reddit has the potential to unlock a lot of value if niche subreddits can achieve critical mass. There are quite a few subreddits that could support highly targeted and valuable advertising. Comment and voting quality also appears to improve dramatically with scale; compare the quality of comments on default subs to niche subs. If niche subs can get that dramatic improvement in quality, reddit would also be able to attract much better demographics for commercial purposes
See my reply to waterlesscloud for an explanation. There are some big problems in the defaults, particularly around political topics, however, these are not issues of scale. They are issues of diversity. Reddit will need to address the diversity issue in order to succeed.
In my experience, the comments on the niche subs are of considerably higher quality than the default subs. So much so that I'm puzzled what you could be thinking about. Can you give some examples?
It's basically a mathematical guarantee. Reddit shows 200 comments by default, so if there are 20k comments, then you are roughly getting the top 1% of comments. If there are fewer than 200 comments, you are getting ALL the comments, basically unfiltered. I've also noticed that the best users make a greater effort on comments that may be read by a large number of users (granted, the average user probably does not)
Voting quality clearly goes up with scale. On a small subreddit, you can make a brilliant comment, and only one person votes on it and you are at score 0. On default subs, the voting tends to be more accurate (though with a populist/groupthink bias)
I think some are confusing comment quality with comment value. A really funny, but silly joke would be a high quality, low value comment. The default subs tend to be lowest common denominator subjects, like "cute" stuff and politics -- low value. Whereas niche subreddits are highly focused on your particular passions and interests. Niche subreddits have greater value to users, which is why they are also more valuable for advertising and monetization purposes.
At sitewide scale, the quality of existing niche subreddits would improve dramatically, and smaller niches that do not exist today as subreddits would gain sufficient scale to support independent subreddits. I think that these niche subreddits could support almost search keyword-like targeting (albeit with lower CPMs because no immediate indication of intent). Imagine native feed advertising volume with keyword-like CPMs.
Not that it's highly relevant, but I'm a developer of a popular reddit app for iOS.
Institutional investors are some of the most conservative investors you will ever meet. They don't have much downside from losing money in a fund that looks "normal", and they don't have much upside in outperforming in a fund that looks "weird". They'll look past personality differences for a proven winner but a track record as short as 500 startups' can easily be attributed to luck (even if it is not). It's a principal-agent issue
The creation/redemption process is intended for market makers known as Authorized Participants (APs) to arbitrage differences in the ETF price and the underlying price. While, yes, you can sell bitcoins to the trust in exchange for shares of the ETF, you would then need to sell those ETF shares in the market. So in other words, you would only have liquidity if there were demand for the ETF. It's possible that there will be more demand for the ETF than for bitcoins simply because ETFs are more accessible.
The index fund is the greatest investing technology ever invented. The under-adoption of this technology is a behavioral problem. The solution definitely isn't additional layers of asset allocators taking fees on top of this.
I'm kind of confused by what Sam is talking about in the RFS about enabling lower cost index fund investing. VFINX has a minimum initial investment of $3,000 and minimum additional investment of $100. At 17 bps that's literally $5/yr. on the Vanguard S&P 500 fund. You are basically talking about a nominal cost to service accounts (send statements, support, backoffice, etc). It would be interesting to think about how technology can lower these costs, but cost isn't preventing anyone from participating.
Many problems in AI, such as NLP, are AI-complete. While it's possible to solve subsets of the problem without creating a human level intelligence (and many companies have done so), these solutions do not "seem" very intelligent. Based on Sam's blog post it sounds like he does mean human-level intelligence. Which unfortunately does seem out of reach within our lifetimes though I hope to be proven wrong.
Very few people even bother to track calories. Some people do have trouble sticking with it, but for most, the eureka moment happens sometime in the first week when they realize that they are consuming far more calories than they had believed. It's not a problem of perseverance when most people aren't even bothering to get started.
Calorie logging is actually probably the best solution to the psychological problem. Your stomach is saying to your brain that it is hungry and that you must eat. Sometimes you might be so hungry that you feel you are actually hurting yourself. But if you have been logging your calories and macronutrients, your brain knows that you will be okay. You're not gonna die even if your stomach says that you will. It's a triumph of cognition over biology.
How about fixing the physiological problem that is telling you you are hungry? If you are feeling hungry all the time, it is because you are leptin resistant. People become leptin resistant in an insulin-flooded environment. Solution: restore leptin sensitivity by stopping the flow of insulin. You stop the flow of insulin by reducing carbs (and possibly protein). You maintain leptin sensitivity using intermittent fasting (if you have iron will-power, you could use this as a starting point, but that sounds miserable to me).
Note that this physiological state (leptin resistance) is likely an evolutionary survival advantage as people would be insulin-flooded when eating fruit in the late summer and early fall, just as packing on weight for winter would be most advantageous. Since we never have the proverbial winter to lose the weight and restore leptin sensitivity, we are left starving and eating more all of the time.
People don't get fat because they are eating too many calories. People are eating too much because, physiologically, they are getting fat. Hormones drive the behavior.
I've met a lot of people who say that calorie counting doesn't work, but I haven't met a single person who consistently and meticulously counted calories over a long period of time, eating at a caloric deficit, who failed to lose weight.
The argument is that you won't keep off the weight. See chapter 2 of Why We Get Fat by Gary Taubes. If you turn off the calorie restriction, you gain all the weight back, and more.
It's mostly irrelevant. No one is investing in the hedge fund average, they are investing in the hedge funds that they think will do well. It's actually the same if you look at VC funds -- the overall returns of venture funds is poor, but the returns of the top quartile of funds is outstanding. In any case, the S&P 500 is not an appropriate benchmark for the hedge fund industry as a whole, because many hedge funds do not invest (solely) in equities and those that do theoretically have different risk characteristics from the market.
I think it is unlikely that hedge fund picking is possible for the following reasons. First, if a fund consistently produces outsized risk-adjusted returns the fund would increase their fees to capture most of those returns (Rentech, formerly Bridgewater). Second, a fund which has outsized risk adjusted returns net of fees would become very popular, receive more investment which creates a drag on returns until either the fund closes to new investors (Rentech) or returns reverted to the mean.
Funds frequently return capital or close to new money in order to stay below their investment capacity. Funds also sometimes charge less than the maximum they can get away with for various reasons. The premise of your argument is simply wrong. Moreover, you are ignoring the very real excess profits that are made on the way to this hypothetical equilibrium. Berkshire Hathaway shares aren't going to make you rich if you buy them today, but I'm guessing the people who bought them in 1970 don't care.
> Funds frequently return capital or close to new money in order to stay below their investment capacity.
The point is they are not open to investment once you have historical evidence that they are "good".
> Funds also sometimes charge less than the maximum they can get away with for various reasons.
The only reason I can think of is to increase investment. But that will happen even for minimal excess return.
> Moreover, you are ignoring the very real excess profits that are made on the way to this hypothetical equilibrium. Berkshire Hathaway shares aren't going to make you rich if you buy them today, but I'm guessing the people who bought them in 1970 don't care.
Obviously there are excess returns the question is if they can be reliably identified before hand and are accessible.
Are you invested in hedge funds? Which ones do you think are good now?
The cliche among hedge fund guys is to be "long term greedy" not "short term greedy", which explains why some funds try to be more investor friendly with fees. You also have flukes like Berkshire that seem to have undercharged simply out of benevolence. I don't really discuss my investments much, but I mostly do not invest in hedge funds for reasons of tax efficiency--a restriction that doesn't apply to many institutional investors. The one fund I am invested in has significantly outperformed with low risk during my holding period. The funds that I would invest in are small funds that probably no one here has heard of.
How do you suppose one tell which hedge fund will do better and which won't beforehand? Past performance? We know that's not a good indicator. If you can tell which hedge funds will do better in the future, you probably can tell which stocks will do better, and then why not just got it yourself without giving someone else 2 and 20?
We agree that S&P500 and hedge funds have different risk factors.
The point is that S&P500 is a lot less riskier and with better returns than an average hedge fund.
Investing in stocks is more labor-intensive than investing in funds. I can identify a few great managers that will do very well over time, write them a check, and be done. By your logic, why should anyone give YC or a16z money? I mean, if I know that YC is better at picking startups, why don't I just go pick my own startups? It's two different skillsets.
It's clearly not the case that I cannot select a set of hedge funds that is less risky than the S&P500. Fixed income funds, for example are much less risky (ignoring for argument's sake some details like inflation risk). I don't know if the "average" hedge fund is more or less risky than the S&P500. Depends how you define average. But no one is investing in the average, you couldn't do so even if you wanted to.
On the other side of the coin, there are index funds for fixed income too. That would be a better compare against hedge fund that primarily uses fixed income assets. (For hybrid hedge funds, there are hybrid index funds too.) Once again, the 2 and 20 payment structure makes it very hard for it to beat a 0.2 fee index fund.
And as for clearly better funds like A16Z and YC now, there have many numerous that have held that crown before. Fees and fund expansion have resulted in worse results -- allowing newer players like A16Z and YC to take off.
My argument is that I don't think it's clear who'll beat the broad market (for their asset class) once the fees are taken out. I suppose we disagree about the value of high-fee managed funds (whether VC, PE, Hedge, etc.). That's fine.
Anyway, enough digression from the discussion on hand.
Good luck to the founders in making their value proposition clear. I am sure there are lots of people want to invest in hedge funds but don't have the funds to invest directly. They will find this appealing.
I didn't say hedge funds shouldn't be benchmarked to their appropriate index, I said that hedge funds as a whole shouldn't be benchmarked to the S&P500 because they're not all equity funds. In fact, the majority of hedge fund allocated dollars are NOT invested in directional equity (not including strategies like merger arb that technically invest in equities but have totally different risk/reward from the market). It's not "the other side of the coin", it's my point exactly.
