Jan

6

An interesting idea I heard is to apply open source principals to speculation.

I started thinking, where has open source historically been successful? Software. And it interesting to note that many of the titans in open source software were quite zealous left-libertarians who believe in things like "information wants to be free". Profit was not high on their lists. What we do here is, already, perhaps somewhat akin to this, but quite unstructured. There is a lot of thoughtful debate, but relatively few actionable investment ideas. But that's not to say that the debate doesn't spur profitable thought processes.

The problem with actual investment ideas is 1. trade signals dissipate once published, 2. investment is a bit like the Chinese civil service exam, in that one must state everything that one knows in order to answer the question successfully. That's probably why Izzy Englander settled on a. a track record, b. fiduciary checks, and c. some investment of his own assets in selecting managers, rather than heavy diligence of the investment ideas themselves.

Similarly, there is an analogy to the Chair's book. It was full of structural ideas, but not full of trade signals. I believe someone followed up by publishing a book of the Chair's trade signals. I do not know what impact that had upon the signals.

One could say that the theoretical academic finance arena is a little like the open source version. And the profit potential of published finance papers is… mixed.

Open source cars are probably somewhat about fulfilling the product desires of "hobbyists" and its interesting to see how that scales. But is "hot rod" design part of the spectrum of things like stabling a racing horse and sponsoring an off-broadway show, for which the rate of return is typically low, because the wealthy, intentionally or otherwise, provide subsidised funds for their passion.

Product design feedback, hobbyism, and scaling profitable products all have intersections, but blending them is difficult. Where this sort of thing has existed with fund managers is a creating a virtuous circle of high quality investors, who will sometimes feedback their own investment ideas, as it will improve their product experience.

Obviously one needs to counterbalance that against just upping the noise signal.


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