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On investing -- how to broaden the possibilities, how to be strategic

Hi Dan and everyone :smile:
Yes, I followed some parts of the London Office from home…
Thanks for the links to the patents (Detail: If others want to find these patents then there’s no “s” in the middle of the first patent, simply 7835968 as far as I can see).

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Have corrected the error in the original post. Thanks!

Having read descriptions of parasite, and briefly reading the patents (not claiming to understand them fully). I still believe that the current code can only work (on average) where the positions taken are expected to appreciate in the context of the current markets. If you could point out that there have been specific shorts or positions in inverse funds taken, that would prove me wrong and at the same time make me feel better.
I would think that the funds recent performance would add some validity to this point.
I think for this discussion to go any further we would have to have a significant number of members say that

  1. the above might be true
  2. current financial markets may be at or approaching a critical point.

So what could RHC do? Many things. But any of the possibilities would be on some agreement that a divergence from the status quo is in order.
Otherwise we will just get lost in fruitless discussions.

I really hope someone will comment on this one way or another.

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Hi @josfirak!

You’ve actually made an accurate assessment in identifying that the portfolio put together with the recommendations typically has < 10% made through shorting strategies…

I’d also agree (& I think most others within RH) that it would make sense to diversify the approach - what should this look like?

The R&D crew have been busy designing and tinkering with underlying algo-plumbing but we are always looking for more diverse expertise, experiences and networks to get involved in this ongoing work.

The forums are a first public step in that direction - so, thanks again for getting straight in!

I also have a few questions and remarks about the parasite:

I agree. I also want to quote @glovink from the September meeting minutes

Our parasite, imho, should be radically negative. It
is nonsense to state that everything will be fine and that markets always bounce
back etc. No, markets do crash. And a lot of hedge funds indeed speculate on this,
and say so openly. Why not RH? Let’s forget the positive Deleuze and walk on to the
other side. Celebrate the Dark Deleuze! Negativism is a very healthy antidote and is
a good way to prevent depression!

This is important for me. I want to be laughing (to the bank) when all the big investors are crying come next market crash. Can we program the parasite to favor shorting against nasty companies like Glencore or Chevron? I want to make money from their misfortune. If RH is a hack, it needs to be anti, there needs to be a sting. This is the fun part. A hack stripped of anti-conventional intent is not a hack at all.

Something else: who knows what is in the portfolio? Can/should that be clearer?

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Can you say whether there has been any change in in the RHC’s investment strategy?
I was hoping to see more discussion on this topic particularly as the NAV continues to decline.

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@josfirak & @steven

Excellent & important questions.

I would really like to respond with a long long post; let’s see what I can do.

Having more investment instruments and having multiple strategies would be absolutely wonderful. And that is what we decided in the member meeting on December: to work toward diversifying and making the project more robust.

The problem is that the traditional coop does not suit that well. It is run by volunteers, as the AUM has not grown enough to support salaried positions. And it takes a lot of committed work to device & deploy new investment instruments. (In fact, it takes a lot of work just to keep the coop going as it is; just the "customer care” alone is several hours per week for 4-5 persons each). Not to speak of the needed general meetings and so on.

Fortunately, during 2015, we (meaning the volunteer team, the board and advisors, members and other people who have taken part in the open offices and other events) believe to have found a way out of this impasse. A goal and a means.

The goal is to continue Robin Hood as a project that evolves, automutates and takes new forms. The next step: the coop of the 21st century as a platform (like facebook or airbnb) owned and operated by its members/users. What if we had a platform, where your money would not sit in a bank, doing whatever the bank wants it to do, but doing what you tell it to do? What if we had a platform, where anyone could develop financial instruments, and launch them as apps for other members to use? A distributed platform like the blockchain. A platform where the success of one endeavour would feed into the success of others. There would be every opportunity to device different investment strategies and different ways in directing profits or other funding to projects. Equity crowdfunding with bells and whistles. No mandatory general meetings; everything happening on a peer-to-peer basis. We are very excited about this possibility.

The means: open sourcing and becoming more focused. Open sourcing is precisely what is happening here, in discourse. The idea is that both 1) the tasks of the coop 1.0 as it is can be divided among more people, making the coop more sustainable, and that 2) the development of the coop 2.0 can be sped up. Becoming more focused: since the spring, a group of people, most of them also volunteers in coop 1.0, have formed a start-up for-benefit company, so that they can concentrate fully on developing the platform. A separate entity, the start-up, is needed in order to gain access to external funding, manage risks and make commitment possible.

We (the volunteer team) are right now preparing a longer document on this process towards the coop 2.0 as a platform; it should be ready in a couple of days and will be posted here.

So, to finally to come to your questions, the fact of the matter is that the volunteer team is, at the moment, more excited about developing the next step, the platform, than tinkering with coop 1.0. It would seem a waste of efforts and quite unwieldly to try to add something beside the parasite, when in view we have a financial-social platform that could – at least potentially – do so much more: options, equity crowdfunding, venture communism, skill-sharing and collaboration, structured finance, something akin to basic income for its members, and so on.

Now that does not mean, in any way, that we should not be thinking about and developing alternative investing strategies. Quite the contrary. That is exactly what the platform is for.

Does that make any sense?

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@steven & @josfirak

More direct answers. :slight_smile:

We can’t program the parasite to do shorting & stuff, since it is it has its own logic, operated and programmed by Sakari Virkki. We can program something like the parasite to do shorting & stuff. In fact, the artists Goldin & Senneby are doing something like that. It would be wonderful to do a project with them. Who wants to take the lead?

The parasite is, of course, all the time changing its view on the market, according to the changes in the market. But its basic logic has not been changed. As for the portfolio, it probably should be more clear and open what is in it, and Sakari has discussed the porfolio in the monthly Newsletters in the past. On the other hand, the portfolio is what the parasite does or results in, so opening that in detail would tip the parasite’s hand.

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Thank you @Tere for your answer. I am beginning to understand the long-term ideas for RH. Very exciting, I won’t keep you off your work any longer!

I think my idea of a negative parasite was a bit naive, as it is already very dark, investing in everything as long as it makes money with a devil-may-care baddest-muthafucka-in-da-hood attitude, rather than my own post-hippie views of betting against evil companies.

The Zero Magic trick would be a first great addition to the RH umbrella, though: an activist hedge fund that purposely bets against unethical companies after learning Greenpeace/Avaaz is planning a major campaign ( engineering its own campaign is probably too risky as it can too easily be construed as insider trading). I wouldn’t know where to start, but yea, let’s try to develop this “app” on the new blockchain platform :exclamation: :grinning:

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Didn’t want to imply anything like that, sorry! I like what I/we are doing. :slight_smile: The point was just to emphasise that going forward we need new tools.

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Tere, thanks for your reply, and yes what you’ve said makes sense, all of it.
Joseph

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I echo the sentiment that a previous reference I made to shorting the market and Parasite was off base, and didn’t fully account for the logic of the parasite.

Just thinking aloud about strategy ( i have read quite a lot of the forum and modus operandi of RHC so apologies if this is covering what has been mentioned around the forum.)

If you are trying to bring more resources into the commons, isn’t the parasite in the hands of RHC alone, a tilt at windmills, (€150k out of a multi trillion dollar pot) Also, isnt the speed of distribution of funds creating a double whammy?

ie the parasite (just like all of us) is operating in an economic environment where every dollar you take out the Wall St system is likely to be replaced with more dollars from QE. And while it seems that only a small percent of every new QE dollar is going into the general economy, still, that whole new dollar diminishes the value of what the parasite has rescued from Wall St?

And the double whammy is that if the dispersal of funds takes many months, the value of those funds is given time to further diminish.

A couple of thoughts with strategy.

a) Is there a way to license the Parasite to other groups, for a multi parasite approach? Knowing how scurrulous these financiers are, even get certain players in Wall St to have a go at their competitors, and hope they can get out before it backfires on them in some unforeseen way.

b) My understanding is that RHC 2.0 is focused on blockchain projects that circumvent the Wall St / central banking hogwash.

Maybe use the Parasite as a strategic selling tool, in the sense of using the Parasite to attract multitudes to support the RHC 2.0 blockchain based projects.

When the time comes and there is a decent and successful portfolio of apps etc underway, show off the fruits of the energies that have been committed to dark investing, and quit the Parasite while it is ahead, as a demonstration of an unequivocal intent to focus all the brain power and creativity behind Parasite, into directly constructive and commons oriented blockchain financial projects.

I am thinking ahead and it could be very counter-productive in the public perception of the RHC 2.0 platform if the parasite takes chunks out of Wall St yet doesn’t relent being a dark agent while we are saying, hey we are the light, the good guys offering you cool and liberating and “ethical” financial instruments :smile: Bit like hackers who turn security contractors, if they turned out to be still hacking, how would that go down?

edit: When I say “ethical” I understand that is an unpopular / overly restrictive term at RHC, in this context, it could be replaced with “fair” which apparently is a concept that every human has an innate grasp of.

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Hi Andy! First the straight replies:
a) we as RHC can’t, just like that, since we use the parasite as per agreement with Sakari Virkki; in order to do something like that Sakari would have to agree.
b) yes, 2.0 does not necessarily have to have anything to do with Wall Street; it will be a set of tools for financial transactions, some of which might be, if the users/operators so wish, with Wall Street.

More generally, this line of thinking is one of the reasons why the next steps towards 2.0 feel necessary. The Parasite is great in many ways, both practically and in the thinking that underlies it, but it is not a “multitool”. As the members and the volunteers of the coop think that more options are needed, well, then we have to find new ways.

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Some Thoughts:

If Parasite does work as a recommendation engine as you say, I think its use could extend beyond investing. What it sounds like to me is that Parasite is essentially trying to select the most “hyped” capital (confidence in capital, both specifically and generally, is a strong factor in its value), and in the context of RHC, this selection is used to invest. This works because the value of capital is based on its expected future earnings, and the set of assets top investors are confident will earn a return would strongly overlap with the set of actual biggest earners. In fact, without some incredible feats of data collection and analysis, this is probably the best possible way for a program to capitalize based on market conditions.

Another potential way to programmatically capitalize, but not based on market conditions, would be to pick assets at random. This strategy could also take the high-frequency approach, depending on a high volume of marginal positions to add up to a large aggregate return.

With a different goal, I think Parasite could be useful, as well–if its goal were not to capitalize but to disrupt capitalization, Parasite could be useful for this, too. Whatever process is used for decapitalization could be guided by Parasite to make the most efficient use of whatever limited resources it has. The disruption of specifically the top investors’ capital would have the twofold effect of reducing not just the investors’ confidence in their investments, but confidence in investment generally.

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@RSalisbury You are actually very on point here.

Part of the ‘recommendation engine’ is that it looks at the relations and positions of things (therefore not just related to investing - for example, how would one look at competence across health care when considering allocation of resources).

That’s facepalm funny.

I also like this idea… but honestly with current organization of RH, not realistic it would get realised right now (with all hands on deck with the RHC train and development of RHU)

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I like this thinking,and I think there’s space for discussing these far out ideas. However I simply don’t understand how it could work, even conceptually. Could you elaborate your idea a little more? I like the goal but I don’t understand how anything like this could work?

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Capitalization essentially represents three things: Expected future earnings, a risk adjustment, and the discounting of the future value based on some discount rate. “Capital,” as in the money value of assets in capitalism, is the present value of a capitalized asset; it is the expected future earnings, less the discount rate, adjusted for risk. The goal of the capitalist is to accumulate capital (future earnings) faster than the average rate of accumulation (which is the rate of inflation). To do this, a capitalist needs assets that are expected to earn a profit, that are low risk.

On a strategic level, co-ops (and other liberatory organizations) will have to work together to form an organized power (not necessarily a state, but an organization that is conscious of its social power) in order to create a free society that can resist capitalism. At some point, this will have to involve the “decapitalization” of the organization/members; decapitalization can be achieved through eliminating debt, the cessation of market purchasing (meaning the development of an internal industry), increasing the risk of assets, or achieving a zero/negative rate of inflation. Parasite, and perhaps other tools like it, could direct the process of decapitalization, by prioritizing it according to the capitalists’ own expectations.

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On coops, the Resileince network suggests a kind of organized network of coops: https://medium.com/@resilience_me/resilience-a-fully-voluntary-wealth-sharing-network-6873c927736a

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@Tere, see also libertarian municipalism and similar ideas

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I am not quite sure how parasite works and how it is correlated with market. But in this untsable market situation and if parasite is correlated with markets I would use some market neutral strategies with parasites to diversify risk.