Everyone heard the stories of people getting hilariously rich by betting early on bitcoin. Apps like Robinhood make it easier than ever to trade stocks actively. And then the whole GameStop madness happened.
So things have been brewing for a while and right now interest in investment topics is at an all-time high. I mean, even my mother asked me what stonks are.
A tried and tested strategy to profit from such a gold rush is to sell shovels instead of digging for gold yourself.
But before we dive in, I've to admit I've always been highly skeptical of anything related to financial markets. There's plenty of evidence that professional money managers are not able to outperform either the stock market at large or a portfolio of stocks chosen randomly.
And of course, there's the efficient-market hypothesis which states that since all available information is already priced in, stocks move randomly. Here you might argue that some funds are clearly able to generate outsized returns. But if we ask 50,000 people to flip a coin 10 times, statistically there will be around 50 people who flipped heads 10 times in a row and no one would call them coin-flipping geniuses.
So for many years I thought that trading and investing was mostly smoke and mirrors. But when I recently dug a bit deeper, what I saw reminded me of what I knew well from academia.
- Instead of "No you can't publish a paper in this journal unless you hold an academic position" I heard "No you can't invest in early stage startups unless you're an accredited investor."
- Instead of "No you can't use a lab as an outsider" I heard "No you can't get access to these financial instruments as an amateur".
- Instead of "Amateur scientists have zero chance of contributing anything valuable" I heard "Retail investors are just losing money, so stay away".
- Instead of "No one is making progress but the only way to make progress is through incremental research" I heard "No one is able to outperform the market but the only way to outperform the market is through fundamental/technical analysis". (Fundamental analysis means studying the financial statements, market, management, and competitors of a company whereas technical analysis means studying past market data to forecast the future direction of the stock price.)
The last point in particular got me thinking. In academia everyone likes to argue that there is little progress because all the low-hanging fruit is gone. But on the other hand, no one is doing the kind of risky research that is necessary to make real progress.
Academia is a game with its own very specific rules. To win you have to publish papers regularly and rake in citations.
The winning strategy is to churn out papers on incremental results with lots of co-authors. Importantly, everyone has to work on the same topics using the same frameworks because how else are you going to get citations? Note that discovering previously unknown truths about nature plays no role in that equation.
Could something similar be going on in finance?
I have zero insider knowledge but it seems likely that finance also has its own set of hidden rules that are not entirely in line with what you would naively assume.
For example, I can easily image that you have to back up investment decisions using numbers that you cooked up using either some form of fundamental analysis or technical analysis. It's no secret that I'm not a fan of that approach.
Let's say it's 2016 and all your friends who are into e-commerce are raving about Shopify. Amazon increasingly looks like a flea market in the middle of Shenzhen and Shopify is arming the rebels. If, based on these soft factors, you made the decision to buy a bunch of Shopify stock, you'd be hilariously rich by now.
I'm sure that you can cook up some narrative how you could've reached the same conclusion using fundamental or technical analysis. That's always possible in hindsight.
But what I'm trying to get at is there are strategies that are overlooked by traditional investors who are confined by the shackles of the ecosystem they're living in. Many financial institutions are primarily sales and marketing organizations that make money regardless of whether the services make money for their customers. They also have a non-representative high concentration of middle-aged men that influence investment decisions who probably won't understand the latest female-and youth-oriented trends.
At the very least it seems possible that Main Street is able to outperform Wall Street by focusing on game-changing information that fly under the radar.
I'm not saying this to convince you to start investing. Instead, I wanted to talk about these issues because it would be very unethical to start projects in this space if it weren't possible to genuinely help people.
With that out of the way, let's talk about opportunities to sell metaphorical shovels to the information-hungry, tech-savvy Main Street rebels.
Riches in Niches
The Game Stop craze originated on Reddit, so it makes sense to start our research here. Each time a market blows up, dozens of submarkets suddenly become big enough to be interesting. And on Reddit, we can observe this happening almost in real-time.
While unsurprisingly, all big finance Subreddits are exploding right now, dozens of niche communities are also seeing unprecedented growth. The most popular categories are:
- Local communities like mauerstrassenwetten (German WallStreetBets), MexicoFinanciero, or UKPersonalFinance.
- Communities that focus on a specific type of stock like /r/CanadaStocks, /r/weedstocks, /r/shroomstocks.
- General education communities like /r/IslamicFinance, /r/FluentInFinance, /r/algotrading.
To see even more examples, have a look at the following table which contains information on 50+ finance-related trending Subreddits.
Now what are we going to do with that information?
The most obvious way to take advantage of this opportunity is by starting a paid publication. Retail investors are just as hungry for information as professional ones. And it's no secret that investors are happy to pay for anything that gives them even the slightest edge.
Importantly, as demonstrated by the following examples, you certainly don't need to engage in any pump-and-dump schemes or sell shady "hot stock tips".
The Van Trump Report
Kevin Van Trump charges $60/month for his long letters that he sends out 5 times a week. While he occasionally discusses individual stocks and companies, his main focus are marco trends and really all kinds of developments that affect agriculture businesses.
At first, it might be hard to believe that 15,000+ people are willing to pay $60/month for reports with headlines like "Disrupting Soil Sampling". But agricultural developments have a huge impact on all kinds of businesses from DoorDash to Tesla and hence are valuable to many investors.
Another important factor is that at $60/month his reports are affordable for people who usually don't have access to this kind of expertise and are a no-brainer for financial institutions that routinely pay thousands of dollars in subscription fees for market intelligence.
With thousands of paying subscribers and given that Kevin writes all the reports himself, it seems safe to assume that he's making north of $5,000,000 in profit each year.
David Kim's unique value proposition is that he's not another salesman who writes sensationalized reports to hype up stocks. Instead, he publishes balanced analysis of business models that are often inconclusive and can't be summarized in a tweet.
Interestingly, almost 30% of his 1000+ paying subscribers ($210 / year) describe themselves as "non-professional investors".
This number together with Scuttle Blurb's revenue growth (almost 100% year-over-year) confirms the assumption that there's a hungry market of investors looking for high-quality information at an affordable price.
I love how he justifies his price point:
"Well, I figured if I charged thousands/year, subscribers might start to think of me as their on call personal analyst, which would spoil my quality of life and crowd out research time. At the other extreme, given the niche appeal of my writeups, I didn’t think I could build a readership large enough to earn a living at a price below $100. $210 felt just low enough where if you enjoyed the blog, you wouldn’t feel weird casually telling your friends to subscribe and you wouldn’t think twice about renewing your own subscription."
While Scuttle Blurb and the Van Trump Report are interesting, they're arguably not the most inspiring examples. After all, you need to be an expert with years of experience to write at that level.
So next, let's talk about how you can tap into that market even if you have zero experience.
Learn and Invest in Public
Instead of trying to hide the fact that you have no expertise and "fake it 'till you make it", you could embrace it. Being a beginner is actually a superpower.
Experts often have long forgotten what it's like to be a beginner and hence it's usually much easier to learn from someone just one step ahead of you. As a beginner you understand perfectly what kind of issues fellow beginners are struggling with. So writing about a topic from a beginner's perspective is actually valuable.
In addition, by being vulnerable and talking openly about everything you still don't understand, you'll build a much deeper personal connection to your audience.
Here's an example. Let's say you're interested in "Shroom Stocks". To get started, you can create a free publication on Substack. Then, to get your first few subscribers you announce on Reddit, Twitter, Hacker News that you want to become the world's best and most honest "Shroom Stock" analyst and offer that people can follow along your learning journey by signing up to your newsletter.
Then share regularly with your list what you learned, try to write reports as soon as you have something interesting to share, and cross post them in relevant Subreddits etc. Once you have 1,000+ subscribers introduce a paywall.
Someone who's currently using the learning-in-public playbook is Jordan O'Connor with Quant Secrets.
He has zero experience in the field and is completely open about it. Instead of expertise, he's offering to take his readers along his journey. And in addition to his newsletter, he also shares his work on Quant Secrets live on Youtube.
In the following tweet he summarized his complete playbook.
So instead of going down the paid-subscription route, he wants to start selling products once he's built up a sufficiently large subscriber base.
I have no doubt that he'll be successful and that a similar project is possible for any of the niche topics in the database above.
UPDATE: My timing couldn't have been any better. Just one day after I published this report, Jordan announced that he's shutting down Quant Secrets. Nevertheless, I'm still convinced that learning in public is an awesome strategy.
If you're now toying with the idea of starting a publication, it'll probably be helpful to do some proper competitor research first. So here's a database of the most popular Substack newsletters which should be a solid place to start:
But writing long-form reports is certainly not everyone's cup of tea. So let's talk about a few other ways to help investors.
Democratizing the Means of Production
Keith Gill aka Deep F***** Value aka the guy who started the GameStop saga has a YouTube channel where he shares, among others, the tools he uses to analyze stocks.
While his setup is fairly advanced for a retail investor, it's also full of rather awkward workarounds. He's using several Chrome Extensions in combination with Google Sheets, and still needs to visit all kinds of website manually to find information.
Awkward workarounds like this are always a clear sign that there's an opportunity for a better solution.
For professional investors this problem is solved by Bloomberg terminals ($24,000/year) which even include a custom keyboard with a "Help" button that, if tapped twice, immediately connects you with someone at Bloomberg.
That there's huge demand for a similar but more affordable product is illustrated by the huge interest an open-source alternative recently received on Hacker News. While this project is cool, it's certainly not user-friendly enough for most people.
So far we've talked about content and software and there's one additional product category that can be invaluable to investors: data.
Uncovering Game-Changing Information
Selling relevant data is probably the fastest way to help investors uncover game-changing information if you're not a subject expert.
Here are two examples.
Machine-Intelligence for the Masses
Huge companies like Renaissance Technologies get an edge by applying machine learning algorithms to data collected online.
For example, understanding how people talk about a given stock on Twitter or Reddit is certainly a valuable data point. Using sentiment analysis algorithms this task can easily be automated and done at scale.
Offering this kind of results to retail investors at an affordable price seems not just like a great opportunity but is also something a solo developer could easily pull off.
SEO Rankings and Google Penalties
Many companies rely at least to some extent on traffic that Google sends their way. Hence when the Google algorithm decides to feature a company's website less prominently in the search results, this is certainly game-changing information that will affect the company's revenue and stock price.
But most retail investors aren't search engine experts and can't afford expensive tools like ahrefs or SimilarWeb that you need for this kind of analysis. So there is an opportunity to build a service that provides easily understandable search engine data on companies listed on the stock market.
Here's a much more in-depth analysis of this opportunity by SEO expert Glen Allsopp.
There are countless other opportunities to make better information available to retail investors. Two more before I'll call it a day.
What about a service that monitors new or expiring patents? For example, Patent Drop is a quite popular newsletter that does just that for big tech companies and Drug Patent Watch charges $2,100 per month for information on patents in the pharma industry.
Or you could collect geospatial, weather, news, and demographic data to offer consumer behavior predictions. One new player in the field is Almanack (founded in 2020) who are currently charging $249 for this kind of data and ended up as Product Hunt's product of the year in the AI and Machine Learning category.
I really hope you enjoyed this one! If you did, please let me know as we're still trying to figure out what kind of content provides the most value to our readers.