People

Are bored tech workers really playing games with money?

The pandemic has inspired millennials to get serious about all kinds of investing, including some young, tech-savvy investors who are exploring a niche idea: algorithmic trading.

Are bored tech workers really playing games with money?

A new pandemic hobby.

Photo: Scott Heins/Getty Images

For the legions of workers sent home in March, quarantine hobbies started out small. Banana bread, sourdough, herb gardens. But then long days and nights at the home office opened the door for more precarious projects — like retail investing.

Stuck inside without an outlet for his carefully designed sports betting model, Matthew Brownsword, a project manager at market research firm Edison Research, turned to the stock market. "I created a code that I can run at night, every night, and in the morning I buy stocks or sell stocks, and I just see how it does." With the abrupt cancellation of sports, the market's potential for a similar modeling hobby grabbed his attention.

Side projects have always been common for programmers, and algorithmic trading is just the latest hot hobby. The r/algotrading subreddit has doubled its subscriber base since the beginning of the year and is now adding anywhere between 700 and 900 new subscribers per day, on top of a 60% increase in daily viewership since before the pandemic, the moderators told Protocol.

This growing interest paints a big and complicated picture about the future of investing. Pandemic boredom and changing consumer habits haven't just created a new era of gamified day-trading — they've spurred interest in retail investing across the board. Financial experts told Protocol that since March, more millennials are opening retirement and brokerage accounts, moving savings into ETFs and experimenting with niche retail investing concepts, like algorithmic trading. The more sedate new investors tend to be older and more gender diverse, while most of the day traders in abundant and rapidly growing Facebook groups (some with tens of thousands of people) are young men. And of the traders who spoke to Protocol, the more tech experience they had (programmers and engineers, mostly), the more likely they were to experiment with algorithms that direct their trading for them.

Beyond just bored

The go-to narrative around retail investing has been simple: Reckless young day traders are creating market volatility and blowing up stocks like Tesla and Hertz. Barstool Sports founder Dave Portnoy has inspired his legion of fans to embrace day trading with cult-like enthusiasm. The stock-trading app Robinhood has gamified investing by designing a platform more like a social media app than a Vanguard website.

"When it comes to a lot of new traders, it's greed. Greed is the number one bad attribute in trading," said Jon Cabral, one of the founders of a futures trading group on Facebook with more than 7,000 members. "Young, dumb" investors are causing a "nightmare" in the market, Cole Smead, the president of Smead Capital Management, recently told CNBC.

At first glance, the data seems to back this up. TD Ameritrade added a record high number of retail accounts in the third quarter — 661,000 — and hit all-time highs for daily average revenue trades. Robinhood added more than 3 million new accounts in the first four months of 2020 and also saw millions of DARTs, according to data provided by Robinhood.

Yet a number of market experts approach this version of the story with skepticism. Yes, there are people with some spare cash playing games with money. There are also some new investors taking advantage of the previously inaccessible opportunity to borrow capital for their trading, which can land them in serious debt. Earlier this year, a 20-year old Robinhood user died by suicide after appearing to believe he had accumulated hundreds of thousands of dollars of debt, though it is impossible attribute any one cause to this tragedy. Those are both problems worth criticism, they said, especially of the platforms doing little to stop it from happening.

But less-gamified platforms like those from Schwab, Betterment and Stash have also experienced similar year-over-year growth in terms of new accounts and trades, and these new users are not engaging in typical day-trading behavior. When taken alongside the day-trading data and new fascination with algorithmic trading, they instead illustrate a bigger picture of a broad swath of the American populace interested in investing for the first time.

Before the pandemic, Wall Street leaders had been vocal about their fear that millennials weren't interested in understanding and investing in the markets, which could be a long-term problem for financial institutions and individual wealth accumulation, JJ Kinahan, TD Ameritrade's chief market strategist, told Protocol. And then the pandemic hit, and "what was Wall Street's reaction? They are idiots, they're not doing it right, they shouldn't be here," he said.

"Are some people just going out and making bad decisions? Absolutely," he agreed. He said he fears, however, that there's a part of the story people are ignoring: The industry wants people to invest, and they want people to get educated while they do it. And the data shows that's starting to happen in a big way.

Algorithmic trading: Unusual lessons, but an education nonetheless

Amid all the furor over day trading, newly serious algorithmic traders have been especially focused on teaching themselves. Though it might not exactly be the traditional investing, or education, that people like Kinahan had in mind.

Chris Stampar, who works with international development nonprofits and designs websites, was already working from home full time in March, so he decided to teach himself Python when he found some extra time during the shelter-in-place. Basic Python turned to portfolio optimization techniques, which turned to algorithmic trading, and suddenly it was way more than a quarantine hobby. "I've enjoyed the coding so much and realizing how incredibly powerful it is, I have incorporated it into my day-to-day investing," Stampar said.

Cabral, the futures trading Facebook group co-founder, has been tinkering with his own algorithm for more than a year. "The wife is pissed at me about it, saying, 'You've been testing this enough, it's time to go live.'" But he refuses to deploy the model until it has seen enough testing to make him absolutely confident.

"Tons and tons of people do it," said Evan Francis, the CEO and co-founder of cryptocurrency trading platform Coygo, where the majority of users are millennial men and many newer, "tech-adjacent" users don't have professional trading backgrounds. "Tons and tons of people also give up algorithmic trading after a year or so," he added. "The average Joe is not going to have a lot of success, but it really depends on the individual."

The inherent difficulty of the modeling and math skills required for algorithmic trading lends well to those who already have programming experience and are actually interested in educating themselves. Brownsword, after an Achilles surgery right before the lockdown began, printed out hundreds of pages on designing a trading algorithm with R (a computer language that's mostly used for statistics) and studied them for months.

And Stampar is part of the growing group of algorithmic traders on Reddit, where he found the educational resources and community that he needed for his projects. Many of the new traders on the r/algotrading subreddit shared stories with Protocol that are nearly identical to Stampar and Brownsword's. They work for big tech companies, as software engineers at major banks and investment firms, in data analytics and social science research and even in nuclear engineering — and they all have taken pandemic time to up their algorithmic game.

Writing trading programs remains niche in the grand scheme of investing because it takes a very specialized mathematical mind to be successful, Kinahan said. "But maybe it is a trend we'll see more and more of, particularly as some of the technology improves."

Years of research indicates that most retail investors, day traders and algorithmic traders do not succeed in making long-term profits, as every expert Protocol spoke with pointed out. And many new investors do not understand that this kind of trading is not about evaluating a company's prospects, but instead examining your own tolerance with risk and how you manage it to make money. "If they're just taking some cash and playing around, they could lose it all. But the lesson may be worth it," said Bradford Cornell, an economist and valuation expert at the Berkeley Research Group.

It's the lesson that's the key. "We think it's a great thing that more and more people are getting invested. At the same time, it's not just a game. How do you make sure people are informed and educated? It's got to be both," Michael Cianfrocca, a spokesperson for Charles Schwab, said. Even if they don't make much money, algorithmic traders are learning a lot by doing.

Creating access to financial markets is important for the long-term success of the banking industry, but it's also essential for wealth development to protect people in times of crisis, argued Brandon Krieg, the co-founder and CEO of Stash, a consumer banking and investment fintech. The pandemic reminded the world that even one financial disaster (especially one only 12 years after the last one) can be crushing for most of the population, a reality he kept in mind when designing Stash. The platform doesn't allow traditional day trading in order to encourage users to focus on the savings and investments they can control.

Because day trading is about risk management, Krieg explained that even people who do it for a living have a difficult time doing it well. "I've seen this movie before," he said.

And that's a concern the entire industry is trying to address. "What we're trying to do right now is find ways to make investing and trading sort of as accessible as possible, but at the same time giving it the necessary … seriousness. Making sure people can be as informed and educated as possible," Cianfrocca said.

Are you spending any extra time on side projects since the pandemic began? Tell me about them! Send your thoughts, stories and accomplishments to akramer@protocol.com.

Enterprise

Why foundation models in AI need to be released responsibly

Foundation models like GPT-3 and DALL-E are changing AI forever. We urgently need to develop community norms that guarantee research access and help guide the future of AI responsibly.

Releasing new foundation models doesn’t have to be an all or nothing proposition.

Illustration: sorbetto/DigitalVision Vectors

Percy Liang is director of the Center for Research on Foundation Models, a faculty affiliate at the Stanford Institute for Human-Centered AI and an associate professor of Computer Science at Stanford University.

Humans are not very good at forecasting the future, especially when it comes to technology.

Keep Reading Show less
Percy Liang
Percy Liang is Director of the Center for Research on Foundation Models, a Faculty Affiliate at the Stanford Institute for Human-Centered AI, and an Associate Professor of Computer Science at Stanford University.

Every day, millions of us press the “order” button on our favorite coffee store's mobile application: Our chosen brew will be on the counter when we arrive. It’s a personalized, seamless experience that we have all come to expect. What we don’t know is what’s happening behind the scenes. The mobile application is sourcing data from a database that stores information about each customer and what their favorite coffee drinks are. It is also leveraging event-streaming data in real time to ensure the ingredients for your personal coffee are in supply at your local store.

Applications like this power our daily lives, and if they can’t access massive amounts of data stored in a database as well as stream data “in motion” instantaneously, you — and millions of customers — won’t have these in-the-moment experiences.

Keep Reading Show less
Jennifer Goforth Gregory
Jennifer Goforth Gregory has worked in the B2B technology industry for over 20 years. As a freelance writer she writes for top technology brands, including IBM, HPE, Adobe, AT&T, Verizon, Epson, Oracle, Intel and Square. She specializes in a wide range of technology, such as AI, IoT, cloud, cybersecurity, and CX. Jennifer also wrote a bestselling book The Freelance Content Marketing Writer to help other writers launch a high earning freelance business.
Climate

The West’s drought could bring about a data center reckoning

When it comes to water use, data centers are the tech industry’s secret water hogs — and they could soon come under increased scrutiny.

Lake Mead, North America's largest artificial reservoir, has dropped to about 1,052 feet above sea level, the lowest it's been since being filled in 1937.

Photo: Mario Tama/Getty Images

The West is parched, and getting more so by the day. Lake Mead — the country’s largest reservoir — is nearing “dead pool” levels, meaning it may soon be too low to flow downstream. The entirety of the Four Corners plus California is mired in megadrought.

Amid this desiccation, hundreds of the country’s data centers use vast amounts of water to hum along. Dozens cluster around major metro centers, including those with mandatory or voluntary water restrictions in place to curtail residential and agricultural use.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Workplace

Indeed is hiring 4,000 workers despite industry layoffs

Indeed’s new CPO, Priscilla Koranteng, spoke to Protocol about her first 100 days in the role and the changing nature of HR.

"[Y]ou are serving the people. And everything that's happening around us in the world is … impacting their professional lives."

Image: Protocol

Priscilla Koranteng's plans are ambitious. Koranteng, who was appointed chief people officer of Indeed in June, has already enhanced the company’s abortion travel policies and reinforced its goal to hire 4,000 people in 2022.

She’s joined the HR tech company in a time when many other tech companies are enacting layoffs and cutbacks, but said she sees this precarious time as an opportunity for growth companies to really get ahead. Koranteng, who comes from an HR and diversity VP role at Kellogg, is working on embedding her hybrid set of expertise in her new role at Indeed.

Keep Reading Show less
Amber Burton

Amber Burton (@amberbburton) is a reporter at Protocol. Previously, she covered personal finance and diversity in business at The Wall Street Journal. She earned an M.S. in Strategic Communications from Columbia University and B.A. in English and Journalism from Wake Forest University. She lives in North Carolina.

Climate

New Jersey could become an ocean energy hub

A first-in-the-nation bill would support wave and tidal energy as a way to meet the Garden State's climate goals.

Technological challenges mean wave and tidal power remain generally more expensive than their other renewable counterparts. But government support could help spur more innovation that brings down cost.

Photo: Jeremy Bishop via Unsplash

Move over, solar and wind. There’s a new kid on the renewable energy block: waves and tides.

Harnessing the ocean’s power is still in its early stages, but the industry is poised for a big legislative boost, with the potential for real investment down the line.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Latest Stories
Bulletins