The Derivative - Why Charts and What Data with Sean Brown of YCharts

Episode Date: July 9, 2020

In today’s episode, we’re passing by all the players and calling in the head coach – the head coach of Ycharts that is. Sean Brown – CEO of Ycharts joins us to talk about how this FinTech SAAS focused company is helping investors and advisors make the complex easy, and the easy look good! Listen to the entire podcast to learn more about: Notre Dame vs Stanford, fundamental charts, a home chef’s best grilled cheese, Ycharts easy consumer interface, human support for a technical product, taking over Bloomberg, the Dave Portnoy Portfolio benchmark, adding COVID data streams, getting clean data (not from China), and what’s next for Ycharts. *Special for The Derivatives listeners – contact Ycharts& mention The Derivative, and you’ll get 15% *Valid only until 8/31/2020 Follow along with Sean on LinkedIn & Twitter, and follow Ycharts on LinkedIn, Twitter, Facebook, and the Ycharts website. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

Thanks for listening to The Derivative. This podcast is provided for informational purposes only and should not be relied upon as legal, business, investment, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations nor reference past or potential profits, and listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk

of substantial losses. As such, they are not suitable for all investors. Welcome to The Derivative by RCM Alternatives, where we dive into what makes alternative investments go, analyze the strategies of unique hedge fund managers, and chat with interesting guests from across the investment world. I create a model portfolio of Dave Portnoy's picks, another model portfolio of Robinhood, you know, Robinhood's most popular, and then I'll show Warren Buffett's, you know, Berkshire Hathaway B class. And I will be able to, on a single chart, compare not 52 lines from Dave Portnoy and 15 lines from Robinhood. I'll be able to aggregate Dave Portnoy's into one line and look at it like it's

its own security. I can see its exposure to ETFs, stocks, and mutual funds. I can see its risk characteristics. I can see its geographic exposure. Hello, welcome to another episode of The Derivative. I'm your host, Jeff Malek, and excited to dive into the fintech world a little bit today and talk with Sean Brown, the CEO slash head coach of YCharts. Welcome, Sean. Hey, Jeff. Thanks for having me. and finding how one of the companies that helps those managers and investors came to be and what they offer. And YCharts, for listeners, if you're not already on the bandwagon, is an investment research platform, provides quick access to investment data and charts, and helps users share those insights. Over the last 10 years, it's been since inception, YCharts is going to be one of the hottest fintech companies around,

and yours truly uses it nearly every day to look up some piece of data or create a blog post. So before we get into how cool YCharts is, let's talk a little bit about you, Sean. Is that cool? Yeah, it's great. Awesome to have you as a user of YCharts. That makes for a great discussion. I know, and I'll have to say, you guys make it almost a little too easy because the support, the live chat is so great that I never really learn anything. I just ask. I mean, I tell our team our job is to make the complex easy and the easy quick. Always glad to hear we're doing our job.

Yeah, those live chat folks are great. So you're here in Chicago. You're up in the suburbs. I am. I'm in a suburb, Lake Forest, about 30 miles north of Chicago. All right. No, well played on Wednesday a few times with some friends. You must have some great friends. I've actually never played on Wednesday on myself. Maybe it's because I'm a terrible golfer, but it also could be, that's a, that's a great course. And I Maybe it's because I'm a terrible golfer, but it also could be that's a great course, and I know it's tough to get on. Yeah, it's fun, and I'm not all that great of a golfer myself, but it's fun. Glad that they're back open in Chicago. So you went to college both Notre Dame and Stanford? I did. I went to undergrad at Notre Dame and grad school.

I got my MBA at Stanford. All right. So who do you cheer for in the annual matchup? I think you can only have one first love in life, and I'll always be a diehard Notre Dame fan. But, you know, if Notre Dame's not playing, I certainly will be rooting for Stanford. I like it.

Who do you think they're going to be back this year, have a season? I do. It'll be interesting to see what that shape takes. I know as a regular attendee to Notre Dame Stadium, they don't have it figured out yet. So I have a feeling stadiums are going to be about, you you know a quarter capacity and people sitting every other row kind of thing so I'm interested it's interested to see how that affects the play on the field when you're you're not getting the loud stadium noises and the excitement of seeing all your classmates in the stands yeah and I just so who is it?

The Oakland A's are selling their fans. You can buy a cardboard cutout of yourself. You send in a picture and they'll put a cardboard cutout in the, in the stands of you. That's brilliant. I was, I was watching over the deep part of the pandemic when the Korean baseball leagues, the South Korean baseball leagues were going and just seeing how they were

filling stands with digital emojis, you know, behind home plate plate and stuff so we'll have to get a little creative here yeah those guys are good and then i think of the football season like anytime you've been notre dame bears game like the men's rooms are just right that's a pure breeding ground for a virus like you're packed in there you're breathing hard it's cold yeah yeah i don't know about that the world has changed let's see how it impacts sports yeah that's a whole nother topic uh so also a bit of a uh chef or a home chef tell us a little bit about that i love cooking the cooking is my therapyrew up, my mom's all Italian, and that was some joy she was able to pass on to me. I just love the feeling of having the family sitting around the island in the kitchen,

open up a bottle of red wine. I'm not the follow the recipe kind of guy. I'm the creative, what do we have in the refrigerator, and how might it come together, and so sometimes I get it right. Sometimes I don't get it right, but I love the creative process of cooking. That's my wife's disclaimer at the start of every dinner party. Like, if we screw it up, we can always order a pizza. Yeah, that's the same, and I've had to do that on a couple occasions. And what are you, you're hitting Italian pasta dishes? Everything?

You know what I really, really enjoy? I love to just take the basics and try to do them better. I love to take the recipe for grilled cheese and make it the best grilled cheese. I love to sous vide a nice steak and get an incredible flavor over out of a steak I've had a thousand times in my life. So I do do a lot of Italian, but otherwise it's literally what did I see on at the grocery store shelf that looked appealing and how could I put it together with some things in my fridge that may be soon to expire and see how it works out. And you know how to what and how to pronounce sous vide. So you're ahead of me by far.

What is that? So sous vide is where you, you basically cook a steak to the exact temperature you want it by. It's basically in a vacuum sealed bag and in a pot that it's boiled at a specific temperature. And then you just put it on the grill to sear it Yeah, so there's no guesswork on the on the no guesswork I mean you say you want something medium medium rare or you say you want something slightly north of rare you pick the temperature

It comes out exact he just sear it at the end to make it look like you're used to a steak looking and it's fantastic All right, I'm gonna try that out. i've been doing for the kids these uh crazy french toast experiments like jelly donut french toast s'mores french toast fruity pebbles french toast yeah i think you have kids around my kids age i think you mentioned you have at least an 11 year old right yeah 11 and 8 okay so i have a 12 and 13 year old and that's how my cooking approach has changed, is I don't like to cook just for myself or my wife. I like to cook for the whole family, and my kids seem to have, you know, picky taste buds, so I've simplified things and gotten to great grilled cheese, great, you know, great pizzas, you know, great steaks, great burgers, great hot dogs,

and just trying to do them a little bit better than I've had them before. All right. I'm inviting myself over for one of those World's Best Grilled Cheeses. That sounds good. As long as you stay about six feet apart, you're welcome. Right. So give us a little background on what you were doing before getting into wide charts. So immediately before I was leading a division of interactive data called YCharts, excuse me, called 7Tix. 7Tix was a low latency trading network used for, you know, very quick trading by hedge funds, prop shops and others. I was leading a division. We sold to ICE, the owners of the New York Stock Exchange, for a little bit over $5 billion. And I told my wife it's time to take some extended time off and do some things we have postponed in life and had every intention of doing that. And then I ran into the team.

I ran into two weeks later, ran into the team at YCharts. And that was four years ago, two weeks. And it's been just awesome since then. My wife's still a little pissed that I never took that time off. But, you know. Yeah, you're supposed to be doing this cooking in Italy after that sale. Oh, yeah. So we've tried to do a little bit better job of fitting in our dreams along the way, maybe, than we used to. But before 7Tix, I have a history that started as being a software developer, progressed to being a strategy consultant, and then I became just a perpetual entrepreneur.

Great. 7 ticks. So who, the ICE data team bought that? Yeah. Yes. Yep. I can't remember the technical name of that, but. Yep. ICE data services. Yeah. Yeah. Yeah. We do some work with them on our Algo, uh, Algo team. Yeah. You know, it was a neat time right um low latency trading uh got a appropriately got a bad name with um some of the bad actors at uh flash boys and some things profiled in books um we we simply had very very fast pipes that we leased out and we managed network uptime and redundancy and, and, and all of those things. And, uh, so it was a neat time where technology perfectly coincided with,

um, you know, the advent of digital trading and things like that. And so a lot of fun. And what you always hear, like it's a race to zero and right. Everyone's out trying to outspend each other, build a radar tower, all this stuff. So were you benefiting from that or you were hurt by that kind of someone oh that that was that was the business we were in right if you're going to make that huge capital outlay um any single party if citadel is going to do it that's a an expensive capital outlay um how about if one party does it and lease subleases out the capacity and

the redundancy that you've put in place? And so that's what we did. We said, build once, let others lease out portions of that. And we were responsible for keeping it fresh, keeping up on all the new technologies so that the hedge funds and prop shops didn't have to do that work themselves, which would have been too expensive. And you became very fluent in microseconds. And what was the lowest latency you were dealing with? It was never enough. All I recall from that, it was never enough. And there was never enough redundancy. And it was a 24-7 job when you're saying you got to span the globe and everything's got to be up and running and inevitably something happens in a trans-siberian

pipe that uh means you're up in the middle of the night trying to figure out how to reroute things so uh i don't remember the exact latency except uh i still uh i still remember being woken up in the middle like numerous times finding out it either wasn't fast enough or it wasn't redundant enough. So they're literally like a internet cable running across Siberia in a pipe that goes? At the end of the day, it comes down to a pretty simple thing. It's like your home neighborhood, right? There's only so many access points to your home. Like there's only so many ways to get around the globe. And as much as you'd like to think there's unlimited redundancy you can put in place, there are certain pinch points where there's only one or two routes. And if anything happens to go bad there, you're in some trouble. Which is like from basically London and New York, there's the transatlantic undersea cables and that

kind of stuff you're talking about. Yeah. You know, I mean, the microwave guys are figuring out new things and there are some additional ways. There's some satellite technology coming about, but yes, predominantly there are a few routes to go across the various ponds and you better have access to each of them. And that's a heavy capital outlay. Yeah. I wonder what percent of the internet using public knows that there's literally cables on the bottom of the ocean, right? It just seems so old fashioned that there's ships out there dropping a cable 3000 feet underwater. Yeah. I mean, we all see these diagrams of the internet and all the nodes and those are great when you're in a land mass that you know goes from city to city

but when you go across oceans that's a that's a different endeavor and yeah it is what it is and there are some critical pinch points yeah what was facebook was gonna do like glimpse over africa and stuff that's another yeah crazy ideas um so then into YCharts four years ago and they brought you in as the head coach. What did that look like? YCharts is a 11-year-old company. So I came in four years ago really to take a company that was good and take it to great. And I'm not sure we've gotten to great yet. In fact, I'm sure we'll never be at great because I keep raising the bar and my team keeps raising the bar on what's great. But it was taking a business that was really focused on multiple industries and serving each of them

pretty well to saying, let's get laser focused on a few industries and be great at that. And so give us the quick elevator pitch on who WhiteCharts is, what they do. So we are a SaaS-based cloud service that's out there at whitecharts.com. And we do two things. One is we enable smarter investment decisions. And that's through some great analytics and some great data and some great customer support, which I think you've become aware of. The other one is we help communications. You know, when you have the word charts in your name, you better be pretty good at

visuals. You better be pretty good at personifying the expression, a picture is worth a thousand words. So we help you come to the right investment decisions and we help you communicate those. And we do it through a pretty easy to use website. If you can use a browser, you can master our software. And again, I mentioned to you, you mentioned to me, we believe human support is vital. As good as our application is, people want and need support, and we try to make that really easy for them to tap into. And that seems like totally opposite of what most firms are doing these days, right? Of going away from human support and put it in an FAQ, make a chatbot available, things like that. What was that decision like to say?

Well, I just think you got to know your market, right? And if your market is a bunch of fully tech-enabled millennials who don't want to talk to people and prefer completely digitized communications and are fine with bots, then a business model to serve them, it's pretty clear what that is. The market we serve predominantly is wealth advisors and asset managers. Typically speaking, those are groups that are north of 40, may not individually be the most tech savvy people or may not have the time to become tech savvy and they appreciate the comfort of knowing they can get some help. Not just in like, how do I do this? But hey, I don't have a big team. Do you have anybody at YCharts who can do this for me? And we don't charge extra for to

create a, help you modify a sheet that links to our database, an Excel sheet that links to our database to achieve whatever your business objective is. That's just the business we in. I guess I'd say that's what our market needs. That's what we provide. And it does run counter to the laws of SAS, which say, you know, don't have people involved because that doesn't work well. It works great for us. Right, but you don't see it as a drag on profitability or it improves the customer experience so you're going to get more customers out of it in the long run? It's a combination of we get more customers and we rarely lose customers. So one of the challenges when you're a subscription-based service, whether you're Netflix or you're a software company like us or, or Comcast is,

how do you keep all the customers you currently have? And one of the, one of the things with our secret sauce is very, very infrequent for a customer to leave us, which means as we look to grow and scale, we can count on very predictably, you know, high 90% of our revenue that we previously garnered sticks with us. And any new customers we bring on board, we bring on with the same sense of comfort that they're going to be with us for a long, long, long time. And I'm talking, you know, five to seven years is kind of our average. And so I view it as kind of a cheaper, cheaper is the wrong word, less expensive, an online version of Bloomberg. Would you say that's fair comparison?

That's one comparison. You know, if you were a breakaway wealth advisor and you were used to working at the wire house or the broker dealer you're at and you had access to a Bloomberg terminal for 20 to 25,000 a year, you may not have that budget when you break away. So we think we've probably got 80 to 90% of the functionality, but 100% of the functionality they need at a fifth of the price. So we can either be a more mobile, easier to use, and easier to learn, and more inexpensive version of a high-end product. Or if you're coming from using free services, Yahoo Finance, Google Finance, Coif Fin Charts, or something like that. We're at a price point where we're not too far out of your free budget. So for those that are power users of those services,

but see some weaknesses, they can become our customers too. So talk about Koi Fin for a minute. I think they're kind of a darling of FinTwit of all the Twitter people I follow on, you know, and that you think that's just because it is free, free tool and they can easily build their charts. Well, first of all, I have nothing but respect for Bloomberg's and Koi Finns and others in our space.

So I'll be careful not to say anything that would sound anything disparaging. But I think when a, when a business model revenue is an important part of any business that I've been part of and free services there's only a couple ways to make money off of a free service it's what do you do with the data you're collecting and do you serve up ads because you can't you know they call it a charity if you don't collect

revenue through time. So I think there are companies out there that are going to need to figure out how over the long run will they make money. In the meantime, there's numerous niches that can be exploited in the space. A free, better version of Yahoo Finance or Google Finance is certainly a space that a company like Koi Fin is exploiting. And why doesn't Google just come in here and dominate this space? I've always thought it'd be great if you could just type in any symbol, a future symbol in the search bar of Google, and you could automatically have the data right there on the screen. Any thoughts on why they'd stay away? Yeah. Well, first of all, you know, if Amazon

or Google wanted to attack any space, believe me, I don't have a big enough competitive moat to say they'd never be able to. So hopefully nobody from Google or Amazon is listening to your podcast right now. We'll filter those out. Yes. But to answer your question, I think to serve the demographic and the market we serve, you need not only data, you need workflow enabling things like how to do a quick analysis on something, how to do a comparative analysis, how to do deep dive research, how to export things to Excel. So you do some very, very customized things and you need human support. And I think when you add together the three-legged stool of

the right data, easy to use tools, and great customer support, that's a pretty difficult stool to replicate. If it was just the data or just the tool part, I think a Google or an Amazon could jump in and make some money. Yeah. And from their standpoint, they're probably saying, well, we've similar to what you said, we've already gone 80% of the way there where you can type in any stock symbol and get a chart right there on the screen. So that's good enough for most of the population. Yeah. But listen, you know, we certainly sit alongside them. If you go pulled up a browser and put Netflix EBITDA or Netflix market cap or things like that, I mean, you're going to see us very highly ranked on those things right up with this search engines. We think SEO is an important way for somebody

looking for data to get what they're looking for. Sometimes they may just be looking for a Netflix EBITDA. They want to grab it. They want to move on. Sometimes what they're really saying is, I really want to look at the video and broadband markets, and I want to do a complex analysis to that, we think that's a place we want to play. If you're just looking for a data element, you know, you're welcome. You can get to our site. You can get that information for free. You can move on with your day. If you're actually looking for a tool to help you with complex analyses or to help you think through or communicate things, that's where we come in. Does Netflix even have an EBITDA yet? Is it positive yet?

I don't believe it is with all the content they need. A lot of content. Yeah. A lot of billions they spend on content. Yeah, and for us, we love the comparison charts um benchmarking across things right i can pull up any number of you know usually it's we do a monthly asset class scoreboard we call it so you use you guys just to pull up the different commodities hedge funds uh s&p world stocks real estate basically via etf as proxies but uh ability to put all those on a chart, normalize it,

5% return, underwater equity curves, all of it. So what do you see? And it kind of feels to me like people who are Microsoft Excel-based workers are kind of more the target or they find it more useful because you have all those excel tools in there well um we're not so arrogant as to think is that we've thought of every single scenario of how you'd like to what you'd like to do with your day and so we've got every single use case supported in our software so because with that disclaimer that we're only as smart as we

are, and that's not smart enough yet, we know we want to make it easy for our customers when they aren't able to get support for their use case within YCharts that they can do it in Excel. So what we do with Excel, and it's a small portion of our customers that actually use Excel or see the need for Excel. What we do for Excel is our database is tied to it and we can help you create, at no charge, we can help you create a sheet that achieves your objectives. And if your objectives is, hey, I want to be able to do a side-by-side portfolio comparison where my client has some fixed income securities that are not in the YCharts platform. So I know I need to go grab that from another system and plug it into a sheet along with what I can get standard from YCharts. We'll create that sheet for them and allow them to get their business objective done. And, oh, by the way, since we're helping you create the sheet and we're in touch with you on it, it serves as a great source of input for us on what things we should put into our software.

So we use it as our R&D sandbox to help us see, wow, we're getting a comment or request to do things outside of our application. It's time to put that into our application. Yeah. And I'm lagging there. I need to do that free call and say, hey, set me up so this automatically pulls into the Excel sheet. We're still doing the export, paste it in, then do our stuff when I know there's the functionality to automatically have it pulled in.

Yeah, we've also got some really cool functionality. I don't know if it meets your use cases. We've got some functionality called model portfolios. Yeah, yeah, we use a lot of those. We do some work with some different mutual funds. And so advisors are saying, hey, what do these all look like together? And we shoot out that report automatically to them every month. Yeah, exactly. So, you know, whether you're creating a sleeve that is a fang sleeve that you may use for multiple of your clients, or you're creating your own version of a 60, 40 or 70, 30 or 80, 20 portfolio, or you just want to do some things like I do often, like Dave Portnoy from Barstool Sports has made a bunch of picks, right?

And over time, I create a model portfolio of Dave Portnoy's picks, another model portfolio of Robin Hood, you know, Robin Hood's most popular. And then I'll show Warren Buffett's, you know, Berkshire Hathaway B class. And I will be able to, on a single chart, compare not 52 lines from Dave Portnoy and 15 lines from Robinhood. I'll be able to aggregate Dave Portnoy's into one line and look at it like it's its own security. I can see its exposure to ETF stocks and mutual funds. I can see its risk characteristics. I can see its geographic exposures. So I think that's neat functionality for so many different use cases that I'm glad to see that you're leveraging it.

Let's get the link to that Portnoy portfolio and we'll put it in the show notes because I'd love to see that. Is it as good as he makes it seem? Yeah, you know, I mean, it's an interesting period in this pandemic where, you know, the day trader is generally speaking, you know, thriving right now and has been over the last 90 days, just a crazy 90 days.

So, yeah, his portfolio looks awfully nice. It's outperforming Robinhood's top day trader picks and significantly outperforming the Oracle of Omaha. Yeah, he's been kind of the loser of this whole thing. So you mentioned Robinhood a few times, so I just wanted to talk about that. What are your thoughts on that poor kid that killed himself and just as a responsibility, as a tech platform in the financial space? And it's a little different for you guys because you're not, you know, kind of enabling the trading. Maybe you are in an indirect way, just, you know, getting a little heavy here for a second.

But what are your thoughts on just kind of the responsibility the company has to be, you know, responsibly offer up this data? Yeah, boy, what a tragic situation that, that is. And, you know, the analog is you're, you're a knife creator. You know, what is your responsibility to what happens with that knife? I think my biggest concern right now in trading and the retail trading is despite whatever small balance, you know, some younger people are putting in their accounts. They can't possibly, very few of them can really know what they're doing. And things are getting so gamified right now that it's hard to tell the difference between a TikTok video that, you know, my 12-year-old

daughter's creating and a trade on margin, you know, or a heavily leveraged position on a Robinhood account. And I obviously say that somewhat facetiously, but we're gamifying everything. And the gaming mentality is, well, if it doesn't go well, I turn off my PlayStation 2 and I go about my day. In the world of real money and real losses, that game's not funny. And so I believe as an industry, especially trading applications, guardrails have to be put up. And as much as you get people to sign things, did you read this disclaimer statement, you could lose money, check here, that's not enough. We have to have some guardrails that say, I want to have you triple confirm that you understand that if the movement

on this call option that you put in place is in the following parameters, your loss could be up to this. I do think there's an obligation to say there is some responsibility for how your platform is being used. Now with us, I sleep very well at night by saying our whole value prop is to help you make better investment decisions. And we are not directly linked into any trading system by design. We want you to be thoughtful. We want you to do your research. We want you to think it through. And we probably want you to sleep on it before you execute on that trade or that rebalance. So we deliberately are saying, we want to help you make good decisions and we don't want to make it too

quick and easy for you to press buy. Right. I think that's for the whole industry is like, how do you weigh that balance between gamification, user interface, super simple, get users in as quickly as possible. And do they really know what they're doing? Have you provided the necessary tools for them to learn what they're doing? Yeah. And free trade scares the hell out of me, to be honest with you. It's wonderful if you're a professional, right? It makes it easy to rebalance a portfolio. It's so dangerous if you're an individual investor and you're dealing with hype and momentum and fear of missing out as opposed to really doing your homework. And then there's, there's just no, there's no barrier to making 20 trades a day. FOMO, the kids call it these days.

Switching back a little, when you were talking about these advisors and whatnot, like do you think why charts ascent and and uh being in the spaces and would it have been possible 15 years ago 20 years ago ignoring the tech piece because a lot of that needed to be but it seems to me as advisors moved out of wire houses as you were saying they need these tools and i think 20 years ago they just they'd call the research department they'd They'd have it in-house to just build these kind of comparisons for them. Yeah, I think the market has changed.

So the independent breakaway advisor space who's managing somewhere between $100 million and less than a billion in AUM, that's just really grown up. So the market's there, I think it's been an interesting time where it's inexpensive to create an application. Data is largely commoditized. And the talent level around technology is superb. And I think when you take the market changing and all the factors to create a solution came out, that really, the advent of that has been in the last 10 to 12 years. And then is your guys, is it all in-house tech? Are you using different like off-the-shelf packages to build out some of the technology? So like any development shop I've ever been part of, you know, we do,

there are some superb code libraries out there that will help you do some basic and generic functions. We certainly leverage some of those, but otherwise it is, you know, I think there's a ton of value in having a singularly architected platform with some constructs created for the future. And I haven't seen too many opportunities where that works by fully embedding somebody else's application into your own. So basic code libraries, but not any complex functionality. So you've been tweeting out some stuff, or I don't know if it's you personally, but the YCharts handle,

been tweeting out some interesting graphs of the coronavirus. Is that data on the platform? Yeah, first of all, on my handle, Sean underscore YCharts, it's all me. I get such joy when I think I'm checking out of work that I really start to use the platform to satisfy my own curiosities and my own creativity. So when I'm tweeting, sometimes it's what's the

impact of a Trump tweet on a public security. Sometimes it's taking a look at what happens after a bankruptcy is declared typically and how deep's the dip and what's the recovery or a corporate trauma like Boeing. I do a lot of those analyses myself. But to answer your question about the coronavirus, it's all in our software. So we felt like our platform, stocks, ETFs, mutual funds, SMAs are in our platform. We also have tens of thousands of economic indicators and other things, cryptocurrencies, coronavirus. We felt like there's a lot of our customers who are saying, I need to understand this pandemic and the details on world countries and states, hospitalizations, deaths, all of the key statistics. We felt it was really important with how progress or lack of progress on

getting through COVID and the health crisis that created and people returning to work. We obviously felt like that's a pretty important leading indicator for how the economy is going to do and how individual securities are going to do. It's hard to believe that people are going to be jumping into casinos or cruise lines or hotels or rental cars until they feel safe. So we felt it was important to put COVID statistics within our platform to help inform advisors on the timing and the appropriateness of making investments in certain securities. And we have that same philosophy for any number of other economic statistics, jobs reports, housing starts, GDP of Sweden, et cetera. We've got thousands and thousands and thousands of economic indicators because we think it ties closely to the research you should do to make good investment decisions. How does that come from the top, from customer requests,

and then it goes through a team that says that we need to get this on the platform? Fun thing about being a small company, we're about 65 people. Fun thing about being a small company is there's not a whole lot of hemming and hawing before you do this. We have an outstanding product management department and an outstanding engineering team.

And they decided it was important enough to stay up all night for a couple nights right at the end of February, early March. And voila, they had it in our software and it's been incredibly valuable. But there was no fill out form 22B and run it by this committee. We just said it was important. Let's go do it. What's the data source? Does that come into it too? Like, hey, do we have, we're not going to put it up there until we're trusting of the data source.

Yeah. That always weighs into it. And sometimes you get it right and sometimes you don't get it right. Happened to be in this case, we got it right from day one. There's a, there's some great statistics from Johns Hopkins that are published daily. And another one called the COVID tracking project, which have proven through time to be as accurate as, you know, accurate's a tough word in today's day and age, but as accurate as a source as there is.

And we're also pretty good at knowing to the event you ever don't get it right, make sure you have an architecture that allows you to swap out one data provider and swap in another. And so we've been very pleased with what we've seen so far the my favorite statistic during all this seems weird to say favorite because it's the excess deaths like to me that filters out a lot of the noise on the on the other data and you just see like hey normally in Chicago there's 10,000 deaths in a year and there's 16,000 this year mm-hmm you know you can say the data is not accurate and they're testing on like kind of removes all the different arguments of not trusting the data to me.

Yeah. The thing we've been unable to normalize out in any way is we've basically dismissed all statistics from China. I'm not trying to be political here, but the statistics just don't add up. So when you take points of comparison of percent of population or infection rates or hospitalization rates or death rates, there's a huge anomaly when you look at data from the epicenter of where all this stuff is purported to have started. So we do try to let people know that our statistics are as accurate as the reporting entity, and that one may not be as accurate as we would have hoped. What are your thoughts overall on China statistics, not just with the virus, but some of their company numbers seem a little iffy and, you know, you're just reporting what's getting reported.

Yeah, I mean, you know, it seems like a weekly basis, whether it's a U.S. publicly listed company. I'm just blanking on the name of that coffee company. yeah yeah you know it there seems to be a a trend line which is all that glitters isn't gold on some of these emerging uh countries don't have the regulatory oversight may not have the ethical oversight that they need and um you know caveat emptor if you're gonna be buying things associated with those as a software company um i would love to see a real stepped up respect for intellectual property rights because there's more than a few stories out there of uh software that ironically is extremely similar to software that was created in a more democratic market and there aren't really good courts of appeals on these kinds of things. Yeah. That's unfortunate. The, uh,

and actually we did some interviews with some Chinese hedge fund managers a couple of weeks ago and they were saying, yes, there's that. But also look at the U S look at Enron and this wire card that just happened. And so it's like, it's not unique to the US. Yes, yes. Bad actors exist. Bad actors exist everywhere. And so a little more on this. So the COVID stats would kind of be considered

alternative data perhaps. Like what are your thoughts on, you know, hedge funds wanting satellite data and number of cars in the target parking lots and and kind of going is there a market there for you guys do we ever have that kind of granularity so it's great you know so i follow millions of dollars you know i i follow all this stuff and i think it's it's it's really great for your if your target market is looking to get the first sign possible that a buy opportunity exists or a sell opportunity exists, as far upstream towards those leading indicators, what are executives' body language? What do parking lots look like?

How late are executives working at night? All of those things are fascinating statistics. They're not yet something that our target market is real interested in. Our target market, again, as wealth advisors, asset managers, broker-dealers, they're much more of a mindset of buy and hold and willing to acknowledge the fact that they may have gotten in one day too late or 15 days too early if you had a short-term time horizon. But with a long-term time horizon, they're saying that's a blip on the radar. I'll let the hedge funds, prop shops worry about market timing and technical analysis a little bit more

than us. We're looking at fundamental analysis and buy and hold mindsets. Yeah, to me, that's the next unicorn of some CME group, ice group type firm that says, hey, we're going to put all this alternative data in one spot, you know, enable companies that come up with the data to better market it and sell it, right? And you can have this huge marketplace of people buying and selling these alternative data I couldn't agree more. I mean you can get all the way to the facetious of How much ban roll-on are these executives? Are these executives using and what's their sweat profile?

So I know whether they're telling the truth or lying in their earnings calls and it's neat to see that evolve Not yet relevant to our typical target market yeah the uh it's funny to me right because you came from low latency which is always a weird term to me because it basically means high frequency low latency seems slow to me if you're not in the business um but it means right there's very low time difference between what you're trying to do but you've gone gone from that super low latency to daily delayed data, right? Mm-hmm. I guess some of the stock data is real-time on there, but are near real-time.

Yeah, and what it's reminded me of is there's all kinds of different ways to invest to achieve your objective. There's short-term, quick in, quick out, and there's methodologies to support that. And there are long-term buy and hold, and there are methodologies and approaches to do that. I personally am a believer that if you're doing things right, you should be blending them together. And much like when we go to buy a house as individuals, I think you start by saying, where is the crime rate lowest? Where are the taxes the best? Where's the school system the best? Where is the weather the best? You look at some key fundamental statistics on a home,

but before you buy, you get more of a technical mindset. You start to look at comparables. You start to look at things that have happened in your market that would allow you, is it the right time for me to get in and buy that house I love in that town? I view investing in a similar way that I think it's neat when people combine fundamental and technical analysis and say, I know this is what I want to hold long term the most, but what is the right entry point for me to make that acquisition? And I love when people merge those a bit. So you, like me, have no standing to say that we have any technical analysis with home owning in Illinois, right? We would be long gone in Texas or Tennessee or something if we considered all the facts of the pension debt, the taxes. But that's a discussion for another time.

That's a whole separate podcast. We'll have to schedule that one. Exactly. So what are some of the next goals and steps for wide charts in terms of what's the future look like for you guys um an ipo potentially down the road you're going to stay private i you know what we're having so much fun right now just growing you know we're growing 30 to 40 percent a year and and that's completely joyous and that gives you plenty to think about plenty to plan for it gives you a lot to think about when you're thinking about next year.

So I can't tell you where we'll be in five years, except I know we're going to have a ton more customers. And hopefully they stay with us for 10 years each on average or as long as their career lasts. We have some work to do everything from the basic evolution to integrating better to creating better and better visuals. You know, again, I go back to the thing we strive for, which is how do you make the complex easy and how do you make the easy quick? There's a lot of complex things that continue to emerge. And so we got plenty to solve there. And then once it's easy, what are the steps we can take to make it even quicker for you to have an idea and tweet it out? You know, we created a direct integration to Twitter. We'll be creating a direct integration to LinkedIn

to say, hey, we know rather than you copy paste your nice visual into one of these platforms, how about we make it real easy and you're directly logging in? So we have so much basic evolution plus new geographies, new asset classes. You know, you've talked about alts, you know, whether we do fixed income. My request while I have you is to get a bunch of hedge fund indices on the platform. I can set you up with HFR or Credit Suisse would be my first two choices, but those would be... Duly noted. And we'll take it under advisement. And the thing, you know, we'll keep aggregating the requests from our customers and figure out what's the right thing.

And then I may take you up on your offer. Yeah. out what's the right thing and then it may take you up on your offer yeah what um what do any plans for like a kind of a network where these different users could be talking to each other sharing portfolios things of that nature outside of twitter and linkedin like in inside the platform yeah a really really great and timely question um typically in the wealth advisor space the history had been wealth advisors had seen themselves as competitive with each other, right? Like I win an account, that means you lose an account. The reality is I think all wealth advisors have realized there's plenty of unserved

market out there. It's not a zero sum game. So we've seen a growing appetite from advisors, especially to collaborate. So to your point, don't be surprised on the horizon if, you know, we've already got, we profile some of our best users, how they use our application, what their insights are. Don't be surprised if we allow them to share their dashboard with others. Don't be surprised if we have forums to say, what do the bulk of our users think about a 60-40 model portfolio centered around Vanguard funds? You know, hey, don't be surprised if we have things that say the most commonly screened securities in the auto space end up being the following. So collaboration is going to be a big part of

our future. Right now, we're taking the collaboration themes mostly within an enterprise. How do we do a better job, Jeff, allowing you and your colleagues to share insights analyses with each other on different licenses where you're saying, here's something interesting I found today, and it quickly emerges in your instance of our software. And it just popped in my head. Like, I would be super interesting of kind of aggregated stats across the platform of like, here was the top search stock symbol and index. Yeah. And, you know, I mentioned earlier, the COVID statistic is quick and easy to get that in. The thing where we want to make sure we get right and we think through is privacy and all of those considerations, because we will never be in the business of saying, hey, here's what Jeff and his five colleagues did. We'll anonymize it and send it somewhere and make some money. That's just not going to be our business model.

But to the degree our client base said. Is that because you're in Chicago and not Silicon Valley? Because that seems to be the rest of their models, right? Yeah, yeah. I believe I want to have a business model that's as transparent as possible because so much of our business is about trust. And if you can't trust me and us, you're not going to want to stick with us for a long, long time. So we want to be transparent. We. Right now we're collecting a huge repository of interesting charts, interesting visuals, and we're saying, Hey, we created it or somebody created it.

If it could benefit you take it and have at it. Yeah. And I think that's a brilliant little piece of a gorilla marketing kind of, of like powered by wide charts. Right. So anytime a user's putting that out there and social and whatnot people are seeing your name um what let's talk a little bit on your thoughts on fintech space in general the fang tesla uh what's the new electric truck maker that's gone you know worth two billion without ever making a truck.

That's not quite FinTech, but back to FinTech, what do you see in the space? What's exciting to you outside of, you know, what you guys are doing exactly? Uh, I, I, the reason I'm in the FinTech space is I think FinTech is way behind in the way it uses technology to solve business problems. So what continues to be exciting for me in this space is we're not there yet. We're not where we need to be. Some specific things in like the wealth tech space that I'd point to is there still is not a good way to prospect, create a financial plan, create a portfolio, effectively manage the portfolio, rebalance the portfolio, and rinse, repeat. Right now, it's still a fragment of, there's a lot of fragmented solutions out there that are disjointed. And when you say, hey, I also want a risk profile

of my customer before I meet with a prospect and before I create a portfolio, there's just a lot of well-intentioned point solutions out there. But I think there's a real opportunity to be aggregated into a more comprehensive solution. And it's typical of fintech, which is, you know, due to regulatory overhang or just history, we're not applying all the best technologies and all the best thinking yet to solve our customers' problems. And who do you think suffers from that disruption when it comes to, I mean, obviously the banks, the big wire house brokerages kind of, even though they seem to be suffering already from REAs pulling out and going independent? Yeah, my answer almost is a generic one,

which is whoever the incumbent is. You're seeing that now with Robinhood, how it's able to disrupt the E-trades and the Schwabs and the Fidelities and services like that. And you're seeing that with robo-advisors, how they have the ability to disrupt traditional wealth management it's always the answer is the incumbent and it's a rare example

where you know where the incumbent is able to pivot to still be competitive and i think we're seeing that prime example you brought up the the tesla and the the the electric powered trucks and stuff hey listen tesla's yeah i mean i mean tesla's market cap you know is greater than toyota's right now and like all these yeah it's crazy yeah i mean it's crazy so it's the incumbent that will pay the price they're either going to have to buy the innovative small company or they're going to have a hard time keeping up because they've built up procedures and barriers that allow them not to be innovative anymore. It's no different in our space. RoboVisors became super successful to feel like your product would be less and less needed, right? Because they wouldn't need the human advisor. It'd just be people click, click, signing up, having their money managed. And the advisor wouldn't need to build stuff on your platform.

So first of all, I mean, if we stayed static, dead on. But let me paint a different scenario for you. if robo-advisors were able to allow the 70% of America that is not currently served by professional asset management, if you said, hey, the target there, that engine still needs to understand the client, needs to come up with the right security, needs to notify them when there may be some challenges and issues. There is a whole lot of brains in our current software and the workflows we currently support that fit well into the fully digital world. I also am a firm believer that if I were to live another 75 years, in 75 years,

there still are going to be humans helping other humans manage their wealth. Because at the end of the day, we're all a little nervous of entrusting our nest egg and all of the wealth that we have worked so hard to create and all of our savings. I think we're all going to still be a little nervous to say a machine's taking care of all of that and I don't have a human I can talk to to express my concerns or my desires. Yeah, my neighbors at Wealth Advisor, and he was basically saying that 10-day period in March, he was a full-time therapist, you know, on the phone for 12 hours a day from 8 a.m. till 8 p.m. Most of the conversation was fairly simple. Like you said, therapists, what does a therapist do? They mostly just listen. And they're playing the role of

therapist and pilot, right? When the plane gets turbulent, you don't want your pilot to be silent. You want your pilot to get on and say, I'm aware, I'm in control, and here's when I'll be in touch with you next. So they're playing one part pilot, the other part therapist, just saying, how are you feeling? Hey, we thought about this when we created your plan. We're going to stay the course. This too shall pass. Boy, that's a much more comforting way to go to bed than checking your robo platform and going, it just went down 28% today, honey. We've got, we've got to sell everything because I think it's going to go down more tomorrow. Yeah. And I, I find interesting, right? It seems that hasn't been the runaway success robos that people thought, uh, turns

out it costs them way more money than they thought for customer acquisition. Um, you know, to the tune, like they were losing money on some of the customers that they require? I still think where it's going is a really nice common ground where the typical advisor can support about a hundred accounts. And with those current hundred accounts, it's very predictable that the fees to support those clients are going to need to drop.

There's going to be margin compression going from 1% of AUM down to three quarters of a percent or half percent. So you need to figure out a way to bring in more accounts. I think it's going to be a nice blend if you can use Robo with some of your smaller AUM and bring on another 150 accounts in a Robo world and wait to see which ones migrate into the more personalized service, hand-holding service that you provide to your top 100 customers. So I see it as a wonderful way for advisors to continue to grow their practice without having to work 150 hours a week. Yeah. Well, my neighbor can attest to his 150 hours hours a week 100 of it's on the golf course but that's it's business he's getting clients oh yeah um great well i'm gonna move on to our

favorites unless you got any other last thoughts on the platform or the future i think we've covered quite a bit. Yeah. Love to hear it. So yeah, every pod, we ask you some of our, your favorites, some quick fire answers. So I'll start with Joe Montana or John Elway.

Joe Montana. Joe Montana. Joe Montana, without a doubt. All day. Favorite Chicago pizza place Lou Malnati's the Malnati family

is in the town I currently live in and I've always enjoyed their pizza although Pizzeria Uno is a close second for me

the Lou is a good one and you we forgot to ask before you're a Cubs or Sox fan or neither? I've never heard of the Sox. I love it.

We'll see what this baseball season looks like. I feel like the Cubs might have a chance. I feel like anyone has a chance in this shortened season. Yeah, we'll see. Everything's going to have an asterisk by it when you've got four guys who had a 400 batting average after playing 60 games and they've got the a different kind of asterisk than barry bonds has by his name it'll be interesting right but like lester if you got some of these older guys that don't have to do the whole season might be beneficial that'll be exciting um usually we ask favorite investing books so i'll offer that one up

there but also favorite kind of fintech or entrepreneur book books so i'll offer that one up there but also favorite kind of fintech or entrepreneur book if you want to take that one instead um entrepreneur book i really liked there was a book called um uh hooked i by ner y'all is his name i really like that and. And there's another book called How to Make Your Customers Badass. I just think those are some fantastic business books that hits on the theme of make your customer feel great,

make them great at what they're trying to do, and all other things will work out awesome for you. Yeah, we used to, my old company that I was head of would make every new employee read, is it Tom Mitchell or some Mitchell hug your customer who ran the suit shop in Greenwich. So it was a little, it was some great messaging. I was also, well, you were also suiting up the hedge fund guys that were willing to pay.

Yeah, yeah. It was easy to hug them. Favorite function inside wide charts um customer success i i'm sorry are you talking application function or organization function i was talking application but i'll take the earlier one that sounded interesting sorry i if you're asking about my favorite roles within YCharts, it's the customer success team. I just love that they're the front and center for helping us make our customers successful.

But if you're in terms of application functionality, I love our model portfolios. I just love how variable the use cases are and how I can use it to truly understand buying opportunities or I can use it to, to truly understand buying opportunities, or I can use it to develop an insight on whether Dave Portnoy or Robin hood or the Oracle at Omaha are best over a two week, two month or two year horizon. I just love the functionality.

That I'm going to make a blog post out of that. I love that idea of looking at those three uh up against each other and then lastly favorite Star Wars character it's a painful one for me um I it's always been Chewbacca but it I say that um in in a very sad way and I remember being in my grandmother's driveway in upstate New York and having my favorite Chewbacca figure that I buried in her driveway as part of an adventure I was on. And then she called us in for dinner and went in for dinner and came back out. And I couldn't find where I buried Chewbacca. So my long and short answer is it's Chewbacca.

And somewhere in Buffalo, New York is my favorite Chewbacca action figure is still in somebody's driveway. Well, when you write your next chapter, that's your first adventure that you're going to take with your wife. We're going to save Chewbacca. We're digging up somebody's driveway because it was gravel back then, but it's surely paved now. So we're going to have an awkward conversation saying can i dig this up and see what happens to plastic after uh 45 years well it'll be frozen in the buffalo tundra so yeah true it may be it may be out there 2 000 years from now some somebody's going to be with a pick and the axe digging there and find the city of buffalo exists and they're going to find an action figure and they're going to piece it together and say, wow, this must have been some mystical symbol. It was a Chewbacca.

Chewy. I love it. All right. Well, thanks, John. This has been fun. I'm looking forward to continue watching you guys grow and have success. Jeff, thank you for being a customer. I really appreciate it. Thank you for having me on. And I did want to offer something up to your listeners too, if that's okay. Yeah. So listen, we love to get in discussions with new people and you're welcome to take a two week free trial. But I also did want to offer a 15% discount to anybody who references your podcast before the end of August. So please, you know, mention this podcast and I would love to get to know you.

All right. I appreciate that. Well, thanks so much. Good luck. Have a happy 4th of July. Forgot to mention, that's why I'm wearing these big, broad red stripes. You too.

Go America. Have fun this weekend, but stand far apart. Stand far apart and don't hold the fireworks too close to your hand. All right. Thanks. Take care, Jeff. You've been listening to The Derivative. Links from this episode will be in the episode description of this channel. Follow us on Twitter at RCM Alts and visit our website to read our blog or subscribe to our newsletter at rcmalts.com.

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