When the path isn't clear, the advisor you turn to should be.

10-Year Archive

Humanizing Tech

Transforming the Stock Market Into A Game

Introducing ‘The Base Code’ personal hedge fund product

I. Riding the Rollercoaster

The stock market feels like a rollercoaster. It’s the chunk, chunk, chunk on the way to the top and then a quick drop down the other side. Because human emotion is more affected by fear than greed. Greed is slow. Fear is fast.

You can see this in any historical stock market graph. In the one below you see the housing bubble crash took almost no time, but it takes forever for the market to build back up to another all-time high, as it is today.

The Dow Jones Industrial Average over the last 10 years ($20K high today, $7K low in 2009)

What’s interesting about human behavior, however, isn’t that we have emotions. Rather, it’s how they impact our perceived rational decision making.

Buy low, sell high.

Everyone knows that old saying. But only Warren Buffett has managed to pull it over off decades. Because everyone is so caught up on catching a wave or timing the market, the end up doing exactly the opposite.

Right now, people see the market at an all-time high and think, “I don’t want to miss out on what everyone else is doing!” and then they go ahead and buy stock at their all-time highs. Any rational person sees that and thinks, “well that’s silly, what goes up must come down”. But we’re not rational. We’re emotional.

So how do we combat against that?

Well, we build a product that flips the graph on its head and when the market is high, it seems like the world is collapsing. But when the market is low, it looks like it’s high and you need to get on the money train.

That’s what The Base Code is all about.

II. Foundational Matrix of Tech Investment

Before we figure out what to invest in, we first have to get a sense for the operating system of life. What will humans have to pay for, even when they don’t want to. Because of survival. We’ll look at it over the long term and through the lens of tech because that’s where much of the automation and disruption is going to occur.

  1. Computation & Data Processing: GPUs (NVIDIA)
  2. Connectivity: global wireless and cellular data (T-Mobile / Deutsche Telekom)
  3. Energy & Transportation: self-driving solar cars and interplanetary travel (Tesla/Solar City merger, SpaceX controlled by the same man)
  4. Computing Devices & Health: Smart Phones, Computers, and connected health wearables like Watches, AirPods, and Glasses (Apple)
  5. Information: knowledge search (Google)
  6. Connection: social media (Facebook)
  7. Commerce & Logistics: purchasing and shipping (Amazon)

With that, we have a pretty good sense of the market leader. Notice I didn’t include banking or biotech. We’re looking for bellweather bets. Most of these companies are still young and have much growth left in them.

View The Base Code’s Valuation Model to learn more about how each of these companies are valued in comparison to their current stock price.

III. Concepting the Product

Now that we have a sense for what to watch and potentially buy, we need a mechanism to get everyday people with only $50 to $100 per month ($25 to $50 per paycheck) to invest.

More than ever before, the fat middle of America is no longer investing nor participating in the stock market. It’s all pension funds and hedge funds and massive investors, not the mom and pop saving for their retirement.

As we move into the age of a new generation reaching maturity, entering the workforce, and beginning to think about saving for retirement, we don’t want them making the same mistakes previous generations might have made starting out.

So, we need to make something fun, with some tips to go along with it, that shows up in their inbox every so often, or notifying them in their social network of choice (Facebook Messenger Base Code Bot, anyone?)

Below is an example of one such mobile email notification, sent on, you guessed it, a Monday:

We put this original email together back when apple was trading at $90-ish per share based on our analysis we gave it a buy. Of course Apple is now trading at about $130 per share so if you would have taken our advice, you’d have made about a +40% return in half a year. Not too shabby.

The goal would be, in that email, to give you the answer and an affiliate link that clicks to open the Robinhood App directly to the Apple stock where you can immediately buy or sell the security. We also would include a link of the back-up analysis with a “Prove It” button so you can see how we arrived at that decision.

Because ultimately investing is about trust, but also about teaching a man (or woman) to fish. Eventually after enough of these analyses, you would start to internalize our analysis process so you can go out and apply it to different areas. Or not, you can simply take our advice cold and pull the trigger, knowing that your financial security is safe with us. All without paying any fees because we’d be using free tools like Robinhood and Openfolio.

Eventually you might have returns that look like ours. +70% over a single year by predicting trends before the rest of the market caught up. All by just putting a little bit of money in every paycheck.

Anyone can do this. Anyone.

IV. Product Mechanics & Brand Overview

Below are a few more of the philosophies and core components of developing The Base Code product.

  • In one word: prophecy
  • Color: emerald green, the stone of prophecy (http://ift.tt/2kwjxd9)
  • Millennial focused brand: fun, short sound bites
  • Email that goes out every every 2 weeks with actual investment trades that Sean has done (and a small link at the bottom that says “Prove It” if you don’t trust me blindly; eventually the goal is that you’ll just take The Base Code’s word for it)
  • “Prove It” example analysis for AAPL
  • Example email of tone (not the right UI or brand, obviously)

Partnerships with Apps for Saving & Trading

  1. Digit (saving): Could also get people saving without them realizing it with Digit.co. (my referral link: http://ift.tt/2l0vUeF)
  2. Robinhood (investing): Establish partnership with Robinhood as lead gen since we push traffic to them for their app. Eventually plug into their private API
  3. Openfolio (social comparisons): integration with Robinhood to see how you’re performing against the market (S&P 500), all investors on openfolio, etc
  4. Cheddar (learning): new video news channel started by an ex buzzfeed guy, sits on the trading floor and live streams news
  5. Numer.ai (AI-based hedge fund)

Trading Tools Developed In House

Monetization Strategy (Preliminary)

  • Give away blog posts and analysis for free on Humanizing Tech’s The Base Code
  • Give away fundamental analysis for free (maybe find a way to add ads later)
  • Subscribe for $5/month for real-time trades rather than getting the insights one month later
  • Gets around all the SEC requirements for a startup taking other people’s money and investing for them (teach a man to fish, as well)

Exit Strategy

  • Get acquired by Robinhood or another of the well-funded investment apps or even one of the long-standing companies like Morningstar
  • They have raised $66M from premiere VCs

How We Turn all of this Into a Game

  • UX as the main tool: Reverse the mind-set by flipping the graph so when the market tanks, you see it as a fire sale (Apple is 20% off today only!) and when it goes up, you don’t buy because prices are high (see below for what happened because of Brexit, it tanks, but now is actually the time to buy things cheap, not sell things at a loss)
  • Some type of social performance indicator to see how you compare against others (openfolio can exist as this at the start)

Potential Gamification Elements — WIP

Leveling up as you learn or use the product:

  • New users are given access the key tools only. Also if there are complex tools, need to find a way to break it down so it is more digestible.
  • Jira as a complete product is complex, but opening and closing tickets is really easy.
  • As users Level up they gain access to more features or tools.

Notification for Earning Money and Losing Money:

  • Earning Money notification makes users feel great.
  • Something Visual. Graphs for stocks are great, but if we did a graph and plotted how much users earned for a stock or for all their stocks on a graph users might be more attracted to keep going. Looking at stock prices is great and makes you smarter, but seeing a graph of how much I earn everyday is addictive (I read multiple stories on AMZ FBA sellers where sellers are addicted to the sellers app, because they see their bank account go up with each sale).
  • Losing feels bad, but if the loss is insignificant users will not mind trying again. If the user earns money on their next investment they will feel great and forget about that initial loss. I believe we can mimic the feeling of wanting to win the lotto or at a casino, but instead of stealing their money Sean makes the user smarter as they grow, so there is much more upside and much less downside as they learn.

Other Notes

  • Add a list of stocks that people should invest in that are in the $10 and under category. That way it’s easier and cheap for me to want to make my first investment. Stocks like apple and amazon might be too pricey for an avg person.
  • Maybe build the marketing voice to mimic the online gurus.
  • “I made X money since I have started without any formal education.” It is very salesy and pitchy, but seems to have a huge effect on people wanting to better their lives.

V. What’s Next

The benefit to Humanizing Tech is we get to concept many different products for how the future is going to play out. Things like EVERAE for finding luxury corporate gifts, things like The Base Code for trading, things like Biologic Intelligence for autonomous robotics, and on we go.

In this case, we don’t have time to build out The Base Code’s product so we’re looking for a scrappy young entrepreneur who’s interested in this topic and wants to build a startup of their own to help us with the concept and build.

Obviously we haven’t given away all the product mechanics of what’s required to make this successful and as is often the case, the devil is in the details, but it requires a leader to execute on it. We can help with the team, but you need to be committed.

If so, give me a shout.

In addition, if you’re interested in a product like this (and I know people are because friends and family reach out asking my advice on things like this), then also give me a shout. We might put a list together so when the product is ready you can be one of the first beta testers.

Sean

Your Recommended Reading

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  5. Amazon’s Secret Self-Driving Car Project
  6. Follow the Investing Channel

Transforming the Stock Market Into A Game was originally published in Humanizing Tech on Medium, where people are continuing the conversation by highlighting and responding to this story.



from Stories by Sean Everett on Medium http://ift.tt/2kXAThc