Community-Directed Investing: A Design Thesis
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A summary of my University of Kansas Design Management thesis.
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Community-Directed Investing: A Design Thesis
- 1. Squirrel: A Community-‐ Directed Approach to Investing University of Kansas Design Management Thesis Summary © Brian M. Smith
- 2. conceptual beginnings © Brian M. Smith
- 3. © Brian M. Smith Fall 2011
- 4. CorporaIons and Community Community Emo$ons Emo$ons empowering, op1mis1c, hopeful, packaged, fashionable sensi1ve, ac1ve, true change, different, for “ac1ng socially, we all win” the good of all, not corporate Local Global Emo$ons Emo$ons connected, the “local” corpora1on, strict, cold, faceless megacorp, a shorter wall secre1ve, “good ol’ boys,” “people are just numbers,” people are Corporate passive © Brian M. Smith Fall 2011
- 5. Conceptual Beginning What if we removed the barriers to entry—financial, aBtudinal, and behavioral—to mutual fund inves1ng? Could we serve the long-‐tail, the underserved segments, for the beFerment of all? Community Local Global Corporate © Brian M. Smith Fall 2011
- 6. SegmentaIon 64M 10M U.S. workers not invested in a self-‐directed mutual fund mutual fund investors 42% of U.S. workers and growing
- 7. Web MenIons There were 3+ million posts of the phrase “direct inves1ng” on the web from October 2010–October 2011.
- 8. Gender Most were made by men.
- 9. SegmentaIon US households with investments and level of self-‐directedness Soloists Validators Delegators Affluent Affluent Affluent Affluent Soloists Validators Delegators > 1M 1% 2% 1% Mass-‐Affluent Mass-‐Affluent Mass-‐Affluent Mass-‐Affluent Soloists Validators Delegators 100K – 1M 8% 19% 12% Mainstream Mainstream Mainstream Mainstream Soloists Validators Delegators < 100K 9% 30% 17% Source: Forrester’s Consumer Technographics
- 10. The Emerging Segment Valida1on for the Emerging segment means social proof and not tradi1onal advice. Soloists Validators Delegators Affluent Affluent Affluent Affluent Soloists Validators Delegators > 1M 1% 2% 1% Mass-‐Affluent Mass-‐Affluent Mass-‐Affluent Mass-‐Affluent Soloists Validators Delegators 100K-‐1M 8% 19% 12% Mainstream Mainstream Mainstream Mainstream Soloists Validators Delegators < 100K 9% 30% 17% Emerging 42% of U.S. < 5K workers
- 11. Mainstream and Emerging Segments GeneraIon X GeneraIon Y Women Mom as family investor Self-‐directed investors
- 12. GeneraIon X and Y
- 13. GeneraIon X and Y Genera1on X and Y’s combined net worth will triple by 2018 to $28 trillion.
- 14. GeneraIon X and Y Genera1on X and Y’s combined net worth will triple by 2018 to $28 trillion. $18 trillion in genera1onal wealth transfer from Gen Y’s baby boomer parents is projected to occur from 2017 to 2052.
- 15. GeneraIon X and Y Genera1on X and Y’s combined net worth will triple by 2018 to $28 trillion. $18 trillion in genera1onal wealth transfer from Gen Y’s baby boomer parents is projected to occur from 2017 to 2052. Over half of Genera1on X consider themselves “self-‐directed.”
- 16. GeneraIon X and Y Genera1on X and Y’s combined net worth will triple by 2018 to $28 trillion. $18 trillion in genera1onal wealth transfer from Gen Y’s baby boomer parents is projected to occur from 2017 to 2052. Over half of Genera1on X consider themselves “self-‐directed.” Researchers believe that Genera1on Y will rely on social outlets for inves1ng advice.
- 17. “No medium can survive the indifference of 25-‐year-‐olds.” — Clay Shirky
- 18. © Brian M. Smith Fall 2011
- 19. behavioral economics © Brian M. . Smith © Brian M Smith Fall 2011
- 20. Behavioral Economics and Social Behavior In many of our ac1ons, especially financial, we are not the ra1onal beings we claim to be. Social and emo1onal factors ohen influence our decisions. © Brian M. Smith Fall 2011
- 21. Combining Losses We are more accep1ng of a small loss when it is combined or aFached to a larger loss. For example, the $1.00 dona1on requests at the grocery or pet store check-‐out can be very successful. Squirrel can -‐ Prompt or nudge investors at the point-‐of-‐sale. $100.00 for groceries + $5.00 for inves1ng. © Brian M. Smith Fall 2011
- 22. The Default OpIon People tend to believe that the default op1on is the right choice, so make the default op1on the desired outcome. Example, Germany’s Opt-‐In Organ Donor program (12%) compared to Austria’s Opt-‐Out (99%). Squirrel can -‐ Make the op1on to automa1cally combine a $1.00 investment with every retail purchase the default. © Brian M. Smith Fall 2011
- 23. Hedonic Framing We tend to feel that two separate gains have more value than one larger gain of equal value. We also tend to feel more emo1onal pain over two losses than one large loss of equal value. Squirrel can -‐ Itemize contribu1ons and posi1ve returns and when possible combine losses. © Brian M. Smith Fall 2011
- 24. Intertemporal Choice The present is more influen1al than the future. We tend to feel more vividly the immediate result of a decision because the future is difficult to envision. For example, feeling the affect of having less money now versus a possible future gain. Squirrel can -‐ Help make the future more real by showing progress towards a named goal. -‐ Suggest money-‐saving ac1vi1es that lessen the emo1onal impact of “losing” money in hand to an investment. © Brian M. Smith Fall 2011
- 25. The Pain of Loss Financial loss is more emo1onally painful than financial gain is enjoyable. Squirrel can -‐ Help manage investor expecta1ons of the vagaries of the market. © Brian M. Smith Fall 2011
- 26. Surprise and ExpectaIon People enjoy a good surprise, which can generate much more emo1onal excitement than a predictable event; however, the potency of surprise declines when it becomes expected. Squirrel can -‐ Use surprise to create appeal, excitement, and pleasure. © Brian M. Smith Fall 2011
- 27. Social Proof People believe the ac1ons of others reflect the correct behavior. For example, many people rely on informa1on from others, such as ra1ngs and reviews, before making a purchase. Squirrel can -‐ Provide social proof through broadcast nudges and community analy1cs. -‐ Sensibly use the bandwagon effect. © Brian M. Smith Fall 2011
- 28. primary research © Brian M. Smith Fall 2011
- 29. © Brian M. Smith Fall 2011
- 30. © Brian M. Smith Fall 2011
- 31. Help Claire make invesIng a daily habit. Claire Appleton Claire, 24, is fully employed but worries about her school loan debt. She dreams of buying a small cozy house before she turns 30. She knows she needs to seriously save, but the reali1es of life keep geBng in the way. Claire is at the grocery store. With her transac1on, she is prompted to invest $5.00 towards her investment account. How can we encourage her to do it? © Brian M. Smith Fall 2011
- 32. © Brian M. Smith Fall 2011
- 33. © Brian M. Smith Fall 2011
- 34. © Brian M. Smith Fall 2011
- 35. Present Gains -‐ “You can see where your money is going.” -‐ “PuBng in a liFle at a 1me and it’s not set in stone.” -‐ “Might end up saving more than an ini1al set amount.” -‐ “Simple makes me more aware.” -‐ “More confidence with myself.” -‐ “You are doing something posi1ve for your life.” Present Losses -‐ “A real concern when something comes up and you have to use your investment instead of saving long-‐term.” -‐ “Tighter budget in the short-‐term.” -‐ “Not being able to go out as much.” -‐ “Social life.” -‐ “Make you more emo1onal on your future if big losses.” -‐ “A real concern when something comes up and you have to use your investment instead of saving long-‐term.” -‐ “Possible that people would not feel like their investment is growing.” © Brian M. Smith Fall 2011
- 36. Future Gains -‐ “AFain goals at a faster rate.” -‐ “Less anxiety about money.” -‐ “Market knowledge.” -‐ “College for my kids.” -‐ “More op1ons for me financially.” -‐ “Be able to reach my goals in a simple way.” -‐ “Future genera1ons will be interested in inves1ng if it is so simple.” -‐ “No need for ‘Rich Dad Poor Dad.’” -‐ “Counters Social Security issue and other economic crises.” -‐ “LiFle effort.” -‐ “Easy way to save for the future.” Future Losses -‐ “What if the market crashes when I need the money?” -‐ “If I have a large amount of money, I may want to spend it.” -‐ “Anxiety about the market.” -‐ “Future losses could be bigger than what I put in.” © Brian M. Smith Fall 2011
- 37. Helping Claire -‐ “If she is saving for a house, maybe animate how her investment is helping build her house.” -‐ “Rent vs. own.” -‐ “Ability for her to track her progress.” -‐ “Show her that giving up small quan11es now could lead to a huge gain.” -‐ “Op1mism.” -‐ “Know when payday is and reminder her to invest.” -‐ “Keep her from spending her savings, because I always do.” © Brian M. Smith Fall 2011
- 38. “Get the youth started.” —Debo’ra Baskin © Brian M. Smith Fall 2011
- 39. The Mobile Wallet 35% 28% U.S. adults who own smartphones U.S. adults use loca1on-‐based services Pew Research1 Pew Research2 1 hFp://pewresearch.org/pubs/2054/smartphone-‐ownership-‐demographics-‐iphone-‐blackberry-‐android 2 hFp://www.pewinternet.org/Reports/2011/Loca1on.aspx?src=prc-‐headline © Brian M. Smith Fall 2011
- 40. The Mobile Wallet 511% Increase in Paypal mobile payment for Thanksgiving 2011 Paypal1 2 hFps://www.thepaypalblog.com/2011/11/shoppers-‐take-‐to-‐couch-‐commerce-‐on-‐thanksgiving-‐day/ © Brian M. Smith Fall 2011
- 41. The Nudge © Brian M. Smith Fall 2011