Q&A: SprinkleBit Sets Out to Crowdsource Active Investing
SprinkleBit CEO Alexander Wallin says he got hooked on investing in stocks when he was 14, working at a small ice cream kiosk in Skärhamn, on the West Coast of Sweden. He invested everything he earned that summer in Metro International, a media company then trading at 3.80 Swedish Krona a share. Metro later issued additional shares at 2.80 SEK—26 percent below his purchase price. But Wallin saw the plunge as a buying opportunity, and doubled down on his investment.
He says he sold his stake in Metro two years later, at an average return of 287 percent. After that, the teenager began creating spreadsheets of data and became an ardent stock picker. By the time he began studying economics in 2007 at UC San Diego, Wallin says, he had saved enough to pay for college himself.
Wallin says his big epiphany came in 2010, when he read James Surowiecki’s The Wisdom of Crowds during a semester at Harvard University. When he returned to UC San Diego, Wallin developed the “voting power model”—an algorithm that uses recent transactions to assess what he calls investors’ “magnitude of conviction.” He founded SprinkleBit out of that research in 2010, and graduated in 2011.
The website initially offered a social stock trading simulator, adding such additional services as online education as it evolved into a comprehensive trading platform. After years of what Wallin calls Kafkaesque challenges, San Diego-based SprinkleBit began operating its online trading platform in November. I talked with Wallin, now 27 years old, by email and phone, and edited his story below.
Xconomy: What is SprinkleBit?
Alexander Wallin: The initial plan was simple—create a social investing platform where people could connect all over the world to discuss ideas and form groups known as pools to execute their trades together with both virtual and real money. We wanted to create a community where investment ideas and solutions are exchanged in an environment of transparency, accessibility, and trust.
X: Virtual money? Are these simulated trades?
AW: SprinkleBucks is our virtual currency, which users will eventually be able to turn into goods and services. For now, it’s mostly used for bragging rights. The reason we are focusing on a stock simulator is because practice makes perfect, like any other aspect in life.
X: How does it work?
AW: We have a four-step process to learn how to invest.
1) Users educate themselves through SprinkleBit University.
2) Watch other investors in the SprinkleBit community and see what they do.
3) Practice risk-free with our stock market simulator.
4) Execute real trades with our integrated brokerage platform.
As members implement their investment strategies, a proprietary algorithm generates a Voting Power Index. This VPI confirms how skilled they are with making investment decisions. This enhances the trust factor between members within the SprinkleBit community, and we can clearly see how the beginners have benefited from following the pros.
X: How does SprinkleBit make money?
AW: It’s completely free to join SprinkleBit and to … Next Page »