Project 1: Impact Case
Assignment Instructions
These are the 6.1040 assignment instructions for this assignment. It goes into greater depth about the expectations, requirements, and deliverables for this assignment. It also includes a rubric detailing how this assignment will be graded.
Team Members
Team Email: 61040-project@mit.edu
| Name | GitHub | |
|---|---|---|
| Henry Asa | henryasa@mit.edu | @HenryAsa |
| Amir Kazeminia | amirka@mit.edu | @amirika20 |
| Cal Wilson | calwilsn@mit.edu | @calwilsn |
| Jonatan Fontanez | jonfon01@mit.edu | @DragonStorm25 |
Team Contract
Expected Level of Achievement
As a team, we aim to deliver the highest quality of work that we can. We will put in a maximum amount of effort to deliver quality work in the allotted time. Ultimately, we are aiming for perfection, and are hoping to receive an A on all assignments of the final project. We expect to work at least 10 hours per week per person on this project and are willing/prepared to work more as necessary.
Personal Goals
Each member of the team bulleted their personal goals for the project and listed their main priorities.
Henry
- Learn how to develop an app with the Social Impact framework in mind
- Gain experience and knowledge working on a software development project with a team of people
- Build an app that interfaces with real APIs, using meaningful data in the process
- Seamlessly and efficiently integrate these APIs into the application
- Coordinate and manage a team of developers, managing and utilizing different people’s interests, passions, and talents to ultimately create a cohesive, feature-rich application
Amir
- Gain experience building software with a team
- Learn how to integrate other APIs in my work, like GPT
Cal
- Learn how real-world software development works by developing an app as part of a team
- Gain more experience practicing good software design principles
- Learn how to integrate popular APIs into my work, such as popular GPT models
Jonatan
- Learn how to develop an app from scratch in a team
- Practice VSD in a team where others can help to improve the design of a project to adhere to certain values better than any single person could
- Gain more experience with front-end development and graphic design
Team Meetings
We aim to meet two times per week in person for roughly an hour each meeting. These meetings will focus on reviewing upcoming deliverables and deadlines, progress since our last meeting, and asking for help if certain deliverables/deadlines are slipping. Needless to say, we will establish open forms of communication where team members can ask questions, ask for help, and collaborate outside of these team meetings.
Accountability
To maximize the quality of work and maintain a level of excellence throughout the development process, we will implement collaborative reviews and peer feedback for impactful/larger decisions. In terms of code, each person will be responsible for their deliverables, and another team member will be assigned to review and test their code before it is merged into the main branch. This ensures that multiple pairs of eyes review a section of code before it is fully implemented and creates a dialogue between different team members working on different systems/components of the application, ultimately ensuring that a better implementation emerges from these collaborative measures.
Decision-Making and Conflict Resolution:
Decisions will be mutually agreed upon within the team. Within people’s assigned responsibilities and tasks, they will have the most authority for those items, but for the larger questions, the team must come to a mutual consensus before proceeding. In the unlikely event that we are unable to come to a mutual consensus/agreement on something, we will proceed with the decision that at least three out of four members agree on. The course Discourse, our TAs, and class professors are excellent resources to gather insights from and will likely be consulted in helping us decide on a particular avenue to pursue.
Task Assignment
During our weekly meetings, tasks will be assigned to members of the group. Depending on the expertise, interest, and availability of each team member, these tasks will be distributed accordingly. Needless to say, if conflicts arise or deadlines appear to be slipping, resources (manpower) will be reallocated accordingly to ensure that the broader team is able to proceed with their assigned tasks with minimal disruption.
Expectations
Each team member is expected to participate in all stages of the development process of this application. Each member’s tasks should be completed in a timely manner (not all in the last day) to give other team members ample time to review everybody’s work. We are expected to maintain an honest, transparent, and open form of communication with others. If unanticipated issues arise, we will vocalize these things and work to handle/account for these conflicts in the most effective and accommodating way possible.
Draft Impact Case
Problem Statement
The majority of people do not have the skillset, knowledge, or time needed to be top investors, and typically the talent of the best investors is inaccessible to the masses. We aim to democratize the knowledge, performance, and ultimately the resulting wealth generation of top stock market traders so that people of all skill sets and backgrounds can benefit from the talents of these top performers.
Importance
This problem is important because it causes a large gap in the profitability of the average investor compared to hedge funds, professional investors, institutions, and other talented traders. This furthers the gap between the wealth of the average person and top earners, resulting in the majority of wealth generation being concentrated among the already wealthy. Additionally, the behaviors and performance of top investors are currently walled off from traditional retail investors, limiting their ability to keep up with the performance of the wealthy/powerful institutional investors since they lack the knowledge/know-how of these top firms.
Solution
The activities of investors on our platform are publicly available to the users of the app so that they can follow where and how to invest. Portfolio distributions and holdings would be made public, allowing others on the platform to view (and “copy-invest”) a user’s holdings automatically. Weekly, monthly, and annual leaderboards would also allow users to see which traders perform best on the platform, and their holdings would be publicly available so other users could “copy” those investment distributions or styles. Advanced GPT-generated insights would also provide users with information on who they should consider “copying” based on their risk-tolerance, investment style, and habits. By making this kind of data more publicly available, users can benefit from increased insights into other users’ holdings, use this information to better inform how and where they decide to invest their money, and ultimately yield returns similar to the top performers.
Justification for Solution
Throughout history, information/data-transparency has empowered/enabled users to better educate and inform their decisions. By “open-sourcing” this previously gated information, users can make more informed trading decisions based on the behaviors of those that they trust. Establishing a publicly viewable leaderboard encourages better performance among users, ultimately lowering the barrier-to-entry for investors to perform at similar levels to that of the very best.
Evidence and Measurability
To track investors’ performance within our application, we can compare the ratio of the income of average investors to top investors. Over time, we can see how users who tend to copy-invest ultimately perform, and whether they use leaderboards or our GPT-based insights to determine who to copy-invest. Using the broader market as a baseline for average/nominal performance, we can see whether users of our application perform better or worse than these benchmarks, and analyze whether top performers emerge on our platform (and whether people actually copy-invest these top performers). We can measure statistics about their portfolio such as the stock market beta and delta, and see whether users are more content with their performance given this newfound and more publicly available data.
List of Interview Roles and Potential Interviewees
Potential Interviewees
| User-Type | Purpose | Potential Interviewees |
|---|---|---|
| Savvy-Investors | This demographic of users includes those who follow the news/markets and make very deliberate/well-informed decisions when it comes to investing. These are the users who have their own ways of gaining information, and do their own research before making an investment. It is generally time-consuming, and they are eager/willing to allocate this time toward this research. |
|
| Semi-Active Investors | This demographic includes users who invest and have an interest in finance/stocks, but do not actively trade on a daily/weekly basis. They follow the news and might trade in a "reactionary" manner, but don't allow stock market trading to consume too much of their time. |
|
| General Investors | This demographic includes users who do invest, but don't really follow the news or keep up with the market trends. They generally invest in broader ETFs with minimal holdings in individual stocks. |
|
Interview Questions
These are just a couple of the interview questions we had in-mind when conducting our interviews. We broke the interview into two sections: pre- and post- idea reveal. We wanted to get people's honest and unbiased feedback on the state of stock market investing and trading platforms before showing them our potential solution. We then wanted to hear how they might respond to our idea, what questions/concerns they have, and what their thoughts are.
Pre-Idea-Reveal Questions
- How do you currently make decisions about investing and selecting the stocks/ETFs that you purchase?
- Similarly, how do you currently make decisions about investing and selecting stocks/ETFs to sell?
- When did you start investing in the stock market?
- How do you currently invest in the stock market?
- What issues have you faced in regards to trading and making investment decisions?
- Do you trust/listen to stock tips? Where do you get these tips from?
- What kind of information (both correct and incorrect) have you gained from others recommending certain decisions to you?
- Would you be willing to share what industries/sectors you are currently invested in?
Post-Idea-Reveal Questions
- What do you think?
- What are your concerns with this kind of an application?
- Do you think these kinds of insights would be useful for you as an investor?
- How might you use the insights provided to you by this application to inform your investment decisions?
Interviews and Summary of Key Lessons
Interview: Kartik Donepodi
Brief Bio: Kartik Donepodi
Kartik is the founder and CTO of Quill AI, an AI-powered financial research assistant tool. He was willing to chat with us over Zoom while he was in New York for business, and shared a lot of useful insights.
Summary of the Conversation and Key Takeaways
Kartik's interests in trading were born during high school when he, and a bunch of his friends, sought to "make as money as possible with the least amount of work required." He learned how to trade by joining high school trading clubs, researching online, reading books from his local library, and subscribing to a variety of different informational newsletters. Similar to other prospective traders, Kartik practiced trading with paper money (fake money), using these tools as a way to learn and gain experience. He has dabbled in trading cryptocurrencies, referring to the crypto world "as the Wild West." He mentioned that "if someone had any information about a token that others didn't, they could make money on crypto."
Kartik mentioned that trading platforms like Robinhood "make trading easier, but do not teach users how to trade." Kartik attributed most of his stock losses to "investing at the wrong time, putting too much/little into a certain asset, and not getting out while [he] was ahead."
In terms of feedback for our application, Kartik expected reputation and building trust with new users to be the main hurdle that needs to be overcome. "Reputation hurdle. A lot of people are burned by the 2021 bull cycle (and subsequent crash) and believe that the best way to generate returns is to simply throw capital into a safe ETF. However, I trust institutional funds more than I do retail investors. So if I could copy-trade a hedge fund (or at least see what they are trading), that would be insightful."
Interview: Richard Guang
Brief Bio: Richard Guang
Richard graduated from MIT in 2023. He was a member of the Sloan Business Club while at MIT.
Summary of the Conversation and Key Takeaways
Richard first started investing his own money during the pandemic. He actively engaged in stock and crypto trading, primarily by using Robinhood. His approach to investment decisions involved online research, watching YouTube videos from trusted sources, reading the news (he cited the Wall Street Journal as being one of his favorite news sources), and following traders on Twitter and Yahoo Finance. Additionally, he analyzes charts (using a combination of different metrics) to evaluate whether it is the right time to purchase a security.
Richard talked about how "the trading community" from social media provides recommendations, including which stocks to look into, but ultimately mentioned that success depends on one's own experience, emotions, information, and a bit of luck. In terms of information accessibility, Richard mentioned that he had access to lot of data through various different sources and websites, but still struggled to effectively use this abundance of data. He found it difficult to sift through the information that was actually important.
Richard no longer actively trades as he "does not have time to follow the news so closely anymore." Richard was skeptical about whether the performance of crowd-sourced users would actually be reliable enough for his own personal funds. He said that he "absolutely would not trust the average success of users over a 6 month period" to inform his trading decisions, as "the success in last 6 months does not mean anything for the future." Like Kartik, Richard expressed that he would trust institutional investors and wishes he could follow their trading patterns.
Interview: Josiah McMenamy
Brief Bio: Josiah McMenamy
Josiah is an undergraduate at MIT studying computer science. He does not follow the news closely, and mainly has his savings tied up in index funds that track the market average.
Josiah "never really started investing," but rather started transferring his savings into a broader market index to simply perform as well as the average. He doesn't have much of a desire to learn more about investing, and expressed that he would not want to actively manage his money himself since he "doesn't know enough about the market." He generally uses Robinhood as trading platform and also has an account with Vanguard.
After the concept was described to Josiah, he expressed both interest and slight skepticism toward the idea. In particular, Josiah like the platform's potential to foster transparency and learning opportunities within the investment sphere, especially for public figures/politicians whose investment activities might be considered an abuse-of-power. By sharing one's portfolio and trades, users could learn from each other's strategies, potentially improving their own investment decisions. Josiah emphasized the educational aspect of such a platform, suggesting that novice investors could benefit from observing more experienced traders' practices and gaining insights into successful (and unsuccessful) investment techniques.
Josiah also discussed some concerns with the idea, specifically related to privacy and the potential for misuse of sensitive financial information. He mentioned the need for stringent privacy controls and the ability for users to opt-in or out-out of sharing their data to maintain a sense of control and security over their financial information. He emphasized that the default option should be to opt-out of sharing portfolio holdings publicly.
Overall, Josiah said that he would use a platform like the one described if it implemented specific security and privacy measures. He liked the concept of a public leaderboard and even discussed the possibility of people building brands for themselves based on their performance within the app, ultimately attracting more people to "copy-invest" their holdings based on their performance.
Research Findings
Similar Companies
This is not the first time somebody has come up with the idea of a social-investing platform. We did some research into some previous startups that tried to pursue this idea.
There are a few weaknesses with these platforms. Firstly, although the portfolios of the users are publicly available, there is no measurement of how well they have done in the long term. Additionally, even if there were a ranking of traders' performance, other traders have to keep track of every single action of the top traders (there is no copy-investing functionality).
Finary Wants to Reimagine Private Banking - Tech Crunch
Finary: The Social Investing Network
Finary is a social investing network that brings together investors of all experience levels to share their investment strategies and portfolios with others. The platform encourages users to connect their brokerage accounts and engage in discussions about investments. Finary's primary focus is on creating a social network of investors. Users can share their investment portfolios and insights with their network, providing a transparent view of their investment decisions. This can allow users to gain useful information and potentially make more informed investment decisions. Additionally, users can discuss investment ideas, and share their research to learn from each other. This democratization of information can benefit investors of all skill levels.
Public: Fractional Investing and Social Trading
Public.com is another innovative fintech startup that focuses on fractional investing and social trading. The platform is designed to make investing more accessible by allowing users to buy fractional shares of stocks and exchange-traded funds (ETFs). This makes it more accessible to users with limited capital. Additionally, Public.com promotes social trading, enabling users to share their portfolios and engage in discussions about their investment strategies with their peers. Similar to Finary, Public.com emphasizes the social aspect of investing. Users can follow other investors, view their portfolios, and engage in discussions about investment strategies. The platform encourages transparency by allowing users to share their investments and insights with their network.
Accredited Investors
An accredited investor is an individual or entity that meets certain financial criteria and is permitted to participate in certain private investment opportunities that are not available to the general public. In the United States, to qualify as an accredited investor, an individual must generally have an annual income of at least $200,000 ($300,000 for couples) or a net worth exceeding $1 million, excluding their primary residence. Certain entities, such as trusts, partnerships, and corporations, can also qualify as accredited investors based on their assets and financial standing. Accredited investors have access to investment opportunities in private equity, venture capital, hedge funds, and other types of private funds that may require their investors to meet these financial thresholds.
What Percentage of People Outperform (and Underperform) Compared to the S&P 500?
Over three years, 74.3 percent of actively managed funds trailed the S&P 500 index. Over five years, 86.5 percent of funds underperformed. Over 10 years, 91.4 percent underperformed.
New York Times - With the Odds on Their Side, They Still Couldn’t Beat the Market
Beating Stock Markets
Concentrating your investment in a limited number of stocks or making a large bet on a single stock can indeed increase the potential for outsized returns, but it also significantly increases the level of risk involved. This strategy is often referred to as "stock picking" and is in contrast to diversification, which aims to spread risk across a broader range of assets to reduce the impact of poor performance from any one investment. While concentrated positions can lead to significant gains, they also expose investors to the risk of substantial losses if those specific stocks underperformed or encounter adverse events. It's essential to carefully consider your risk tolerance and investment objectives when choosing between a concentrated or diversified approach, and for many investors, a balanced approach that includes some level of diversification is preferred to manage risk while pursuing reasonable returns.
VSD Analysis
Stakeholders
Direct Stakeholders
The direct stakeholders of our app include investors of all forms, whether they have decades of experience and success, or are investing for the first time.
Indirect Stakeholders
Indirect stakeholders may include any people financially dependent on a user, as well as hedge funds and other investors who do not use the app. A user’s family may be impacted due to a change in financial situation, be it better or worse, that comes from using the app. Hedge funds could become less profitable if people choose to invest with our app rather than with them. Other investors who do not use the app could potentially be impacted due to a gap in information between our users and them.
Non-Targeted Use
It is possible that nefarious influencers may attempt to manipulate the market by pushing their followers to make some questionable investment, allowing the villain to profit through a pump-and-dump scheme or similar tactics.
Time
Reappropriation
Some users may attempt to use the platform for their own benefit, such as through pushing their own investment classes or “system” that can be purchased. This occurs on other social media platforms that are not focused on investing, so it is likely that our community would be even more susceptible. Hedge funds or other institutional investors may try to use data from our users to benefit themselves at the expense of the users. They could do this through tracking user portfolios and trading trends or possibly gaining access to user data through some other method.
Adaptation
This app encourages users to invest and make more informed financial decisions. This should generally be positive, as it makes it easier for users to save for their children’s college, retirement, etc. However, users may be encouraged to make risky investments resulting in them becoming financially irresponsible.
Pervasiveness
Political Realities
The app would likely be censored in some regions, causing these users to not be able to make informed decisions or possibly be unable to use the app at all. This would likely be the case in totalitarian countries that want maximal control over their citizens.
Crossing National Boundaries
Investing is heavily regulated, and different countries may have stricter regulations that prevent publicly sharing portfolios or financial advice. The app will likely face regulatory challenges in many countries, making it difficult to spread around the world.
Widespread Use
The app lowers the barrier to entry into trading, making it easier for the majority of people who have little training or knowledge in finances and trading. It also makes this trading extremely public for users of the app, which brings with it an increased expectation to share information like this publicly. This is similar to how the increased use of social media led to a higher expectation for people to post updates about their lives on social media.
Values
Desired Values
| Desired Value | Elaboration |
|---|---|
| Democratization | The app should make investment knowledge more accessible to the general population, better informing the public of tactics and strategies used by successful traders. |
| Community | We hope to create a network of users that help each other to become profitable investors and improve their financial positions. |
| Trust | We must be careful that false information or nefarious schemes are not spread on the app, as this can have a significant impact on both the portfolios and the lives of our users. |
Value Tensions
| Value Tension | Elaboration |
|---|---|
| Democratization vs. Privacy | We want to encourage users to spread sound financial advice, but many users may want to keep their portfolios private. Copy investing and public stock positions prioritize democratization over privacy. |
| Universal Access vs. Trust | The app should not amplify the opinions of some users over others, but allowing all users to become "influencers" or spread their information freely may lead to misinformation. Allowing an open forum for all users to spread investment advice would prioritize universal access over trust. |
| Community vs. Competition | Users should be encouraged first and foremost to learn about trading and finances, and competition is a great motivator. However, we also need to build a strong community between users to ensure the environment of the app does not become too toxic and push users off the app. This becomes more of an issue than most apps due to the increased mental and emotional burden of handling finances. |
User Experience of Values
A focus on the social aspect of the app will help users think about trading in a more social and public way. Aspects of the design such as the leaderboard and the ability to copy others' investments will reinforce the aspect. A balance between competition and community should be struck to ensure the more core values of the app are held.
Revised Impact Case
Problem
The majority of people do not have the skillset, knowledge, or time needed to be top investors, and typically the talent of the best investors is inaccessible to the masses. It is also easy for average investors to be taken advantage of by bad actors such as scammers or others who have their own interests in mind. We aim to democratize the knowledge, performance, and ultimately the resulting wealth generation of top stock market traders so that people of all skill sets and backgrounds can benefit from the talents of these top performers. It has also come into the public consciousness that politicians have vastly overachieved the market in their investments.
Importance
This problem is important because it causes a large gap in the profitability of the average investor compared to hedge funds, professional investors, institutions, and other talented traders. This furthers the gap between the wealth of the average person and top earners, resulting in the majority of wealth generation being concentrated among the already wealthy. Additionally, the behaviors and performance of top investors are currently walled off from traditional retail investors, limiting their ability to keep up with the performance of the wealthy/powerful institutional investors since they lack the knowledge/know-how of these top firms. The profitability and performance of people in varying positions of power (whether that be politicians, hedge funds, insider traders, or other groups with increased knowledge of how a stock might perform) seems to be an abuse of power that leaves retail investors in the dust due to their lack of advanced/proprietary information.
Solution
The activities of investors on our platform are publicly available to the users of the app so that they can follow where and how to invest. Portfolio distributions and holdings would be made public, allowing others on the platform to view (and “copy-invest”) a user’s holdings automatically. Weekly, monthly, and annual leaderboards would also allow users to see which traders perform best on the platform, and their holdings would be publicly available so other users could “copy” those investment distributions or styles. Advanced GPT-generated insights would also provide users with information on who they should consider “copying” based on their risk-tolerance, investment style, and habits. By making this kind of data more publicly available, users can benefit from increased insights into other users’ holdings, use this information to better inform how and where they decide to invest their money, and ultimately yield returns similar to the top performers. This level of transparency also encourages people with advanced knowledge/information to share that information with others, ultimately discouraging any nefarious activities.
Justification for Solution
Throughout history, information/data-transparency has empowered/enabled users to better educate and inform their decisions. By “open-sourcing” this previously gated information, users can make more informed trading decisions based on the behaviors of those that they trust. Establishing a publicly viewable leaderboard encourages better performance among users, ultimately lowering the barrier-to-entry for investors to perform at similar levels to that of the very best. It enables users to be more aware of the risk and potential profitability that comes with their investments. This type of platform also encourages people in positions of power to be more public/transparent with their investment activities, ultimately reducing corruption and insider trading.
Evidence and Measurability
To track investors’ performance within our application, we can compare the ratio of the income of average investors to top investors. Over time, we can see how users who tend to copy-invest ultimately perform, and whether they use “leaderboards” or our GPT-based insights to determine who to copy-invest. Using the broader market as a baseline for average/nominal performance, we can see whether users of our application perform better or worse than these benchmarks, and analyze whether top performers emerge on our platform (and whether people actually copy-invest these top performers). Conversely, we can also look at politicians who were previously excessively profitable and see if they are now less profitable. We can measure statistics about their portfolio such as the stock market beta and delta, and see whether users are more content with their performance given this newfound and more publicly available data.