One of my favorite things about this story is the way it discretely slides an association between "Amazon engineer" and "has $50k to let go of 'forever' on a social experiment" across the table to the audience.
That's the real message that's going to be received by a large amount of the population reading this story as it makes the rounds on outlets like CNBC.
He totally is just some random guy. I know this, because I worked with him for a few years in Amazon Fulfillment. Just found out today that it was him that made this project (haven't talked to him in a while).
Toy money, i guess.
Its suprising who is a millionair and who isnt. In a car factory where my brother works, one of the workers, financing a house with his money and then houses with money from the house, became a millionaire without anyone in the above layer noticing.
So if he gets chewed out by one of his fore-masters or executives, they are - not knowing- chewing out somebody who could quit any time.
All it takes is 10-20 years of saving 30+% of your income. Most people balk at that savings rate, but anything white collar pays enough to have that sort of savings if you are willing to life a more modest lifestyle than your socioeconomic peers.
10 years later the interest you earn on it will be more than the 30% you are putting in.
This is probably it. I personally signed up for Robinhood based on this project. I'm already interested in stock trading though so it wasn't that big of a commitment from me but they do have a nice App and signup process compared to other financial trading outfits I've used.
For folks playing at home and wondering "What is Robinhood?"
From [1]
> Robinhood is a stock brokerage that allows customers to buy and sell U.S. listed stocks and ETFs with $0 commission. ... we are able to maintain a lean bottom-line and pass the savings along to you, the customer ... Robinhood is an SEC registered broker-dealer and member of FINRA & SIPC.
Yeah, Robinhood is mentioned quite a bit on his site, including a sign up referral link. Seems like their referral program gives you $10 for each signup.
Also he says if it hits $25K, then the game is over. So it's only $25K at real risk, not $50K. (True, the stocks could fall further before he liquidates.)
Also: anyone have an idea as to what regulations he is citing when he says if it drops below 50% he has to close the account? Is that a Robinhood thing, or an equities trading thing? As far as I know, there is no regulation limiting how much a person can lose on the market...
Makes me wonder if perhaps his account balance is $25k personal, and $25k matched by Robinhood for the stunt.
If I were Robinhoood, I'd try to be the facebook of financial startups- give every high school student a starting portfolio of fake stocks to manage through high school so they learn how to invest and manage money, then have avenues to have different "tabs" in their portfolio for real stocks they have gifted by family, and another for real ones they buy...
They can play with purchase what ifs in the stock sandbox, and plan and grow in the real tabs... among many many other things...
I did that with google finance about a decade ago and the financial crisis wiped me out. I wasn't even good at managing fake money.
Disclosure: I have started putting away some money in a vanguard Roth IRA now. I don't think about it too much because it is the minimum vtsax would let me invest anyways.
In my middle school course when we played "the stock market game", I just picked a spread of reasonable stocks at the start. Every time we could rebalance our portfolio, I just read. I didn't care about the game. Got first or second in the class, and thus free pizza, for it. Kinda continuing that with in my current investment life; invest in index funds, walk away.
But is investing in stocks something you would want high school graduates to pick up?
I always thought of stock-picking as something that the average Joe should be careful with. Trading on less information than insiders and slowly being eaten by fees and taxes. It's an under EV game.
Besides that there's the wisdom of crowds that will eventually follow the trends and invest irrationally (pump and dump). That's how bubbles are created.
When I was in highschool, I was attempting to corner the market on commodities - specifically wheat!
Every day I would log in and manage my account - I was a commodities broker and I managed to build a pretty powerful little empire with my savvy transactions.
While not as powerful when it came to ore... my wheat holdings were no laughing matter... that was until the day I smoked pot, dialed in and accidentally sold all my wheat holdings as opposed to buying up all the other supply - thus eliminating my monopoly on the galactic wheat trade...
Man, Trade Wars was a blast in the early nineties.
That's an interesting story and I'm sure you learned a lot through the experience. I'm also sure there are plenty others like you, to whom trading was educative.
But on the other hand I'm sure there are a whole lot of young people on the other side of things. Those who start learning about stock-trading and soon see it as a way to make money fast by taking huge risks. They get spammed by 500$ signup bonuses to various stock-trading platforms, they're presented with 100x leveraged trading options and such. I don't see much benefit in that.
What I think is young people should be taught how the market works with a huge grain of salt. Definitely not by letting them go wild with play-money since we all know what will follow up.
The Financial Industry Regulatory Authority (FINRA) in the U.S. established the "pattern day trader" rule, which states that if a stock trading customer makes four or more day trades (opening and closing a position within the same day) in a five-day period the customer is considered a day trader and must maintain a minimum $25,000 account balance.
I think you need $25k to be a day trader on Robinhood. So if it drops below that he can't trade the same way he would unless he adds more cash which I guess he isn't prepared to do.
You can trade with less. You can't day trade, defined based on the number of trades in a certain period. Some brokerages may enforce additional limits, but I've personally traded on NASDAQ via US brokerage accounts with less in them than that, so you certainly can do it.
Day trading has a specific definition in this context (can't remember if it's SEC, FINRA, or some other acronym), and refers to the buying and selling of the same security with a single day. That $2.5k Fidelity account will go out of its way to tell you that you're not allowed to do that.
Stopping you from trading on the account doesn't protect the value in the account (and makes it harder for you to take action that would protect it, too!)
Typically you're forbidden from increasing your equity loan on a margin call - closes are completely fine (So you can buy shorts, or sell longs, but the inverse is against the rules). I've never used robinhood, but I've been declared a PDT before.
No, that is not what stop-loss orders are for. A stop-loss order only puts a sell offer into the market when the market prices falls below a certain threshold, there is no guarantee as to what price someone will actually buy your shares at, or that anyone will buy them at all.
If you want to have a hard limit on the loss, you'll have to buy a put option.
Not sure why this is being voted down. A counterparty in an option agreement can become insolvent. This is typically analyzed under the name counterparty risk.
Much much much less common than a stock going down, but when large counterparties become insolvent, a lot of people start needing to write off big chunks of their positions.
A stop loss with no limit means "if the price hits X, then sell my shares for as low as 0.01/0.001" (same as a market sell order). You can verify this by imagining a single trade below the stop loss, then the only buy order being at 0.01.
If you put a limit on the stop loss then there's no guarantee it'll clear, but at least you won't sell for some ridiculously low amount.
The exchange might have circuit breakers that won't let a particular symbol change more than X% in a given period of time.
Don't waste your money and time trading individual stocks. Invest for your future with dollar-cost-averaging and buying ALL the stocks (AKA a diversified index-tracking fund with very low fees (less than 0.1%/year)).
$50k in RSUs annually is a decent target for a mid-level engineer (non-management). With overlap of grants after the first year and price appreciation of the stock, you can imagine how this can grow.
That said, I think Amazon has some unfriendly vesting terms compared to the SFBA-based companies I'm more familiar with.
I think so too. When it first launched I signed up for robinhood and tossed just 100 bucks to see how it worked. App needs a lot of work to be useful so I doubt I'll throw any more money at it. On the plus side, I am up ~4%
That was my first question too. What "engineer" has $50K sitting around to practically throw away? Then I remember, when it comes to tech reporting, "engineer" could mean anything on the spectrum between "7th code monkey from the left" to "CTO".
I think you misunderstood my point. I'm not at all surprised that he has $50k to do this with as an engineer (I could do the same). Engineers, as a class of people who work at companies like Amazon, are very well paid.
I was more commenting that many other people outside the industry are going to become familiar with this idea on a somewhat more visceral level now that it's at the point that CNBC is talking about it.
As an aside, you might be surprised at how many of those "seventh code monkey from the left" are clearing over $200k per year at Amazon. The last time I spoke to people I know at Google/Facebook I was hearing total annual compensation packages of about $250k for senior level in NY and CA.
If you don't have a family and aren't growing your spending habits to match your pocket you can easily have that much extra cash lying around (NB I hesitate to use words like "easily" because people tend to have an indignant reaction, but that doesn't really alter my point).
I think y'all are overestimating the risk. He isn't throwing it away. He's mentioned here that it's max 1 trade of 1 share every 5min. The initial portfolio is very diversified, so barring a concerted attack this experiment's returns likely won't be much different from a random actively managed mutual fund -- with the advantage of having no management fees and no trading fees either.
Everytime you buy and sell a stock even if the stock didn't move and no fee, you loose at least 0.01 usd per share because of the spread. Ie. Apple trades 123.45 to buy and 123.44 to sell.
Plenty of knowledge workers are able to effectively write off tens if not hundreds of thousands of dollars if they so pleased. No different than making a fun {car|house|vacation} purchase. People are wired differently, right?
he has 50k on the account, he can pay the platform fees. if the returns minus fees are higher than stock returns sans fees, it is game. and right now, it might as well be.
Bitcoin required a couple dollars per transaction, not to long ago.
You are overestimating his risk, right now, for stocks.
The current setup isn't likely to lose him much money. Throwing darts to pick your stocks will cause your stock portfolio to be surprisingly diversified.
Random stock pick is actually a not crazy investment strategy that is likely to get you the same amount of return as putting your money in an index fund.
Transaction fees in cryto, on the other hand, would cause him to lose 10k a month.
Thought a lot about this during the development period, but nothing materialized. I might do it someday but would probably need to ramp up the scoring algorithm first.
Why did you decide to do it with $50,000 and Robinhood instead of just creating a bot to trade stocks on an Investopedia stock simulator account? [0]
I mean, I understand that $50k might not be a lot for you, but if the aim is to see what the majority of random people on the internet feel like buying, while measuring the return of these decisions, this could be accomplished without putting up any actual money.
One of the reasons I decided to do this project in the first place is because nobody has ever done this before (at least based on my research), and I wanted to be the first. There are plenty of stock simulators out there, so fake money didn't sound appealing to me.
> The actual money aspect is why this blew up. No one would care if it was fake money.
Two things:
1. This is assuming it was done for the press coverage, and not just as a hobby project
2. If I were to do this, I don't think I'd advertise it was fake money. What's the difference anyway? It's not as if people on the internet benefit at all from the investment return. I always assumed this was more of a "Twitch plays Pokemon" thing than anything more serious.
I wasn't assuming it was about press coverage necessarily (though maybe it was), but that in order to be interesting it needs a critical mass of people participating. If it wasn't real money then that wouldn't happen.
Actually, those two bits are pretty small. Theres a ton of code all over github for interacting with Robinhood. The twitch chat API is really just IRC. Glueing those together was the easy part.
The more interesting and complicated components are the UI and the scheduling and a publish-subscribe module that I created, tho no plans to open source it anytime soon.
Actaully the pubsub part is pretty core to system overall. Basically I have a set of 'operations' modules each operating independently (gathering news, tweets, votes, stock quotes, etc). They publish that data over the pubsub system, so that all the subscribers (mostly in-memory caches) read and update accordingly.
Game events also get published through it (round end, trade placed, new round, etc)
Shouldn't really be any harder? 50k going in, pay taxes on profits, or get deductions on losses based on where things stand December 31st (that is, assuming there are any taxes at all before liquidation) ?
You need to report each trade to the IRS, plus some stocks are pass through in term of tax. Mainly oil stocks. It means you have to report their business expenses, profits, and revenues inside your own tax returns even with only 1 share. It's not a big deal, but that's result in lot of paperwork.
It's just how you do the accounting. For instance, you might buy a stock over time, and then sell it over time as the price is rising. You have to pay tax on those gains, but how you do it is a choice. You can do first-in-first-out, so the gains would be e.g. on the first 5 shares you bought vs. the first 5 you sold. You can also do first-in-last-out, which might make sense if you can get long-term capital gains rates on some trades.
It's kind of ridiculous, but most traders will have some sort of automated solution to help with it. The exchange you use should give you a nice report of your trades.
Currently working in Fintech, so my coworkers and I had talked about stockstream before. Had no idea it was you until I opened the link above and did a double take.
Coming back to Amazon Fulfillment soon. Just couldn't stay away.
The way your stream works I can't imagine you would lose that much, since the buys are in such small lots. There'd have to be a way for the users to make you go all in on a volatile stock to see those kinds of losses (or access to a sharper knife like options).
Anyway, it's an interesting experiment. Very popular over at /r/wallstreetbets.
There are no protections against trolls. At this point a dedicated group of less than a hundred could probably take over the vote.
I'd actually love to see more dedicated troll attacks. So far the main attack seems to buy $SEB since it's so expensive, but sometimes it later gets sold at a profit.
Personally, I've mentally written off the $50k so, I'll just be enjoying the show.
But how do you deliberately lose money? I think there's this idea that you could tank a portfolio with ease, but if that were true, shorting would be incredibly lucrative.
It's just as hard to lose money on stocks as it is to gain them (aside from racking up trade fees or something).
I find the experiment pretty interesting, how many people will try to make him go to zero? How many will want to make the value higher? If you were leveraging a pump and dump house how does that work? And home much can you trade at once? (all would seem to be a silly amount, but it has to be enough to make reasonable trades)
And how do you know it is actually real money? We used to do office stock pools where folks would start the month with "$100,000" and got two trades a day, one at noon and one when the market closed (easy to do on the west coast) at the end of the month the one with the most "money" would "win". It was fun and taught me a lot about market volatility (and that I would suck as a day trader :-)) but there was no actual requirement for money to actually trade hands. And even at $50,000 you're not buying or selling enough to move most stocks.
I've come across multiple papers investigating stock trading strategies, where they mentioned little or no effect for the actual strategy, but a significant positive effect for the opposite strategy.
Maybe this is the beginning of "Twitch Trading". If ppl like seeing other ppl playing video games, trading stocks/futures could find an audience. The question is what would be the incentive for a competent trader/algo to let ppl see it's trades.
As far as I know eToro already allows users to copy other traders strategies. The incentive for the trader to allow others to copy their strategy is likely some % gain based on the number of copyers, so if you develop a successful trading strategy and allow others to profit off it, you also profit. Just a hunch.
what would be interesting though, but much more of a niche, would be if some successful quant traders did an in-depth review of some "alpha" or strategy they ran some time ago, which is no longer profitable. They could discuss their tools, analysis , trading metrics, performance, and some discussion of why the strategy stopped working.
It would give a good window into the work-flow and skills required to do this successfully. Even if it's retrospective, going back a few years.
Possibly general solicitation of funds from retail investors. But I agree with you that if you're any good, you're not going to be asking retail for money, you're heading straight to UHNW individuals and whatnot.
I'm really curious what his streaming software looks like. I've always been interested in how stream video gets composited and what tools are available, but I'm too lazy to look into it.
Pretty easy: "The game is divided into voting rounds, each lasting 5 minutes. Every 5 minutes the top buy or sell command will be executed and one share will be bought or sold. You may only vote once per round."
Buying or selling a share is basically atomic, so there's no coordination needed apart from the overall portfolio. Looking at the portfolio, http://stockstream.live/portfolio.html , most positions are just a few shares.
It's a much smaller group of people in this case, so my guess is that the people who'll stick around are people who already do trading and are somewhat knowledgable.
There have been other x plays streams with a small number of viewers that did pretty well at slowly beating their games. When you have thousands of people like TPP did, you attract trolls who spam "down9" ;)
I guess it might depend on what timeline you're looking at? Generally, a more hands off approach to investing is better in the long run, so over the long run perhaps highly disorganized and taking forever to accomplish basic tasks would make for better investing?
Video games require relatively long sequences of coordinated actions to accomplish anything, though. In trading, every action is fairly self-contained in a few important ways, e.g. the ordering of actions doesn't matter much.
ha nice! I didnt know robinhood api was public. Any pointers?
Did you set it up as some formal entity or just through your personal account? Any pointers to learn about the restrictions. I'd love to so some interesting apps myself.
Its basically patent- trolling with ground. You buy enough to stop any construction process, dead in the water due to legal processes.
Now you can extort from any company going there, wanting to build something the money for the little area you sell + the money it would cost to restart construction elsewhere - 1$ + the legal fees saved by not going to court.
ProTip: You might want to share the wealth with local legislators later upon, to avoid having zoning-laws changed.
That's the real message that's going to be received by a large amount of the population reading this story as it makes the rounds on outlets like CNBC.