E729: Founder Richard Craib shares his A.I. hedge fund Numerai, built with an anonymous network of 15,000 (& counting) data scientists, encryption, the blockchain, his own currency to reward collaboration, and a mission to manage the world’s money

about this episode

There’s a new way to make stock market predictions. Numerai, a hedge fund based in San Francisco, has gained a following as the first hedge fund that gives stock market data to machine learning data scientists using structure-preserving encryption to prevent them from mimicking the fund’s trades themselves. Several thousand anonymous data scientists compete to create the best trading algorithms—and win bitcoin for their efforts. At the same time, the company carefully organizes this encrypted data in a way that allows the data scientists to build models that are potentially able to make better trades. Founder Richard Craib believes that Numerai can become even more successful if it can align the incentives of everyone involved. His hope is that his new kind of currency, Numeraire, will turn online competition into a collaboration—and turn Wall Street on its head in the process.

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Timestamps:

1:30: Jason introduces today’s guest, Numerai founder Richard Craib

1:50: Hedge funds are late stage VCs

3:00: Inside info vs hard to obtain info

3:30: Richard explains what a quant does

5:13: Flash trading/high frequency trading is trading on short timeline horizons

8:43: Other ways to trade stocks and models: high freq trading, normal trading, quant (longer term)

9:00: How quants get compensated

10:50: Sentiment analysis

19:28: Richard explains that the key way in which Numerai is different from traditional hedge funds is that they give away all data

20:32: Education degree for quants – anything quantitative, such as math and stats (masters/professors)

21:06: How Numerai works

26:00: Everyone views this as an experimental project

30:22: Software behind Numerai and what data means

39:45: Concerns around sending money to people

46:32: Machine learning

55:04: Investors for Numerai