In another thread, the one on optimization, Jin stated as follows (the all-caps and bold are his):
P123 HAS CLEARLY STOPPED BEING A QUANT SITE. P123 IS A SITE FOR PEOPLE WHO HAVE MATH PHOBIAS. I BELIEVE P123 IS MISSING OUT ON A LARGE MARKET. P123 DOES NOT ATTRACT PEOPLE WHO ALREADY KNOW THE ANSWERS TO THE QUESTIONS YUVAL KEEPS ASKING HERE ON THE FORUM. P123 DOES NOT ATTRACT PEOPLE WHO DO NOT WANT TO WAIT ON US DO GET THE ANSWERS–PEOPLE WHO KNOW THAT EVEN IF WE HAVE THE ANSWERS THE METHODS WILL NOT BE IMPLEMENTED.
P123 could attract new members if they could use basic, proven methods without having to get multiple features approved to be able to use these methods. Features—that in truth—will never be approved.
Finally, QUANTITATIVE HEDGE FUNDS OUTPERFORM HEDGE FUNDS THAT USE FUNDAMENTAL ANALYSIS. There can be no question that the methods work.
For an anecdotal example, WARREN BUFFETT IS NOT TOP DOG! Jim Simons beats him handsomely: see image.
BUFFETT’S RETURNS ARE DECLINING AS ARE THE RETURNS AT P123 I THINK. For Warren Buffett, it is a reality that he admits to frequently. Some of us are in denial.
Let’s talk about this.
There has been considerable talk within p123 lately about where the company should turn for growth. My position is that p123 is missing a huge opportunity by not speaking to people who just want to pick stocks, amd don’t necessarily want to automate everything they do. I know with 100% certainty that the market is big and that it exists (because I’ve seen it first hand for decades), and that it is not necessarily tied to “performance.” Back when I was at Value Line, I used to say that we were not in the financial services business but rather in the entertainment business. Stock picking is FUN and people love doing it, arguing about it, experimenting with it, etc., which why Wall Street Week was a hit program in the old days and CNBC, Bloomberg TV, Fox Business took over in this era and why Seeking Alpha, which played well to it, was able to reduce Yahoo! Finance, the once dominant web outlet, ti virtual irrelevance. But this is a hard market to expand in because getting attention requires gobs and gobs of outreach, marketing, promotion, etc. and whether p123 will have the stamina to stay with it is unknown at this time.
The quant market as p123 now defines probably has some juice left in the professional area once S&P is a memory after mid-2020 (S&P has done much to damage p123 in this area) and once global gets going. That’s good and could be impactful in a positive way.
But among US individuals, I think the quant market, as p123 serves it, may have peaked.
So the quant question is the nature of the quant opportunity as Jim defines it, a more intense quant market. I doubt p123 can serve hard-core quant pros on the platform. These folks are very demanding and want exactly what they want the way they want it. No “platform” can feasibly serve this much variety of demand. To serve this market, p123 will, I think, have to do so on a custom contractor type basis and some (many?) might even want to contractually bind an outside vendor to confidentiality. And that could, I think, be a strong opportunity for p123.
Custom one-on-one relationships aside, bear in mind that there are other vendors who provide high-end specialty quant capabilities. So its not as if p123 is needed to serve the Jim market. The question is what is the need to have it all on a single-source platform, the costs of meeting the need (which may include costs associated with being able to handle many different kinds of new/alternative/unstructured data sets), what the potential demand is for the general-purpose platform, and what people would pay. The market, I think, will be small since it would require a high degree of quant skills/education. (The more a seller demands of a customer, the smaller the custoner base will be)
My question, therefore, what, exactly, is the business opportunity for p123 in the high-quant area. This is not about capabilities Jim, Steve, Yuval or any other person might want. It’s about the business (profit) prospects for p123 in supplying it.
When it comes to this market segment/niche, I’m not a believer. But if you want to advocate for it, you need, ultimately to talk to Marco; he may follow this thread or if not, if credible points are made I and/or Yuval can be expected to call his attention to it.
Any “sales” process involves overcoming objections, so I’ll share with you some of my concerns and give you an opportunity to overcome them (and I’m open minded, if you persuade, I’ll change my mind).
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To what extent are hi-quant (my label) customers driven by the desire to simply do it versus the desire to perform (however you define it)? This concerns me deeply because I fear much success is attributable, not to quant skill, but to the good fortune of having been able to successfully exploit as 35+ year period of loos (often wildly loose) money creation and pro-investor political tendencies both of which are under serious threat. I’m always motivated to serve a customer that cherishes the joy of experimenting and use of use of quant data/tools to expand understanding. But selling to someone who is going to pissed if they can’t earn at least 25%-30% a year, oh no. I think that would be commercial suicide.
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How effective are hi-quant customers in generating performance — attributable to use of tools, etc., as opposed to unique genius that leads to success in any endeavor? This for me, is a major concern and I’d want to see much more evidence than the brief and flawed anecdotal table Jim reproduced in the other thread. I suspect that VT>LO*NAMC (Volume of Talk > Level of Outcomes Not Attributable to Market Conditions). In other words, does this stuff REALLY work. We’ve seen over many years how p123, as it is, can make people better than they otherwise would be. I am yet to see where the fancy stuff can make a large number of investors better. Show me I’m wrong — or show me that desire to do high quant is attributable to the process of doing it, apart from performance.
In business, nobody can be all things to all customers and I don’t see a cost-benefit case for p123 straying into high quant. My fear is that p123 would spend a ton of money only to wind up with few new customers most, if not all of them would, put forth a never-ending series of demands for more and more things (most with substantial cost implications and questionable at best incremental revenue prospects). If p123 is to become the kind of hi-quant platform some dream of, show us its a bona fide business. Show me I’m wrong to believe, as I now do, that it would just cause p123 to wind up perennially digging into a rabbit hole the bottom of which keeps sinking deeper and deeper and deeper.
Seriously, I’ll advocate for it if you show me its a business, not just a feature wish list or an anecdote. As Michael Bloomberg liked to say when he was Mayor of NYC, “In God We Trust. All Others Bring Data.”