We no longer live in a world in which institutions can determine the future of the company based on its finances and its potential return on investment. As I specialize in quantitative finance, of course, I believe that everything has a price and that everything can be measured in monetary terms. However, we all forget the things that matter while chasing big ROI numbers.
Have you heard of the accounting term “goodwill”? If not, let me share your Investopedia definition to save some time: “Goodwill is a miscellaneous category of intangible assets that are more difficult to analyze individually or measure directly. Customer loyalty, brand reputation, and other non-quantifiable assets count as goodwill. “Why am I bringing it here? Simply because there are some intangible assets that we sometimes forget when pricing a company and / or define your future by submitting a buy / sell order.
A company is not just a technology, it is also people, brand, resources and many other things together. Weakened companies in many cases suffer from poor management, lack of pivot and understanding of how to adapt to the new market environment. So we know that private equity firms are looking for such “weak” companies to do some radical business revamps to bring them back to market later as a newly rebranded lucrative investment opportunity.
Startups are always asked about “purpose.” Why are you building this business? One of the main purposes that generates a lot of impact on society is to generate employment. The company creates jobs for people to maintain and drive the economy. When an institution decides to sell short to a certain company, they do not see people behind, they see money in their trading account.
you can’t win the market or not?
Market agents and democratization of investment
Teachers and traditional financial courses always used to say “you can’t win the market.” But who and what is this “market”? It consists of many different players: institutions (investment bank, hedge funds, corporations, etc.), HNWIs, retail investors, professional traders, and “the crowd.” Investing used to be something that was not easily accessible, it used to be for people who know (or think they know) what they are doing. These days, apps like Robinhood opened up a whole different world and brought in another category of people: “the crowd.” Now let’s change our question a bit: “You can’t win the market, can you?”
Gen X, Y, Z: Market changes come with generations
We also need to consider the mindset and core drivers of Gen X and Gen Y. Gen X are the people who value stability, they are looking for ways to generate better income, stable income too. While millennials opt for YOLO exchanges. Millennials are born with technologies and easily adapt to all new tools and test all new applications that appear on the market. Generation Y are the people who are also used to communicating online, having a social network and participating in communities. Millennials and the growing Generation Z also believe that they can make a difference and are ready to fight for it.
Generation Y and Z believe they can make a difference and are ready to fight for it
YOLO Merchant Onboarding As Covid Crisis Emerges
Every generation that experiences a great deal of injustice and economic failure is now no exception. The Covid crisis changed the rules of the game in the financial industry. It boosted the fintech market and took it to whole new levels, unlocking financing, banking, savings, and ultimately investment, for the masses. Many people lost their jobs, experienced severe financial difficulties, and at the same time are stuck with their laptops at home as everything else is closed due to the pandemic. People started spending more time on self development, reading, getting into new things and one of them turned out to be “investments” with apps like Robinhood providing a very easy solution to do that. Can it be worse if I try? Many asked themselves.
People started discussing investment strategies, talking to each other, joining different investment communities, and having fun betting options and meme stocks. The stories, when someone earned a crazy xxx%, began to spread on the web. These stories began to encourage newcomers to take up investing (or gambling, to be precise). Every user who adds $ 100 – $ 1,000 of capital is nothing on an individual level, imagine how much capital it is when your community has 10 million people. Now imagine how tired these people are of the traditional financial system that didn’t help them and how much they want to make fun of it.
Every user who adds $ 100 – $ 1,000 of capital is nothing on an individual level, imagine how much capital it is when your community has 10 million people
The recent case with GameStop and AMC showed that “the crowd” can be more powerful than any institution and can be the one that determines the rules of the game. They are irrational, initially they are not driven by xx% ROI, they are driven by the “f *** the wall street” kind of thing. . The crowd doesn’t want to be dictated by rules, they want to be the one to dictate them.
I have been asked many times about the possible outcome of such meme exchanges. I always responded that people gave the company the opportunity to survive and pivot. They could do as well as they could miss that opportunity. Personally, I wanted to believe the first case and was happy to see the news that GameStop was launching an NFT platform.
Be friends with the crowd and the crowd will help you.
You can satisfy an average investor by giving them good performance figures, but you can’t satisfy the crowd just by doing that. It must be great, it must generate impact, it must be a company that does something for people and income is a secondary factor. The crowd values your “goodwill” even if you don’t think in these terms.
People are watching
I think digital communities are reshaping the corporate mindset. You could anger a person without causing any harm to your company before. Now imagine this person sharing how you annoyed them in a community with 10 million people. You get an angry crowd that goes against you. I want to think that we are moving towards more transparent, impactful and sustainable businesses as people watch.