Q&A: Founder/Tech Exec, Former Hedge Fund Research Director, SEAL Team Intelligence Officer, Consultant

Two roads diverged in a wood, and I-

I took the one less traveled by,

And that has made all the difference.

  • Robert Frost

Title summarizes the road I've traveled… consultant  → intelligence community/SEAL Teams/Special Operations → director of research at a well known hedge fund → tech executive at successful growth company → entrepreneur. I love challenges. I love the non-obvious. I still haven't figured it all out and keep looking for answers. I don't think you find them by standing in the same place. 

I'm not going to mention specific names or companies here (and ask you to do the same), but I'm also not trying to hide. Feel free to reference my linkedin profile (in/mrb44). If you stop by, you are more than welcome to connect with me. 

When I started my transition from the military many years ago, Wall Street Oasis was an amazing resource for me. Part informative. Part therapy. Part entertainment. I really valued the perspectives of both the people who had answers and those who were looking for answers. I found the community a good source of motivation. I wanted to do this Q&A to pay it forward.

Getting to it… I worked as a consultant for a couple of years out of undergrad before joining the Navy, where I served as an intelligence officer in SEAL Teams and was selected for other elite special operations units. I graduated from training the week after 9/11 and over the next decade I completed 10 combat deployments and operated in 17 countries. I finished my career running intelligence operations outside the combat theaters. It was an amazing experience. The incredibly motivating and talented people I had an opportunity to work with, the things I got to do, and the history I had a chance to be a part of was way beyond my wildest expectations. 

I transitioned out of the military and ended up at one of the top hedge funds via business school. At the hedge fund, I became the Director of Fundamental Research and was responsible for conducting primary research on behalf of the 40+ long/short investment teams at the firm. In this role, I leveraged a lot of lessons I learned in the military collecting, analyzing, and reporting intelligence in complex and dynamic information environments. The parallels between hunting terrorists and picking stocks were pretty remarkable.

I was eventually recruited away by another firm, but during my non-compete, I decided to pursue other interests. Namely, I became very interested in technology and building software products. So I made another unlikely transition and was hired as a senior executive at B2B software company that was acquired for nearly $4 billion, and ultimately, became responsible for how more than 700 engineers, product managers, designers, and program managers come together to build product.

More recently, I've pursued a handful of entrepreneurial ventures and am getting ready to launch a product that I think will be of great interest to this community. It's based on my experience as an outsider on Wall Street. Someone who has had success despite having limited proficiency with traditional investing skills. 

We will be delivering actionable trading insights based on the same data and information that billion dollar investment managers use to generate alpha via a mobile app for less than $100/year. We take these datasets, which have previously been unavailable to individual investors, and create highly accurate trading signals that can be used by anyone. No expertise in finance or accounting required. And for those that are data curious and enjoy developing their own insights, we provide the ability to explore the underlying metrics. We will also provide real time alerting so that users can take action when there are notable changes to trends.

I didn't grow up on Wall Street so I didn't realize there was a game inside the game. I was shocked at how much access to information hedge funds have. I was shocked at how much money was spent on gaining access to that information. I was shocked at how the entire system caters to institutional investors. I expected there to be a huge disparity between the information the pros were working with and what the average Joe on main street had access to, but I had no idea. It never sat right with me that the playing field was so uneven. 

I'm not an Occupy Wall Street guy by any stretch of the imagination. I believe in capitalism. I believe if you work hard and are really talented you deserve more than someone who is lazy and talentless. But what I saw was total bullshit. It's impossible to judge talent when the person on one side of the trade has so much more information than the other. There are a lot of really capable and talented people out there who are trading blind.

So my mission is simple… jailbreak everything. We are starting with a few core datasets but the goal is to eventually put everything available to professional investors and more into the hands of the retail investor and give them frameworks and tools to make it all work. This is the tool I wish I had when I was just another guy interested in the markets. It's also the tool I wish I had when I was in charge of research at a large fund.

A 2 minute demo is available and we are beginning to sign up people for early access. If you are interested, I'd love to have you check out the links and sign up to be one of the first users. We are also offering pretty serious discounts for referrals. 

I'd obviously be thrilled to talk more about the product and business, but I'm here to share insights and experiences that may be helpful to you so if there's anything in my background that might help you move your career or life forward or you are just simply curious about, send it. 

Mike

@AndyLouis @WallStreetOasis.com

Comments (35)

Jan 8, 2022 - 1:33am

Awesome background and story, not sure why noone has jumped on this yet. Thanks for taking the time to share Mike.

There were a few things that I'd love to hear your thoughts on:

  • As an econ major when did you become interested in software? When did you pick up coding?
  • Could you talk more on the parallels between hunting terrorists and trading. I understand both situations have asymmetrical information across actors, were there any salient game theory situations or lessons from your time in intel that led you to recognise how a situation would play out in the HF world?
  • It seems you've lived a life of pushing your personal boundaries and being in that discomfort zone, what do you think drives this for you?

Cheers. New product looks incredibly valuable, good luck with the launch!

Most Helpful
  • CEO in ER
Jan 8, 2022 - 12:53pm

Yea... things were starting to feel a little quiet in here. I figured 1) I'm boring as hell 2) People are reluctant to engage or 3) It's been a long week after a big New Year's celebration. A few folks have connected with me on Linkedin and some have signed up for the Vizabull product launch, so maybe it's 2 or 3.

1. I actually started coding out of college. When I was a consultant, they were offering huge bonuses to people to do SAP work so I actually switched over to a technical track. I just love creating building stuff. Taking something from an idea in your head and turning into something that can actually be touched and used. I built a jeep from the wheels up. I've done some significant construction and landscaping. I do some finished woodworking. I write a lot. There's something very satisfying about that kind of work, and software is just another expression of that. Truth be told, however, my coding skills suck today. I obviously, didn't do any in the military. At the hedge fund, I had a small development team that helped me build some of our proprietary systems . In the past couple of years, I learned enough to get the initial prototype of the Vizabull product going, but I'm a total hack. My role is more product vision, setting goals, articulating requirements, sourcing data, designing the fundamental based algorithms, strategy, finance, marketing, etc... I leave the development work to the pros. 

2. This is one I could write a book on. I'll give the Cliff Notes here, and then can dive deeper into anything that is interesting.

  • At their core, both of these professions are both about information dominance. In most other professions, success is a function vision, strategy, execution. Here it's about how much information you have, how good that information is, and how well you interpret it. When every decision carries with it some form of measurable/observable risk, it's very different than normal life.
  • In these information businesses, you are dealing with information that is highly complex and dynamic. The facts are constantly changing. Key information is often not available. The information that is available is sometimes very opaque. Sometimes it's very contradictory to other available information. The signal to noise ratio is often pretty low. Information can be tainted or biased. Your job is to figure out what the truth is, but that's very difficult in this kind of environment. The way I describe it to people is imagine you are trying to put together a puzzle, but the most important pieces aren't on your desk. They are scattered throughout your home, apartment complex, neighborhood. You have to go out and look for them. Some are in plain sight but others are hidden very well. As you are looking for them, you realize there are puzzle pieces to a thousand other puzzles out there too so you are mostly coming across puzzle pieces that are no use to you. But it's hard to tell which are relevant and which are not because they are just a single piece of puzzle with little additional context. They all kind of look the same. And then some pieces are blacked out with a sharpie. And other pictures have been cut into little pieces or altered. And there's a constant shower of random pieces falling onto your table. And every time you leave to go find a new piece, someone comes along and moves all your pieces around and knocks them off your desk. These types of information environment make putting the puzzle together very difficult. Finding the truth is very difficult. And without the truth decision making is difficult.
  • The information also has a very short half life. The type of trading we did at the hedge fund was very active. We always wanted to be out ahead of trends or important news. We wanted to see things before others did, but obviously everyone else was looking to do the same. And at some point, the information was going to become common knowledge and baked into the stock price. So it was a race. Sometimes it was against a known clock (earnings, regularly released data) but sometimes it was against an unseen clock. In the SEAL Teams, you might get information on a target's location, but how time late is the information? How long will he stay there? So in addition to complexity and dynamism, there is also an intense time pressure, and you need to weigh this time pressure against the time it takes to find more answers and create more clarity.
  • In this environment, you need to have extreme intellectual honest. Steve Jobs had his famed reality distortion field, and his success is largely attributed to this attribute. It was a strength in tech and building product. It would get him killed in a minute in combat, and he'd lose all his money if he was an investor. You need to see things for what they really are, not what you want or believe them to be. To do otherwise is perilous. I'd say this is even more important in investing because it's possible to be totally wrong but get it right or to be totally right and get it wrong. The only way to learn and grow in this environment is to be honest about why you made a call and what really happened. If you start creating narratives that around your decisions that aren't honest... well... your deluding yourself, and that's easier to do than people think.
  • In both environments, you get very direct and unambiguous feedback on your decisions. You kick in a door and the bad guy is either there or he's not. You buy a stock it either goes up or it goes down. You can't pretend to be good if you aren't. Everyone sees it. It's probably a little easier to fake it on the investing side because the tolerances aren't as high. You are going to lose, which is why you build a portfolio. In combat, you need to be dialed in. You don't have a portfolio of lives.
  • So given those commonalities there are three things that I carried over from my work in the SEAL Teams that I think helped me be successful.
    • Executing the intelligence cycle. I'm going to modify it a bit from its strict doctrinal wording, but it basically involves identifying requirements --> identifying existing sources of information that can answer those requirements --> identifying information gaps (things that can't be answered by existing sources --> developing new capabilities to answer those gaps --> collecting that information using those new capabilities --> analyzing information --> creating reports that communicate those findings --> getting that information into the right hands at the right time. If you can do all that well and at scale, then you are incredibly valuable. I can go on and on here, but I will say that the average person focuses on existing sources and and analyzing that information. Requirements (what information is necessary to help me make an informed decision) are so important because this really helps solve the puzzle problem I described above. It allows you to focus on what's really important and triage out all the noise. Almost nobody invests enough time in developing new capabilities to collect against gaps. This is a lot of what I did in the military. Analytical skills are all over the board. I'll address this more in a bit. Creating reports and disseminating information aren't really critical for most investment teams that work in relatively small self-contained teams, but since I was supporting 40 teams covering different sectors and looking at different companies it was critical.
    • Building collection processes that scale. This is really hard. You basically want to create fixed information infrastructure that does most the work for you and can be re-leveraged. You don't want to be running a series ad hoc research projects that are only good for a moment in time. To illustrate this, I'll use a spider web as an analogy. metaphor. A spider doesn't chase its prey. If it did, it would run around, burn a ton of calories, and eventually die. It burns calories on building a web. It then sits and waits. Then when the web catches something, it sends a signal to the spider to alert it. The spider runs out of its retreat to investigate. The brilliance of of this set up is in the location and design of the web, not in frantically chasing after every target. The intelligence community is exceptionally good about building these webs. We do in with source networks and we do it in the technical arena. We invest in building, maintaining and expanding this infrastructure. It's proactive, not reactive. It's reusable. The more nodes you add to it, the more powerful it becomes. Because it's essentially a fixed asset, the price per insight is always going down over time. And then you train it to alert you when it sees something. This same concept can be applied to investment research, and is exactly what I did at the hedge fund. It's also the underlying the principle upon which Vizabull is being built. Hedge funds can invest in building this infrastructure but individuals don't have the time or resources to do it. So I'm doing it for everyone.
    • Another thing that was very important is understanding that you can't assessing information without first assessing the source. That's something I learned in the military. It's all about understanding the source. What does it see? What doesn't it see? What are its biases? It's motivations? I'll give you a couple of examples. I had a source give me some information about a very high level terrorist target. He told me where the guy was, who he was with, what he was doing. He provided very specific details, which on the surface appeared consistent with what we already knew. The source had an excellent track record of reporting and had proven very reliable in the past. But he hadn't reported on this particular target or anyone in this target's circle before. He was from one part of the country claiming to have access to a different part of the country. The information turned out to be bogus and the important clues weren't in the information itself but in understanding the source. One from the hedge fund. We were looking at a retailer. We had information from credit card panels that suggest that sales, which had previously been extremely strong, had rolled over hard. Meanwhile, channel checks indicated that sales continued to be extremely strong. Credit card data is great because you get good scale and it's very quantifiable, but you don't get color or nuance. Channel checks are great because you get a lot of color and nuance, but you don't get scale and it's tough to quantify.  So they are complements and when they disagree, its tough determine which is right... except that we knew that this retailer had recently launched a branded rewards credit card that was not included in in the credit card panel. So the credit card panel was missing had almost overnight developed a critical blindspot . So again, understanding sources... so important. 
    • The last thing that was really helpful is approaching analysis from an ecosystem or network perspective, not from a point target. We didn't catch bin Laden, by looking for bin Laden. We caught him because we built a detailed picture of his network. We understood the different nodes and the people, places, and activities taking place in those nodes. And most importantly, the relationships between the different nodes. When you observe something in one place, you can make connections to what is happening someplace else. This is important because often times the information you are most interested in is the hardest to find/most guarded. I found the same to be true doing investment research. I never looked directly at a single public company. There are compliance reasons, but more practically, there was really nothing to see there. They weren't going to tell me anything that the rest of the market didn't already now. So we built out maps of their ecosystems. Understood the players. Identified data. And we made sure we understood how everything related to the public company we were interested in. That way when we saw something, we could interpret what it meant. And usually these signals came well before most of the market even suspected something was going on. It's kind of like those optical where you don't see it when you stare at it but if you look away or scan you can see it

3. The simple answer is that I enjoy it and find it personally satisfying. I also like being around amazingly talented people. They inspire me and make me better. The more psychologically nuanced answer is probably it's how I address the chip on my shoulder. The world is constantly telling us we can't do something... be something... have something. I take it pretty personal, and it becomes a challenge. And then when people stop telling you that you can't do something you just start making challenges up. To be totally fair, I was up at Mt Shasta a couple of months ago and chickened out on a 40' waterfall jump into 40 degree mountain water so it's not like I'm all that hard. As I get older I'm picking my challenges a bit differently. 

Jan 8, 2022 - 10:14am

Seeing as you left corporate America to join the military during peacetime, would you recommend doing so today? Why did you end up leaving the military? Did you hallucinate at all during BUDs? Were you in a relationship before joining the military and if not, did you get into one during the military? How difficult was it maintaining that when you were deploying all over the world?

Know that these aren't really relating to finance but your story is awesome.

  • CEO in ER
Jan 8, 2022 - 2:00pm

First, I wasn't a BUD/S graduate. So I'm not a SEAL. I was an intelligence officer by background. I went to basic intel school, and then various advanced schools for intelligence collection and SERE. My job was primarily to collect information in hostile and non-permissive environments. In the Teams, I was trained so that I could operate alongside the assault teams in the field. Then I went through the selection process for other units. So I unfortunately can't speak first hand to the hallucination question directly, but I've definitely heard others share stories. 

I believe deeply in service. Selfishly, I think it's a very satisfying pursuit. Unselfishly, I honestly think it might be the only thing that will save this country. And when I say service, I am talking about military, non-profits, nurses, doctors, EMTs, teachers, firefighters, police, elderly care... whatever. I wish more people getting out of college would spend a little bit of time serving before they jump into their careers. It grounds you. I think it helps build good value systems. It teaches you responsibility in a way you wouldn't get in a junior role someplace else. Specifically regarding the military... it's not for everyone, but if someone was really interested in it, I'd say absolutely... Go for it. I joined about 18 months before 9/11 so it was peacetime, but that changed very quickly. But even when we aren't at war, the world is a really interesting place. There's always something going on. 

I left because I got married and then we caught bin Laden. One chapter closed and another chapter was beginning. I looked back on my decade of service and couldn't ask for me. I looked forward to the next decade and I didn't like what I saw. I enjoyed being a junior officer out in the field. I wasn't crazy about doing the jobs more senior officers are asked to do. The years right after 9/11 was like the wild west. You could operate pretty freely. But things started to get more politicized. Operating started to become more difficult. More red tape. More strings attached. It was only getting worse. I was looking at my timeline and saying I could either get out in my late 30s or mid 40s. I didn't want take a government job, and I thought the odds of me making a successful transition in my 40s were significantly lower than in my 30s. But most of all, I wanted a family and the thought of being away from my kids when they were growing up killed me. My wife was former military and then in the government. We spent a lot of time apart. We both were overseas a lot. I used to love being deployed and on the road... then it started to get hard. But we at least understood each others jobs. After we got married, I took a job overseeing ops but that didn't require me to deploy and allowed me to go to business school. Things got more normal. A few years later I transitioned. There was an important insight for me here. I don't believe in zigging and zagging. Changing your mind about what you want to do with your life every couple of years. But you do go through different seasons. You change. The world changes. And you want to be in tune with that. 

I was not in a real relationship when I joined, and I wouldn't say I was in a serious relationship until I met my wife 8 years in. 

  • Prospect in PE - Growth
Jan 8, 2022 - 11:16am

Thoughts on getting on an 18x contract and joining SF units today? Current sophomore at a target and the pressure to jump straight into to corporate world is strong, but I'm heavily leaning towards serving first. 

  • CEO in ER
Jan 8, 2022 - 3:26pm

I get this question a lot, and I'll share the best answer I have... although it might not be as helpful as you are looking for.

This is a deeply personal decision.There is no perfect answer, only puts and takes. You don't have a crystal ball, so you don't know where the different paths will take you. You need to operate a bit on faith. 

I can explain to you in very deep detail why I made the decisions I made. I can tell you about the amazing lessons I learned, friends I made, and experiences I had. I can share with you the deep honor I feel for having served my country. I can tell you about the pain and loss I've felt. The frustration and bullshit I had to endure while in uniform. The sacrifices my friends and family had to make while I was running around the world chasing the next war. I can tell you about strength and confidence that was built while serving, but also how the experiences have also handicapped me (and other veterans) as we've tried to move on with our lives outside the military. I can net all that out and tell you, that I wouldn't trade any of it for the world. You'll likely get all of that out of the military as well, but how you process it and what you take away may be very different than me. Ultimately, your motivations and the circumstances of your life are unique to you. 

So my biggest piece of advice to anyone looking to make this move is to look deep into yourself and find out what's important to you. What are you willing to risk and what are you not willing to risk. Who are you and who do you want to be. If you can answer those questions with clarity, then you move down the path (whichever you choose) with confidence. You don't have to convince me, or your parents, or your friends, or your boss, or the recruiter, or your instructor. You just need to understand yourself. 

In general, the SF community is amazing, and I think it's a worthy goal/calling. I can relate to the pressure to join the corporate world. When I was a sophomore, everyone I knew was going into investment banking. It freaked me out so bad that I walked down to the recruiter and almost dropped out. I'm glad I didn't, but I totally get it. 

In terms of the environment today, I'm pretty removed, but the special ops community, and the military more broadly, is going through a major transition. Pivoting from a global war on terror to confronting China, Russia, Iran in this weird world of conventional military threats, economic leverage, technology evolution, and data race, has got to be extremely challenging from a leadership perspective. It's so much more complicated than the last couple of decades. From an outside looking in, I think it's extremely interesting, but I'd be willing to bet that it's really hard on the troops. They probably feel like they are being jerked around. So from that perspective, it might not be the best time in the world to join, but as I said above, the world is always an interesting place, and there's always something else to prepare for. And the training is amazing. The skills you build are amazing. The culture is amazing. The people are amazing. 

If there is something specific you are wrestling with, you can follow up or send me a pm.

Mike

  • CEO in ER
Jan 8, 2022 - 7:24pm

In the quiet stretches, I'm just going to start jamming on some random topics, and hopefully they are helpful to someone.  

I'll start with the most important lesson I learned at the hedge fund. This probably won't be mind blowing for pros out there, but it is really the crux of the market and the basis for everything. It's the one thing I wish someone had explained to me when I started and it's the one thing I constantly remind myself of now. It's what separates pros from beginners.

The market is all about expectations. It's not about good companies or bad companies. Their success or failure. It's about what people believe about a company, what is actually true about a company, and the delta between the two. 

When I started following the market, I'd say things like... "they are killing it. I'm going to invest." Or... "That company is doing terrible, I'm going stay away from it." Instead of making obvious statements like these, I should have been asking…  Do I believe this company is performing better or worse than other people and why? Do I believe the opportunity ahead for this company is bigger or smaller than other people and why?

The tricky part isn't actually articulating your own view. It's describing where you believe reality is relative to the market's expectations.

If you go to Seeking Alpha ( I'm going to pick on the analysis there a bit… if you are a regular contributor, I'm sorry… maybe you are responsible for the two reasonably constructed assessments anyone will find there), you'll never see someone talking about their view vs. expectations. Everyone on there is talking about sales are doing this, margins are doing that, multiples are this, supply constraints are screwing everything up, blah blah blah.

You know what this all has in common? Everyone knows it already. It's already baked into the stock. These aren't investment thesis. They are just opinions followed by a repetition of facts. You might as well be saying… Buy Tesla. The grass is green. The sky is blue. The capital of the United States is Washington, DC. Earth is the third planet from the sun. There's no argument there. You are literally guessing. 

If you want to know why a lot of people don't beat the market when they start actively trading stocks, this is a good starting point. 

So how do you actually do this?

Maybe in another post…

Jan 8, 2022 - 7:54pm

I'm still a student, but I was basically hesitating between pursuing a career in intelligence or investing, and I think it attracts people that have similar personalities, so it's great to see someone who did both.

That's a a great trade, but I don't have any specific question that comes to mind. Is there something people never ask you about but that you'd like to share? Advice for youngsters?

Jan 8, 2022 - 7:54pm

I'm still a student, but I was basically hesitating between pursuing a career in intelligence or investing, and I think it attracts people that have similar personalities, so it's great to see someone who did both.

That's a a great trade, but I don't have any specific question that comes to mind. Is there something people never ask you about but that you'd like to share? Advice for youngsters?

  • CEO in ER
Jan 8, 2022 - 11:49pm

What are you afraid of? Dance floors and karaoke bars.

That's a joke. I am terrified of them, but that's not what I wish people would ask me. 

I don't think it's what but who. People who think like me, value the same things as I do, are driven by the same motivations are pretty good about engaging. But there are a lot of people out there who disagree with me, my decisions, my life choices, and my values. I wish they would (respectfully) engage more. I actually really value different opinions and appreciate the discourse. It's one of the best ways to learn and build confidence in your views. If your beliefs are confronted and you are open to alternative views, you either walk away more informed and you update your views to reflect the new information or you have more conviction in your original views because they have been stress tested. Either way I'm grateful. 

Obviously, this is not just an issue with me, but an issue in society broadly.

I have a lot of advice for "youngsters." I love that word by the way. Makes me feel like a grumpy old man. The one piece that's directly related to what I was just talking about is don't get trapped in your echo chambers. Seek out dissenting views. I think society makes this hard so it actually takes work, but it's important. If you find everyone around you agrees with what you are saying and doing, that's a warning signal. Be open to different views. You don't have to agree, but it's helpful to understand. 

Here are few more off the top of my head,

1. I already mentioned service. I think service is huge. If you don't want to give up years of your life, then just volunteer helping the homeless or reading to at risk kids one day a month. It'll change your life.

2. Try to live and work overseas early in your career. Preferably a non-English speaking country. Study abroad is better than nothing, but I don't think it's as immersive when you are hanging out with other college kids. Why is this this important? For the same reason that seeking out dissenting views is important. It provides perspective.

3. You are capable of way more than you believe you are. Remind yourself of this every morning. Then go out and try to prove it. 

4. This is going to sound weird coming from me, but love more... a lot more. It's the key to happiness. That one eluded me for a long time. 

Jan 9, 2022 - 12:34am

Reading this, like one of the first comments illustrates above, the title of this thread makes it seem like you want to lead the non-mil folks to think that you are a SEAL while tacitly omitting that you were a navy officer in the intel career field that worked with SEALs (and presumably other SOF and conventional elements). 
 

Yale undergrad, Wharton, and Point 72 are prestigious enough (if prestige and pride by association are what you are after), no need to inflate your background by omission and word smithing. 
 

How did you manage to go to Wharton while on AD and not incur a service obligation? EMBA?

If so how in the world did you go from active duty as an intel officer, EMBA, to "director of research" at point 72? That's a huge leap. Prior professional or family connection to the firm? Is Steve Cohen your biological father? 
 

And why leave Point 72 after only a few years? That IS the exit. 

  • CEO in ER
Jan 9, 2022 - 1:15am

I mention Intel Officer in the title and in several other places. Unless you hacked my Linkedin account, that I provided freely, that should still say Intelligence Officer.  I think the first time BUD/S or SEAL gets brought up here, I make it crystal clear. And I'm quite certain that my assignment to, and 10 combat deployments with, the SEAL Teams and other special operations units earns me the right to say I was an Intelligence Officer in the SEAL Teams. I think the people I served with would agree. No word smithing required. 

Different perspectives are interesting and helpful though.

Yes it was an EMBA. My command took care of me and cut me loose every other Friday. I say in one of my previous posts that I got married, took a desk job, and went to business school. 

No connection to the firm. I had a good story and they were building a centralized research function. I convinced them that my background was relevant and would provide a competitive advantage. Then I was really good at my job and made a lot of people money.

I think I talked about why I left the hedge fund. 

  • Associate 3 in IB - Gen
Jan 9, 2022 - 12:58pm

Thanks for the post! What types of background did you look for when you were building out the research function at Point72? 

  • CEO in ER
Jan 9, 2022 - 5:43pm

We were open to different backgrounds but were focused on a few key traits. We wanted people who enjoyed doing research. People who enjoyed the hunt and were curious. We wanted people who were coachable and could learn quickly. And we wanted people with a good work ethic. We tended to stay away from people in banking because they typically were more interested in analyst roles on an investment team than doing centralized research. Totally different roles and skillsets.

  • Associate 3 in IB - Gen
Jan 10, 2022 - 11:47am

How and where did you source for research candidates? How big was the pay difference (at the junior level) between an analyst role and a centralized research role? Think you mentioned you made a lot of people money at the HF, but does the team get a cut of the P&L based on ideas generated? A missing element i suppose is the timing and sizing of trades that the investment team does.  

Jan 9, 2022 - 3:46pm

I watched your demo. It looks like you've got 4 sources of alternative data that you combine into an overall signal. 1) Have you run a backtest? What happens if you blindly buy the top 20% highest rated stocks and short the lowest 20%? 2) Big funds have these data and a lot more, along with the infrastructure to trade much more quickly than retail can using a mobile app. Why should there be any alpha left here?

  • CEO in ER
Jan 9, 2022 - 6:29pm

Good question. 

I can speak a little to the methodology around the data signals, but first I think it's important to point out the intent here is not create alpha. The intent is provide access to the same information as professional investors have. From an individual investor standpoint, s/he is potentially sitting across a trade from someone who has way more information than they do. They'd prefer to at least have the option of working off the same information. 

We are also not trying to build a trading algorithm on top of this. We aren't trying to tell x number of users how to trade. We are trying to give them insights in a reasonably easy to consume manner. Then they can make their own decision.

We do backtest the signals, but we backtest against whether the company beats or misses on revenue. Essentially what we are saying when a signal is positive is that based on what we are seeing in the data, we believe the company is performing better than expectations. We measure the accuracy of that call by seeing whether the company misses or beats.

  • Research Analyst in HF - Other
Jan 9, 2022 - 4:20pm

this is a shill post for his garbage product trying to take advantage of gullible retail traders disguised as a QA

dude ran p72's internal expert network, it's a glorified interview/transcript service

  • CEO in ER
Jan 10, 2022 - 6:19pm

I guess I fundamentally disagree with your broad characterization of retail investors being gullible. I believe a lot of them are quite intelligent and capable, and I think those will be the people most interested. There are legitimate questions about market size and ability to execute, but based on what I'm seeing, I'm willing to put my time and resources towards this. The only way we will know for sure though is to build and launch and see. 

If I wanted to swindle people, I'd launch an ICO or NFT or something. Building and launching a product is a lot of work, and the users validate if there is value or not. It's not really something you can fake. And I probably wouldn't choose to discuss it here with this audience if that was my intent.

There's an underlying point about the need to be responsible, which I totally agree with and take pretty seriously.

I understand why you wouldn't be a fan of this , but you aren't the intended audience.

At its core, the idea is about giving more people access to information. People with that information already might not like it, but if there really is no value in it, who cares?

For everyone else, it's hard to see how it wouldn't be net positive. You don't meet too many people out there who say, "I'd really like to have less information when I make important decisions."

  • CEO in ER
Jan 15, 2022 - 5:08pm

You are probably looking for some really cool stories, and I wish I had some cloak and dagger stuff to share, but everything we did was pretty straightforward. There are very real compliance and PR issues so we walked the straight and narrow. But the reality was subterfuge was largely unnecessary. Employing tradecraft takes a lot of work, and it's only necessary if you are trying to gain denied access, protect sources, or protect yourself. It's a bit overkill in this context. 

But to build on parallels that I think are interesting... 

The first is pattern of life. The idea is that if you are trying to anticipate what is going to happen, you need to understand patterns. Getting sporadic and random data points isn't sufficient to build a pattern. It's also through this constant surveillance that you learn about things in real time. I talked about about information half life. Seeing things quickly is a huge advantage, and you can't do this if you are just occasionally dropping in. It's also through this constant observation that you identify new targets/opportunities to explore. If you are just checking in on something occasionally, you are like to miss opportunities (either because you don't see them or you are time late).

Super simple example. I slap a GPS beacon on a target vehicle. If that GPS provides a constant signal, I can learn a lot more than if it pings every hour. And I can learn a lot more if it pings every hour than if it pings at random times. 

When people think about research, they often think it's about answering a specific question at a specific time. For example, where is the car right now? While that may be an important question, where do we think that car will be tomorrow at 3am may also be important. Maybe the locations where the car regularly stops are important. Maybe where the car hasn't traveled is important. Maybe it takes the same route from point A to point B, and then one day it doesn't. That may be important. Seeing things is different than answering a point question. Seeing things allows us to be proactive and timely. In order to answer us to see things that are important, the car needs to be under constant surveillance. 

This obviously takes a lot of resources, which is why alternative data businesses exist. Take Orbital Insights as an example. Commercial satellite imagery is available to anyone, but systematically collecting it, aggregating it, analyzing it, and building useful reports... that's really hard to do and it's expensive. So these vendors build the capability, the infrastructure, and processes because their clients don't have the ability, or it doesn't make sense, to do that in house. But these data businesses sell the output to whoever is willing and able to buy. There's no exclusivity.

This is what a good, dedicated research team is going to do for you. They are going to build or develop proprietary capabilities. Design processes to scale the collection, aggregation, and analysis of the information collected and disseminate the insights. The scale of operations allows for pattern of life type analysis. Pattern of life type analysis contributes tremendously to idea velocity. And it's all controlled and exclusive to the fund. The proprietary nature of the information gives the investors a unique angle that nobody else has.

In terms of capabilities, they are exactly the same as you find in the intelligence community. You have human sources. You have signals. You have imagery. You have open source. You can build research platforms around any or all of them.

On the human side, certainly a lot of debriefing and elicitation techniques were helpful. Gathering information from people is not as straightforward as some think. We embellish to impress. We state opinion as fact. Everything we observe is through a uniquely colored lens. We have biases. We intentionally and unintentional omit important information if not properly prompted. Our communication lacks precision. Just about everything we say is open to some level of interpretation. That's all stuff you need to deal with during the conversation. But then you need to take a perfect picture of that conversation, preserve it, so that it can be referenced against other information. If I had a dollar for every time someone heard one thing, stepped away, and then reframed the things they heard to fit a bias or to make it consistent with something they heard someplace else, I'd be a philanthropist by now. So not sexy, but documentation is critical.

I also think open source is really interesting. There's so much good information out there, but it needs to be systematically harvested, and that can be a lot of work. What's out there is just really raw. For some reason, it's easily dismissed. Maybe because it's assumed that because it's public it's been baked into the market already. But there is a huge difference between raw data, and finished intel that provides an insight. Like... you can be standing in a field of gold and not even know you're rich. The gold needs to be prospected, mined, extracted, and refined. Just sitting in the ground it's really easy to miss and basically worthless.

For what it's worth, the same is true in the intel community. People have always gone crazy over information collected clandestinely and turned their nose up at open source, and that's still largely true today. But there's a growing voice that open source has a lot of value and is radically underutilized.

  • Investment Analyst in HF - EquityHedge
Jan 12, 2022 - 3:42pm

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