San Francisco, CA – Daniel Idzkowski shook the world back in 2016 with his radical invention, the SKUNKLOCK, the first bicycle lock that fought back against bike thieves with noxious chemicals. The story behind the SKUNKLOCK wasn’t just a spur-of-the-moment crazy idea built by someone frustrated by their bike being stolen, it was a crusade to pull the lid off a corrupted industry.
“The problem at the core wasn’t just that tens of millions of bikes get stolen every year, it was that every single bike lock company was lying to their customers about the effectiveness of their products,” said Idzkowski, regarding why he built the exploding lock. “It needed to be crazy,” when we asked why it needed to fight back, “our goal, first and foremost, was to make enough noise that everyone learned about the existence of angle grinders and that stronger or German steel won’t save your bike.”
When we asked why he thought bike lock companies were actively hiding the existence of angle grinders, he said simply: “who wants to solve a problem that leads to less profit?”
Idzkowski has since built a reputation for uncovering misleading marketing propagated by large monopolistic industries and building companies with a mission to right the wrongs.
With multiple companies popping up since SKUNKLOCK launched trying to solve the angle grinder problem, it’s safe to say Idzkowski accomplished what he set out to do, so we asked him what was next on his conquest for truth.
“I’m coming after your financial advisor,” he said, “the most corrupt industry today, plagued with misinformation and shady players, is unequivocally the wealth management and investment industry.” It’s well known that 2022 spelled the worst year for the traditional 60/40 portfolio in over 100 years, and Americans lost an estimated 7 trillion dollars in retirement savings. We asked Idzkowski what he thought about the last few rocky years in the markets: “everyone is distracted with commission-free trading apps and cryptocurrencies,” and “every financial advisor and wealth management app is using an antiquated model for asset allocation that no longer serves the needs of the modern investor, and the 99% are told lies to keep it that way.”
We were intrigued, why would everyone use a model that doesn’t work anymore, and why doesn’t it work anymore? “The reason is simple, the model was revolutionary back when it was published in the Journal of Finance in 1952, but the world has changed substantially over the last 71 years with technology and globalization at the forefront.” The model he was referring to is Strategic Asset Allocation, the gold standard of financial advisors and investing apps alike was derived from Modern Portfolio Theory, the original Ph.D. thesis from Harry Markovitz, published in 1952. “At the core, the model believes that because different asset classes like domestic and international equities are not perfectly correlated, if you put them in the same portfolio, you will benefit from diversification and lower losses in bear markets,” he said. But the problem is that correlations of these various asset classes in today’s world are highly variable and much higher than they were 70 years ago; what’s worse is that during a market crash when you need protection the most, they approach 100%.”
But what did this really mean for the portfolios of hundreds of millions of people that comprise trillions of dollars? Why is this really a problem? “Drawdown is the real epidemic in the investing world – people are no longer protected from it with these antiquated investing options available to them.” Drawdown is the losses a portfolio can see from its peak to bottom in a given period of time, for example, the drawdown of the 60/40 portfolio in 2022 was over 20%. “What most people don’t realize is that losses don’t have a linear relationship to gains, so when your retirement portfolio loses 30% like many did last year, you need 42% just to get your money back.” Why is this such a big problem? “Imagine the millions of people within a few years of retirement, now they have to work another few more years because that money is gone,” Idzkowski said, “and this compounds over 20 or 30 years: if young investors could have simply reduced that drawdown to 5% or 10%, they could have potentially retired a few years earlier or at least kept up with inflation.”
We asked Idzkowski what he believes are some of the most common lies, misinformation, or advice being spread to investors, Idzkowski noted that one big misconception is that “if you research a company enough, you can choose the right one, and you will beat the market. That one is very common, also, being told ‘don’t worry, markets go up and down; you can wait out the market crashes and you’ll be fine’ is another one that is prevalent“ Idzkowski said, “but some of the most harmful is that ‘you can diversify by simply buying and holding different passive ETF index funds like equities, bonds, international, and commodities and that will protect you from crashes and drawdown’ he said. We wanted to know what the risks are if we don’t change the way we advise investors and the asset allocation approach we use today: “just because investing in the 60/40 portfolio or passively in a basket of stocks and bonds over the last 30 years has averaged roughly 7% annually, doesn’t mean that you will get that over the next 30 years, and that’s exactly what happened in 2022” a scary thought.
We wanted to know what Sidepocket, his latest venture, was doing differently that solved this multi-trillion-dollar problem. Idzkowski realized that solving this problem was a massive and complex undertaking, “I guess some people refer to it as a deep-tech, in a similar space as artificial intelligence, it’s taken us over six years of research and development to get to the point where we performed the way we did in 2022, and our core technology has infinite potential for evolution and improvement.”
Sidepocket launched on iOS in a highly selective closed beta in June of 2022. “Sidepocket offers an investing platform and solution that allows investors to subscribe to multiple fully-automated asset allocation strategies that rebalance your allocation once per month to ensure you’re assets are always protected when there’s a bear market, and that you’re benefiting from growth when times are good,” Idzkowski said enthusiastically with a grin on his face. “Some asset managers and hedge funds call this approach tactical asset allocation, but what we’ve done is a bit more complex. The challenge was really how to take this highly sophisticated approach and technology for asset management, and make it work for investors that aren’t billionaires; it’s easy when someone is accredited, for someone unaccredited, not so much.” Idzkowski explained when we asked if this is something easy to build and why no one else has done it before.
“Our mission is to bring our asset allocation technology to the masses, not hide it away for the top 1% like most other hedge funds in the industry do. We have to ask ourselves, what would happen if we didn’t make general AI like ChatGPT available to anyone, but only those that could afford it, I surmise it could be a similar outcome if we just created a hedge fund for billionaires instead of a widely available investing solution for the 99%” Idzkowski said emphatically.
He shares that Sidepocket keeps a close eye on the latest developments in both technology and finance to serve its clients. Plans for 2023 include integrating crypto assets into the platform as a speculative ‘Sidepocket’ an investor can get exposure to, something he claims is more effective than a buy-and-pray strategy for cryptocurrencies. “Whether it’s through partnerships with other companies, or by developing new products and services, we’re committed to staying ahead of the curve for our clients. We are trying to help them build wealth over the long term and achieve consistent returns for the next 30 years, not the last 30. Our proprietary technology and our ever-evolving advisory engine are what will continue to set us apart in the future,” says Idzkowski. “We’re looking to make a transformative leap in innovation in the investment world, starting as a B2C offering, and evolving into a universal API and integrable investing platform that could even help modernize existing Registered Investment Advisors” Sidepocket will officially be opening its door to the public on iOS devices on February 13th.
Sidepocket is a venture-backed deep-tech company in the wealth management space that offers various automated investing strategies. Clients can group strategies by their own investment goals and utilize advanced statistical analysis, quantitative modeling, and predictive analytics to reduce drawdown during bear markets and crashes, leading to better long-term returns.
Leave a Reply