Kind: captions
Language: en
the following is a conversation with
richard craig founder of
numerai which is a crowdsourced hedge
fund
very much in the spirit of wall street
bets but where the trading is done
not directly by humans but by artificial
intelligence systems submitted
by those humans it's a fascinating and
extremely difficult machine learning
competition
where the incentives of everybody is
aligned
the code is kept and owned by the people
who develop it
the data anonymized data is very well
organized and made freely available
i think this kind of idea has a chance
to change
the nature of stock trading and even
just money management in general by
empowering people who are interested in
trading stocks
with the modern and quickly advancing
tools of machine learning
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as a side note let me say that this
whole set of events around
gamestop and wall street bets has been
really inspiring to me as a
demonstration
that a distributed system a large number
of regular people are able to coordinate
and collaborate
in taking on the elite
centralized power structures especially
when those elites are misbehaving
i believe that power in as many cases as
possible should be distributed
and in this case the internet as it is
for many cases
is the fundamental enabler of that power
and at the core what the internet in its
distributed nature represents this
freedom of course the thing about
freedom
is it enables chaos
or progress or sometimes both
and that's kind of the point of the
thing freedom is
empowering but ultimately unpredictable
and i think in the end
freedom wins if you enjoy this podcast
uh subscribe on youtube review it on
apple podcast
follow on spotify support on patreon or
connect with me
on twitter at lex friedman and now
here's my conversation with richard
craig
from your perspective can you summarize
the important events
around this amazing saga they've been
living through of wall street bets the
subreddit and gamestop
and in general just what are your
thoughts about it from technical to the
philosophical level
i think it's amazing it's like my
favorite story ever
like when i was reading about i was like
this is the best
um and it's it's also you know connected
with my company which we can talk about
but
what i liked about it is like i like
decentralized coordination
and looking at the mechanisms that these
are wall street bets
users use to hype each other up
to get excited to prove that that they
bought the stock and they're holding
um and and then also to see that
how big of an impact that that
decentralized coordination had
um it really was a big deal well you're
impressed by the distributed uh
coordination the collaboration amongst
like i don't know what the numbers are i
know numero
is looking at the data after all this is
over and done it'd be interesting to see
like from
uh a large-scale distributed system
perspective
to see how everything played out but
just from your current perspective
what we know is it obvious to you that
such
incredible level of coordination could
happen
where a lot of people come together and
distribute a sense there's an emergent
behavior that happens after that
no it's not at all um obvious and one of
the reasons is the
lack of kind of like credibility to
coordinate with someone you need to kind
of make
credible contracts or credible claims
so if you have um a username on uh
our wall street bets like some of them
are like deep value
is one of them that's an actual username
by the way we're talking about
there's a website called reddit and
there's subreddits on it
and a lot of people mostly anonymous i
i think for the most part anonymous can
create user accounts and then can then
just
talk on form like style boards you
should know what reddit is if you don't
know what reddit is check it out
uh if you don't know what red is maybe
go to uh
the ah sub subreddit first aww
with cute pictures of cats and dogs
that's my recommendation anyway
okay yeah that would be a good start to
reddit when you when you get into it
more go to our wall street vets
it gets dark quickly oh we'll probably
talk about that too
uh so so yeah so there's these users
and it's there's no contracts like
you're saying there's no contracts the
the
users are anonymous um but there are
little things that that do help
so for example if you've posted a really
good investment idea in the past
that exists on reddit as well and it
might have lots of upvotes
um and that's also kind of like giving
credibility to your next
to your next thing um and then they are
also putting up
screenshots uh like this this is the
these
i here's the trades i've made and here's
a screenshot now you could fake the
screenshot
but um but but still it seems like if
you've got a lot of karma
and you've had a good performance on the
community
it somehow becomes credible enough for
other people to be like you know what
he actually probably did put a million
dollars into this
and you know what i can i can follow
that trade easily
and there's a bunch of people like that
so you're kind of uh integrating all
that information together yourself
to see like huh there's something
happening here and then you jump
onto this little boat of like behavior
like
we should buy the stock or sell the
stock and then another person jumps on
another
person jumps on and uh all of a sudden
you have
just a huge number of people behaving in
the same direction it's like flock of
whatever birds
exactly what was strange with this one
it wasn't just let's all buy tesla
we love elon we love tesla let's let's
all buy tesla
because that we've heard before right
everybody likes
um tesla well now they do
um so what they did with this in this
case
they're buying a stock that was bad
they're buying it because it was bad
and that's really weird because that's a
little bit um
too galaxy brain for for a decentralized
community
how did they come up with it how did
they know that was the right one and the
reason they liked it
is because it had really really high
short interest
it had been shorted uh more than its own
uh
float i believe um and so they figured
out that if they all bought this bad
stock
they could short squeeze some hedge
funds
and those hedge funds would have to
capitulate and buy the stock at really
really high prices
and we should say that shorted means
that these are a bunch of people
when you short a stock you're betting on
the on the
you're predicting the stock's going to
go down and then you will make money if
it does
and then uh what's the short squeeze
it's really that
if you if you are a hedge fund and you
take a big short position
in a in a company um there's a certain
level
at which you can't sustain holding that
position
right there's no limit to how high a
stock can go but there is a limit to how
low
it can go right so if you short
something you have infinite loss
potential
and if the stock doubles overnight like
gamestop did
um you're putting a lot of stress
on that hedge fund and that hedge fund
manager might have to say
you know what i have to get out of the
trade and the only way to get out
is to buy the bad stock that they don't
want like they believe will go down
uh so it's an interesting situation
particularly because it's not zero sum
if you say let's make let's all get
together and make a bubble
in watermelons you buy a bunch of
watermelons the price goes up
it comes down again it's a it's a it's a
zero-sum game
if someone's already shorter to stock
and you can make them short squeeze
it's actually a positive sum game so yes
some redditors will make
a lot of money some will lose a lot but
actually the whole group
will make money and that's really uh
that's really why it's it was such a
clever thing for them to to do
and coupled to the fact that shorting i
mean maybe
you can push back but to me always from
an outsider's perspective
seemed i hope i'm not using too strong
of a ward but it seemed almost unethical
maybe not unethical maybe it's just the
thing to do
it's okay i'm speaking not from an
economics or financial perspective i'm
speaking from
just somebody who loves i'm a fan of a
lot of people i love celebrating the
success of a lot of people
and this is like the stock market
equivalent of like
haters i know that's not what it is i
know that there's efficient
you you want to have an economy
efficient mechanism for punishing
uh sort of over-hyped overvalued things
that's what shorthand guess is designed
for but just always felt like these
people
are just because they're not just
betting on the loss of the
company it feels like they're also using
their leverage and power
to manipulate media or just to write
articles
or just to hate on you on social media
and you get
to see that with the almost on so
so this is like the man the
people like hedge funds that we're
shorting are like the
the sort of embodiment of the
evil or just the bad guy the
overpowerful that's misusing their power
and here's the crowd the people that are
standing up and rising up so
it's not just that they were able to
collaborate
on wall street bets to sort of
effectively make money for themselves
it's also that this is like a symbol of
the people getting together
and fighting the centralized elites the
powerful
and that you know i don't know what your
thoughts are about that in general
at this stage it feels like that's
really exciting
that people have power
just like regular people have power at
the same time
it's scary a little bit because
you know just studying history people
could be manipulated by charismatic
leaders
and so like uh just like elon right now
is like manipulating
uh encouraging people to buy dogecoin or
whatever uh
the the like that can be good
charismatic leaders and there could be
bad charismatic legions
and so it's nerve wracking it's a little
bit scary
how much power subreddit can have to uh
destroy somebody because right now we're
celebrating they might be attacking or
destroying somebody that
everybody doesn't like but what if they
attack somebody
that is actually good for this world so
that and that's kind of the
the awesomeness and the
price of freedom is like
it could destroy the world or it can
save the world but at this stage it
feels like i don't know
overall when you sit back do you think
this was just a positive
wave of emergent behavior is there
something negative about what happened
well yeah the the cool thing is the they
weren't doing anything
the the reddit people weren't doing
anything um exotic
it was an it was a creative trade but it
wasn't exotic
it wasn't it was just buying the stock
okay maybe they bought some options too
but um it was the hedge fund that was
doing the exotic
thing um so i like that it was
it's hard to say well you know we've got
together
and we've put all pooled all our money
together and now there's a company out
there that's worth more
what's wrong with that yeah right but it
doesn't talk about
you know the motivations which is and
then we destroyed some hedge funds in
the process
is there something to be said about the
the humor
and the i don't know the edginess
sometimes viciousness of that subreddit
i haven't looked at it
too much but it feels like people can be
quite
aggressive on there uh so is there
what is that is that what is that what
uh freedom looks like
i think it does yeah you definitely need
to let people
the one of the things that people have
compared it to is the occupy wall street
right which is let's say you know some
very sincere
uh liberals like 23 years old
whatever and they go out with signs and
they they have some kind of case to make
um but this isn't sincere uh
really um it's like um a little bit more
nihilistic
a little bit more yolo um and therefore
a little bit more scary
because who's scared of the who's scared
of the wall street occupy wall street
people with the signs
right nobody but these hedge funds
really are scared i was scared
of the of the wall street bats people
i'm still scared of them
yeah the anonymity is a bit terrifying
and exciting
yeah i mean yeah i i don't know what to
do with it you know i've been
following events in russia for example
it's like there's a struggle between
centralized power and the distributed
i mean that's the struggle of uh the
history of human civilization right
but this on the internet just that
you can multiply people like
some of them don't have to be real like
you can probably create bots
like it starts getting me
me as a programmer i start to think like
me is one person
how much chaos can can i create by
writing some bots
yeah and i'm sure i'm not the only
one thinking that uh there's i'm sure
there's the hundreds thousands of uh
good developers out there
listening to this thinking the same
thing and then as that develops
further and further in the next decade
or two what impact does that have on
financial
markets on just destruction
of uh reputations
of just or politics you know the the
bickering of
left and right political discourse the
dynamics of that being manipulated by
you know the people talk about like
russian bots or whatever
i we're probably in the very early stage
of that right
exactly and uh this is a good example
so do you have a do you have a sense
that most of wall street bets
folks are actually individual people
right that that's the feeling i have is
there's just individual
maybe young investors just doing a
little bit of an investment but just on
a large scale
yeah exactly the reason i found out what
i've known about
wall street for a while but the reason i
found about gamestop was this
just i met somebody at a party who told
me about it and he was like 21 years old
and he's like it's going to go up 100
in the next one day we're talking about
in last year uh this was probably no
this was yeah a few days ago
yeah it was like maybe um maybe two
weeks ago or something
um so it was it was already high game
stuff
um but it was just strange to me that
there was someone telling me at a party
uh how to trade stocks who was like 21
years old
um and uh and i started
yeah i started to look into it and um
yeah he and he did make he made
i made 140 in one day uh he was right
and now he's um you know supercharged
he's a little bit wealthier
and now he's gonna look wait for the
next thing and this decentralized
entity is just gonna get bigger and
bigger and they're gonna together search
for the next thing
so there's thousands of folks like him
and they're going to probably search for
the next thing to attack
people that have power in this world
that sit there with power right now
in government and in finance in
any kind of position are probably a
little bit scared right now
and honestly that's probably a little
bit good
it's dangerous but it's good yeah it
certainly makes you think twice about
shorting and certainly it makes you
think it's right about putting a lot of
money into a short
like these funds put a lot into one one
or two names
and so it was very very badly risk
managed
do you think shorting is uh can you
speak
at a high level just for your own as a
person is it
good for the world is it good for
markets
i do think that the two kinds of
shorting evil shorting
[Laughter]
and chill shorting okay um evil shorting
is what melvin capital was doing um
uh and it's like you put a huge position
down
you get all your buddies to also short
it and you start making press
and um and trying to bring this company
down yeah
um and i don't think in some cases
p there's you go out to like fraudulent
companies say this company's a fraud
maybe that's okay like some but but this
they weren't even saying game stuff
they're just saying it's a bad company
and we're gonna bring it to the ground
bring it to its knees
um a quant fund like numerai
we always have lots of positions and we
never have a position that's like more
than one percent
of our fund so we actually have
right now 250 shorts um i don't know
any of them except for one because
it was one of the meme stocks but
yeah but it we shorting them
not to make them go we don't even want
them to go down
necessarily yeah that doesn't sound a
bit strange did i say that but
we just want them to to not go up as
much as our longs
right so by shorting
a little bit we can actually go along
more in the things we do believe in
so when we were going long in tesla we
could do it with more money than we had
because we would borrow from banks who
would lend us
money because we had longs and shorts
because we didn't have market exposure
we didn't have market risk
and so i think that's a good thing
because that means
um you know we can short the oil
companies and go along tesla and make
the future come forward faster
and i do think that's not a bad thing
so we talked about this incredible
distributed system
created by wall street bets and then
there's a platform
which is robinhood which allows the
investors to efficiently as far you can
correct me if i'm wrong but you know
there's those and there's others and
there's numerai that
allow you to make it accessible for
people to
invest but that said
robin hood was uh in a centralized way
applied its power to restrict trading on
the stock that we're referring to
uh do you have a thought on actually
like all
the things that happened i don't know
how much you were paying attention
uh to sort of the shadiness
around the whole thing do you think it
was forced to do it or was there
something shady going on
what are your thoughts in general well i
think i i want to see the alternate
history
like i want to see the counter factual
history
of them not doing that not doing it how
bad would it have gotten
for hedge funds how much more damage
could have been done
if the momentum of these short squeezes
could continue
um what happens when there
are short squeezes uh even if um
they're in a few stocks they affect kind
of all the other shorts too
and suddenly um brokers are saying
things like you need to put up more
collateral
so we had a short it wasn't gamestop
luckily it was blackberry and it went up
like 100 in a day
it was one of these meme stocks super
bad company the ais don't like it
okay they always think it's going down
what's a meme stock
a meme stock is kind of a new term for
these stocks that
catch memetic momentum on reddit
yeah um and so the meme stocks were
gamestop the biggest one game stonk as
elon calls it
amc um
and blackberry was one nokia was one
so these are high short interest stocks
as well so these are targeted stocks
that
some people say oh isn't it isn't it
adorable that these um
these people are investing money in
these companies that are
you know nostalgic it's like you're
going to the amc
movie theater it's like nostalgic it's
like no it's not why they're doing it
it's that they had a lot of short
interest that was the main thing
and so they were high chance of short
squeeze
in saying i would love to see an
alternate history do you have a sense
that that
what is your prediction of what that
history would have looked like well
you wouldn't have needed very many more
days of that kind of chaos
to to hurt hedge funds
um i think it's underrated how how
damaging it could have been
uh because when your shorts
go up your collateral requirements for
them go up
similar to robin hood like we have a
prime broker
that says said to us uh you need to put
up you know like forty dollars
per per hundred dollars of short
exposure
and then the next day they said actually
you have to put up you know
all of it 100 and we were like what
um but if that happens that if that
happens to
all the short all the commonly held
hedge fund shorts
because they're all kind of holding the
same things if that happens
not only do you have to cover the short
which means you're buying the bad
companies you need to sell your good
companies
in order to cover the short right so
suddenly like
all the good companies all the ones that
the hedge funds like are coming down
and all the all the ones that the hedge
funds hate are going up
in a cascading way
so i believe that if you could have had
a few more days
of game stock doubling amc doubling
you would have had more and more hedge
fund deleveraging
but so hedge funds i mean they get a lot
of but
they do you have a sense that they do
some good for the world
i mean ultimately so okay first of all
wall street bets itself is
a kind of distributed hedge fund new mri
is a kind of hedge fund
so like a hedge fund is a very broad
category i mean
like if some of those were destroyed
would that be good for the world
or is it would there be coupled
with the the destroying the evil
shorting would there be just a lot of
pain in terms of investment
in good companies yeah a thing i like to
tell people
if they hate hedge funds is i don't
think you want to re-run
american economic history without hedge
funds
so so on mass they're they're they're
good yeah
yeah they're good yeah you really
wouldn't want to uh because hedge funds
are kind of like
picking up um they're making liquidity
right in stocks
and so if you'd like if you love venture
capitalists
they're investing in new technology it's
so good you have to also kind of like
hedge funds
because they're the reason venture
capitalists exist
because their companies can have a
liquidity event when they go to the
public markets
so it's kind of essential that we have
them there are many different kinds of
them
i believe we could maybe get away with
only having an
ai hedge fund
but we don't necessarily need these evil
billions type hedge funds that make the
media and try to kill companies but we
definitely need hedge funds
maybe from your perspective because you
run such an organization
and uh vlad the ceo of robin hood
sort of had to make decisions really
quickly probably had to wake up in the
middle of the night kind of thing
uh you know and he also had a
conversation with elon musk
on clubhouse which i just signed up for
it was
it was a fascinating one of the great
journalistic uh performances of our time
with the
elon musk surprise for eve how hilarious
would it be if he gets a pulse
and then his wikipedia be like
journalist and uh
as you know i don't know if you can
comment on any aspects of that but like
if you were vlad how would you do things
differently what are your just
thoughts about his interaction with elon
how he should have played it
differently like i guess there's a lot
of aspects to this interaction one is
about
transparency like how how much do you
want to tell people about really what
went down
there's ndas potentially involved uh
how much on in private
do you want to push back and say no
you
to centralize power whatever the phone
calls you're getting which i'm sure
he's getting some kind of phone calls
that might not be contractual
like it's not contracts that are forcing
him but he was being
uh what do you call it like pressured
to behave in certain kinds of ways from
all kinds of directions like what
uh what do you take from this whole
situation
i was very excited to see vlad response
i mean it's pretty cool to have him talk
to
elon right and one of the things that
like struck me in the first like few
seconds of vlad
speaking was like i was like
is vlad like a boomer like
like but here we are like he seemed like
a 55 year old man
talking to a 20 year old yeah elon was
like the 20th
yeah and he's like the 55 year old man
you can see why citadel are nmr buddies
right like you can yeah you can see why
it's like this is a this is a nice
reason
that's not a bad thing it's like he's
it's like a he's got a respectable
professional attitude well he he also
tried to do like a jokey thing
like no we're not being ageist here
boomer uh but like you like uh like a 60
year old
ceo of bank of america would try to make
a joke for the kids that's what vlad
said exactly
yeah yeah i was like what is this this
guy's like what is he 30
yeah uh and i'm like this is weird
yeah um but i think maybe that's also
what i like about
elon's kind of influence on american
business is like he's super like
anti the professional right like why
why say why say you know 100 words
about nothing and so i liked how he was
cutting in and saying flat what do you
mean spill the beans bro
yeah so you don't have to be courteous
it's like the first principles thinking
it's like what the hell happened yes and
let's just
talk like normal people the problem of
course is
uh you know for elon uh it's cost them
what is it tens of millions of dollars
is tweeting like that
but perhaps it's a worthy price to pay
because ultimately there's something
magical about
just being real and honest and just
going off the cuff and making mistakes
and paying for them but just being
real and then moments like this that was
an opportunity for vlad to be that
and he felt like he wasn't do you think
there
do you think we'll ever find out what
really went down if there was something
shady
underneath it all yeah i mean it would
be sad if nothing shady happened
right but his presence made it shady
sometimes i feel like
that with mark zuckerberg the ceo of
facebook
sometimes i feel like yeah there's a lot
of shitty things that facebook is doing
but sometimes i think he makes it look
worse by the way he presents himself
about those things like i i honestly
think that a large amount of people at
facebook
just have a huge unstable chaotic system
and they're all
not all but mass are trying to do good
with this chaotic system
but the presentation is like it sounds
like there's a lot of
uh back room conversations that are
trying to manipulate people
uh and there's there's something about
the realness that elon has
that it feels like ceo should have and
vlad had that opportunity
i think mark zuckerberg had that too
when he was younger younger
and somebody said you got to be more
professional man you can't say
you know lol to an interview
uh and then suddenly he became like this
distant
person that was hot i'd like you'd
rather have him make mistakes
but be honest than be like professional
never make mistakes
yeah one of the difficult tires i think
is like marketing people or like pr
people
is you have to hire people that get the
fact that you can say lol on an
interview
or i you know take risks
as opposed to what the pr i've talked to
quite a few big ceos and
the people around them are trying to
constantly minimize
risk of like what if he says the wrong
thing what if she says the wrong thing
it's like what be careful it's
constantly like oh
like i don't know and there's this
nervous energy that builds up over time
with larger larger teams
where the whole thing like i visited
youtube for example everybody had talked
at youtube
incredible engineering an incredible
system but everybody's scared
like let's be uh let's be honest about
this
like madness that we have going on of
huge amounts of video that we can't
possibly ever handle there's a bunch of
hate on youtube
there's this chaos of comments a bunch
of conspiracy theories some of which
might be true
and then just like this mess that we're
dealing with and it's exciting it's
beautiful
uh it's a place where like democratizes
education all that kind of stuff
and instead they're all like sitting in
like trying to be very polite and saying
like well we're just uh want to improve
the health of our platforms like
it's like this yeah discussion like all
right man let's just be real let's
let's let's both advertise how amazing
this freaking thing is
but also to say like we don't know what
we're doing we have all these nazis
posting videos on youtube
we don't we don't know how to like
handle it and just being real like that
i suppose that's just the skill maybe it
can't be taught
but over time the whatever the dynamics
the company is it does seem like
zuckerberg and others get
worn down they just get tired yeah uh
they get tired of
not being real of not being real which
is uh sad
so let's talk about numerai which is an
incredible
company uh system idea
i think but good place to start
what is numerai and how does it work
so numero is the first hedge fund that
gives away
all of its data so this is like probably
the last thing
a hedge fund would do right why would we
give away a data it's like giving away
your edge
um but the reason we do it is because
we're looking for people
to model our data and the way we do it
is by obfuscating the data
so when you get when you look at
numerized data that you can download for
free
it just looks like like a million rows
and of
numbers between zero and one and you
have no idea what the columns mean
but you do know that if you're good at
machine learning or have done
regressions before you know that i can
still find patents on in this data even
though i don't know
i don't know what the features mean and
and the data itself is time series data
and even though it's obfuscated
anonymized
what is the source data like
approximately what are we talking about
so we are buying
data from lots of different data vendors
um
and they would also never want us to
share that data
um so we have strict contracts with them
so we only
we only can but it but it's the kind of
data you could never buy yourself
unless you had maybe a million dollars a
year
of budget to buy data so what's happened
with the hedge fund industry is
you have a lot of talented people
who used to be able to trade
and still can trade but now they have
such a data disadvantage
it would never make sense for them to um
to
to trade themselves but numerai by
giving away this obfuscated data we can
give them a really really high quality
data set that's
that would otherwise be very expensive
and they can use whatever
new machine learning technique they want
to find patterns in that data that we
can use in our hedge fund and so
how much variety is there in underlying
data we're talking about
uh i apologize if i'm using the wrong
terms but there's
one is just like the stock price the
other there's like options and all that
kind of stuff like the what are they
called order books or
whatever like i is is there
maybe other totally unrelated to
directly to the stock market data
like like the natural language as well
all that kind of stuff
yeah we were really focused on um stock
data that's specific to stocks so um
things like you can have like a p every
stock has like a p e ratio
for some stocks it's not as meaningful
but every stock has that
every stock has one year momentum how
much they went up in the last year
um but those are very common factors but
we try to get
lots and lots of those factors that we
have for many many years like 15
20 years history and
and then the setup of the problem is
commonly in quant called like
cross-sectional global equity
you're not really trying to say i want i
i believe this stock will go up
you're trying to say um the like
relative position of this stock
in feature space uh makes it not a bad
buy
in a in a portfolio so it captures some
period of time
and you're trying to find the patterns
the dynamics captured by
the data of that period of time in order
to make short-term predictions about
what's going to happen
yeah so our predictions are also not
that short we're not really um
caring about things like order books and
and tech data
not high frequency at all we're actually
holding things for quite a bit longer
so our prediction time horizon is about
one month we end up holding stocks for
maybe like three or four months
so i kind of believe that's a little bit
more like investing
than um then kind of plumbing
like to go long a stock that's mispriced
on one exchange and
shorter on another exchange that's just
arbitrage
but what we're trying to do is really
know know
know something more about the longer
term future of the stock yeah so from
the patterns from these like periods of
uh time series data you're trying to
understand something fundamental about
the stock not
like about deep value about like with
this big
in the context of the markets like
underpriced overpriced all that kind of
stuff
so like this is about investing it's not
about like
just like you said high frequency
trading which i think is a
fascinating open question for a machine
learning perspective but just to like
sort of build on that
so you've anonymized the data and now
you're giving away the data
and then now anyone can
try to build algorithms that
make investing decisions on top of that
data or predictions on the top of that
data
exactly and so that that's um
what is that so what does that look like
what's the goal of that what are the
underlying
principles of that so the first thing is
you know
we could obviously model that data
in-house right we can make
an xg boost model on the data um
and that would be quite good too but
what we're trying to do is by by opening
it
up and letting anybody participate we
can do
quite a lot better than if we modeled it
ourselves
and a lot better on the stock market
doesn't need to be
very much like it really matters the
difference between if you can make
10 and 12 in an equity market neutral
hedge fund
because the whole usually you're trying
you're charging two percent
fees so if you can do two percent better
that's like all your fees it's worth it
so
we're trying to make sure that we always
have the best possible model as new
machine learning libraries come out
new new techniques come out they get
automatically synthesized like if
there's a great paper
on supervised learning someone on
numerix will figure out how to use it on
numerized data
and is there an ensemble of
uh models going on or is it always
or is it more towards kind of like one
or two or three
like best performing models so the way
we decide on how to weight
all of the predictions together is
um by how much the users are staking on
them
oh yeah how much of the cryptocurrency
that they're putting behind their models
so they're saying
i believe in my model tr you can trust
me because i'm going to put
skin in the game um and so we can take
the stake weighted predictions from all
our users
add those together average those
together and that's a much better model
than any one model
in the in the sum because ensembling a
lot of models together is kind of the
key thing you need to do in investing
too
yeah so you're putting there's the kind
of duality from the user
from the perspective of a machine
learning engineer you're
it's both a competition just a really
interesting difficult machine learning
problem
and it's uh a way to to invest
algorithmically so like here and but
the the way to invest algorithmically
also is a
way to put skin in the game that
communicates to you
that your uh the the quality of the
algorithm
and also forces you to really uh
be serious about the models that you
build
so it's like everything just works
nicely together like
um i guess one way to say that is the
interests are aligned
exactly okay so uh it's just like poker
is not not fun when it's like for very
low stakes
but the higher the stakes the more the
dynamics of the system starts playing
out correctly
uh like as a small side note is there
something you can say about which kind
looking at the big broad view of machine
learning today or ai
what kind of algorithms seem to do
good in these kinds of competitions at
this time
is there some universal thing you can
say like
neural networks suck uh recurring you'll
know or suck transformers suck
or they're awesome like old-school
sort of more basic kind of classifiers
are better all the is there is there
some kind of conclusion
so far that you can say there is there
definitely something
pretty nice about tree models like like
xg
boost um and uh they just seem to work
pretty nicely on this type of data
uh so out of the box if you're trying to
come
100th in the competition in the
tournament maybe you would try it use
that
um but what's what's
particularly interesting about the the
problem that um
not many people understand if you're
familiar with machine learning
um this typically will surprise you when
you model our data
so um one of the things that
you look at in finance is you don't want
to be too exposed to any one
risk like even if
the best sector in the world to invest
in over the last 10 years was
tech you would not does not mean you
should put all of your money into tech
right so though if you train a model it
would say put all your money in stack
it's super good
but um what you want to do is actually
be very careful of how much
of this exposure you have to certain
features
so on numerix what a lot of people
figure out is actually if you train a
model
on this kind of data you want to somehow
neutralize or minimize
your exposure to these to certain
features which is unusual because if
if you did train um a stop light or stop
street
uh detection uh on computer vision
uh your favorite feature let's say you
could and you have an auto encoder and
it's figuring out okay it's going to be
red and it's got to be white
that's the last thing you want to be you
want to reduce your exposure to
why would you reduce your exposure to
the thing that's helping you your model
the most
and that's actually this
counter-intuitive thing you have to do
with machine learning on financial data
so reducing it's reducing your exposure
would help you generalize the things
that are
so basically financial data has
a large amount of patterns that appeared
in the past
and also a large amount of patterns that
have not appeared in the past
and so like in that sense you have to
reduce the exposure to red lights
uh to to the color red that's
interesting but
how much of this is art and how much of
it is science from your perspective so
far
in terms of as you start to climb from
the 100th position to the 95th
in in the competition yeah well if you
do you
make yourself super exposed to uh
one or two features you can have a lot
of volatility
when you're playing numeri you could
maybe very rapidly
rise to be high if you were getting
lucky yes and that's bit like the stock
market
sure take on massive risk exposure put
all your money into one stock
and you might make 100 but um
it doesn't in the long run work out very
well
and so um the best users are
are trying to stay high for as long as
possible and not not necessarily try to
be
first for a little bit so me
a developer machine learning researcher
how do i lex freeman participate in this
competition and how do others
i'm sure there'll be a lot of others
interested in participating in this
competition
what are let's see there's like a
million questions but like
first one is how do i get started
well you can go to numer.ai sign up
download the data and on
the data is pretty small in the data
pack you download
there's like an example script python
script
that just builds a xg boost model very
quickly from the data
and um so in a very short time you can
have an example
model is that a particular structure
like what uh is this model then
submitted somewhere so this
needs to be some kind of structure that
communicates with some kind of api
like how does the whole yeah how does
the your model once you've built it
wants to create a little
little baby frankenstein yeah how does
it then live in it's okay well we want
you to keep your baby frankenstein at
home
and take care of it we don't want it
okay so we you never
upload your model to us you always um
only giving us predictions so we never
see the code that wrote your model which
is pretty cool yeah that our whole hedge
fund is built
from models where we've never ever seen
the code um
but it's important for the users because
it's their ip
why they want to give it to us that's
brilliant so they've got it
themselves but they can basically almost
like
license the the predictions from that
yeah um so think about it what some
users do is they set up a
uh compute server and we call numeric
compute it's like a little aws
kind of image and you can automate this
process um so we can ping you we can be
like we need more predictions now
and then you you send it to us okay cool
so that that's
uh is that described somewhere like what
the preferred is the aws or whether
another cloud platform is there i mean
is there sort of
specific technical things you want to
say that comes to mind that
uh is a good path for getting started so
download the data
maybe play around see if
you can modify the basic uh
the algorithm provided in the
example and then you what set up a
little server on the aws
that then runs this model and takes
pings and then makes predictions
and uh how does your own money actually
come into play
doing the stake of cryptocurrency
yeah so you don't have to stake you can
start without staking and many users
might
try for months uh without staking
anything at all to see if their model
works on the real life data right and is
not over fit
um but then you can get numeraire
uh many different ways you can buy it on
um
you can buy some on coinbase you can buy
some on uniswap you can buy some on
binance
um so what what did you say this is uh
how do you pronounce it so this is the
numerai
uh cryptocurrency yeah nmr
nmr what's you just say nmr it is
it is technically called numero numero
i like it yeah but uh and more simple
nmr numero okay so and you could buy it
uh you know basically anywhere yeah so
it's a bit strange because sometimes
people
are like is this like pay to play right
and it's like
sword it's like yeah yeah you need to
put some money down to show us you
believe in your model
but uh weirdly we we're not selling you
the cr like you can't buy the
cryptocurrency from
us right it's like it's also we never
if you're if you do badly um we destroy
your cryptocurrency
okay that's not good right you don't
want it to be destroyed but
what's good about it is it's also not
coming to us
right so it's not like we win when you
lose or something like that
like we're the house like we're
definitely on the same team
yes you're helping us make a hedge fund
that's never been done before
yeah so again interests are aligned
there's no uh there's no tension there
at all which is
which is really fascinating you're
giving away everything and then the ip
is owned by
the sort of the the code you never share
the code that's fascinating
um so since i have you here and you said
a hundredth i didn't ask
out of how many so we'll just
but if i if i then once you get started
and you find this
interesting how do you then
win or do well but also how do you
potentially try to win if this is
something you want to take on seriously
from the machine learning perspective
not from a financial perspective
yeah i think um the first of all you
want to talk to the community people are
pretty open
uh we give out really interesting
scripts and ideas
for things you might want to try um and
uh but you're also going to need a lot
of compute probably
and so some of the best users are are
you know actually the very first time
someone won
on numerix i would i wrote them a
personal emails like you know you've won
some money
we're so excited to give you three
hundred dollars and then they said i
spend way more on the compute
[Laughter]
um but this is fundamentally a machine
learning problem first i think
is this is one of the exciting things i
don't know if we'll in
how many ways you can approach this but
really this is
less about kind of
no offense but like finance people
finance minded people they're
also i'm sure great people but it
feels like from the community that i've
experienced these are people who see
finance as a fascinating uh
problem space the source of data but
ultimately they're machine learning
people or
ai people which is a very different kind
of flavor of community and
i mean i i should say to that uh i'd
love to participate in this
and i will participate in this and i'd
love to hear from other people if you're
listening to this if you're a machine
learning person
you should participate and tell me uh
give me some hints
um how i can do well at this thing
because this boomer uh
i'm not sure i still got it but because
some of it is uh it's like
kaggle competitions like some of it
is certainly a set of ideas like
research ideas
and like fundamental innovation but i'm
sure some of it is like deeply
understanding getting like an
intuition about the data and then like a
lot of it will be like
figuring out like what works like tricks
i mean
you could argue most of deep learning
research is just tricks on top of tricks
but
there is uh some of it is just the art
of getting to know
how to work on a really difficult
machine learning problem
and i think what's important the
important difference with something like
a kaggle competition
where they'll set up this kind of toy
problem
and then there will be an out of sample
test like hey you did well out of sample
and this is like okay
cool um but what's cool with nimrod is
you're you're the out of sample is the
real live stock market
we we don't even know like we don't know
the answer to the problem well
we don't like you'll have to find out
live and so we've had
users who've like submitted every week
for for like
four years um because it's kind of a
interesting we say it's the hardest data
science problem on the planet right
and it sounds maybe sounds like maybe a
bit too much for like a marketing thing
but
it's the hardest because it's the stock
market it's like
literally they're like billions of
dollars at stake
and like no one's like letting it be
inefficient on purpose
so if you can find something that works
on numerous you really have something
that
that is like working on the real stock
market
yeah because there's like humans
involved in the stock market i mean this
uh you know you could argue there might
be harder data sets like maybe
predicting the weather all those kinds
of things but
the the fundamental statement here is
which i like i was thinking like is this
really the hardest data science problem
and you start thinking about that but
ultimately also boils down to
a problem where the data is accessible
it's made accessible made
really easy and efficient at
like submitting algorithms so it's not
just
you know it's not about the data being
out there like the weather it's about
making the data super accessible
making a building a community around it
like this is what imagenet did
exactly like it's not just there's
always images
the point is you aggregate them together
you give it a little title
there's a community and that's that was
one of the hardest right for a time
and most important data science problems
in the world uh because it was
accessible because it was uh
made uh sort of like
there's uh mechanisms by which like
standards and mechanisms about which to
judge your performance all those kinds
of things and numerize actually
step up from that is there something
more you can say about
why from your perspective it's the
hardest uh
problem in the world i mean you said
it's connected to the market so if you
can find
a pattern in the market that's a really
difficult thing to do because a lot of
people are trying to do it
exactly but there's also the the biggest
one is it's
it's non-stationary time series
we've tried to regularize the data so
you can find
patterns by doing certain things to the
features and the target
but ultimately you're in a space where
you don't
there's no guarantees that the
out-of-sample distributions will
conform to any of the training data
and and every single um
era which we call on the website like
every single era in the data which is
like sort of showing you the order of
the time
um it's it's even the training data is
has these same
same dislocations and um so
yeah it's and so and then there's yeah
there's so many things that might
um might you might want to try this this
like there's unlimited possible number
of models right
um and so
by by having it um be
open uh we can at least search that
space
it's zooming back out to the
philosophical you said that numerai is
uh
very much like wall street pets uh
is is there i i think it'd be
interesting to dig in why you think so
i think you're speaking to the
distributed nature of the two
and the power of the people nature of
the two
so maybe can you speak to the
similarities and the differences
and in which way is nimra more powerful
in which way
is wall street bets more powerful yeah
this is why the wall street bet story is
so interesting to me because it's like
feels like we're connected
yeah um and looking at how just looking
at the forum of wall street vets it's
i was talking earlier about how how can
you make credible claims
you're anonymous okay well maybe you can
take a screenshot how
or maybe you can upvote someone maybe
you can have karma on reddit
and those kinds of things make this
emerging thing possible
numerai it didn't work at all
when we started it didn't work at all
why
people made multiple accounts they made
really random models and hoped they
would get lucky
and some of them did yes staking
was our like solution to could we
could we make it so that we could trust
we could know which model people
believed in the most
and we could wait models that had high
stake
more and effectively coordinate this
group of people
to be like well actually there's no
incentive to creating bot accounts
anymore
either i stake my accounts in which case
i should believe in them
because i could lose my stake or i don't
and that's a very powerful thing
uh that having a negative incentive and
a positive incentive
can make can make things a lot better
and staking is like this
is this really nice like key thing about
blockchain
it's like something special you can do
where they're not even trusting
us with their stake in some ways they're
trusting the blockchain
right um so the incentives like you say
it's about making these perfect
incentives
so that you can have coordination to
solve one problem and
nowadays i i sleep easy
because i have less money in my own
hedge fund
than our users are staking
on their models that's powerful in some
sense from a human psychology
perspective it's fascinating that the
wall street bets worked at all right
that the the amidst that chaos emerging
behavior
like behavior that made sense emerged it
would be
fascinating to think if numerai style
staking could then be transferred to
places like reddit you know and not
necessarily for financial investments
but
uh like i wish sometimes people
would you know would have to stake
something
in the comments they make on the
internet yeah
like that's that's the problem with
anonymity is like
anonymity is freedom and power that you
don't have to you can speak your mind
but it's too easy to just be shitty
exactly and so this the i mean you're
making me realize from
like a profoundly philosophical
aspect numerous staking is a really
clean way to solve this problem
it's it's a really beautiful way of
course it only with numerai currently
works for a very particular problem
right not for human interaction on the
internet but
that's fascinating yeah there's nothing
for to stop people in fact we've open
sourced like the code we use for staking
in a protocol we call erasure
um and any if reddit wanted to they
could even use that code to do
have have enabled staking on um
our wall street pets and they're
actually researching now they've had
some ethereum grants
on how could they have more crypto stuff
in there in ethereum because wouldn't
that be interesting
like imagine you could um instead of
seeing a screenshot
like guys i promise i will not uh
sell my gamestop we're just going to go
huge
we're not going to sell at all
and here is a smart contract
which no one in the world including me
can
undo that says my i have staked
uh millions against this claim
um that's powerful and then what could
you do
and of course it doesn't have to be
millions it could be just very small
amount but then
just a huge number of users doing that
kind of stake exactly
that you know that could change the
internet it would change and demand wall
street
they would not they would never have
been able to they would still be short
squeezing
one day after the next every single
hedge fund collapsing
if we look into the future do you think
it's possible that numerai
style infrastructure where ai systems
backed by humans are doing the trading
is what the entirety of the the stock
market is or the entirety of the economy
is run by basically
this army of ai systems with
high level human supervision yeah the
thing is
that some of them could be could be bad
actors
um some of the humans no well these
systems could be
tricky so actually i once met a hedge
fund manager this is kind of interesting
he said
um very famous one and he said um
we can see sometimes we can see things
in the market where we
know we can make money but it will mesh
it up
yeah we know we can make money but it
will mess things up
and we choose not to do those things and
on the one hand maybe this is like oh
you're being super arrogant like
of course you can you can't do this but
maybe he can
and maybe he really isn't doing things
he knows he could do but would
change you know be pretty bad would the
reddit army
have that kind of uh morality
or concern for what they're doing
probably not based on what we've seen
the madness of crowds
there'll be like one person that says
hey maybe
and then they get trampled over uh
that's
that's the terrifying thing actually
this uh
a lot of people have written about this
is somehow that like
little voice that's human morality gets
silenced when we get into groups and
start chanting
yeah and that's terrifying but like i
think
uh maybe i misunderstood i thought that
um
you're saying ai systems could be
dangerous but you just describe how
humans can be dangerous
so which is safer so i mean one thing is
uh numero yeah so wall street bets these
kinds of like
these kinds of attacks like it's not
possible to
to model numerized data and then come up
with the idea from the model
let's short screen gamestop right it's
not even framed in that way it's not
like possible to have that idea
so but it is possible for like kind of a
bunch of humans so
i think there's it's numerix could get
very powerful
uh without it being dangerous but
wall street bets needs to get a little
bit more powerful
and it'll be pretty dangerous yeah well
i mean uh so
this is a good place to kind of think
about mri data today
uh and umri signals and what that looks
like in 10
20 30 50 100 years you know
like right now i guess maybe you can
correct me but this the data that we're
working with is like a window
it's a you know anonymized obfuscated
window into a particular aspect a time
period of the market
you know you can expand that more and
more and more and more potentially
you can imagine in different dimensions
to where it encapsulates
all the things that uh where you could
uh include kind of human to human
communication
that was available for like uh to buy
gamestop for example
on on wall street bets so maybe it's a
step back can you
speak to what is numerized signals
and uh what are the different data sets
that are involved
so with numeric signals um you're still
providing predictions to us
but you can do it from your own data set
so numeraid's all you have to model our
data to come up with predictions
numerous signals is whatever data you
can find
out there you can turn it into a signal
and give it to us
so it's a way for us to import signals
on data
we don't yet have and
and that's why it's particularly
valuable because it's
going to be signals you're only rewarded
for signals that are
orthogonal to our core signal
so you have to be doing something
uncorrelated and so
strange alternative data tends to have
that property
there isn't too many other signals that
are correlated with
um with uh you know what's happening on
wall street bets
that's not going to be like correlated
with the price to earnings ratio right
um and we have some users as of recently
as of like a week ago
there was a user that created i think
he's in india
he created a signal
that is scraped from wall street bits
and now we have that signal uh as
one of our signals in thousands
that we use at numerai and the structure
of the signal is similar so this is just
numbers and time series data
it's exactly and it's just like it's
kind of a you're providing a ranking of
stocks so you just say
give it a one means you like the stock
zero means you don't like the stock
and you provide that for five thousand
stocks in the world
and they somehow converted the the
natural language that's
in the wall street so they've come
exactly so there's they made they open
source this collab notebook
uh you can go and see it and look and so
yeah it's taking that
making a sentiment score and then
turning it into a rank
sentiment score yeah uh like this stock
sucks so the stock is awesome
uh and then converting that's that's
fast just even looking at that data
would be
fascinating so on the signal side what's
the
vision it's long term what do you see
that becoming
so we want to manage all the money in
the world
that's numerized mission and to get that
we need to have all the data
and have all of the talent like there's
no way
for the first principles if you had
really good modeling and really good
data
that you would lose right it's just a
question of how much do you need to get
to get really good so numerai already
has some really nice data that we give
out
this year we are 10xing that
and i actually think we'll 10x the
amount of data we have on numerix
every year for at least the next 10
years
wow so it's going to get very big the
data we give out
and signals is more
data people with any other random data
set
can turn that into a signal and give it
to us and in some sense that kind of
data is the edge cases the weirdness is
the
so you're focused on like the bulk yeah
like the main data and then there's just
like weirdness from all over the place
that just can enter through this
back door exactly and the it's
it's also um a little bit shorter term
so
right the signals are set about a seven
day time horizon
and the on numeric it's like a 30 day so
it's often for faster situations
you've written about a master plan and
you've mentioned which i love
uh in a similar sort of style of big
style thinking
you would like numerai to manage all of
the world's
money uh so how do we get there
from from yesterday to
several years from now like what's uh
what is the plan
so you've already started to allude to
it it's like get all the data and get it
uh
yeah all the talent yeah humans
models exactly i mean the important
thing to note there is
what would that mean right and i i think
the biggest thing it means is like uh
if there was one hedge fund um you would
have
uh not so much talent wasted
on all the other hedge funds like it's
super weird how the industry works
it's like one hedge fund gets a data
source and hires a phd
and another hedge fund has to buy the
same data source and hire a phd
and suddenly a third of american phds
are working at hedge funds
and we're not even on mars and like
so in some ways numerix it's all about
freeing up
people who work at hedge funds to go
work for elon
yeah and and also the people who are
working
on numeraid problem it feels like
a lot of the knowledge there is also
transferable to other domains
exactly our top one of our top users is
uh he works at nasa
jet propulsion lab yeah and he's he's
like amazing i went to go visit him
there
and it's like he's got like numerous
posters and he's like it's like it looks
like you know
the movies like it looks like apollo 11
or whatever
yeah the point is he didn't quit his job
to join full-time
he's working on getting us to jupiter's
moon that's his mission the europa clip
emissions
actually literally what you're saying
literally we he's smart enough that we
really want
his intelligence to reach the stock
market because the stock market's a good
thing hedge funds are a good thing
all kinds of hedge funds especially but
we don't want him to quit his job
so he can just do numerous weekends and
that's what he does he just made a model
and it just automatically submits to us
and he's like one of our best users you
mentioned
briefly that stock markets are good for
my sort of outsider perspective
is there a sense do you think trading
stocks
is uh closer to gambling or is it closer
to
investing sometimes it feels like it's
gambling
as opposed to betting on companies to
succeed and this is maybe connected to
our discussion of shorting in general
but
like from your sense the way you think
about it is it fundamentally still
investing
i do think um i mean it's a good
question
i it's i've also seen lately
people say this is like speculation is
there too much speculation in the market
and it's like
but all the trades are speculative like
all the trades have a horizon
like people want them to work um
uh so i i i would say that
um and there's certainly a lot of
aspects of
gambling uh math that applies to
investing okay
like one thing you don't do in gambling
is put all your money in one
bet you have bankroll management and
it's a key part of it
and small alterations to your bankroll
management
might be better than improvements to
your skill
um so there and then there are things we
care about in our fund like we want to
make a lot of independent
bets we talk about it like we want to
make a lot of independent bets because
that's going to be um
a higher sharp than if you have a lot of
bets that depend on each other like all
in one sector
um but but yeah i mean the point the
the point is that you want the prices of
the stocks to be
to be reflective of of how
of their value of the underlying value
yeah yeah you shouldn't have
there be like a hedge fund that's able
to say well
um i've looked at some data and all of
this stuff's super mispriced
like that's super bad for society if
it's if it looks like that to someone
i guess the the underlying question then
is uh
do you see that the market often like
drifts away
from the underlying value of companies
and it becomes a game in itself
like with these whatever they're called
like derivatives like the option like
you know um
options and uh shorting and all that
kind of stuff
it's like layers of game on top of the
actual
like what you said which is like the
basic thing that lost your bets was
doing which is like just buying stocks
yeah there are a lot of games that
people play
that are um in the derivatives market
and
i think a lot of the stuff people
dislike when they look at the history of
of what's happened they hate like credit
default swaps
or collateralized debt obligations like
these are the
these are the kind of like enemies of
and then the long-term capital
management thing it was like
it was like that 30 times leverage or
something just
that no one like you could just go to um
a gas station and ask anybody at the gas
station
is it a good idea to have 30 times
leverage and they just say no
the common sense just like went out the
window so
the i yeah i don't i don't i don't
respect
long-term capital management
okay but numero doesn't actually use any
derivatives
unless you call shorting derivative uh
we just we do put money into companies
we and that does help the companies
we're investing in it's just in little
ways
um we we really did buy tesla and it and
it did
and we were you know we were not um we
played some role in and that's it's
success
super small make no mistake but still i
think that's important
can i ask you uh a pod head question
which is uh
what is money man so
if we just kind of zoom out and look at
i said let's talk to you about
cryptocurrency which perhaps could be
the future of money
in general how do you think about money
he said numero
the division the goal is to to run
to manage the world's money what is
money
in your view i don't have a a good
answer to that
but it's definitely in my personal life
it's become
more and more uh warped um
and you start to care about the real
thing
like what's really going on here um
elon has talks about things like this
like what's what is a company
really it's like it's a bunch of people
who like kind of show up to work
together and like
they solve a problem and they might not
be a stock out there that
that that's trading that represents that
what they're doing but it's it's not the
real thing
um and being involved in crypto um
like i would early put in crowd sale of
of ethereum
and uh and all these other things and
different
crypto hedge funds and things that i've
invested in and it's like
it's just it's just kind of like it
feels like
how i used to think about money stuff is
just just like totally warped
um because you yeah you kind of
you stop caring about like the like
the price and you care about like the
product
so but by the product you mean like the
different mechanisms that money is
exchanged
i mean money is ultimately a kind of
little you know
on one it's a store of wealth but it's
it's also a mechanism of exchanging
wealth
but that like what what wealth means
becomes a totally different thing
especially with
uh cryptocurrency to where it's almost
like these little contracts these little
agreements these transactions between
human beings that represent
something that's bigger and just like
cash being exchanged 7-11 it feels like
yeah
maybe answer what is finance uh like
you it's what are you doing when you can
when you have the ability to to take out
a loan
you can bring uh a whole new future into
being
with finance uh if you couldn't get a
student loan
to get a college degree you couldn't get
a college degree like if you didn't have
the money
but now like weirdly you can get it with
and like yeah all you have is this like
loan which is like so now you can bring
you can bring a different future into
the world and that's how i when i was
saying earlier about if you rerun
american history
economic history without these these
these things like
you're not allowed to take out loans
you're not allowed to have have
derivatives you're allowed to have money
um it would just it just doesn't really
work and it's a really magic thing
how how how much you can do with finance
by kind of bringing the future
forward finance is empowering it's uh we
sometimes forget this but yeah it
enables innovation it enables big risk
takers and bold
builders that ultimately make this world
better you said you were early
in on cryptocurrency can you give your
high-level overview of
just your thoughts about the past
present and future of
cryptocurrency um yeah so my friends
told me about bitcoin and i
i was interested in um equities a lot
and i was like well
it has no net present uh value it has no
future cash flows
bitcoin pays no dividends um
so i really couldn't get my head around
it i like
that this could be valuable um
and then i but i did so i didn't feel
like i was early in cryptocurrency
in fact because i was like it was like
2014 it felt like a long time after
bitcoin
um and then but then i i really liked
some of the things that
uh ethereum was doing it seemed like a
super
visionary thing like i was reading
something that was um
that was just gonna change the world
when i was reading the white paper
um and i liked the different constructs
you could have inside of an ethereum
that you couldn't have on on bitcoin
like smart contracts and all that
exactly yeah and even the
they were yeah even spoke about
different uh
yeah different constructions you could
have yeah that's a cool dance between
bitcoin and ethereum of
it's in the space of ideas it feels so
young
like i wonder what cryptocurrencies will
look like in the future like if bitcoin
or ethereum
2.0 or some version will stick around or
any of those
like who's gonna win out or if there's
even a concept of winning out at all
is there uh a cryptocurrency that you're
especially
find interesting that uh
technically financially philosophically
you think
is is uh something you're keeping your
eye on
well i don't really i'm not looking to
like invest in cryptocurrencies anymore
um but i i
they are i mean the they're and many are
almost identical
i mean there's not there wasn't too much
difference
um between even ethereum and bitcoin in
some ways right
uh but there are some that i like the
privacy ones i mean i was like
i like z cash for it's like coolness
it's actually
um it's it's like a different kind of
invention
compared to some of the other things
okay can you speak to just briefly to
privacy what is there some mechanisms of
preserving some privacy of the
so i guess everything is public yeah is
that the problem
the yeah none of the transactions are
private
um and so you know even
like i have some of my i have some
numeraire
and you can just see it in fact you can
go to the website and says like
you can go like etherscan and it'll say
like numerai founder
and i'm like how the hell you guys know
this
so they can reverse engine near whatever
that's called yeah and so they can see
me move it too
they can see me oh why is he moving it
yeah um
so uh so but yeah zcash then
also when you can make private
transactions you can also play different
games
yes um and it's unclear
it's like what's quite cool about zcash
is i wonder what games are being played
there
no one will know uh so from uh from a
deeply analytical perspective
uh can you describe why dogecoin is
going to
win which it surely will like it it
very likely will take over the world and
once we expand out into the universe it
will take over the universe
uh or on a more serious note like what
are your thoughts on the recent success
of deutsche coin where
you've spoken to sort of the the meme
stocks the memetics of the whole thing
it feels like the joke
can become the reality
like the the meme the joke has power
in this world yeah it's fascinating
exactly
it's uh it's it's like
why is it correlated with elon tweeting
about it
it's not just elon alone tweeting right
it's like
elon tweeting and that becomes a
catalyst
for everybody on the internet kind of
like spreading
the joke right exactly the joke of it so
it's it's it's the
the initial spark of the fire for a wall
street
bets type of situation yeah and that's
fascinating because
jokes seem to spread faster than other
mechanisms
like funny is very effective
at uh captivating the uh like the
discourse on the internet
yeah and i think you can have um like
though i like the one meme
like doge i haven't heard that name in a
long time
yeah um like i think back to that meme
often that's like funny and every time i
think back to it
there's a little probability that i
might buy some
kind right and so i imagine you should
have millions of people
who have had all these great jokes told
them
and every now and then they reminisce oh
that was that was really funny and then
they're like
let me buy some uh wouldn't that be
interesting if like the entirety
if we travel in time like multiple
centuries
where the entirety of the communication
of the human species
is like humor like it's all just
jokes like we're high on probably some
really advanced drugs
and we're all just laughing non-stop
it's a weird like
dystopian future of just humor elon has
made me realize uh how
like good it feels to just not take
seriously every once in a while and just
relieve like
the pressure of the world at the same
time the reason i don't
always like when people finish their
sentences with lol
is like that you don't when you don't
take
anything seriously when everything
becomes a joke
then it feels like uh
that way of thinking feels like it will
destroy the world
it's like i i often think it like will
mim save the world to destroy because i
think
both the possible directions yeah i
think this is a big problem i mean
america i always felt that about america
a lot of people are telling jokes kind
of all the time
and they're kind of good at it um and
you take someone aside an american
you're like i really want to have a
sincere conversation it's like
hard to even keep a straight face yeah
because um
everything is so there's so much levity
so it's complicated i like how sincere
actually like your twitter
can be you're like i'm in love with the
world yeah
i get so much for it i'm not i'm
never gonna stop because i realize like
you have to be able to sometimes just be
real and be positive and just be
uh say the cliche things which
ultimately those things actually capture
some fundamental truths about
life yeah but it's it's a dance and i
think elon does a
a good job of that now from an
engineering perspective of being able to
joke but every once you know what
mostly to pull back and be like here's
real problems
let's solve them and so on and then be
able to jump back to a joke
so it's uh it's ultimately i think i
guess a skill that we
have to learn i uh but i guess your
advice is to invest
everything uh anywhere listening owns
into deutsche coin
that's what i heard from this yeah
exactly yeah
our hedge fund is unavailable uh just go
straight to dogecoin
you're running a successful company and
it's just
interesting because my mind has been in
that space of uh
potentially just being one of the
millions other entrepreneurs
uh what's your advice on
how to build a successful startup how to
build a successful company
i think that one thing i i do
like and it might be a particular thing
about america but like
there is something about like playing
tell people what you
really want to happen in the world like
don't
stop it it's not it's not gonna make it
um like if you're asking someone to
invest in your company
don't say i think um maybe one day we
might make a million
dollars um when you actually believe
something else
you actually believe you're actually
more optimistic but you're
toning down your optimism because you
want to appear
um like low risk
but actually it's super high risk if
your company becomes mediocre
because no one wants to work in a
mediocre company no one wants to invest
in mediocrity
um so you should play the real game um
and obviously this doesn't apply to all
businesses but if you play a
venture-backed
startup kind of game like play for keeps
play to win
go big um and it's very hard to do that
i've always feel like um
i yeah i start you can start narrowing
narrowing your focus
because 10 people are telling you you
know you got to care about this
boring thing that won't matter five
years from now and
you should push back and do the real
play the real game
so be bold so both i mean there's a
there's an interesting duality there so
there's
the way you speak to other people about
like your plans
and what you are like privately just
in in your own mind and maybe it's
connected with what you're saying about
yeah sincerity as well like if you if
you appear to be
sincerely optimistic about something
that's big or crazy it's putting
yourself up to be kind of like ridiculed
or something yes
and so if you say my my mission is to um
yeah go to mars it's just so bonkers
that uh
it's hard to say it is but uh
one powerful thing just like you said
is if you say it and you believe it
then actually amazing people uh
come and work with you exactly it's not
just skill but
the the dreams there's something about
optimism that
uh like that fire that you have when
you're optimistic of
actually having the hope of building
something totally cool something totally
new
that when those people get in a room
together like they can actually do it
yeah yeah there's yeah there's
that's uh and also makes life really fun
when you're in that room
so all that together ultimately
i don't know that's what makes this
crazy ride of a startup really
uh look fun and elon is an example of a
person who succeeded at that
there's not many other inspiring figures
which is sad
i used to be a google and there's uh
there's something that happens that
sometimes when the company grows
bigger and bigger and bigger where that
kind of ambition kind of quiets down a
little bit
yeah you know google had this ambition
still does of making the world's
information accessible to everyone
and i remember i don't know that's
beautiful
i i still love that dream of
that you know they used to scan books
but just in every way possible make the
world's information
accessible same with wikipedia every
time i open up wikipedia
i'm just awe inspired by how
awesome humans are man and creating this
together i don't know what the meetings
are over there but
it they it's just beautiful like what
they've created is
is incredible and i'd love to be able to
be part of something like that
and you're right for that you have to be
bold and there's
and strange to me also i think you're
right that there's how many boring
companies they are
right something i talk about especially
in fintech it's like
why am i excited about this is so lame
like what is this isn't even like
important even if you succeed this is
going to be like
terrible yeah this is not good um and
it's just strange how
people can kind of get fake enthusiastic
about like boring ideas
yeah when there's so many bigger ideas
that um yeah i mean you read these
things like this company raises money
and it's just like that's a lot of money
for the worst idea i've ever heard
some ideas are uh really big so like i
worked on autonomous vehicles quite a
bit
and there's so many ways in which you
can present that idea to yourself
to the team you work with to just yeah
like to yourself when you're quietly
looking in the mirror in the morning uh
that's really boring
or really exciting like if you're really
ambitious with autonomous vehicles
there it it changes the nature of like
human robot
interaction it's changing the nature of
how we move forget money if you get all
that stuff it changes like
everything about robotics and ai machine
learning
it changes everything about
manufacturing i mean the cars the
transportation is so fundamentally
connected to cars and if that changes
it you're changing the fabric of society
of movies of
everything and if you go bold and take
risks and go
be willing to go bankrupt with your
company
as opposed to cautiously you could you
could really change the world and it's
so sad for me to see all these
autonomous companies
thomas vehicle companies they're like
really more focused about
fundraising and kind of like smoke and
mirrors they're really afraid they're
the the entirety of their marketing is
grounded in fear
and presenting enough smoke to where
they keep raising funds so they can
cautiously
use technology of a previous decade or
previous two decades
to kind of test vehicles here and there
as opposed to do
crazy things in bold and go huge at
scale
to huge data collection i mean um
yeah so that's just an example like the
idea can be big but if you don't allow
yourself
to take that idea and think really big
with it
uh then you're not gonna make anything
happen yeah you're absolutely right
in that so you you've been connected in
in your
work uh with a bunch of amazing people
how much interaction do you have with
invest with investors like
that whole process is an entire mystery
to me is there some people that just
have influence on the trajectory of
your thinking completely or is it just
this
collective energy that they behind the
company
yeah i mean i i came here and i i
i was amazed how yeah people would i was
only here for a few months and i met
some incredible investors
and i'd almost run out of money and uh
once they invested i was like i
am not gonna let you down and i was like
okay i'm gonna send them like an email
update every like three minutes
yeah and then they don't care at all so
they kind of wanna
i don't know like so as for some i like
it when it's just like they're always
available to talk
but um a lot of building a business
especially a high-tech business
um there's little for them to add
right there's little for them to add on
product there's a lot for them to add on
like business development
and if we are doing product research
which is for us
research into the market research into
how to make a great hedge fund
and we do that for years
there's not much to to tell the
investors so they're basically is like
i believe in you there's something i
like the cutter your jib
there's something in in your idea in
your ambition
and your plans that i like and it's
almost like a pat on the back
it's like go go get em kid yeah it is a
bit like that
uh and that's cool uh that's a good way
to do it i'm glad they do it that way
um like the one in meeting i had which
was like really good with this was
meeting howard morgan uh who's a
actually a co-founder of renaissance
technologies in the like 1980s
and worked with jim simons and um
he he he was in the room and i was
meeting some other guy and he was in the
room
and i was explaining uh how quantitative
finance works i was like so you know
you they use mathematical models and
then he was like i
yeah i i started renaissance i i know a
bit about this
and then i was like oh my god um
so yeah but then and then i think he
kind of said well
yeah he said well because i was talking
he was working at first round capital
as a partner and they kind of said they
didn't want to invest
um and then i wrote a blog post
describing the idea and i was like i
really think you guys should invest and
then they end up
oh interesting you convinced them all
that yeah because they're like we don't
really invest in hedge funds and i was
like
you don't see like what i'm doing this
is something so a tech company not a
hedge fund right
yeah numerous brilliant it's when it
caught my eye there's something special
there so i really do
hope you succeed and obviously it's a
risky thing you're taking on
the ambition of it the size of it but i
do hope you succeed
you mentioned jim simons um he comes up
in another world of mine
really often on the he's just a
brilliant guy
on the mathematic side as a
mathematician but he's also a brilliant
finance hedge fund manager guy have you
gotten a chance to interact with him at
all
have you learned anything from him on
the math
on the finance on the philosophy life
side of things
um i've played poker with him it was
pretty cool it was like um
actually in the show billions they kind
of do a little thing about this
poker tournament thing with all the
hedge fund managers and that's real life
thing um and they have a lot of like
world series of bracelet
what sort of poke bracelet holders but
it's kind of jim's thing
um and um i met him there
and uh yeah it was kind of brief but i
was just like
he's like oh how do you why are you here
and i was like oh howard sent me you
know he's like
go play this tournament meet some of the
other players
and then um was it texas hold him yeah
texas hold him tournament yeah
like do you play poker yourself or was
it yeah i do i mean it was crazy and the
on my right was the ceo who's the
current ceo of renaissance
peter brown um and peter mueller
who's a hedge fund manager at pdt
uh and yeah i mean it was just like and
then you know
just everyone and then all these brace
world series like people i know from
like tv
um and robert mercer who's
crazy uh he he's the guy who
who donated the most money to trump
um and he's just like it's a lot of
personalities character yeah
geez that's crazy um so it's quite cool
how yeah like the
it was really fun and then i managed to
knock out peter muller i have a
uh i got a little trophy for knocking
him out because he was a previous
champion in fact i think he's won the
most and he's won three times
super smart guy um but
uh but but i will say jim outlasted me
in the tournament um and
they're all extremely good at poker yeah
um but they're also so is a ten thousand
dollar buy-in
um and i was like this is kind of
expensive
uh but it all goes to charity jim's
math charity but then the way they play
they have like rebuys
and like they all do a ton of
rebuys this is for charity
yeah so um immediately they're like
going all in and i'm like
man like so i end up you know adding
more as well
uh so this is like you couldn't play at
all without doing that
yeah the stakes are highest but you're
you're connected to a lot of these folks
they're
kind of titans of just
uh of economics
and tech in general do you feel a burden
from this you're a young guy
i did feel a bit out of a place there
like um
the company was quite new and
they also don't speak about things right
so it's not not like going to meet
an uh famous rocket engineer who will
tell you how to make a rocket
they do not want to tell you anything
about how to make a hedge fund
it's like all secretive and that part i
didn't like
um and they were also kind of making fun
of me a little bit
like they would say uh like they'd call
me like i don't know the bitcoin kid
or yeah um and then they would say even
things like
uh member peter yeah said to me
something like i don't think ai is going
to have
a big um role in finance um and i was
like
hearing this from the ceo of renaissance
was like weird to hear because i was
like of course it will
and he's like but it but he can see he's
i can see it having a really big impact
on things like self-driving cars right
but finance
it's too noisy and whatever and so i
don't think it's like the perfect
application
and i was like that was interesting to
hear because it's like and that i think
it was that same day
that um libra i think it is
the poker playing ai started to beat
like the humans yeah
so it's kind of funny hearing them like
say oh i'm not sure i could ever
get attack that problem yes and then
that very day is attacking the problem
of the game we're playing well there's a
kind of a magic
magic to um somebody who's exceptionally
successful
looking at you giving you respect but
also saying that
what you're doing is not going to
succeed in a sense
like they're not really saying it but i
tend to believe
from my interactions with people that
it's a kind of prod to say
like prove me wrong yeah that's
ultimately that's that's how those guys
talk they they see good talent and
they're like
yeah and i think they're also saying
it's not going to succeed
quickly in some way they're like this is
going to take a long time
um and maybe maybe that's good to know
and certainly ai in in trading
that's one of the most so uh
philosophically interesting questions
about artificial intelligence and the
nature of money
because it's like how much can you
extract in terms of patterns
from all of these millions of humans
interacting
using this methodology of money
it's like one of the open questions in
artificial intelligence in that sense
you converting into a data set is one of
the biggest gifts
to uh the research community to the
whole anyone who loves
data science and ai this is uh
this is kind of fascinating i'd love to
see where this goes actually i think i
say sometimes
long before agi destroys the world a
narrow intelligence will win all the
money in the stock market
like a wave like it's just a narrow yeah
um
and i wanna i don't know if i'm gonna be
the one who invents that so i'm building
numerai
to make sure that that narrow ai you
know uses our data
so you're giving a platform to where
millions of people can participate
and do build that narrow ai
themselves people love it when i ask
this kind of question about books
about ideas and philosophers and so on
i was wondering if you had
books or ideas
philosophers thinkers that had an
influence on your life when you were
growing up
or just uh today that you would
recommend that people check out blog
posts
uh podcasts videos all that kind of
stuff is there something that just kind
of had an
impact on you that you couldn't
recommend a super
kind of obvious one that um
i really what i was reading zero to one
while coming up with numerai it's like i
was like halfway through the book
um and i really do like a lot of the
ideas there and it's it's also about
kind of thinking big and
um uh and also it's like
peculiar little book it's like why like
this little picture of the hipster
versus unabomber and it's it's a weird
little book so
i like there's kind of like some depth
there in terms of a book on a
if you're thinking of doing a startup
yeah that's a good book a book i like
a lot is um maybe my favorite book
is david deutsch's beginning of infinity
um i just found that so
optimistic it puts you everything you
read in science
it like makes the world feel like kind
of colder because the
like it's like you know we're just just
coming from evolution
and uh coming from nothing has nothing
should be this way or whatever and
humans are not very powerful we're just
like scum on the earth
and the way david deutsch sees things
and argues that he argues them with the
same rigor
that the cynics often use and then
has a much better conclusion um that
uh you know some of the statements of
things like you know anything that
doesn't violate the laws of physics
can be solved like so ultimately
arriving in a hopeful
uh like a hopeful yeah without being
like
um a hippie you mentioned kind of advice
for startups is there
in general whether you do a startup or
not you have a device for young people
today
you're like an example of somebody who's
paid their own path
and were i would say exceptionally
successful is there advice
somebody who's like 20 today 18
undergrad or thinking about going to
college
or in college and so on um that you
would give them
i think uh i often tell young people
don't start companies
is it no don't start a company unless
you're prepared to make it your life's
work
like that's a really good way of of
putting it
and a lot of people think well you know
um this semester i'm gonna take a
semester off and in that one semester
i'm gonna start a company and sell it or
whatever right and it's just like
what are you talking about it doesn't
really work that way you should be like
super into the idea
so into it that you want to spend a
really long time on it
um is that more about psychology or
actual time allocation like is it
literally
the fact that you need to give a hundred
percent for potentially years
for it to succeed or is it more about
just the mindset that
that's required yeah i mean i think well
any i think yeah you don't want to have
certainly don't have a plan to sell the
company
um like quickly or something what's like
oh it's like a company that has a very
it's like a big fashion component like
it'll only work now it's like an app
for something um
so yeah i that's that's a big one and
then i also think
something i've thought about recently is
i had a job as a quant
at a fund uh for about two and a half
years
and part of me thinks if i had spent
another two years there
i would have learned a lot more
and had even more knowledge to to be
where
to basically accelerate how long
numerous took so
the idea that you can sit in an
air-conditioned room
and get free food or even sit at home
now in your underwear
and make a huge amount of money and
learn whatever you want
and get it's just crazy it's such a good
deal
yeah oh that's interesting that's the
case for i was terrified of that like at
google i thought i would become
really comfortable in that
air-conditioned room
and that i was afraid the quan situation
is
i mean what you present is is really
brilliant that
it's exceptionally valuable the lessons
you learn because you get to you get to
get
paid while you learn from others if you
see that
if you see jobs in in the space of your
passion
that way that it's just an education
it's like the best kind of education
but of course you have from my
perspective to be really careful
or not to i get get comfortable
relationship then you buy a house or
whatever the hell it is and
then you get you know and then you
convince yourself like well i have to
pay these fees for the car for the
house blah blah blah and then and
there's momentum and all of a sudden
you're on your death bed and there's
grandchildren
and uh you're drinking whiskey and
complaining about kids these days
yeah so i you know that i'm afraid of
that momentum but you're right
like there's something special about the
education you get
working at these companies yeah and i i
remember on my desk i had the
like a bunch of papers on quant finance
a bunch of papers on optimization
and then the paper on ethereum just on
my desk as well and the white paper and
it's like it's amazing how much how kind
of
and you can learn about so that i also i
think this like idea of like learning
about
intersections of things i don't think
that too many people that know like
as much about crypto and quant finance
and machine learning
as i do and that's um a really nice set
of three things to know stuff about
and that was because i had like free
time in my job
uh okay let me ask the perfectly
impractical but the most important
question what's the meaning
of all the things you're trying to do so
many amazing things
why what's the meaning of this life of
yours
or ours i don't know humans um
yeah so have you ever heard people say
asking what meaning of life is is like
asking the wrong question
or something the question is wrong yeah
no that usually people get too nervous
to be able to say that because it's like
your question sucks
i don't think there's an answer it's
like the searching for it
it's like sometimes asking it it's like
sometimes sitting back and looking up at
the stars and being like
huh i wonder if there's aliens up there
if there's
there's a useful um like uh
palette cleanser aspect to it because it
kind of wakes you up to like
all the little busy hurried day-to-day
activities
all the meetings all the things you like
are part of
we're just like ants a part of a system
a part of another system and
and then when this asking this bigger
question allows you to kind of zoom out
and think about it but this
ultimately i think it's an impossible
thing for a limited capacity like
cognitive capacity to
to capture but it's fun to listen to
somebody who's exceptionally successful
exceptionally busy now who's also young
like you they ask these kinds of
questions about like
uh death you know do you consider your
own mortality kind of thing
and and life whether that enters your
mind
because it often doesn't it gets it kind
of almost gets in the way
yeah it's amazing how many things you
can like that are trivial that could
like occupy a lot of your mind
until something until something bad
happens or something
flips you and then you start thinking
about the people you love that are in
your life
and you start thinking about like holy
this ride ends
exactly yeah i i i just had covered
um and i had it quite bad it wasn't what
wasn't really bad
it was just like i also got a
simultaneous like lung
infection so i had like almost like
bronchitis or whatever
i don't even i don't understand that
stuff but
it felt i started and then you're forced
to be isolated
right and so it's actually kind of nice
it because it's very
it's very depressing yeah and then i've
heard
stories of i think it's shawn parker he
had like all these diseases as a child
yeah and he had to like just stay in bed
for years and then he like made napster
it's like pretty cool um so yeah i had
about 15 days of this
recently just last month and it it feels
like it did shock me into um
a new kind of uh energy and ambition
were there moments when you were just
like terrified
at the combination of loneliness and
like
you know the thing about covet is like
there's some degree of uncertainty
uh yeah like it feels like it's a new
thing a new monster
that's arrived on this earth and so
you know dealing with it alone a lot of
people are dying
it's like wondering like yeah you do
wonder i mean
for sure and then these there are even
um
new strains in south africa which is
where i was and maybe i had maybe the
new strain had some
interaction with my genes and i'm just
going to die but ultimately it was
liberating
i loved it oh i loved it i loved that i
got out of it
okay because it also affects your mind
you get confu you get confusion and kind
of
a lot of fatigue and you can't do your
usual tricks of psyching yourself out of
it
so you know sometimes it's like oh man i
feel tired okay i'm just gonna go have
coffee and then i'll be fine
it's like now it's like i feel tired
cough i don't even want to get out of
bed to get coffee
because i feel so tired and then you
have to confront
uh there's no like quick fix cure and
you're trapped at home
but that so now you have this little
thing that happened to you that was a
reminder that you're mortal
and you get to carry that flag in
in uh in in trying to create something
special in this world
right with new mri listen uh this was
like
one of my favorite conversation because
you were you're the way you think about
this world of money and just this world
in general is so clear
and you're able to uh explain it so
eloquently
richard that's really fun really
appreciate you talking today thank you
thank you
thanks for listening to this
conversation with richard craig and
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and now let me leave you some words from
warren buffett
games are won by players who focus on
the playing field
not by those whose eyes are glued to the
scoreboard
thank you for listening and hope to see
you next time