Posts about disclosure

Covestor’s launch

covestor.gifThe Wall Street Journal today mentions Covestor, a new service that enables investors to share their trades. I invested in the company, which was founded by the sonorously monikered Rikki Tahta, a fellow former board member on Moreover.

Here’s the idea, from various of the company’s self-descriptions: “ aims to de-institutionalize money management. They provide a real-trade sharing service that offers self-directed investors the opportunity to compete with, and be rewarded like, professionals. By sharing the work they already do for themselves Covestor enables them to build their reputations, and eventually earn fees based on proof of their investment record.” And from the home page: “The smartest investors aren’t all professional money managers. Every day, adept unsalaried players around the world are matching, or beating, results of the pros. We think it’s high time for these unsung investment talents to get more recognition, more resources, more of the rewards.”

So it’s not a wisdom-of-the-crowds play. It’s a wisdom-of-the-wise play. Those who have demonstrated track records of success — and prove that by revealing their actual trades — can benefit as others see their value. How? When other investors watch what works for a successful investor and follow his or her lead. Now we can see who is succeeding — and why — instead of relying on the advice of brokers and analysts whose track records are not so clear and whose money is not where their mouths are.

At another level, part of what’s fascinating about this is, as the Journal begins to point out, people today have a different sense of privacy — or better put, a different sense of the value of openness. My parents and grandparents would not reveal such facts, even anonymously. But the key to social linkage on the internet is that you have to give up something to get something: You won’t meet other skiiers unless you reveal that you are one. This is true of social services: Facebook, MySpace, dating services. But it is also true of other arenas that want to benefit from social intelligence: You can’t call yourself an expert investor unless you show your stuff. And now you can benefit from that, thanks to Covestor. It’s also true that the more you reveal, the more value you get back.

Covestor verifies your trades (by your allowing it to take your data in directly from a broker or by Covestor manually confirming your status). You get to control your identity: you can keep it within the Covestor community or you can export your identity to, say, your blog with a widget that reports and certifies your track record.

Now I’m a dolt at investing — except, of course, for my very wise investment in Covestor and Rikki; after all, I still own Time Warner stock and I never bought Apple stock. But I will benefit from Covestor by following the leaders. Because I’m a dolt, though, I won’t do the best job actually describing the service. Om Malik, who’s much wiser and probably thus richer, does a better job:

You sign-up for the service, and plug-in your online brokerage account information and your portfolio shows up on the site, and the system creates its relative performance to the broader indices, sector indices and also creates a risk profile. It’s not a fantasy game; instead it is your real portfolio, where real money is at work.

The site, while no-frills has all the elements you would see on say Morningstar fund screen. You can see a person’s holdings as percentage of their portfolio, with relevant charts and other relevant data. Lets say, you are good at picking broadband stocks; others on Covestor can track your investments. There are shades of social networking, with a built-in reputation system. There are other features that help you gauge the quality of investment information you are getting from a person.

If the “covestors” agree with your investment style, then these covestors can allocate say a small portion of their own investment dollars to mimic your investment style. The more successful you are, the more followers you get. Think of yourself as their virtual money manager – an attractive proposition for those who take (very vocal) pride in their investing prowess. It is not that different from a blog, where unique voice or view points lead to a ‘following.’

See also Seeking Alpha’s report.

Buzz, blogs, and bucks

The Wall Street Journal tries to find a story in bloggers being on the advisory board of FON and blogging about it but they don’t come away with much because most of those bloggers disclosed that they were on the advisory board.

This raises a question about conflict of interest — a question with a pretty simple answer: Disclose.

But it raises a bigger question about whether all these bloggers are trying to be journalists. They’re not. Some are just people. Some are advocates. Some are journalists. Newspapers tend to think that if it has words it must be somebody trying to be like them. But that’s not always the case and it’s a mistake to think that all bloggers are trying to be minimedia. They are what they are: people.

And those people do, indeed, need to care for their credibility. If a neighbor told me to go buy tile at a great store and didn’t tell me he owned a piece of it, I’d be pissed if I found that out after I had a problem with the place; I wouldn’t trust his next recommenation much. Credibility and trust matter in life as they are supposed to matter in journalism. Trust is the organizing principle of life.

But that doesn’t mean that we all have to take some journalistic vow of uninvolvement. What, David Isenberg can’t both write about open networks and be involved in them? Of course, that’s ridiculous. David Isenberg has a stance on networks and I expect him to live and talk from that perspective.

Similarly, considering my health hiccup of late, I’ve been reading lots of sites and blogs and articles and PowerPoints by lots of people, including some from the company that makes the drug that I’m taking now. I know their perspective. I take that into account. But I find them all valuable. In fact, I find what some of the affiliated people have to say more valuable than some of the unaffiliated precisely because I do know their perspective.

The secret to this is disclosure. And the irony of this is, of course, that journalists are the worst at disclosing. They think they shouldn’t or don’t have to but they are the ones who demand that everyone else should disclose. Doctor, take your own medicine.

: Don Dodge also writes about how much easier it is to launch a company today in part because you don’t have to do through the gatekeepers of the press. Witness the launch of CoComment this week, upon which I commented along with many others. They launched via blogs and they got help doing that from the guy who understands spreading a message via blogs better than most anyone: Hugh MacLeod. Says Dodge:

We now live in a meritocracy. Money, VCs, and the press no longer decide what will be successful. Great products/services with intuitive designs that solve a real problem win.

The people who are in the best position to know what’s good are often those are most deeply involved in the arena a company is entering. Once I know their relationship, I can judge what the say accordingly, can’t you?

: And here is my disclosure.

: LATER: David Weinberger responds to the article. He’s nicer about it than I would have been. But then, he’s nicer than I am.

: Doc has links to much more discussion.

Blogging god

Charmaine Yoest, who extended an invitation for a blogging junket to the Justice Sunday II, responds to my post, among others, here. I figured it was accidental that I got invited, but she says that it was quite intentional. I do salute them for being open to inviting all sides. I wasn’t sure what group was extending the invitation and plane tickets; turns out it is the Family Research Council. Charmaine scolds me for my word choice about these folks and she’s right. But still, I am antimatter to their matter. And I certainly would not take their money. But I’m glad everyone’s being transparent about the arrangements.

: Yesterday, an AP reporter called to talk about this. During the conversation, it occurred to me that I did not fully disclose one payment I received to be at an event I also blogged and I should have done so. I went to an Annenberg confab about — what else? — the future of news and they paid honoraria and picked up travel for the speakers. I then also blogged the event. I should have told you that.