In this video, Peter Bakker (Unhedged CEO/Co-founder) discusses with Barry Winata how the idea of Unhedged came to be and the strategies to democratise algorithmic investing (algo trading) to retail investors.
Disclaimer: The information in this video is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Barry Winata [00:00:00] Whether you’re an investor, trader or just sitting on the sidelines, it’s pretty obvious that the stock markets are going gangbusters right now. Every day billions of dollars are being made on Wall Street. But what does this mean for Main Street? The line has always been skewed in favour of the big banks and hedge funds while the retail investors pay the bill. But now things are changing. The balance of power is now shifting and the field is being levelled. Investing is being democratised every day for you and me, but more needs to be done to fight greed and enable everyone towards financial freedom and independence in this episode. My guest is Peter Baker. He’s the CEO and co-founder of Unhedged, an early stage company developing a platform to place the power of the big banks into the hands of everyday investors using advanced algorithms. This is a disruptive space and will no doubt change the game for retail traders and investors. Remember, if you like these podcasts and episodes, don’t forget to subscribe, share and like. So with that, I hope you enjoy my conversation with Peter Bakker. Peter, nice to have you on the show also.
Peter Bakker [00:01:27] I’m very happy to be invited by a mutual friend.
Barry Winata [00:01:32] Yeah, James has been very polite and kind and in introducing us and I’m actually very interested to hear about what Unhedged is all about. But before you sort of introduce what Unhedged is, why don’t you give a quick background about yourself and then and we can take it from there.
Peter Bakker [00:01:51] Yeah. Awesome. So basically. So I’m Dutch, as you can hear from my accent, it never goes away. I became a statistician after my university and I got really interested in your design. And then I built a company that in the end converted databases from four four telcos and a business was actually pretty successful. So in 2001, we sold out and then I sat on this accidental, I would say, still say a pot of money. And I thought, OK, what I do to do, I do, and my dad said, listen, you are too young, you you have to lock in a a bit of money and a part of it. You just enjoy and treat and do other things. So that’s what I did. I locked in my pension, so it will pay out when I am too old to enjoy it properly. And then I started trading, but I also wanted to travel. So I travelled around the world for two years. I followed the route of Marco Polo and I couldn’t watch my my money, so I started to automate my trades. So that’s how it started. And so I had different ventures. So I don’t know the company that was doing and helping me out because of me so big brother to do as much as voting, stuff like that old stuff, you know, 2003, it’s a while ago and I went to INSEAD to do my MBA and then I was recruited to Google. So I hung around at Google for a while. Very interesting, but not so good for entrepreneurs. And after a while I went to a company called MyDeco, which is was founded by Brent Hoberman in the UK, who also founded Lastminute.com where he was the CEO and we basically broke the company up, broke it up and sold it. So then I went to Australia and basically became a full time trader. I did some other some other jobs. But so some things happening in the background. Early morning in. And so in 2017, I became really involved with a quant company called Quintopian in Boston and Quantopian, great quant company, great concept, but I think they took on too much funding and had a few issues there. And I became very involved with the open source project called Zipline. And Zipline, I became at one point one of the developers who made life trading connections to two Zipline, and then I thought, there’s a company here. So that’s when I started. And the primary thing, what I what I did there was was I first of thought about a marketplace between algo developers and retail traders. This didn’t work because there’s no trust on both sides. Then I went to a model where you connect your brokerage account to an hour ago. That also doesn’t work. It’s very cumbersome. A few companies in the US do it also here in Australia, do it. And then I thought, OK, let’s go to the simplest model, which is a is a real adviser, but not powered by a static rebalancing that’s powered by algorithms.
Barry Winata [00:05:48] I think there’s a lot of interest right now in the stock market. I think, you know, there’s always been interest, but so much more, especially as technology is changing every day. There’s always improvements and innovations in technology, especially algorithmic trading. And I want to learn a bit more about the essence of algorithmic trading, especially from your background, where, you know, you come from an extensive history of trading both manually and automated in a way. First of all, what is algorithmic trading for those people who are listening? And they want to understand a little bit more about this concept. Can you explain a little bit about what algorithmic trading is?
Peter Bakker [00:06:40] Yeah, sure. So algorithmic trading is basically in its essence, is you let algorithms make the decisions of all your your buys and sells and in essence, that’s it. But then you have a lot of ways to do it. Right. So some people call algorithmic trading when they automate things through trading for you, which, yeah, I don’t do. But I think what the essence is, if you if you take away just orders done through algorithms and it’s how you get to those algorithms and that’s a very, very academic process, you have to make sure that the hardest thing about algorithmic trading is actually not creating the algorithms, is getting data and getting data that’s reliable and getting data that actually represents the world at that point in time. And then you basically what what then is so very subtle flavours of algorithmic trading you have on on the more advanced and you have machine learning anything and the more simple and you have very rule based algorithms and even the very simple rule based algorithms, they work. And it’s very funny sometimes to see that things that because one of my one of my pets is that when I see an academic, an academic paper or an academic saying something about dog training, I just immediately tested. And most academic stuff is not really good. But if you look if you if you watch and if you listen to very experienced trainers, they sometimes have very simple rules actually work. Which is quite funny. So algorithmic trading in his base is a huge gamut from very simple rules, for example, a rule could be when the market goes under its 200 day moving average or 200 day moving average, I sell out of and goes above us on it. Even if you follow a simple rule like that, then you would do better if you just like most people, buy random stuff. And Robinhood,
Barry Winata [00:09:16] here’s who’s using algorithmic trading nowadays. Who are the big players in the market right now? And I guess we can sort of get into that more deeply later on. But just from a high level, who are the participants in algorithmic trading at the moment?
Peter Bakker [00:09:33] Yeah, so when you talk about algorithmic trading, you have to basically split to two parts. So one is the algorithmic execution, which is basically most volume. So all brokers use algorithms to execute and to get the best feel for you. So then you get these estimations that about 80 percent of the volume is caused by algorithms. I don’t know. That’s not for me. Real algo trading. Then you have the algorithms that are are purposely built to trade and to make a better result than just holding the market and the ultimate players where we always look at this renaissance, DoubleLine Capital, Bridgewater, Bridgewater is a very interesting beast because they use a lot of alternative data. And then you have actually quite a few small shops which are incredibly unknown, but that have very good results. Here in Australia. You have a shop called Baronial and they’re actually pretty good there. Their results are very more than decent.
Barry Winata [00:10:51] What is your, uh, in terms of, you know, the major shops that you mentioned? You know, I think the common thread there is that most of these guys are hedge funds and they are a you know, they have plenty of money under their belt and they’ve been making, you know, hundreds of millions and billions of dollars trading every day. How is that different from the olden days of of doing trading and investing, you know, before technology revolutionised the stock market, you know, what was the major difference there? And if so, if there was a difference, um, what was the value? I mean, did the algorithms outperform those who were able to, you know, manually invest in trade? Or do you think that the performance is on par with the way that things were done in the old days?
Peter Bakker [00:11:51] Well, I think the biggest difference is this. The biggest difference is data. And so in the olden days, people made decisions based on order and inside. So you were connected to the company and you had an insight that they did something and then you bought it and you waited until that information got dissipated into Democrates. What algorithms and in fact do is, is they can you they can they can look at millions and millions of data points every second and they can interpret that which people just cannot do. So if I say, what’s the main difference between that, between those really ugly firms and old style prop trading, that it’s data and access to data, because it’s not only is the data available, it’s the data available fast enough. And it’s the data is is it reliable enough? Because I have a lot of data sets that are interesting and I can see great alpha, but I can’t get a glance of the source. I can’t get them reliably enough. So then that becomes useless. So that’s that’s one of the things. The other thing is that. The. Protesters were always humans and humans have have have a lot of biases and biases are basically getting your results. So biases, for example, that you have a cognitive bias. So once you have a stock, then you only see information about a stock and you see it in a certain light. And then there is the bias that it hurts when you have a loss that hurts more than a profit, gives you pleasure. So what people in general tend to do is they. They start chasing winners. Which is good in general, but they start to chase it to the point that’s when they start losing. They also keep on chasing them and then they make a loss. And so there’s a lot of human biases that machines just don’t have. Now, there’s an argument that you can say, well, the algorithms are built by people, so the biases of people will slip into it. Yes. In simple rule based algorithms do. That’s true. But when you look at a new class of algorithms, you have deep machine learning and and some form of A.I. because I trading is still quite hot because it’s frowned upon by regulators. I can get back to that later. But the the the the simple fact that you have more data you can process is faster and you have algorithms and machines. I use, for example, a lot of grass and fast AI and all stuff from from Facebook profit. So there’s a lot of software available that you could not have like a while ago.
Barry Winata [00:15:33] It’s interesting to hear about your take on the human side of trading. I think for the most part, you know, I’ve known and I myself, you can get very emotional, and especially when it comes to your winners and especially very especially your losers as well.
Peter Bakker [00:15:53] Losers, are they hurt more than anything?
Barry Winata [00:15:57] And so I think it’s important to at least have some sort of unbiased approach to trading, especially in the the fluctuations and the, you know, the tumultuousness of the stock market. And so I think it’s important to understand why what you’re building at the moment is very important. So as we sort of go into that topic, sort of explain to everyone, how did you come up with the idea of unhedged? Obviously you have your background, but why is this why was this so important for you to build this tool for everyone?
Peter Bakker [00:16:37] Yeah, that’s actually quite, quite strange. And because often people approach this from a from a financial services point of view, always like you just want to be, you know, their fund manager or a bank. But one of the things that really motivates me day in, day out is when I when I was doing a lot of trading and I was helping and consulting for hedge funds and doing stuff. And at one point I run a small fund for for a very rich man. And it was quite happy with the results of one point up forty seven percent in six months. So we said, OK, I’m going to be crying to help. I thought, oh, this man is already incredibly rich and now I’m making more millions for a billionaire. It really doesn’t do anything for me, and of course, I made I made excellent money because I got part of the results, but then I thought I won. When I spoke to you about the results to my friends, they said, oh, can we also invest? Oh, you can’t, because it’s classed as a hedge fund or I know you have to be a sophisticated trader or a wholesale trader. Every country has its own definition and the regular regulator does not allow you to do this trader trading. And I thought that’s that’s really, really bad. And I started thinking about it and and, you know, I’ve been lucky, and sometimes I think people always say that when they are exiting car companies is primarily because they were good. But you have to realise that if you do start ups, there’s a lot of luck involved, luck and timing and the right people. And I would say I was lucky that one of my first jobs was a Start-Up, that I build myself an accident. Right. Most people don’t have that luck and. The absence of of luck then determines a lot of things, how you can invest in the future. And that’s starting to irritate the hell out of me, the heck I would say the international audience. So that irritated me so much. I thought, OK, how can we change this? How can we how can we give this still? So in the beginning, I thought, OK, let’s let’s create algorithms that trade normally and then try to commercialise it. And when I spoke to the regulators, they just don’t allow it. They say, no, no, you can’t do that. Because, I mean, when I when I said earlier, those big firms. Right, these big, big hedge funds, that that trade, they also do they trade in a certain way. So they what they call the trade market neutral, dollar neutral. And they try to be in other areas also neutral. But it basically means that if you are dollar neutral, you have less money, shorts and longs. So in the end, you have zero in your bank account. But because what you buy long and what you buy short and yet you create more value and a market neutral. So they try to be what’s called beta one 5.0. Right. So they they if the market goes up or the market goes down, doesn’t matter. The algorithm makes money. And so they only have left so called alpha. But if you do go that way, the Alphas are tiny, they’re really like tenths of a percent. So you have to you have to process billions of dollars to get a significant amount of money out of it. And so. The moment you go to the neutral, market neutral, so you have to go short, you have to go Lovatt, then the regulator says, Oh no, you can’t do that. And so the whole regulatory environment in which country is built such that this type of trading is just not acceptable for people, for normal people. And we have to change, and I’m very passionate about it, that we we can’t I can’t change the regulator, but what I did in the last two or three years, I created algorithms that are not neutral, that don’t go short. They don’t love her. They don’t do a lot of things that the regulator says. You can’t do that. But they create offer based on alternative data and market data. And Alpha is a little bit better than what normal people could do a robo advisor. But even if you do a little bit better over the long term, that’s a lot better because then compounding starts to kick in
Barry Winata [00:22:04] what is just for everyone? What is our friend? What is beta?
Peter Bakker [00:22:09] So basically Alpha Beta. If I would experience in the most simple way, it’s just a a Ogura formula. So it’s basically Alpha plus. Betye Times, Democrates is your outcome, you know, and so in a most simple sense, if you have a metre of zero, you have zero times Democrates that you have only Alpha left, or if you have one as a beta demarcates. Yeah, well, the D so alpha is whatever you can earn that is above normal market returns and beta is what the market is itself, the multiplayer. And so basically what you got, what hedge funds tried to do is make to beat a zero and then only half left the Alpha. What we are doing is completely different. We say, listen, if you look at the very long term and let’s say U.S. markets go up, if I if I take 20 years, any period of 20, 20 years, the market goes up and then the only triggers can I can I cut off the drawdowns? Can I cut off the things that go down? And so that is how I create Alpha is not by trying to multiply the beta, but by switching the beta. And it’s a little bit of a difficult concept, but suppose the market goes up, then I want to be one beta, so I want to follow the market. Suppose the market goes down. I want to be negative beta because the market is not negative. I do it times minus one and I’m positive. And so because of algorithms that I work with beta switches and. The the key, the key that’s that’s, I think the key of what I do and what hedge funds they try to do BETYE zero, I do try to be to switch to follow the beat in the market, but then go out negative, negative, positive. If you look at robo advisors like Battlemind, wealth from livest, et cetera, et cetera, what they are doing is beta dampening. So when you have the market is an ocean and you throw oil on it and the waves are still there, but it’s less high and low. And so by definition, this method, which is called a modern portfolio theory out of nineteen fifty two, there’s method by default, makes you underperform the market, but also makes you by default, less volatile than the market. So most people prefer to prefer less volatility over a lot of gains. But I think we can do better. We can do better.
Barry Winata [00:25:22] So what is what is what is unhedged doing that is better?
Peter Bakker [00:25:27] So first, we are class of of algorithms is our bittersweetness, that’s that’s as I said. But the second thing is what’s very important is diversification is key. I mean, anyone in the business of of investing, they say, OK, diversification is key. But what we are doing is not we don’t diversify assets if we need to, but we diversify algorithms. So we develop several algorithms that we can create as many as we want. But now we go through life with three. And those algorithms, they’re all three of the class beta switcher. So they switch beta to negative. When the market goes down into positive and have fun, the market goes up. However, the mechanism that they switch are completely different. So they look at completely different data sets and a completely different asset universes. So I said universes, for example, Nasdaq or all stocks or oil futures or whatever. And so if anybody would take a combination of these three algorithms, then they would get a far better results than if they would take any one of them or if they just would follow the market. And that’s because some of these algorithms they switched to early and some switched to late. And that doesn’t matter because the two of us were either on time or too late and they start to cancel each other. It was a draw down. So the negative parts, they start to cancel it out and then you get a very smooth equity curve. And as long as you rebalance regularly, so our users have the option to rebalance every month and we rebalance for them. Then you take out the risk out of the whole thing because. Suppose very when you were very insightful in your early, early teenage years and you thought, I buy Apple. You buy also some other stocks, but you buy Apple or you buy some of them, and now you’re if you would not rebalance now, you would sit now. Ninety five percent Apple and some other crumbs in your portfolio. So your whole market will be Apple, your whole portfolio will be Apple. And that means that you exposed all the time to Apple. That happened to be a good result in this case. But the chances that you chose Apple or not, I think because there were a lot of lessons so you could have chosen eat and then you would have nothing plus a few crumbs. And so the rebalancing part is very important so that you basically first you create what they call uncorrelated return streams and you you mix them in a certain way. And the second thing is you rebalance it, you don’t let go one out of whack.
Barry Winata [00:28:46] I mean, it’s interesting to hear about this really interesting approach. And I know that obviously in the US there are robo advisors and these robo advisors are responsible for doing exactly that. They will you know, you put in your money, whether it be betterment, as you mentioned, Charles Schwab, TD Ameritrade, and they will take the load off you and then they will take your money and they will invest it into the market and try to track it as good as the S&P 500, for example. And then over time, they will rebalance that portfolio based on their modelling, based on their algorithms and what have you. Is this similar to what Unhedged is doing at or slightly different?
Peter Bakker [00:29:39] No, so that’s that’s so what they are doing is what they call the day they follow the modern portfolio theory, so they have a static portfolio and a static portfolio as rebalanced our holding periods on on our assets are in general 18 between 18 minutes and 18 days. So some very short space on a bit longer. And the mix of assets that Charles Schwab or Vanguard uses, it never changes. It’s always the same. And just to just rebalance, what we’re doing is pretty completely different because I can write a blog every week on what the algorithms buy and why, and sometimes as why, because it’s it’s a high algorithm. But I can I can see that it buys completely different things in in every period because it just looks at different and different data properties. And that’s I mean, there’s so many for example, Charles Schwab would put homebuilders in their portfolio as because homebuilders are important in the U.S. for getting a return. And that’s nice, great homebuilders. OK, but if my husbands would buy homebuilders, they would buy it on other data like data about the permits issued by government or the steel prices or the wood prices. And so they take a completely different approach because the whole the whole modern portfolio theory is is a valid theory in academics, but it’s not only flawed and still. Thousands and thousands of hedge funds. So you’re not heard of robo advisors and robo advisors like services and financial advisors, they follow the theory blind because it had a Nobel prise. Yeah, but the same theory says that all people are rational, that every all the information is immediately priced into the markets and that the markets are efficient. Just to call at three three assumptions that everyone know that’s not true, because if that would be true, GameStop would never happen. You know, so it’s a it’s a bit of a bit of a. What what the robo advisors do is really great, right? They do things on a very low price day. They do a lot better than ninety nine point five percent of all people could do it themselves. However, this is also a little bit of my gripe is what they’re doing is so simple that you I mean, we can do it on a spreadsheet. We can do it ourselves, and we can do that rebalancing ourselves. It would cost us 10 minutes a month. And for 10 minutes a month, they get paid somewhere between, let’s say, half a percent or two point two percent or three percent of your assets. To sometimes up to two percent of your assets every year. Wildcoast once a month for yourself to do it, to do the same, it’s not hard. It’s very simple. You can download the spreadsheets everywhere. So this industry is built on the fact that you where you park money in a fund. People get just paid just for the fact that you parked it. I think that’s wrong. What what I think this whole industry should go to a model is you park, you pay for performance when you are better. And what I can do myself, I want to pay for it. Yeah. And and that’s that’s that’s key. This industry is because of the structure of and accepted structure of how people pay fund managers and financial advisers. It’s just broken because it doesn’t really doesn’t want to make people over perform. They just want to sit on the money.
Barry Winata [00:34:14] I mean, that’s I think that’s such an important point to make. And I think the financial system definitely need is ripe for change and some sort of disruption. And, you know, you mentioned GameStop and I definitely want to go into GameStop towards the latter part of the conversation. But, you know, just sticking with unhedged for the moment. You know, I know that there’s been a lot of development and you guys are growing and you guys are thinking of new and innovative ways to do this. So, you know, what are you what do you see unhedged going in the next one to two years? And, you know, who do you see this affecting? You know, the biggest the biggest populations that I can see this really changing the lives of our retail investors. And I think that’s going to give them a lot of power and a lot of, you know, the ability to be able to confidently invest their money in the stock market. So with regards to unhedged, you know, what are your plans for the next few years?
Peter Bakker [00:35:22] So so the the so we’re launching this stuff to fund itself because there’s a fund behind it which we created ourselves. If on balance, this month and the IPO launch in July and for normal investors, I had to I was forced just as first to the so-called sophisticated investors. But that’s fine. So basically the plans are as follows. We want to I always see a world of start-ups and Internet. So the first 50, first hundred fifty five thousand, first fifty thousand people on the platform and the first fifty day they come out of my own network in the first 500, they will probably come from a small crowd equity fund raise that I’m going to do. So that’s an important part of my journey. And I do that because I believe that people who do private equity fund funding. They like investing. They like to talk about it and they like a little bit more risk, so they’re not so risk averse. So they’re the right people, I think, to start off and to build from their. On that our whole backend is built on either of us loved. I haven’t heard anybody in the industry doing it serverless trading engine and it’s built to be multi regulatory environment, multi language, multi broker and multi custodian and trustee. And that means that we buy we have designed a company to go abroad. And so we won’t be one of those companies that is very insular and just sticks on with this Australia. We will go very quickly to other countries and that’s one of the journeys I’m passionate about. The other thing that I’m passionate about is that I want to give more types of algorithms to to people. And so one of the other things we’re working on in the country is ESG algorithm. So that basically takes ESG signals in the world and then starts to over overweighed certain equities based on the fact that because they are doing well in the ESG front, we expect them to at one point to command a premium. And so to go up, if the regulators allow us, we want to develop crypto crypto algorithms. Crypto is notoriously hard to invest in. I mean, everybody sees these people driving Lamborghinis and and saying I had 10000 percent profit. But for most people, that’s a scary thought. Right. And it’s a difficult industry to be in. It’s it’s hard to to open up accounts. And when people want to steal your money. And so I want to make that a little bit easier as well. And it would be better for the whole portfolio because you have, again, a return stream that’s completely independent of the market and that would create a better result in the end, especially when you rebalance it. But, yeah, at the moment, Barrie, I’m just I’m just hiring talent. I’m just hiring talent. That’s my that’s my main thing at the moment. We have a lot of people coming to us like we like what you’re doing. But to build a company like this in the early stages, you know, you have to be very careful how you construct the team and what culture you want to create. I don’t want to create a filter culture that is in banks. I want to create a culture of a property company that has a mission to enable better investment tools to normal people. And that means a lot of things.
Barry Winata [00:39:37] I think we definitely will make sure that people are aware of what you’re up to. And definitely, you know, talent is one of those scarce resources that’s hard to come by. Good talent, I suppose. And I think it’s very important to to realise that this is going to be, you know, very, very game changing. And I know that you mentioned crypto. You know, at some point you want to introduce that that asset class into into the fray so that, you know, retail investors can get access to that. What is your what is your take on crypto at the moment? I think obviously crypto is becoming very, very popular and not just because of Bitcoin, but, you know, just with the whole idea and concept of investing in a simply completely separate, different asset class, but also the power of crypto in in providing value beyond cryptocurrency and the block chain, providing a lot of benefit there. Are you for or you against crypto?
Peter Bakker [00:40:49] Yeah, I’m for or against that’s a little bit of a strange question, but it’s a little bit of a loaded question. But because I try to see the world as it is, it’s just here. So we have to live with it. And but I think on a on a whole, I think the crypto industry as a whole is a very positive development because it also helps to to enfranchise people who are disenfranchised by big banks. And, you know, sometimes I say to to my kids, like all these big buildings you see in a city with all these bank names on it, we have paid. We have paid by overpaying for our fees. So not need it. You can run the new Neil Banks. They prove now you can run a bank with 30 people, 40 people. And proper functioning banks, you don’t have to have a thousand people in the building because they all have to be paid. And I don’t I’m not saying let’s fire all bankers because bankers are also people and they need a job. But the the what I like about crypto is that it this it disenfranchises behaviour that is not adding any value. And what I like about the crypto industry so far is that what they have? What’s being billed is a copy of the of the revisions financial system, and I mean, I’m an active investor in crypto. So, uh, so my question, though, my answer would be, I think it’s a positive thing, but it’s a very dangerous area. And I would say in general, when it comes to investing in crypto, I think you should treat crypto as a asymmetric bet. And what I mean with that is that you you can invest small amounts of money that you will not miss if it’s completely zero and those amounts of money can become fortunes. And I don’t know if it’s still the case, but I know that some of the stuff I bought years ago about like five hundred dollars and five million dollars, I confess, I don’t mind if I want it to become zero, but some of those five hundred dollars became suddenly thirty thousand dollars, although that makes a difference to make it. And if you do that 10 times, it starts to make a difference in your life. What I think is really dangerous about the industry, that they also create tools that expose people to risks they don’t really understand. So if you see the Bitcoin futures, Bitcoin options and finance is several instruments that are basically leveraged or Giertz hundred to one. That’s great if it was up, but if it only has to go down a few percent and then you lose all your money and what you see now happened also in 2008 in the US, people start to do strange things. They start to lever themselves up. So parts of the house put it in crypto. And yeah, that’s just adding risk. That you just that that’s going to wipe you out completely and. You know, and wiping out it happens all the time in society, you know, you have the so-called bubbles and the bubbles are followed and then people get wiped out. As a society, that’s not such a problem. And because if if you have a few million people and a few hundred people get wiped out, oh, that’s fine. And they go bankrupt. Oh, that’s fine. But the tragedy for those people themselves is sometimes. Hard to understand and hard to fathom what it means for someone to feel rich. Mortgage, part of the house put it in Krypto and end up with a debt of a few million dollars. It’s not that hard to do. It’s very easy.
Barry Winata [00:45:29] And I think that I want to just add on top of that is that I think Robin Hood has made it much more easier for anyone to to put their money into the stock market. And I think there’s maybe a double edged sword to Robin Hood, where it’s definitely democratising a lot of the investment. But at the same time, I think that there are a lot of naive people out there who are reading the news, getting a lot of information about huge, you know, thousand gains on certain stocks and they are going all in without the proper financial education. And so I think that’s scary. But it’s also, as you mentioned, you know, it’s the world as you see it. And so it’s not good or bad. It’s just that it just needs to be thought about a bit more deeply.
Peter Bakker [00:46:30] Yeah, yeah, so the the I think Robin Hood, what they did and even. I mean, even even the payment for order flow, because their business model is that if if you do a trade and they basically sell the trade to hedge funds and such funds pay for that pleasure. And so that’s why they can make things free. But it also. Creates a basically a bit of a perverse incentive for Robin Hood to get as many people to trade as many stocks as possible because then they get paid more overtrading is one of the things that make people lose money. And people also have a very selective memory, if you if you see all those guys on Twitter and StockTwits and all these other platforms screaming, I made a thousand dollars a day. Yeah. So if you sometimes ask him, so how much did you make in a month? Oh, nothing, because the thousand dollars I made I lost. I lost yesterday, but I didn’t tell you, you know. So it’s it’s this this skewness of of of self reporting is brings on the feeling to to people who do not participate, like all these people are getting rich and I’m not here. And what do they do? They put into savings and start gambling because if you are investing without a plan, it’s gambling. It’s it’s not investing. And if you see it as gambling, that’s fine. That’s great. No problem. But people see it as investing and they put the money that they destined for the kids to go to school or day for a new car. And they think, well, if I double it, then I can buy a bigger car. Yeah, but if you have it, you can buy a bike.
Barry Winata [00:48:44] I want to I want to close off maybe the conversation with just your your final thoughts on what’s been happening in the stock market lately. You mentioned GameStop, EMC. What is your. I believe I guess my question is with regards to the power struggle and the balance, and this is sort of goes in line with what Unhedged is trying to do. You know, so far up until now, the the hedge funds, the big banks have all had that power and they’ve been dominating the market with with what they’re doing. So when it came to something like GameStop and you saw the stock and the price of GameStop should astronomically high because of a credit subtrend. How what does that mean for the economy, like what does that mean for all of us as as retail investors? What did that show to the world about the balance between Wall Street and Main Street?
Peter Bakker [00:49:46] Hmm, interesting question. Interesting. So the balance between Main Street and Wall Street has also been always been skewed to Wall Street and slowly society starts to form a groundswell up to to to eat that up slowly. Crypto is one thing, but also companies like us who basically allow people to invest in more advanced things than they could make up themselves. And I don’t think the last thing that’s being said, because the government in general is very much in bed with the banks. Right. I’m not a conspiracy theorist, but the whole society hangs together from a lot of angles. And in the end, society is driven by people. And if bankers are friends with politicians and you know, there is a implicit or explicit way for working together, the one thing that a lot of people do not know is that the government needs banks desperately because although the government prints money, 80 percent of all money supply is created by retail banks, by normal banks, because when you put money into a bank, they take 80 percent of the money and load it out again. And that money comes back again and 80 percent of that gets out again. That’s all money creation, money creation. Most money is created by normal credit creation that banks do. And so as long as we don’t have an alternative for that, banks will always be important because they’re very important in the in the cycle of money, et cetera, et cetera. And I’m not saying we should we should go in the street and start bashing banks and saying that things are bad, things are fine. But I’m running a little bit against this. That doesn’t there’s at one point there’s no need for greed, for more greed than I every time. And some of your your listeners might logically disagree, but when I look here and in the streets and I see Lamborghini’s and I think, OK, that’s cool that you can buy a Lamborghini, but what does it say about you that you actually don’t care about money? That you are you sure that you you when you drive the Lamborghini, that you thought about other people in the street that do not have any access to? Money creation or wealth creation that you flaunt. And so I’m I’m not a socialist, but I do think that when you start flaunting wealth and bankers are particularly good at it often, what does it say about you? What does it say about the excess that you have generated? The excess you have generated is money that your customers do not have in your pocket, in their pocket anymore. This is Neil.
Barry Winata [00:53:07] Well said, just to close it off, what is it what do you need? What are you searching for? And just in terms of unhedged and how do you want. What did you call of action? Call to action. And and finally, if people want to get in touch with you, well, how can they reach you?
Peter Bakker [00:53:26] Well, they always can and can reach me on on my LinkedIn or I mean Peter at unhatched or I’ll just email me. No problem. I’m what I’m looking for. We’re always looking for talented people. Right. So and I know there’s a lot of talented people around. Are you looking for quants? Because we want to bolster our Quantium quite a bit and we haven’t spoken about it at all. But I would love to get more women in the company. And it’s such a male dominated industry. It’s really annoying. And Elvis, who has now more than a billion in management, has proven that there’s an enormous amount of women who feel disenfranchised by the by the finance industry. And, yeah, if if there’s women, female coders or him, she and she and others, I don’t mind anything but, uh, coders and person will want to be involved in this venture. Yeah. Contact me. We would look for Python coders. Yes. But also, um, capital. I mean, we’re we’re I’ve learnt in my entrepreneurial career. There’s two things you’re always doing. You’re always raising capital and you’re always recruiting. So that’s my ask. I’m looking for capital and I’m looking for people.
Barry Winata [00:55:21] Sounds good. Well, thank you so much for joining the episode. And it was very insightful speaking with you. And I hope everything goes well with Unhedged. And I definitely think that what you’re doing is going to provide a lot more access to the markets, but also in a much more democratic way that will provide wealth to and and distribute wealth amongst the population more evenly. So that’s it’s something to be passionate about, but also something to be excited about at the same time. So thank you, Peter, for joining the episode.
Peter Bakker [00:56:00] Very welcome. Very welcome. Thank you.