The problem….with the solution
IT hit me as I sat outside the ‘Youngs Drugs and Stationary store’ of old, now rebranded the Coffee Bar in Redwood City, California.
As i sat there drinking the barista’s recommended brew, I realised — there was a problem, a problem with our companies solution.
Upside was incarnated as a specific solution to a very specific problem. Namely, how to build a multi-manager hedge fund; for 10% of the costs with 10,000 times the data. Alpha, for Beta if you like.
Why? Well, for the last decade the team and I at Ivaldi Capital had competed with the big beasts in the space, Millenium, Citadel, Point 72. (By and large we had done excellently, but with the start of every new year the odds of us doing it again felt like the return to a coin toss). We were outgunned, in assets, in fees and in resources.
So we started working on prototypes for how to re-think the whole model. How could we continue to deliver exceptional returns to pension funds who were (rightly) unwilling to pay the premium fees others were able to demand.
Our conclusion, ultimately, was Upside — and so we started building it, in earnest, in 2019.
The problem with our solution was that we needed to get users, thousands and thousands of them, and to work, well, for free.
So for 3 years we pivoted our way into a pretzel.
It was then at the moment of towel throwing that we had, the best, and worst meeting I’ve sat in — among colleagues. The “Truth” of our situation was thrown down, in front of everyone.
In the moments after a thunderstorm, the air feels fresh, clear and full of possibilities. So too did the day after that meeting.
We needed to solve each problem sequentially, and not try to solve top down.
So we decided to focus on the first problem. How could we get users for nothing. What could we give them, that would encourage them to trust us and give us their ‘data’ and ‘effort’.
It was in that moment we spotted the rise of the trading app losers, I do not mean than in a derogatory way, I mean that in those that mathematically — in the UK where CFD (swaps) are reported, it turned out that over 60% of users “trading via trading app” lost money.
How could that be? Markets were going one way. UP.
What would happen if markets turned?
Well, it turned out that Free trading was not free AND that most of these early adopters were gambling, and lured by the impossible dream of enormous gains they chased rumours, gossip, intra-day moves.
They were not investing, not as we knew it, but gambling.
And in that moment we realised the true FIRST PROBLEM, and one we could solve — well we certainly should be able to having spent a decade running a multi-billion dollar Global Hedge Fund and another decade at the largest investment banks on the planet. If WE could not help these guys and girls to stop losing, then who could?
So we set about building Upside v.1 “Operation Ryan Rookie”…… and Rihanna
The first product
Taking investors who were losing >60% of the time, and getting them to (a) lose less and then (b) make money.
That required us building an investment analyst program — in app, and for the ticktok generation. Not “teaching”, but “journey based” learning, matching expertise with investment menus’ tailored to their actions, in app.
As we started to answer Ryan’s problem, we noticed Rihanna. She is 25–40, shes super smart, she’s a single mother of one in Stockholm, she’s a senior PR executive in London with 2 kids and a 2 hour commute, she’s the student at a West London University who keeps winning the investment club competitions but professes no financial knowledge. She’s the wife of a serial entrepreneur, a fashion journalist. She’s SMART, and she is not interested in gambling, she doesnt have a trading “app”, but she wants to invest, she just does not know where to start.
And so, we started to solve Rihanna’s problem too, it was the same set of tools, that we’d already built, but a different journey.
And that was the epiphany, the investment journey. We can let everyone take their own journey and build the investment portfolio they want FOR THEM. Not prepackaged, not motivated by gambling. A Fidelity for the 21'st century.
That was the problem with our solution, it started out as our problem, not Ryan and Rihanna’s problem. Now that we are solving their problem, we can start to address the original problem — but with a twist. We can let Ryan and Rihanna participate. A true — true- investment ecosystem. Now that really is a solution to a problem.
It was an expensive coffee, but perhaps the greatest I’ve ever had.