Jan 2, 2019 · 16m · a16z
a16z Podcast | How Technology Is Changing Investing
0:00 / 0:00
▶ Watch on YouTube →
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this a16z podcast episode, host Angela Strange joins OpenInvest co-founder Josh Levin and Quantopian CEO John Fawcett to discuss how software, open data, and algorithmic customization are disrupting traditional asset management and democratizing financial markets for retail and quantitative investors alike.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 3.3 Guest teaching 2.8 Guest disagreement 0.5 The host pushing back 1.3
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 10:01 John critiques index crowding
John expressively questions optimistic views on universal indexation, asking rhetorically when everyone doing the exact same thing in the market has ever led to a good outcome.
Hardest push from the host ▶ 9:02 Angela questions retail voting relevanceAngela refuses to accept the premise that retail shareholder voting matters without evidence, raising the counterargument that individual holdings are too diffuse to produce meaningful impact.
Biggest teaching moment ▶ 1:42 Josh reframes stock picking vs portfolio optimizationJosh clarifies that excluding target stocks is not stock picking, educating the host on how OpenInvest breaks down index vectors and tweaks correlated holdings to preserve market beta.
The host holds their own ▶ 9:45 Angela demonstrates AUM statistical contextAngela showcases domain expertise by citing exact industry growth metrics regarding the shift from passive to active assets under management over the past decade.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| OpenInvest and Custom Values-Based Portfolio Management | 2 | 3 | 0 | 0 | Angela asks basic exploratory questions about OpenInvest's platform mechanics. Josh educates the host on how adjusting correlated holdings maintains market beta while removing specific restricted stocks without active stock picking. | |
| Quantopian and Democratizing Quantitative Investment Strategies | 4 | 3 | 0 | 0 | Angela introduces a marketplace analogy comparing Quantopian to Airbnb to frame platform requirements. John explains how quant behavior in research versus backtesting differentiates successful trading algorithms from overfit ones. | |
| Evaluating Algorithmic Trading and Mitigating Overfitting | 3 | 2 | 1 | 4 | Angela cites institutional proxy voting statistics and challenges the assumption that retail votes have meaningful impact. Josh counters with real-world proxy examples like Exxon and Oracle. | |
| Analyzing the Active versus Passive Investing Shift | 4 | 3 | 1 | 1 | Angela sets up the discussion by citing passive investing AUM growth statistics. John and Josh break down market structure concerns and outline the post-fund future of personal finance. |
Statements from this episode (16)
Levin: Three megatrends are reshaping modern wealth management
“I think the three big mega trends in wealth management you should know about is a move towards passive investing. A move towards interest in socially conscious investing, and then just better digital tools, awesome digital interface.”
Fawcett: Half of Quantopian's new traffic lands on technical research discussions
“About half of our new traffic land on discussions about things like Markov chain models, or common filters in trading, or different research topics that people are trying out, or papers they're trying to reproduce on the platform.”
Fawcett: Successful algorithmic quants spend 100x more time on research
“We've noticed that the people who have good outcomes out of sample, when we're testing after they've created an algo, spend about a hundred times the amount of time on the research step.”
Fawcett: Quantopian timestamps user strategies to eliminate overfit algorithms
“So when someone comes to Quantopia, they actually are creating their strategy in the browser, you know, on our system. And so we're building this big database of strategies. And that one piece of information is incredibly important because it makes a bright li…”
Strange: 90% of institutional investors participate in proxy votes versus retail
“90% of the stats that just came out, 90% of institutional investors are very involved in proxy votes, whereas the number for retail is something very low.”
Levin: OpenInvest enables Tinder-style shareholder proxy voting via smartphone swipes
“We just released the ability for clients to vote in shareholder resolutions with a swipe on their smartphone, like Tinder”
Levin: Individual shareholders own nearly 80% of US equities markets
“Even just taking the individual shareholders directly and indirectly own nearly 80% of U.S. Equities markets.”
Levin: 62% to 63% of Exxon shareholders voted for climate risk reporting
“And there was actually a seminal vote last spring with Exxon on climate change, where 62, 63% of the votes were in favor of Exxon reporting on the risks of their business from a regulated two degree world.”
Strange: Passive investing grew from 20% to 33% of AUM in a decade
“About a decade ago, there were a fifth of assets under management which were passive. Now it's up to a third.”
Fawcett: Active asset management will always be required for institutional investors
“I think for institutional investors, there's a real need for actively managed portfolios because they have different needs, right? So they're not just trying to appreciate their assets. They have to be defensively posture. They have to be prepared for their ob…”
Levin: Investors will rent cloud strategies in a post-fund future
“There's a post fund future coming, right? Why are we all in these cookie cutter vehicles? Why is the banking system built on slogging them? Because you're pulling against certain costs, namely transaction costs. What happens as transaction costs go to almost z…”
Levin: 85% of millennials want value-aligned investing
“85% of millennials want to invest in companies that align with their values, right? It's not going away.”
Levin: 55-to-65-year-olds are OpenInvest's second-largest demographic
“Our second biggest segment is 55 to 65 year olds, and they're more focused on military and tobacco, and younger people have different issues.”
Levin: OpenInvest is onboarding a pension fund for mobile proxy voting
“We're currently onboarding an entire pension fund, and the pensioners themselves are going to be voting in real time on environmental and social political issues on their smartphones.”
Fawcett: Quantopian aims for total coverage of real-economy datasets within 10 years
“And the thing that we want to accomplish over the next 10 years is if you think about the explosion in data from the real economy, we want to have total coverage. We want every single data set that exists to have, you know, several humans look at it, try to ex…”