Open Source Investing

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I gave a guest lecture at the University of Virginia for an undergraduate class titled "Wall Street and Technology".

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  • Interesting and windy road6.5 - # of years since graduating from undergrad4 - # of companies I’ve worked for 6 - # of roles I’ve held in my career1 - # of times I changed careersSpent the last 3-1/2 years @ The Motley Fool QUESTION: Show of hands, who here’s heard of The Motley Fool? In your own words, what do you think they do? This is a great opportunity for me to gauge perceptionWhat I’ve done there and do now:DesktopsNetworkApp serversPhysically touching the web serversAnd involved in how the website is builtMaking sure it is done well and with the customer in mind.Learned about investing through osmosis…. And the clubs, classes, conversations, and guest speakers that TMF offers
  • My motivation for getting into technologyDriven by my view of technologyIt is a purposeful enabler.It can help people realize and achieve their potential if applied correctly. Which is the fundamental impetus of this lecture
  • open source investing defined[1’s and 0’s pic?]definition
  • QUESTION: Why is investing important?QUESTION: Who said this quote?
  • QUESTION:What were things like back when Oliver Stone’s 1987 movie (or ‘documentary’ as I like to call it) Wall Street came out?Used to have to pay a broker,be in the dark, They make money based on commission by trade volumeIf you wanted to DIY, it was pretty difficult - shareholders, 1 share, get annual reports - sift through data - that implies that you knew the inside baseball and how to place trades (or be like Warren Buffett and hang out in the basement of Standard and Poor’s basement and sift through their research) - needed written confirmation - teacher in ny calls their stock broker, they call their trading desk, trading desk calls trading floor - fax in trades, same process different medium - (can still do this today) - incentives of the broker aligned to volume of trades; not in best interest of the customer
  • Frameworks for investingPersonal Finance and Beginning Investing adviceBridging the gap between the two for the initiated
  • This enticed like-minded people, and a sense of community started to form.Much like a neighborhood watch keeps your neighborhood safe from burglars and hooligans, The Fool’s Discussion Boards helped keep your portfolio safe of greedy brokersYou start to see a sharing of investing ideas, success stories, failures, etc.
  • With all of this information at your fingertips, placing trades has changed too. No longer having to fax in trades, you can do real-time investing from your smart phone if you wished
  • Deep Blue – ’97, the computer that beat world chess champion Gary KasparovIt wasn’t just the computer, it was the 70 chess grandmasters and developers working together to build it, to make it smarterQUESTION: What does CAPS stands for?:Give away schwag for accuracy and creativityJester capsMarket capsCommunity association for picking stocks (unofficial)
  • The next evolution
  • High volume tradingTechnology driving the boat now – billlions of transactions dailyShops with “quants” to create applications to perform day trading and outperform the marketWe’re starting to see an evolution of this from this into the next phaseQUESTION: can anyone guess what this next thing is?
  • How you can get started
  • Open Source Investing

    1. 1. Open Source Investing<br />By Dave Haeffner<br />
    2. 2.
    3. 3. My aim (hah, get it?!) is that each of you leave here with either one useful idea, OR, one piece of Fool schwag.<br />If you end up leaving with both, then I consider this a phenomenal success.<br />If you end up with neither, then I have failed.<br />
    4. 4. To help give context, I’d like to share a bit about myself and my career, which has been a fairly windy road for such a short amount of time<br />
    5. 5. 6.5<br />4<br />6<br />1<br />
    6. 6. It’s been 6.5 years since I graduated from undergrad<br />I’ve worked for 4 different companies<br />Help 6 different roles<br />And have changed careers once thus far<br />
    7. 7. Spent over half my career at The Motley Fool, and have held 3 different roles while there<br />Worked in IT Operations and now in Software Development<br />Learned about investing along the way<br />But before I get too much into that, I’d like to share my view on technology<br />
    8. 8.
    9. 9. It is a purposeful enabler<br />It can help people realize and achieve their potential if applied correctly<br />Which is the fundamental impetus of this lecture<br />
    10. 10. Definition for open source investing on the Web:<br /><ul><li>The enablement of smarter and faster financial investment decisions and actions for individuals and groups through the availability of data, connectivity, and tools</li></li></ul><li>So what?<br />Why should Investing matter to the individual?<br />
    11. 11. “The most powerful force in the universe is compound interest.”<br />
    12. 12. Things were different back in the days of Gordon Gecko<br /><ul><li>If you wanted to DIY, it was pretty difficult
    13. 13. Had to know enough to be a shareholder and slog through annual reports
    14. 14. This implies that you knew the inside baseball and how to place trades (or be like Warren Buffett and hang out in the basement of Standard and Poor’s basement and sift through their research)
    15. 15. Had to call and/or fax trades into a broker which went to a trading desk which then went to the trading floor
    16. 16. Incentives of the broker were (and are) aligned to volume of trades; not in best interest of the customer</li></ul>Brokers struck me as more like used car salesmen more than anything.<br />
    17. 17.
    18. 18. Is there a better way? <br />How do you think things have changed since then?<br />
    19. 19.
    20. 20. Data has become ubiquitous. You just have to want to open your eyes.<br />With it, businesses emerged, leveraging free and premium data and creating content. Offering advice. Even creating investing methodologies around it.<br />
    21. 21. http://www.fool.com/how-to-invest/thirteen-steps/index.aspx<br />
    22. 22. A big portion of these sites are a sense of community<br />Like minded people for the first time could come together and talk about investing<br />It’s a lot like coffee shops. Collaborative spaces where diverse minds come together to share their ideas and new ones come about as a results<br />
    23. 23.
    24. 24. You also see DIY broker services at peoples’ fingertips.<br />So you have well informed, collaborative individuals, now able to place trades no longer by phone or fax, but by smart phone.<br />
    25. 25. Be your own broker<br />
    26. 26. By having a community of individual investors, an interesting evolution occurred; community intelligence<br />Back in ‘97 Kasparov was defeated by a computer: Deep Blue<br />This computer was not just a single entity, it was programmed by many people to accomplish this feat. So in essence, Kasparov was defeated by a community of diverse skill sets working together for a common goal<br />It’s this concept that led Motley Fool co-founder David Gardner to come up with the idea of CAPS<br />
    27. 27.
    28. 28. Technology has taken place of a lot of human interactions.<br />For example, high-volume trading is a common tactic<br />Leveraging quantitative analysts (“quants”), sexy algorithms, raw computing power, and some investment capital has led some firms to consistent market beating returns<br />
    29. 29.
    30. 30. But we’re starting to see the next evolution of high volume trading start to occur with qualitative data being used<br />Sentiment analysis of social networks for example<br />
    31. 31. http://twittersentiment.appspot.com/<br />
    32. 32. To put a nice bow on all of these points, I’d like to close out with these points<br /><ul><li>Compound interest is your friend
    33. 33. Don’t sweat it if you aren’t there yet, you can start tomorrow
    34. 34. There’s more information than you can possibly fathom
    35. 35. The technological landscape is continually evolving. It’s only a matter of time until Sky Net becomes real
    36. 36. As this keeps happening, be sure to keep asking one important question “So what?”_or_ What problem is this solving, why is it important?</li></li></ul><li>
    37. 37.
    38. 38. Dave Haeffner<br />Purposeful Technologist<br />The Motley Fool<br />dave@tourdedave.com<br />@TourDeDave<br />

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