Like the one and meeting I had,
link |
which was like really good with this one,
link |
was like really good with this was meeting Howard Morgan,
link |
who's actually a co founder of Renaissance Technologies
link |
in the like 1980s and worked with Jim Simons.
link |
And he was in the room and I was meeting some other guy
link |
and he was in the room.
link |
And I was explaining how quantitative finance works.
link |
I was like, so, you know, they use mathematical models.
link |
And then he was like, yeah, I started Renaissance.
link |
I know a bit about this.
link |
And then I was like, oh my God.
link |
So yeah, but then I think he kind of said, well,
link |
yeah, he said, well, because I was talking,
link |
he was working at first round capital as a partner.
link |
And they kind of said, they didn't want to invest.
link |
And then I wrote a blog post describing the idea
link |
and I was like, I really think you guys should invest.
link |
And then they end up.
link |
You convinced them, oh, that must be good.
link |
Yeah, because they're like, we don't really invest
link |
And I was like, you don't see like what I'm doing.
link |
This is something different.
link |
This is so a tech company, not a hedge fund, right?
link |
Yeah, and Numerize Brilliant.
link |
It's when it caught my eye, there's something special there.
link |
So I really do hope you succeed.
link |
And obviously it's a risky thing you're taking on,
link |
the ambition of it, the size of it.
link |
But I do hope you succeed.
link |
You mentioned Jim Simons.
link |
He comes up in another world of mine really often on the,
link |
he's just a brilliant guy on the mathematics side
link |
as a mathematician, but he's also a brilliant finance,
link |
hedge fund manager guy.
link |
Have you gotten a chance to interact with him at all?
link |
Have you learned anything from him on the math,
link |
on the finance, on the philosophy, life side of things?
link |
I've played poker with him.
link |
It was pretty cool.
link |
It was like, actually in the show Billions,
link |
they kind of do a little thing about this poker tournament thing
link |
with all the hedge fund managers.
link |
And that's a real life thing.
link |
And they have a lot of like world series of bracelet,
link |
world series poker bracelets holders,
link |
but it's kind of Jim's thing.
link |
And I met him there.
link |
And yeah, it was kind of brief, but I was just like,
link |
he's like, oh, how do you, why are you here?
link |
And I was like, oh, Howard sent me, you know,
link |
he's like, go play this tournament,
link |
meet some of the other players, and then.
link |
Was it Texas Holdem?
link |
Yeah, Texas Holdem tournament.
link |
Do you play poker yourself, or was it?
link |
I mean, it was crazy.
link |
And on my right was the CEO,
link |
who's the current CEO of Renaissance, Peter Brown.
link |
And Peter Muller, who's a hedge fund manager at PDT.
link |
And yeah, I mean, it was just like, and then, you know,
link |
just everyone, and then all these bracelet world series,
link |
like people I know from like TV.
link |
And Robert Mercer, who's fucking crazy.
link |
He's the guy who donated the most money to Trump.
link |
And he's just like.
link |
It's a lot of personality.
link |
Geez, this is crazy.
link |
So it's quite cool how, yeah, like the, it was really fun.
link |
And then I managed to knock out Peter Muller.
link |
I have a, I got a little trophy for knocking him out,
link |
because he was a previous champion.
link |
In fact, I think he's won the most.
link |
I think he's won three times.
link |
But I will say Jim outlasted me in the tournament.
link |
And they're all extremely good at poker.
link |
But they're also, so it was a $10,000 buy in.
link |
And I was like, this is kind of expensive.
link |
But it all goes to charity, Jim's math charity.
link |
But then the way they play, they have like rebies.
link |
And like, they all do a shit ton of rebies.
link |
This is for charity.
link |
So immediately they're like going all in and I'm like, man, like,
link |
so I end up, you know, adding more as well.
link |
Like you couldn't play at all without doing math.
link |
Yeah, the stakes are high.
link |
But you're connected to a lot of these folks.
link |
They're kind of titans of just economics and tech in general.
link |
Do you feel a burden from this, your young guy?
link |
I did feel a bit out of place there.
link |
Like the company was quite new.
link |
And they also don't speak about things, right?
link |
So it's not like going to meet a famous rocket engineer
link |
who will tell you how to make a rocket.
link |
They do not want to tell you anything
link |
about how to make a hedge fund.
link |
It's like all secretive.
link |
And that part I didn't like.
link |
And they were also kind of making fun of me a little bit.
link |
Like they would say, like they'd call me like,
link |
I don't know, the Bitcoin kid or, and then they would say,
link |
even things like, remember Peter said to me something like,
link |
I don't think AI is going to have a big role in finance.
link |
And I was like, hearing this from the CEO of Renaissance
link |
was like weird to hear because I was like, of course it will.
link |
And he's like, but he can see it.
link |
I can see it having a really big impact
link |
on things like self driving cars.
link |
But finance, it's too noisy and whatever.
link |
And so I don't think it's like the perfect application.
link |
And I was like, that was interesting to hear.
link |
Because it's like, and I think it was that same day that
link |
Libra, I think it is, the poker playing AI
link |
started to beat like the human.
link |
So it's kind of funny hearing them like say,
link |
oh, I'm not sure AI could ever get attack of that problem.
link |
And then that very day is attacking the problem
link |
of the game we're playing.
link |
Well, there's a kind of a magic to somebody
link |
who's exceptionally successful looking at you,
link |
giving you respect, but also saying that
link |
what you're doing is not going to succeed in a sense.
link |
Like they're not really saying it.
link |
But I tend to believe for my interactions with people
link |
that it's a kind of prod to say, like prove me wrong.
link |
That's ultimately, that's how those guys talk.
link |
They see good talent and they're like, I'm...
link |
And I think they're also saying
link |
it's not going to succeed quickly in some way.
link |
They're like, this is going to take a long time.
link |
And maybe that's good to know.
link |
And certainly AI in trading,
link |
that's one of the most so philosophically interesting
link |
questions about artificial intelligence
link |
and the nature of money.
link |
Because it's like, how much can you extract
link |
in terms of patterns from all of these millions
link |
of humans interacting using this methodology of money?
link |
It's like one of the open questions
link |
in the artificial intelligence.
link |
In that sense, you converting it to a dataset
link |
is one of the biggest gifts to people
link |
in the research community, to the whole...
link |
Anyone who loves data science and AI,
link |
this is kind of fascinating.
link |
I'd love to see where this goes, actually.
link |
The thing I say sometimes,
link |
long before AGI destroys the world,
link |
a narrow intelligence will win all the money in the stock market.
link |
Like, wait, just a narrow AI.
link |
And I don't know if I'm going to be the one who invents that.
link |
So I'm building Numeri to make sure that that narrow AI
link |
So you're giving a platform to where millions of people
link |
can participate and build that narrow AI themselves.
link |
People love it when I ask this kind of question
link |
about books, about ideas and philosophers and so on.
link |
I was wondering if you had books or ideas,
link |
philosophers, thinkers that had an influence
link |
on your life when you were growing up
link |
or just today that you would recommend that people check out
link |
blog posts, podcasts, videos, all that kind of stuff.
link |
Is there something that just kind of had an impact on you
link |
that you currently recommend?
link |
A super kind of obvious one that I really...
link |
I was reading Zero to One while coming up with Numeri.
link |
It was like halfway through the book.
link |
And I really do like a lot of the ideas there.
link |
And it's also about kind of thinking big
link |
and also it's like peculiar little book.
link |
It's like there's a little picture of the hipster
link |
And it's a weird little book.
link |
So there's kind of like some depth there.
link |
Turns out a book on a...
link |
If you're thinking of doing a startup, that's a good book.
link |
A book I like a lot is maybe my favorite book
link |
is David Deutsch's Beginning of Infinity.
link |
I just found that so optimistic.
link |
Everything you read in science,
link |
it makes the world feel kind of colder.
link |
Because it's like we're just coming from evolution
link |
and coming from...
link |
Nothing should be this way or whatever.
link |
And humans are not very powerful.
link |
We're just like scum on the earth.
link |
And the way David Deutsch sees things and argues...
link |
He argues them with the same rigor
link |
that the cynics often use
link |
and then has a much better conclusion.
link |
That's some of the statements and things like...
link |
Anything that doesn't violate the laws of physics can be solved.
link |
So ultimately arriving in a hopeful...
link |
Like a hopeful path forward.
link |
Without being like a hippie.
link |
You've mentioned kind of advice for startups.
link |
Is there in general, whether you do a startup or not,
link |
do you have advice for young people today?
link |
You're like an example of somebody who's paved their own path
link |
and were, I would say, exceptionally successful.
link |
Somebody who's like 20 today, 18 on a grad
link |
or thinking about going to college or in college and so on
link |
that you would give them?
link |
I think I often tell young people,
link |
don't start a company unless you're prepared
link |
to make it your life's work.
link |
That's a really good way of putting it.
link |
And a lot of people think,
link |
well, this semester I'm going to take a semester off
link |
and in that one semester I'm going to start a company
link |
and sell it or whatever.
link |
And it's just like, what are you talking about?
link |
It doesn't really work that way.
link |
You should be like super into the idea,
link |
so into it that you want to spend a really long time on it.
link |
Is that more about psychology or actual time allocation?
link |
Like is it literally the fact that you need to give 100%
link |
for potentially years for it to succeed?
link |
Or is it more about just the mindset
link |
Yeah, I mean, I think you certainly don't want to have a plan
link |
to sell the company quickly or something.
link |
Or it's like a company that has a big fashion component.
link |
Like it'll only work now.
link |
It's like an app or something.
link |
So yeah, that's a big one.
link |
And then I also think something I've thought about recently
link |
is I had a job as a quant
link |
at a fund for about two and a half years.
link |
And part of me thinks if I had spent another two years there,
link |
I would have learned a lot more and had even more knowledge
link |
to be where, to basically accelerate how long numer I took.
link |
So the idea that you can sit in an air conditioned room
link |
and get free food or even sit at home now in your underwear
link |
and make a huge amount of money and learn whatever you want
link |
and get, it's just crazy.
link |
It's such a good deal.
link |
Oh, that's interesting.
link |
That's the case for, I was terrified of that.
link |
Like a Google, I thought I would become really comfortable
link |
in that air conditioned room.
link |
And that I was afraid of the quant situation is,
link |
I mean, what you presented is really brilliant
link |
that it's exceptionally valuable the lessons you learn
link |
because you get to get paid while you learn from others.
link |
If you see jobs in the space of your passion that way,
link |
that it's just an education.
link |
It's like the best kind of education.
link |
But of course, from my perspective,
link |
you have to be really careful not to get comfortable.
link |
Again, in a relationship, then you buy a house
link |
or whatever the hell it is.
link |
And then you get, and then you convince yourself,
link |
like, well, I have to pay these fees for the car,
link |
for the house, blah, blah, blah.
link |
And then there's momentum.
link |
And all of a sudden you're in your death bed
link |
and there's grandchildren.
link |
And you're drinking whiskey and complaining
link |
about kids these days.
link |
So I'm afraid of that momentum, but you're right.
link |
There's something special about the education
link |
you get working at these companies.
link |
Yeah, and I remember on my desk,
link |
I had a bunch of papers on quant finance,
link |
a bunch of papers on optimization.
link |
And then a paper on Ethereum, just on my desk as well.
link |
And the white paper.
link |
And it's like, it's been amazing how much, how kind of,
link |
and you can learn about, so that I also thought,
link |
I think this idea of learning about intersections of things.
link |
I don't think there are too many people
link |
that know as much about crypto and quant finance
link |
and machine learning as I do.
link |
And that's a really nice set of three things
link |
to know stuff about.
link |
And that was because I had free time in my job.
link |
Okay, let me ask the perfectly impractical,
link |
but the most important question.
link |
What's the meaning of all the things you're trying
link |
to do so many amazing things?
link |
What's the meaning of this life of yours or ours?
link |
Yeah, so I have yet had some people say,
link |
asking what meaning of life is,
link |
is like asking the wrong question or something.
link |
The question is wrong.
link |
No, usually people get too many questions.
link |
Usually people get too nervous to be able to say that
link |
because it's like your question sucks.
link |
I don't think there's an answer.
link |
It's like the searching for it.
link |
It's like sometimes asking it.
link |
It's like sometimes sitting back and looking up at the stars
link |
and being like, huh, I wonder if there's aliens up there.
link |
There's a useful pallet cleanser aspect to it
link |
because it kind of wakes you up to all the little busy,
link |
hurried day to day activities, all the meetings,
link |
all the things you're like a part of.
link |
We're just like ants, a part of a system,
link |
a part of another system.
link |
And then when this asking this bigger question
link |
allows you to kind of zoom out and think about it.
link |
But there's ultimately, I think it's an impossible thing
link |
for a limited cognitive capacity to capture.
link |
But it's fun to listen to somebody who's exceptionally
link |
successful, exceptionally busy now, who's also young like you,
link |
to ask these kinds of questions about like death.
link |
Do you consider your own mortality kind of thing and life,
link |
whether that enters your mind?
link |
Because it kind of almost gets in the way.
link |
Yeah. It's amazing how many things that are trivial
link |
that occupy a lot of your mind until something bad happens.
link |
Or something flips you.
link |
And then you start thinking about the people you love
link |
that are in your life.
link |
Then you started thinking about like,
link |
holy shit, this right ends.
link |
Exactly. Yeah. I just had COVID.
link |
And I had it quite bad.
link |
It wasn't really bad.
link |
It was just like, I also got a simultaneous lung infection.
link |
So I had like almost like bronchitis or whatever.
link |
I don't even, I don't understand that stuff.
link |
But I started, and then you're forced to be isolated.
link |
And so it's actually kind of nice.
link |
Because it's very depressing.
link |
And then I've heard stories of, I think it's Sean Parker,
link |
he had like all these diseases as a child.
link |
And he had to like just stay in bed for years.
link |
And then he like made Napster.
link |
It's like pretty cool.
link |
So yeah, I had about 15 days of this recently, just last month.
link |
And it feels like it did shock me into a new kind of energy and ambition.
link |
Were there moments when you were just like terrified
link |
at the combination of loneliness?
link |
And like, you know, the thing about COVID is like,
link |
there's some degree of uncertainty.
link |
Like it feels like it's a new thing, a new monster
link |
that's arrived on this earth.
link |
And so, you know, dealing with a loan,
link |
a lot of people are dying.
link |
It's like wondering like... Yeah, you do wonder.
link |
And then there are even new strains in South Africa,
link |
which is where I was.
link |
And maybe the new strain had some interaction of my genes
link |
and I'm just going to die.
link |
But ultimately it was liberating somehow.
link |
Oh, I loved that I got out of it.
link |
Because it also affects your mind.
link |
You get confusion and kind of a lot of fatigue.
link |
And you can't do your usual tricks of psyching yourself out of it.
link |
So, you know, sometimes it's like, oh man, I feel tired.
link |
Okay, I'm just going to go have coffee and then I'll be fine.
link |
It's like, now it's like, I feel tired.
link |
I don't even want to get out of bed to get coffee
link |
because I feel so tired.
link |
And then you have to confront.
link |
There's no like quick fix cure and you're trapped at home.
link |
So, now you have this little thing that happened to you
link |
that was a reminder that you're mortal
link |
and you get to carry that flag in trying to create something
link |
special in this world, right?
link |
Listen, this was like one of my favorite conversations
link |
because the way you think about this world of money
link |
and just this world in general is so clear
link |
and you're able to explain it so eloquently.
link |
Richard, it was really fun.
link |
Really appreciate you talking to it.
link |
Thanks for listening to this conversation with Richard Crabe
link |
and thank you to our sponsors.
link |
Audible Audio Books, Trial Labs, Machine Learning Company,
link |
Linkist app that summarizes books and Athletic Greens,
link |
all in one nutrition drink.
link |
Click the sponsor links to get a discount
link |
and to support this podcast.
link |
And now let me leave you with some words from Warren Buffett.
link |
Games are won by players who focus on the playing field,
link |
not by those whose eyes are glued to the scoreboard.
link |
Thank you for listening and hope to see you next time.