The idea of trading on Wall Street based on Twitter “sentiment” can be traced back at least to a landmark, though deeply flawed, study published in the October 2010 issue of the Journal of Computational Science. The study’s authors claimed that by using Twitter, they could predict the daily changes in the closing values of the Dow Jones industrial average with 87.6 percent accuracy. Since then, Watson says, the challenge has been to refine the process so that Twitter becomes an ever-more-trustworthy crystal ball.
“How do you filter out the nonsense?” Watson asks in a blog post. “There certainly are scammers and spammers and sarcasm on Twitter. And there certainly are people intent on doing the wrong thing. But that stuff is, unfortunately, human nature and has existed on Wall Street for over a century. It has been a part of business since people started selling things to each other — think snake-oil salesmen.”
Sizing up Twitter sentiment so tellingly that traders would see it as a valuable predictive tool was the holy grail for the four founders of SMA in May 2011, when they began brainstorming. They were sure it was the next big thing.
“We were all developers for trading systems, and we were looking for new projects to work on together, but we didn’t even have a place to meet,” says Joe Gits, president and CEO of SMA. That problem was solved when Jeff Blaschak, another of SMA’s founders, was offered free use of space by his brother-in-law in an office building in Chicago’s Loop. But the formalities of desks, offices and boardrooms have never really mattered much to them. With an MBA and three Ph.D.s among the four of them, they straddle the heady world of academia and the make-a-killing world of the capital markets and appear most comfortable in the deceptively casual culture of startups. They use Skype and email from their suburban homes and treat any coffee shop with Wi-Fi as an office.
The more democratic a workspace is — no walls, no offices, no obvious physical hierarchy — the more creativity is encouraged, Gits says. SMA’s current space, in a hip neighborhood west of the Loop, features a long bar stocked with good beer and a few small, round tables suitable for a cocktail lounge, but no boardroom or dreaded workstations.
“The idea is that anybody can jump into anything — got a good idea? Let’s hear it,” Gits says. “How many decisions are made over a water cooler? If I see something, I can just call over to Jeff or somebody and say, ‘Hey, why did we score this tweet?’ ”