(Image lost in the Great Update of 2009)
When I’m not making games, I’m still cranking away on my day job–Piqqem. Eric Schonfeld did a review of the site on TechCrunch last Friday, so I thought I’d respond with my own two cents on the company. Clearly I’m a little biased since I work there (and wouldn’t be if I thought it was going to fail), and it certainly doesn’t hurt that I know where the site is headed. I should also point out, though, that these are my own thoughts on the site and not the “company line” (assuming we had one). I could paraphrase like crazy, but I think it’s way easier to just quote the original article and put my own thoughts on the subject.
If nothing else, Piqqem is certainly a good place to get ideas for stocks to invest in. But does it really have any chance of ever beating the market? Like any social investing site, its picks are only as good as the people who contribute to it.
Maybe I’m a dirty hippy, but this just seems elitist to me. I already put way more faith in my dad’s/uncles’ stock recommendations than I do in anything I read on Yahoo Finance. None of them have finance degrees (though, to be fair, a couple of them are accountants). If the monkey at the zoo gave me good advice, I’d at least listen to it. I think we can make some assumptions about who would even sign up for a site like Piqqem (educated enough to use the internet, some interest in the stock market) that I’d trust any of our users at least as much as some Wall Street analyst with an Armani suit and a who-knows-what hidden agenda. I’m not going to run out and buy something based on what one single Piqqem user says, but if 5,000 of them are saying they believe in a stock I might just give it a second look.
When it comes to stocks, the best prediction market out there is the stock market itself. It is the biggest prediction market out there, with millions of people predicting the future price of stocks every time they buy or sell shares. All of those predictions are aggregated together in the form of the price.
This is probably the number one complaint we get from people, but I don’t think it’s 100% true. Doing a very unscientific survey of a few companies (AAPL, MSFT, GOOG, YHOO, JAVA) shows that each of them has at least 60% of their outstanding shares owned by either institutions or mutual funds, meaning average trader has very little to do with the movement of the price. Average is a relative term, of course– clearly I’m not talking about Warren Buffet, but at what point does a trader become average? Less than $5 million? $1 million? $500,000? I’ve only got four grand invested in the market (the max contribution to my Roth for the one year I’ve been out of school), so clearly I’m not swinging the market one way or the other. Even if I did feel like a market mover, there are two ways that I as a consumer can affect a stock’s price: by purchasing the stock (a vote of confidence in the company) or by purchasing whatever it is that company produces (or using its service). I use Google Ads instead of Yahoo Ads. I bought a Honda instead of a Ford. Being from Atlanta, I’m a die-hard Coke fan and an avid Pepsi hater. Earnings may be released quarterly, but public sentiment is something that’s constantly evolving. Piqqem is one way for people to gather that type of data.
The votes should be weighted by money. If someone is willing to put down a million dollars on the shares of Apple going up, that should count more than someone who just puts $100 down (or worse, is just clicking on a Website). Money not only makes the predictions of a market better, it also makes it harder to game the system because there is more to lose if you turn out to be wrong.
We are Crowd Technologies, and while we don’t necessarily stick to the Wisdom of the Crowds a hundred percent of the time, we do at least try (one of the reasons you won’t see a “Best Piqqer” anywhere on our site). If I had a million dollars, I would’ve put it all on Apple when it was below $90 a couple of weeks ago. The fact that I have closer to $100 doesn’t make that feeling any less strong, so to say that my sentiment is meaningless goes very strongly against the idea of crowd intelligence. Other than an occasional Super Bowl pool, I’ve never placed a bet on a football game. I still submit my game picks every week, though, and it’s fantastically rewarding when I get more right than my buddies. That may be comparing Apples and Falcons (har har), but both tasks require me to take what data I have and apply it picking which entities I feel have the best shot at “winning.” The stock market is infinitely more complex than a football game (especially considering there’s not a winner and a loser and 10,000 teams are playing against each other at the same time), but I think the analogy holds. There’s a joy to be found in “being right,” regardless of whether or not I have a financial stake in the outcome.
[Assuming] Piqqem is perfect and it does produce better stock picks than any one individual could, investors will quickly discover and then it will become a reflection of the market. Piqqem does not exist in an information vacuum.
This is a problem we’d love to have, which brings me to my biggest question: who says the crowd has to be right? With enough data from enough users on enough stocks, I can pretty much guarantee we can slice the data so that someone is always “right”. And I don’t mean someone as in Steve from Tuscon (apologies if there actually is a Steve from Tuscon). I mean subsets of the big crowd. Maybe men aged 18-25 are better at predicting which way EA’s stock will move. Maybe doctors and pharmacists are great at choosing biotech stocks. Then again, maybe middle-aged housewives from Texas are fantastic predictors of semiconductor stocks. Highlighting any one of these makes for an entertaining story (couldn’t the market use a little of that?), which is enough to make the idea of Piqqem a fun one to work on. As a country, we love our pop culture indicators–from small towns that predict major elections to groundhogs that predict the weather. Who’s to say that crowd sentiment can’t be another one of those?