Topics: Portfolio diversification, AI investing, investment predictions, tax loss harvesting, create and managing your own portfolio, Global Predictions

Anthony Noto , Benzinga Editor

Featured Guest:

Alexander Harmsen CEO, and Co-founder of Global Predictions

Prepare your portfolio for today's economy

With Global Predictions Import your 401k, crypto, real estate, and investment accounts and get automated recommendations from an expert system.

BZ: Hello, Alexander Harmsen. Welcome to Benzinga Interviews. How are you today? 

Alex Harmsen: Great to be here. It's going really well for those listening wherever they upload their podcasts or watch their internet videos.

BZ: Alexander is an experienced . Tech entrepreneur. He's a CEO and board member and advisor having founded multiple successful companies and organizations. So he is a good get for us here at Benzinga. And I'm happy that you're joining us today. We have a lot to talk about. But first and foremost how are you doing?

How has, how have you fare during this turbulent time in the economy? Inflation is an all, is that an all time? 40 year high. I believe that's the number that they're telling me what's your take of everything? 

Alex Harmsen: It's definitely a time when macro plays a more important role than, almost anything else.

Where one of the things, one of the trends that we've seen, happen. A huge change over the last 13, 14 months is, we've seen a lot of people go from focusing on individual stock picking everyone feeling like they're a winner. They're really good at this game to, people focusing on travel, shutdowns, inflation, thinking about geopolitical events, thinking about how, supply and demand is changing.

Thinking about transportation network. Thinking about, commodities, oil, all these macro pieces, which for a long time I think was for us, the major focus. We've always thought that portfolios as a whole rise or fall based on these macro trends and that, putting that into the spotlight has just aligned a lot with, what we focused on at Global Predictions.

Personally I've never really spent much time doing the stock picking. It's always been thinking about the portfolio and diversification. And downside protection and how all these different pieces fit together as a puzzle in my own portfolio. And I'm actually very excited to have just, bought a, bought my first house.

Even though mortgage rates are crazy high, we got the house at something like a 40% discount compared to what it was going at, six month ago. 

BZ: So how did you find this deal? 

Alex Harmsen: Tons of opportunities, honestly. We didn't have to hunt that long. I think just based on all these macro conditions and the interest rates rising, it was it just put a lot of downward pressure on the housing market and we're seeing that not just in the Bay Area where I live, across the country.

3:05 BZ: So you're, I take it you're very savvy for you to find this great house deal. And that had to have, Inspired you to start Global Predictions because the thesis is to make people smarter investors or to help people become smarter investors. 

Alex Harmsen: Definitely we want to help people become more confident in investing.

I think, it started for me and my co-founder I like to think of this as the classic, Wall Street, meet Silicon Valley. My co-founder worked at Bridgewater for more than half a decade. 

And my background, I've ran a, like you mentioned before, at the top of the podcast a number of different successful startups. Fundraised, tens of millions of dollars ran teams of 50 or 60 people. And my background has always been focused. Physics and modeling and simulation and AI and trying to apply that to economics and then integrating that with the investing I think provided a, just a crazy unique opportunity for us to democratize a lot of the tools that you might see in professional portfolio management.

Hedge funds, family offices, pension funds, trying to bring those kinds of tools down to the masses, to make it easy enough for me to use, my own life. And even this real estate decision, partly came about because, there was a very clear hole in exposures and diversification.

When it comes to real estate, especially when mixed. The tech exposure and the startups and, the, the other assets that I have personally in my life. It felt like over the last 10 years, there's been a significant amount of. Tools and platforms available to help people with trading and accessing stock markets.

Lots of news, lots of what feels like noise. I think to most people, if you're not doing this full time, if you're a software engineer or marketer or a dentist or a doctor, then you know you have your life to live. You're, a professional in some sense. And so we wanted to help people, give them the right sort of platform to be able to think.

How am I doing overall across all of my different assets, in one place?

 BZ: Let's pretend I'm a potential Global Predictions user. Haven't heard of it until today. What can it do for me? What's your pitch? 

Alex Harmsen: I like to think about Global Predictions is the intelligence engine.

We've built a recommendation platform. We've built a macro insight system. That is looking at hundreds of thousands of different trends across the world. And then we have a tool that you can sign up for free called Portfolio Pilots. And Portfolio Pilot basically lets you import your retirement accounts, crypto cash real estate investment accounts, aggregate them all into one place, and then it connects that to the Global Predictions recommendation engine to provide you analytics, recommendations, advice on what to do.

And then at the end of the day, you are in control of the, that decision. So we vary specifically, in the sign up flow. Remind people, we can't make trades for you. You have to hit the big red button. because it really feels like for a lot of people, a lot of our users, they want to feel more confident, they want to understand what's going on and then at the end of the day, make the trade the to really own that those decisions 

BZ: portfolio pilot came out just this month. 

Alex Harmsen: Correct. We've been at beta for like almost more than a year. We have close to a billion dollars of assets on the platform, but then like truly opened it up. Just last week, six days ago. 

It's been a crazy week for us. Absolutely.  

BZ: You have a new product coming out. a new feature, I should say

Alex Harmsen: As part of the sort of multi-week, launch strategy for us. We had thousands of users sign up just in over the last couple days. And then teasing a tax loss harvesting tool that we're about to launch in December 1st. And so one of the most requested things that we've received from, the people that are already using the system is being able to do something like tax loss harvesting the.

It really feels like tax loss harvesting is something very simple that can save almost everybody thousands of dollars in 2022, especially because, probably there's a few items in your portfolio that have lost money this year. Probably a few. And it really feels like only robo advisors are able to do that.

But you don't have control of that process. Basically you have to give your. Or you have to work with a wealth manager or family office. And so for the vast majority of people, I think most have heard about it, but don't really have the tools to be able to do it properly.

So we're basically launching December 1st, a do it yourself tax loss harvesting feature that we think can save you a couple thousand dollars with maybe 15, 20 minutes of time. As long as you do it before December 30. Okay. So there's a little bit of a time crunch there and, but it's not a robo advisor.

It's not a robo advisor. Okay. Like I mentioned, it's really, it's, we're trying to give you the tools, recommendations, advice, guidance to get to the finish line, to get to the point where you need to go and execute the traits yourself very intentionally, and you may think, that's a, an issue with the platform, but we found that gives people the confidence to experiment

And really understand what they're doing and then, actually pulling the trigger itself. , makes it very clear what you are and what you are not doing. Shows the transaction cost. Shows all the inputs that go into that. 

9:30 BZ: Just real quick, walk us through how that could potentially reduce our tax bill come next year.because I give my paperwork to my accountant. She's great. She handles everything and I don't worry about it. I give her receipts. I give her my spending. 

What is this product and how could, or this feature and how could it potentially save someone like me a little bit? 

Alex Harmsen:  absolutely. Even myself, I work with an accountant, come February, March, I download everything from all these different platforms, send it off in one big package, and then they try to, minimize the tax bill and take advantage of whatever it is that the house, the mortgage, the kids, whatever it is.

And the important thing I think to realize though, is that, as part of that package that I send, I am downloading from my Interactive Brokers account, a statement of everything that I sold over the last year. And, there's some sort of realized gains from my investment portfolio and the realized gains basically get added to my income tax and, get included as part of my the attacks that I'm paying at the end of.

And so one of the things that you can do if you take this step, before December 31st, before the end of the year, is sell any losses and basically cut down the amount of realized gains. So maybe I've sold, $20,000 worth of stock and, realized $6,000 worth of gains this year.

 If I have $6,000 worth of losses, I could offset that. and basically pay $0 in additional income tax from the investments. Of course. Maybe I don't wanna sell those losses, because I like having the exposure. Maybe there's a bunch of tech stocks or crypto, that's down right now and I'm intentionally holding onto those because, I think the markets are gonna recover at some point in the next couple years.

So the second half of the tax sauce harvesting is basically buying very similar. to the ones that you're selling so that you can count the losses and still have the same kind of exposure that will rebound over the next couple years as the markets recover. And so it's basically selling the losses to match and bring your gains down to, as close to zero as possible, and then finding the equivalent ETF or the equivalent stock to keep the same kinds of exposure in your portfolio so that, as a portfolio, nothing really changes.

You have the same expected returns, you have the same downside protection, you have the same risk in your portfolio, but you're able to minimize your tax burden. Interesting. Okay. So how did you get Global Predictions up on its feet? It's a relatively young company, correct? We're a couple years old at this point.

Global Predictions itself. We wanted to validate that we could build some core engine that is monitoring data that's taking in hundreds of thousands of different securities, macro trends, different types of data about, what's happening in the world. We built a world monitoring service on top of.

To understand, what's happening and where is it deviating from historical trends. There's an anomaly detector that's built into that. And then we basically have a forecasting engine there that uses a couple different models. And then you have something like a portfolio management system on top of that with tools like recommendations that, plug into portfolio pilot, the consumer tool that we.

And as you can imagine, that's taken a couple years just to stand up all that infrastructure. But in many ways, this is similar to what you might find, behind the scenes at some of these systematic macro hedge funds. Something similar to what you might see at, hedge funds like Bridgewater.

And partly you need the scale, right? You need all this data. You need to look at all these things at the same. Partly because everything is interconnected. One thing in the economy affects something else. If you are just looking at real estate in New York, potentially you missed the fact that covid or inflation or interest rates or liquidity conditions, have an impact on that market.

And we spent a lot of time validating that. And our core thesis, for Global Predictions was, can we take these hedge fund level models, tools, infrastructure. And basically turn that into something that we can then build a commercial business on top of. And portfolio pilot is really the first, tool that we build on top of this core infrastructure.

because, we thought what better mission is there than democratizing access to these kinds of models? And there's, hundreds of thousands of users that are looking for these kinds of tools to, optimize to get a little bit more out of their portfolio. And have some sort of security, build some sort of confidence, especially in the downturn like we are today.

BZ: So you built pretty much built this thing, I imagine with a small team during Covid, like during 2020 when everybody was trapped in the house, like when, give me, walk me through the timeline. 

Alex Harmsen: Absolutely. Like I said, it was the modeling a simulation background.

I've been doing this, for the last 15 years or so, and we've built the same kinds of hybrid AI models, tremendous amounts of data in the autonomous vehicle space, in life sciences, in pharma and then, bringing that into the sort of economics and the investment. In many ways felt like a natural extension of that.

And meeting my co-founder Reid we hired a, we raised a couple million dollars from venture capital and especially during covid when early days was sort of March, April, may of course when it felt like the world was being turned upside down. There was a whole new economic paradigm.

Everyone was looking at different kinds of relationships, felt very fitting at the time. And you can imagine. 10, extremely smart, very diverse team over the last couple years basically working on these models, bringing this data together to be able to deliver.

What we think is a relatively simple tool now to, to consumers. Where are the, I like to think that there's tons of potential now that we have this core model and that's been stress tested and works for, tons of other applications down the road. So all through Zoom calls, crunching all this data, it's a completely distributed team.

 We have 10 people on the team and I've met four of them in person. Wow. And working together for years. It's distributed all over the world. People in Europe, India, Canada, the us you get one of the great things actually, I think about Global Predictions is that it's, truly global.

 And because of the time zones, there's someone working on it all, around the clock. 

17:20 BZ: You're a Y Combinator person, right? You're a vet from Y Combinator 

 Alex Harmsen:  exactly. Were you able to pull connections from there too, to get this up on it feet? because I imagine other startups got the, the metaphorical door slammed in their face if they ever tried to pitch something during 2020 when everybody was remote and oh gosh, oh, you and everybody else got a startup idea.

BZ: But what was some of the past connections you have as this veteran entrepreneur that helped in this getting Global Predictions? 

 Alex Harmsen:  I will say that I'm quite fortunate in having, existing network of investors to pull on existing network of engineers and, this community partly through Y Combinator, that's been tremendously useful, partly through On Deck as well.

Also a great community of co-founders and company builders and investors. There's, a couple different scholarship networks I'm a part of, partly the alumni network. I honestly think that there's this saying that, some of the biggest companies in the world have been built, during recessions.

 And I think part of it is because you need a certain amount of, fiscal responsibility. Partly because the money isn't available, you have to innovate. You have to, be very lean about how you build a team. And so I think we've stretched the money that we have, quite far.

But I also think that, especially in 2020, the early days of the pandemic there was just so much uncertainty in the investment community that, a lot of investors did go back to. Successful entrepreneurs, people who have done it before which I do think gave me a little bit of an unfair advantage.

 Especially because the thing that we're pitching is, a little bit insane. It's definitely a very big vision and I really don't think we're gonna be able to realize the true potential of Global Predictions, for another 10.years . Okay. So literally it's right on the brink of really pulling together all this, all the trends.

because if you start during Covid trends were, who knew what was gonna happen. Exactly.

19:30 BZ: So it's, so how do you test that? How do you get it started? If things are so uncertain, even now things are uncertain, heading into 2023. How do you convince a potential customer we are the platform for you?

 Alex Harmsen: I think this is a great question. I honestly, I think there's, maybe there's two parts of this question or two parts of the answer. One part of it is that I think it looks uncertain if you look, with a microscope , if you look one day at a time or if you only look at, one or two relationships and I think we get caught in this a lot because it's very easy to tell a narrative and say Apple is going through this crisis because of, X liquidity conditions, but in reality it's a much bigger picture.

And so if you're able to zoom out and actually look at the macro picture, if you're able to look at all these different trends, then you know, I think you start to see a machine that actually functions fairly rationally. It's not really a surprise that over the last year, to control inflation, the Fed is at the right interest rates.

It'll. Unemployment, it's gonna because layoffs. It's gonna because these companies revenues to fall. It'll because these impacts on the stock market. Liquidity people end up delivering, right? There's a chain of events that's fairly predictable that happens every single time there was a recession, or every single time we enter into a high inflationary period.

And so I think if you zoom back far enough, history repeats itself. But it never repeats itself exactly in the. I think the underlying factors end up repeating themselves and if you can capture those underlying factors and then, so I think that's part one. Okay. And, we will never be a hundred percent perfect.

And so part two is, acknowledging that, we make certain forecasts, we understand these different relationships, but every single weight in our knowledge graph, every single forecast we make, every single recommendation, comes with a degree of. And so we like to think that we have very high accuracy within our models, but relatively low precision.

Okay. And we're right almost all the time, but in many of our forecasts there's big error bars. And that allows us to be right, within this, margin of error. There is the chance of being correct is pretty. And if you use those kinds of models, with the error bars and the uncertainty together with a good portfolio management approach, then you can actually capture the right sort of risk.

You can look, if you know where the uncertainty is coming from, you can actually build a portfolio where, say you have an I, a 20 item portfolio. With real estate and some ETFs and some, exposure to different sectors, some international exposure, if you model out where the underlying drivers are coming from for that portfolio and where the risks are, then you can actually, have them be orthogonal to each other.

You can make sure that the risks are coming from different. . And in that sense, even if you don't know exactly what's happening, if you've modeled the risks and underlying drivers properly, you could build a fairly robust portfolio where at any point, 15 of your 20 items are going up and five are going down, no matter what the macroeconomic conditions are.

Interesting. And I think that's really the principle, right? And so in a sense, we don't need to be perfect in our predictions. We don't need to be perfect in the for. to be able to build really good strategies for users to give the right sort of recommendations and, outperform markets. It's more that systematic approach that ends up being the, the core driver of that return.

23:38 BZ: So I have you for a couple more minutes and I have two more questions. One do you care to make a prediction now looking into 2023? A lot of people are, A little bit nervous about what they say is a looming recession. Give us a little predictions. What are you feeling as we turn the corner here?

 Alex Harmsen: I like the question absolutely right. It's core to the business and I'm never gonna say anything with, complete certainty. But we do, technically we've been in a recession for a little while now, obviously, all of the quarterly earnings over the last month or two have shown head counts, a down scoping and expectations.

We are seeing inflation coming down, even though it's one data point, in general, a fairly optimistic that this is, starting to get under control. We see the, unemployment numbers, starting to look better in terms of, the actions that the Fed is taking, are starting to work.

 Not including the tech sector though, minus the tech sector. We're looking higher level, right? And so I. Even a lot of the people we work with end up looking very specifically at sectors and like in reality, I think it's very easy for us to forget, us, us meeting, tech workers and people in the crypto space.

It's very right, very difficult sometimes to zoom way out and look at the industry as a whole, to think about oil and commodities and agriculture and manufacturing. And so in that sense, I. We're gonna be in a recession for quite a while longer. . And, the Fed in particular, is still holding the line very strongly that we need to get back to something much more manageable.

And very likely this is gonna deepen before it gets better. And into 2023, we're still gonna be in recession and then realistically, start climbing out of that in, end of 20 23, 20 24. It's hard to be able to call the bottom exactly. But this isn't gonna shoot up in, Q1 or q2.

BZ: Last question. I know that you've accomplished a lot in your career. You have a knack for focusing on these big hard problems that have a meaningful impact. What, who were your heroes? Who inspired you to go down and become the entrepreneur that you are? Do you have any sort of heroes in the business world that sort of had an impact on you?

Whether either you met them or you read about them? Who set you on this path?

 Alex Harmsen:  I, I think it's a great question. I think that, I don't think it's necessarily entrepreneurs and company builders that have gone through this. Maybe it comes from two places, okay. One of them is that I had a mentor in university who was an incredible astrophysicist and, spoke all over the world and contributed to some, really cutting edge astronomy and blazed his own path. Like he, he really one of the things I really admired from him is that he bucked the status quo. He decided, this is what I enjoy doing. Here's where I think I can make a unique contribution. And had a lot of fun doing that. And, partnered with all the right people and put himself in places.

To like really almost create his own luck, right? Like he created a lot of opportunities for himself as we went along. And then , I think separately, the going through Y Combinator, I think was very eyeopening because they would invite lots of speakers to come out. And it was very casual.

There was a couple hundred of us in the room. There was someone who was, a billionaire had built massive companies. He just spoke like one of us. He was a couple years away. He was on a slightly different path than I was. And I dunno, there was something very grounding about that.

And it made me think that, all I need to do is just be like a couple percent better than average, but every single day of my life. And not taking anything for granted, really using this like privileged position that I'm. and not squandering that and just continuously, every single day, just becoming a little bit better, a little bit better, a little bit better.

And I think that focus is really the difference between, bill Gates and the average guy, or Jeff Bezos and the average guy, right? , I think that's I think that's prob like both of those I think are like quite defining and something I think about like quite often. 

29:00 BZ: What's your advice for a young entrepreneur who maybe has this idea that maybe, perhaps he's in Y Combinator, perhaps he wants to apply to Y Combinator. What's your advice? 

 Alex Harmsen: There's something about that focus, right? There's something about not trying to do it all. not trying to do it all at once.

One of the things that I do like pretty religiously at the start of every day oftentimes just when I'm in the shower, is think through what are the three things that are gonna be most impactful? What do I wanna focus on today? And even though I end up doing, hundreds of other things and have, dozens of meetings, if I get those three things done, it's a successful day.

Prioritizing. It's the prioritizing and really thinking like, what is gonna move the needle, right? because I have, I have 422 emails in my inbox right now, but two of those emails are more critical than, the other 400 and, 20 of them. And so if I respond to those two emails and push those two projects forward, or poke this one person or have this one meeting, that's gonna have a hundred x impact compared to everything else that I.

And, zooming out, macro is like obviously the, the made, topic that runs to my mind. But if I zoom out and think what is actually impactful, what is actually driving the business forward, my own life forward, my relationship forward, then you end up having real impact then, the small rocks, end up sorting themselves out.

BZ: Awesome. Alex, this was a great conversation.