I made my first angel investment in 2014. It was a small check into a company that was trying to use AI to predict stock prices. The founder was brilliant, a PhD from Stanford who had spent years working on Wall Street. He showed me a demo that was nothing short of magical. It was a black box that could supposedly see the future. I was hooked.
That company failed, spectacularly. The black box, it turned out, was a little too black. It worked until it didn’t. And when it didn’t, no one could figure out why. That experience taught me a valuable lesson: AI is a powerful tool, but it’s not a magic wand. You can’t just throw data at a model and expect it to print money. You need a human in the loop.
Fast forward to today, and I’ve made over 200 angel investments, including in some of the biggest names in AI like Anthropic, OpenAI, Scale AI, and Hugging Face. I’ve also had two successful exits of my own, RemoteTeam which was acquired by Gusto, and MovieLaLa which was acquired by Gfycat. And I’ve seen firsthand how AI is transforming every industry, from HR to entertainment. But the one that excites me the most is finance.
We’re on the cusp of a new era in investing, one that I believe will be dominated by a new type of investor: the quantamental investor. This is not your father’s stock-picker, nor is it a pure quant. It’s a hybrid, a cyborg, a perfect blend of human and machine.
The Two Tribes of Investing
For decades, the investment world has been divided into two tribes. On one side, you have the fundamental investors, the disciples of Benjamin Graham and Warren Buffett. They believe that the key to long-term success is to do deep, bottom-up research on individual companies. They read annual reports, talk to management, and build complex financial models. They’re looking for an edge, a piece of information that the rest of the market has missed.
On the other side, you have the quantitative investors, or quants. They believe that the key to success is to use computers to analyze vast amounts of data. They build complex mathematical models that look for patterns and anomalies in the market. They’re looking for an edge, a statistical arbitrage that they can exploit over and over again.
For a long time, these two tribes have been at war. The fundamental guys dismissed the quants as black-box traders who didn’t understand the businesses they were investing in. The quants dismissed the fundamental guys as old-school stock-jockeys who were guided by gut feelings and biases.
But something has changed. The world is drowning in data. There are now over 44 zettabytes of data in the world, and that number is expected to grow to 175 zettabytes by 2025. No human can possibly process all of that information. At the same time, the market has become more efficient. The low-hanging fruit has been picked. It’s harder than ever to find an edge.
This is where the quantamental investor comes in.
The Best of Both Worlds
The quantamental investor is a new breed of investor who combines the best of both worlds. They use the power of computers to analyze vast amounts of data, but they also use their human judgment and experience to make sense of it all. They are, in essence, part human, part machine.
I’ve seen this firsthand in my own investing. I’m not a quant, but I’m also not a pure fundamental investor. I use a variety of tools and data sources to inform my decisions. I look at everything from credit card data to satellite imagery to social media sentiment. But I also talk to founders, I use the products, and I try to understand the story behind the numbers.
One of my most successful investments was in a company that was using AI to analyze satellite imagery of retail parking lots. The idea was simple: if you can count the number of cars in a Walmart parking lot, you can get a pretty good idea of how their sales are doing. This was not a new idea, but the company had a unique approach. They had built a proprietary AI model that could not only count the cars, but also identify the make and model of each car. This gave them a much richer dataset than their competitors.
I was intrigued, but I was also skeptical. I had seen a lot of AI companies that promised the world but couldn’t deliver. So I did my own due diligence. I talked to the founder, I looked at the data, and I even drove to a few Walmart parking lots to see for myself. What I found was that the data was incredibly accurate. The company had a real edge.
I invested, and the company went on to be a huge success. But the key to that success was not just the AI. It was the combination of the AI and the human element. The founder was not just a brilliant data scientist, he was also a savvy investor who understood the retail industry. He knew what to look for in the data, and he knew how to turn that data into actionable insights.
The Quantamental Toolkit
So what does it take to be a quantamental investor? There’s no one-size-fits-all answer, but there are a few key ingredients.
First, you need to be comfortable with data. You don’t need to be a data scientist, but you need to be able to speak the language of data. You need to be able to understand what the data is telling you, and you need to be able to spot when the data is lying to you.
Second, you need to have a deep understanding of the industry you’re investing in. You can’t just be a tourist. You need to be an expert. You need to know the players, the trends, and the competitive landscape.
Third, you need to be a critical thinker. You can’t just take the data at face value. You need to be able to question the assumptions, challenge the conventional wisdom, and think for yourself.
Fourth, you need to be a lifelong learner. The world is constantly changing, and you need to be able to adapt. You need to be constantly reading, learning, and experimenting.
The Future of Investing
I believe that the quantamental investor is the future of active management. In a world that is drowning in data, the only way to succeed is to combine the power of the machine with the wisdom of the human. The best investors of the future will not be human or machine, they will be both.
This is not to say that the old ways of investing are dead. There will always be a place for pure fundamental investors and pure quants. But I believe that the biggest opportunities will be found at the intersection of these two worlds.
I’m putting my money where my mouth is. I’m actively looking for and investing in the next generation of quantamental investors. I’m also working on a new book, “Becoming Top 1%,” which will explore this topic in more detail.
The rise of the quantamental investor is not just a trend, it’s a paradigm shift. It’s a whole new way of thinking about the market. And I, for one, am excited to see what the future holds.
Frequently Asked Questions
How has this view evolved over time?
My thinking on most topics has changed significantly over the years. Early in my career, I held many conventional views that experience proved wrong. I try to update my beliefs when the evidence changes.
What's the most common pushback you get on this?
People often push back by citing exceptions or edge cases. And they're usually right that exceptions exist. But building a strategy around exceptions rather than patterns is a losing game for most founders.
Do all experts agree with this view?
No, and that's fine. The best ideas in business are often contrarian. I share my perspective based on my experience and data, but I encourage you to seek out opposing viewpoints and form your own conclusions.