Monetizable Sentiment Indices

Quick Read: Recently we’ve seen how being able to smartly parse the chatter on social media becomes valuable – especially for speculative trades. This heralds an interesting opportunity: i.e., monetising such knowhow of social sentiment, at scale.

Have you heard of BUZZ – the social sentiment ETF?

Social Media ETFs

In a previous post, we argued that there is a certain premium attached to being able to smartly parse and capitalise on the knowhow of the social media chatter on forums like r/WallStreetBets. This is best exemplified by the recently launched ETF by New York asset manager VanEck the Buzz NextGen AI US Sentiment Leaders Index. Quoting the FT article..

The Reddit rebellion might have died down for the moment, but New York asset manager VanEck is betting that there is long term value in listening to social media chat and is launching a social sentiment exchange traded fund. The fund will invest in the stocks being most talked up on social media. (..)

Its underlying benchmark, the Buzz NextGen AI US Sentiment Leaders Index…aggregates investment-related content from social media sites such as Twitter and StockTwits, blogs and news articles. Machine learning and artificial intelligence are then deployed to attempt to “identify patterns, trends and changing sentiment which can affect market-based outcomes”. The 75 US large-cap stocks judged as having the highest degree of positive investor sentiment and bullish perception then form the portfolio, which is rebalanced monthly. (..)

Source: Financial Times

The following tidbits from the interview with Jamie Wise, CEO of Buzz Holdings and the originator of the index, shed more light on some further specifics related to the ETF.

“This is not a Reddit meme stock ETF,” said Jamie Wise, CEO of Buzz Holdings. “This is about the broader conversation around stocks mentioned on social media platforms. We are using broad social media sources, principally Twitter and StockTwits.” Wise said it also uses Yahoo Finance, Benzinga and Reddit.

How to determine “social media buzz?” Wise says the index uses natural language algorithms that examines whether the comment is positive, negative or neutral, then ranks each stock based on the degree of positive sentiment and breadth of discussion. That’s key to understanding the index: stocks are weighted by sentiment, not market capitalization, and no one stock can exceed 3% of the index. It is rebalanced every month. 

“We are aggregating the collective sentiment of the community” that comments on stocks on social media, Wise said.

Source

Is social media popularity a good way to pick stocks? Can stocks be manipulated on social media? Well the jury might still be out on that. But given the current dynamics, it is more likely that the larger question here might soon be skewed towards ‘when’ vs ‘if’.

Extending this thought further

If we are to extend this concept further, new opportunity pools could become evident. Start with any category where popular social sentiment matters, and you would see a monetizable product waiting to be packaged and sold. Few examples:

  • Sports
    • Today, there are social media networks for sports gamblers like BetSperts, but if and when these networks manage to capture, index and channel the emergent sentiment on their platforms, they could very well monetise the same. (obviously this would be subject to the prevailing legal, regulatory and policy frameworks.)
    • The idea: Derivatives for sports betting based on social sentiment indices built on realtime social media chatter. (BTW did you try Locker Room – the Clubhouse for sports fans, insiders and athletes?)
  • Music
    • In 2003 iTunes revolutionised music ownership by letting customers purchase and download the music they want for just 99 cents per song. Now, how about letting the general public participate in the actual funding and co-ownership of their favourite artiste’s tracks/albums by facilitating fractional ownership à la securities on the stock market.
    • The idea: Letting artistes raise funds for their album(s) through an IPO kind of offering to their fans/community. The value of these ‘stocks’ could be pegged to the sentiment/chatter/metrics on platforms like Spotify, SoundCloud etc. And we could have ‘exchanges’ that facilitate trading of these ‘stocks’ among the community. (Taylor Swift would perhaps not have to bother with her rerecordings then)

SoundCloud seems to have already taken a step in this direction by launching ‘fan powered royalties‘ last week.

Source: SoundCloud

Quoting from SoundCloud’s press release announcing the launch..

Fan-powered royalties levels the playing field for independent artists by tying payouts to fandom. Artists are now better equipped to grow their careers by forging deeper connections with their most dedicated fans; and, in turn, fans can directly influence how their favorite artists are paid. Fan-powered royalties reflect feedback from the independent artist community on SoundCloud who want equitable payouts, transparency, and control over their own careers.

Essentially, any context where popular sentiment (now readily available through the hose pipes of social media) lends itself to be indexed and tracked, could potentially be transformed into a monetizable opportunity to unlock value and disintermediate the equation between creators and fans.

And we might perhaps see more such opportunities becoming evident thanks to the alignment of these three forces:

  1. the emergence/growth of platforms that democratise and aggregate media of all types on the Internet
  2. the rapidly growing creator economy and associated ecosystems and
  3. the rise of new modes of interdependencies between (1) and (2) connecting the users’ utility, consumption and communications patterns at scale

Even then we are perhaps just seeing the tip of the possibility iceberg.

[Featured Image: Source]

Narrative Violations and Narrative Primitives

Quick Read: Sometimes narratives could have ‘violations’. And sometimes, what might at first appear to be a ‘violation’ could prove to be intrinsic to its narrative. Knowing the former from the latter could help unlock great value – across verticals or contexts.

Making sense of John Coltrane’s “Giant Steps” is said to be difficult.

It is considered by many to be one of the most revered and feared compositions in Jazz history. In fact generations of Jazz musicians are known to approach ‘Giant Steps’ as the pinnacle in Jazz improvisation.

Why? This video could provide a delightful crash course of an answer.

Or take Afrobubblegum – the new film genre redefining on screen representation of Africa.

It refers to fun, fierce and frivolous African art that has joy and hope at the centre of it. The pioneer of this style, Wanuri Kahiu a TED fellow and a Kenyan filmmaker says “We’re so used to narratives out of Africa being about war, poverty and devastation. We believe that Africa is joyful and full of pride and respect and hope,” and continues to champion the need for such art that captures the full range of human experiences to tell vibrant stories of Africa.

And tell she did!

In 2018, Wanuri Kahiu’s story of young lesbian love, Rafiki, made international headlines for being the first Kenyan film programmed at the Cannes Film Festival in 71 years of French Riviera cinema history.

What is common between Wanuri Kahiu’s ‘Afrobubblegum’ and John Coltrane’s ‘Giant Steps’?

The genre of Afrobubblegum or the Jazz track ‘Giant Steps’ standout because they ‘violate’ the popular narratives around their respective art forms or subjects. They are examples of what venture capitalists call Narrative Violations.

Narrative Violations

While the term could seem like a fancy jargon to reference the essential characteristic of what makes something a ‘contrarian bet’ to a VC, I should admit that it serves its semantic purpose of helping us put a label on something specific through descriptive and non ambiguous terminology.

Perhaps it is this pull that made Geoff Lewis and Eric Stromberg – the founders of Bedrock Capital – write a manifesto for their firm titled ‘In Search of Narrative Violations‘ stating the following..

Some recent ‘Narrative Violations’ listed on Bedrock Capital’s manifesto letter

The letter in its entirety is eloquent and makes for a great read and ends on an inspiring note saying..

“..As our keystrokes hunt for the next narrative high, thousands of possibilities that will never be remain trapped beneath our fingertips. When we allow popular narrative to dictate who, where, and what is worthy of our time or capital, breakthroughs that could transcend remain overlooked, underestimated, or simply fade away.

Against all odds, a few brave entrepreneurs violating the narrative today will come to define profound new truths tomorrow. We’re on a mission to find them

To be clear, the concept of ‘Narrative Violations’ has also had its fair share of critiques for being too reductive. It was even declared 2019’s ‘VC Bingo’ buzzword of the year.

Nonetheless, I find the concept to be a clarifying filter that helps me process or question most things with a healthy dose of scepticism and encourages me to seek out edge cases in popular rhetoric, including say even that around the concept of ‘Narrative Violation’ itself.

Why?

Consider this question.

What if, sometimes, narrative violations are part of the narrative?

i.e., what if a ‘violation’ is actually an inherent part of a larger pattern that constitutes the narrative itself? Like say, a recurring motif that becomes apparent if only one were to step back and consider the big picture. Being able to see if and when that is the case could help us identify emerging paradigms and recognise how such paradigms propagate.

For e.g., after the dotcom bubble burst in 2000, Carlota Perez published her seminal book Technological Revolutions and Financial Capital arguing that the ‘burst’ was completely normal and qualified it by drawing patterns from four similar epochal periods over the last two centuries: the industrial revolution, steel and railways, electricity and heavy engineering, the automobiles and mass production.

Across each of these periods, she pattern matched its associated moments of ‘crash’ (the equivalent of the dotcom bubble burst from 2000) and recognised such instances as inalienable parts of larger cycles that play out over several decades (as opposed to say some inexplicable violations to the popular narratives of their times).

Source: Carlota Perez, Technological Revolutions and Financial Capital,2002

The master stroke of her framework is that it inherently provisions for moments of ‘big bangs’, ‘bubbles’, ‘crashes’ and then again necessary ‘recompositions’ as part of a single unified narrative that cohesively explains the interplay between financial capital and technological revolutions. And then continues to shine a spotlight on how this narrative seemed to have repeated itself across ages almost inviolably.

(Bonus reads: Two of my favourite thinkers, Alex Danco and Ben Thomspon have recently used Carlota Perez’s framework to write about Debt Financing and Paradigm Shifts in tech. Highly recommended reads indeed.)

To reiterate, a key takeaway for me here is the idea of the narrative as a paradigm that propagates.

Such a narrative construct that propagates needs to be essentially indivisible, should have a full self contained arc of a structure to serve as a standalone story if need be and be able to play out as a cohesive whole even with trivial variations in contexts or actors.

Matthew Ball has a term for this – The Narrative Primitive.

In one of the most intellectually stimulating podcasts I have listened to in the recent past, Matthew Ball joins Patrick O’Shaughnessy to discuss movies, the Metaverse and more and refers to the concept of ‘Narrative Primitive’ to explain why the worlds of the Marvel Cinematic Universe or the Star Wars stand out as expansive and immersive. The following lines from the podcast’s transcript shine light further.

… “how would you have told the story 80 years ago if you had all the tools available? How are those stories going to change in the next 10 years?” And in some instances that is unlocking what you might call a narrative primitive, that’s perhaps some of the reasons why the Marvel Cinematic Universe or the tales of Star Wars are so expansive today, so immersive.

Now, when I consider these two concepts – Narrative Violation and Narrative Primitive – together, I am tempted to posit the following.

The essential insight that rock star traders, venture capitalists and story tellers possess is this – they know a good narrative when they see one. And more importantly they have an eye for a narrative violation. Because they think in narrative primitives.


Noteworthy ingredients – that may or may not have gone into the making of this blog post:

[Featured Image: Pendulums on freepik]

The Sci-Fi Pay Phone Fallacy

 

Quick Read: Future predictions could sometimes just be past projections – repurposed to fit the current context. Sometimes that could make for a liberating realisation – especially in current times.  

3.15.20

That’s the name of the latest album by Donald Glover aka Childish Gambino – an American actor, comedian, writer, producer, director, musician, artist and DJ – a polymath in the entertainment business.

What’s unusual about this album?

It has no title except the date of release, 3.15.20; no artwork; and except for 2 songs, none of the 12 tracks has a title. Quoting Sanjoy Narayan on mint:

On Sunday, 15 March, Donald Glover Jr, better known by his stage name Childish Gambino, launched a new website called Donaldgloverpresents.com and released a new album, which streamed on a loop on the site for most of that day. There was no fanfare; no announcements; no publicity.

For an artist as high-profile as Glover, this was an unusual approach….

…Shortly after his new website stopped streaming the album and went blank, Glover’s, or, rather, Gambino’s, new album got more conventionally released on music-streaming services where you can hear it now. It has no title except the date of release, 3.15.20; no artwork; and except for the second and third songs, Algorhythm and Time, none of the 12 tracks has a title. Instead, Gambino has chosen to title his tracks by time codes—the points in time that they come up on the album. For instance, the first track is labelled 0.00; the fourth is 12.38; the fifth 19.10; the sixth 24.19; and so on.

donald-glover-presents
The album initially played on a loop on the site ‘Donald Glover Presents’, accompanied by an unfinished illustration depicting a very modern scene of rioting, fiery chaos and selfie-taking. (Source)

What’s truly unusual about the album, however, is how it mocks at our assumptions and shatters our accumulated biases about his music. Quoting Sanjoy Narayan again:

It’s an astonishingly experimental album on which Gambino is, in parts, a rapper, a soul, funk and R&B guy, and a sonic innovator who composes melodies and harmonies and melds them to make songs that push every boundary…

..It’s a super ambitious album that traverses so many genres and styles that it would require multiple listens to try and list out or even describe. Funk and soul collide with electronic music; modern hip hop gets to mate with elaborate orchestral arrangements; and smart lyrics comment on the state of the world and other serious issues.

Unique juxtapositions, delightful blends, unexpected connections, inventive remixes and surprising twists. That’s always been the recipe for great story telling across formats from stand up comedy and sci-fi thrillers to food and fashion.

It is compelling how consistently it works every single time – get people to default to their baseline expectations and add in an unexpected twist to move the carpet off their feet and presto, you have a winner! In fact an entire movie was made literally off this very premise.

Turns out getting us to default to our baseline world views/expectations is not that hard after all. Simply because we tend to base our assumptions of a likely future basis our previous experiences. In fact, research suggests that humans predict what the future will be like by using their memories.

Imagining the future then becomes a kind of nostalgia. 

This fallacy could sometimes be evident in sci-fi movies.

Let’s take a classic example: the original Blade Runner from 1982.

In the film, Harrison Ford’s character Deckard makes several calls to other characters using a “videophone,” which is essentially a glorified payphone with a VHS-quality video screen glued on top. Incidentally, the film is supposed to take place in a futuristic 2019, but it makes a faulty assumption that human beings will still be using pay phones as their primary form of communication by then.

payphone
Video Pay Phone in Blade Runner (1982), Source

Back to the Future II also prominently featured payphones and fax machines—both of which were prevalent at the time the film was made, but are obsolete today.

Writers even have a name for this – the science fiction pay phone problem. It essentially refers to how we often assume the continuity of our previous experiences, and subsequently bring our accumulated biases with us, when trying to predict the future.

This could perhaps help serve as an instructive reminder to us that even though we can dream up detailed, novel scenes of things yet to come, our imagined futures could sometimes really just be projections of our past.

And nowhere is this reminder more relevant than in the current times when we are inundated with predictions and discourses about what a post Covid future could look like and how it could potentially impact us, our educational institutions, organisations, cultures, traditions, industries, economies and nation states at large.

As the sci-fi pay phone fallacy reminds us, the future always holds more surprises than we might predict. So instead of stressing about and losing our minds on what a post Covid scenario would pan out to be, sitting back, relaxing and enjoying some Childish Gambino could just be what the doctor ordered for us.

Stay safe. And here’s hoping we all come out of this better, stronger and together. Real Soon.

[Featured Image: Payphone from Back to the Future, digital wallpaper source]