The Heretic's Guide to Global Finance: Hacking the Future of Money: The Activist Hedge Fund

TRADERS (photo: Harri Homi)

Note: This essay was commissioned in 2015 by VICE USA, who then neglected to publish it. Apologies to everyone who took the time to give me quotes

Hedge fund traders are financial mercenaries. Like all mercenaries, they are hired by rich and powerful people. Unlike some mercenaries, however, their lives are never in danger. Rather, they settle in upmarket offices with wood-paneled boardrooms and sparkling water, getting extraordinarily wealthy by betting on anything from Apple shares to oil futures to distant coalmines operated out of Indonesia.

This, though, is no normal hedge fund. Robin Hood Coop is an activist hedge fund run by anarchic artists.

And this is no ordinary office. It has no wood panelling and no sparkling water. In fact it barely has running water at all, being a graffiti-strewn ex-slaughterhouse in Milan squatted by a radical arts group called Macao. Below us in the hall is a naked woman painted blue wearing a gas mask, dancing to the sonic violence of industrial death-metal music. Next door is a punk street-theatre collective manufacturing artificial vomit in buckets to throw at a protest. There are empty cartridges of police teargas on our table, now used to hold marker pens.

MACAU, MILAN (photo: Harri Homi)

The term ‘hedge fund’ is used loosely. Strictly speaking, Robin Hood is a Finnish cooperative, and you do not need to be rich to join it. You become a member of the co-op by buying a share for 30 euros. They take that money and use it to bet on the US stock markets. To do so, they use an algorithm called ‘The Parasite’, which sucks in lots of stock market data and uses it to make trading decisions. Any profits they make from this trading are then steered back to their members, but also to a communal fund that supports rebellious projects that mess with the mainstream.

The co-founder is the unassuming Finnish political economist Akseli Virtanen. He opens the meeting up with a playful grin, extending his arms and saying, “Welcome to the wild side of finance.”

Robin Hood came to life in 2012 when Askeli and a team of artists and critical academics joined forces at the University of Aalto outside Helsinki in Finland. The fund was envisaged as a piece of ‘economic performance art’ and the team went out to raise money from scraggly freelance workers and other lowly chancers. They somehow managed to collect over €500 000. By financial sector standards that’s a pretty tiny amount of money – many funds have billions under management – but it was enough to make the university management very nervous. You guys are artists, not financial traders. Management wanted the project to cease.

Rather than conforming, Akseli got rebellious. He stepped down from the university and Robin Hood went independent. Since then they have focused on building up a global support network of counter-cultural weirdos extending from Helsinki to California.

This network grows through the tradition of Robin Hood’s ‘offices’, where the team meets at different locations around the world to hold workshops in conjunction with a local host group. The first of these offices I attended was in late 2014 in Dublin. It took place in an old abandoned bank, hosted by an assortment of Irish open-source culture devotees. Unlike the closed, secretive and exclusive character of normal hedge funds, Robin Hood’s offices are explicitly open and collaborative. It is not like a private company with confidentiality agreements, and guests do not have to be signed in by security personnel.

(photo: Harri Homi)

The collective is trying to meld together the tools of high finance with the underdog culture of the radical activist underground, and that unusual combination has piqued the interest of many. In the background of the Milan squat, propped against the frame of a cracked window, is the legendary Italian ‘autonomist’ Franco ‘Bifo’ Berardi. He’s been a prominent figure in anarchist worker politics from the 1960s, rallying people together to create cooperative enterprises and pirate radio stations outside the market economy. Scattered around the room are philosophers of algorithms, hacker culture and digital technology. They mix with coders, designers and creative types like the exuberant Portuguese artist Ana Fradique, who co-manages the fund.

Ana describes Robin Hood as ‘artivism’ – a mix of arts and activism. Indeed, the meetup feels like a synthesis between an intellectual salon, a practical hackathon and a political campaign meeting. On the whiteboard is a scrawled web of lines drawn in marker pen, sketches of company structures and money flows. The team is attempting to explain the outlines of the Robin Hood fund to local Milan activists who are curious about how it works.

SUBVERSIVE SCHEMATICS (photo: Harri Homi)

Akseli takes the lead. “We have, on the one hand, a financialized economy in which the financial sector parasites off almost everything. On the other hand, we have increasing precariousness of labour, an erosion of worker protections. People who sweat in mines or care for the sick get paid almost nothing and live in anxiety, whilst traders who push money around earn enormous sums. In their search for returns big investors seek to enclose and commoditise whatever remaining public commons exist.”

Financial funds often name themselves after mythological figures – like the colossal Cerberus Capital Management styling itself after the three-headed hellhound of the underworld – but the mythic figure of Robin Hood doesn’t fit comfortably within normal financial culture. In one version of the legend he’s a guy who steals from the rich to give to the poor, a champion of economic redistribution. In another, he’s a guy who dares to poach deer in the king’s private forests, a rebel against privatisation of common land. Redistribution, equality and protection of public commons? These are not things that financial institutions normally specialise in.

“Our fund delves into the heartlands of Big Finance and makes money using their own rules,” says Akseli, “and then we distribute the returns back to precarious, insecure workers.”

That sound nice on paper, but does this algorithmic trading actually work? The Parasite algorithm consists of nothing but lines of code, but it is a core member of the team. They feed it with a $15 000-per-year data stream from the New York Stock Exchange and NASDAQ. In financial jargon, it is a ‘trend-following’ algorithm, which means the Parasite digests the data and seeks to identify herding behaviour among big players in the stock-market, and then makes trades to try profit from that. Robin Hood has achieved double-digit returns with this strategy in both 2013 and 2014. It’s too early to tell if this performance will continue – and 2015 looks to be a leaner year – but it doesn’t seem too bad for a group of relative financial amateurs.

(photo: Harri Homi)

Serbian activist Branko Popovic is sceptical. He’s in Milan to take part in Mayday protests, and has ambled into the room by chance. His day-to-day life involves fighting housing evictions and squatting public theatres due to be turned into luxury apartments. In comparison to such concrete actions, Robin Hood’s financial trickery seems abstract. “I understand you’re trying to be like a vampire on the market”, he says, “but why be a vampire on vampires? They have nothing to give us.”

Branko’s sentiment echoes an age-old tension within radical movements. Do you attempt to work within mainstream structures, or do you attempt to completely bypass them? Robin Hood takes a lot of flak from activists who find the idea of taking an active part in the financial system repugnant. Radical movements often start by imagining the current world as not being the way it should be, and then adopt a stance of defiant rejection, trying to live as if it wasn’t there, avoiding contact with it and seeking purity in small communities of like-minded people.

We saw this during the Occupy Movement. Idealists took to the streets in an attempt to reclaim some public commons, but never attempted to actually occupy the financial institutions themselves. The insults they threw at the banksters did nothing to break down the insider-versus-outsider barrier that financial workers actually rely upon to maintain their powerful mystique. Now it is five years later and the sector has drifted out of the public eye, back to business-as-usual.

Under Akseli’s patient response to Branko there is frustration. “There are no financial virgins. Everyone is implicated in the system in some way or another, and we embrace that. We believe in this world and not in some other. In this world the high priests of finance tell you that you cannot touch their temples. But if something is sacred you must profanate it to bring it back down to earth. The best way to do that is to reach out and touch it, to make it dirty. We want to be irreverent and scandalous.”

BOARD MEETING (photo: Harri Homi)

This is not the first time I’ve heard the group being criticised. The project came up as a topic of discussion at a Berlin technology activism meetup that I attended. Robin Hood was treated with a mix of bemusement and scepticism, and a prominent member of the group was dismissive. “It has an element of fun, but let’s face it, it’s just a normal financial fund trading like any other. It’s not an emancipatory project to help workers. It’s just a kind of joke.”

Perhaps being a joke is part of the point. Pekko Koskinen is another member of the Robin Hood collective. In Finland he is part of the Reality Research Center, where he designs ‘reality games’ – games situated in real world settings with hidden rules known only to participants. He views Robin Hood as a type of mischievous game to explore the markets. “People often want clear boundaries between good and evil, professional and amateur, Right and Left, but Robin Hood breaks those binaries. We’re creating a Trojan horse to warp the rules of the market. Activists making a hedge fund is a bit like building a home-made surfboard to ride monster waves with professional surfers who say you can't paddle out with them. Sorry, but we’re going to ride.”

LUXURY APARTMENT (photo: Harri Homi)

Reading through Robin Hood’s official documents, one begins to feel that they’ve got the spirit of a joker making fun of the pretences of high finance. They mimic and mock the language to create a deviant dialect. Their May 2015 ‘Grey Paper’ reads like something produced in collaboration between Goldman Sachs and Occupy Wall Street:

"Robin Hood will issue €20 million of collateralized equity notes, called ‘Hood notes’. All investment monies from note issuance will be turned over to the Parasite for investment… Note holders, as denizens of Robin Hood, will continue to design, propose, vote-on, and execute mutual equity programs with all shared proceeds."

Geert Lovink of the Institute of Network Cultures in Amsterdam is a keen observer of the team. “Robin Hood is a financial hack, a subversive installation that takes the standard conventions set by the big financial institutions and bends them.” It’s a tradition in radical activism that can be traced back to movements like the Situationist International, or the absurdist clowns of the Dada movement. The Dada artist Marcel Duchamp took a urinal and called it Fountain. Robin Hood takes a hedge fund and calls it a liberator of precarious workers.

For Geert, though, the tantalizing element of the fund is that it can actually make money to help other radical projects. “In a world of austerity, the funding for arts, culture and political activism is being cut. Robin Hood offers us a new source of funds, and it does so by using the vehicles of the very financial institutions that caused the austerity in the first place”.

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For a group to apply for a share of the profits made by Robin Hood, though, it must operate outside the ‘work-yourself-to-death-so-you-can-consume-yourself-to-death’ logic of the mainstream economy. And Robin Hood has just announced their first round of distributions. They’ve given €5000 to the autonomous arts space Casa Nuvem in Rio de Janeiro, €6000 to the activist broadcaster Radio Schizoanalytique in Greece, and €4000 to the Commons Transition project run by the P2P Foundation alongside the Catalan Integral Cooperative (CIC).

The CIC is a network of Catalonian cooperatives that was co-founded by bad-boy Spanish bank-activist Enric Duran. €4000 is not massive money, but it’s a welcome boost for a project normally excluded from mainstream funding. "The CIC is a very inspirational commons-based economic network”, says Stacco Troncoso of the P2P Foundation. “We want other community groups around the world to learn from it, so we’re using the funding from Robin Hood to build training materials based on the CIC’s experience for widespread distribution."

Akseli is impatient though. Giving away €15000 in trading profits to rebel economic groups is cool, but it is still too small. A key purpose of the Milan workshop, therefore, is to introduce a work-in-progress that the team refers to as ‘Robin Hood 2.0’. According to Akseli, 2.0 will be “even more monstrous” than the first incarnation. Rather than being based out of Finland, he wants to transform Robin Hood into a decentralized global crypto-fund, built using the underlying blockchain technology of the cryptocurrency Bitcoin.

Bitcoin uses a public database – called a blockchain – to record the creation and movement of digital tokens between participants in the Bitcoin network, and thereby keep track of those participants’ token balances. Unlike a bank that keeps a centralised private database to keep score of your money, the Bitcoin blockchain is collectively maintained by a decentralized network of peers. Such a blockchain, though, needn’t only be used to record the existence and movement of digital currency tokens. It could also be used to record the existence and movement of shares… like shares in an activist hedge fund.

Akseli has roots in the radical tradition of worker cooperatives, but he believes that the old-school cooperative is “a form that belongs to the last century”. He believes they can be updated to the current century by using blockchain-based ‘crypto-equity’.

STARE INTO THE BLOCKCHAIN (photo: Harri Homi)

Dan Hassan is a software engineer who has joined the team to test out the feasibility of Robin Hood using blockchain technology. “Old co-ops allowed co-operation between small groups of people, but with crypto-equity we can scale that up” he says. He is part of the burgeoning blockchain community that includes groups like Ethereum, and he has come to Milan to run a session explaining blockchain basics. “A blockchain is a collectively maintained database controlled by no one person. You bring it to life by getting a network of people to all run the same software, and that software has rules for creating a shared account of reality between those people. The more people involved the stronger it is. Imagine a global network of people using this technology to organise themselves into huge digital co-operatives that facilitate mass collaboration.”

So, shares in an activist hedge fund could be created and moved around using such a system, but building a next-generation anarchic crypto-entity to take on Wall Street still seems like a pretty tall order. The team has done most work thus far as unpaid volunteers, but to create this ‘Robin Hood 2.0’ will be a full-time job. And that requires an injection of capital to pay proper salaries.

So what do you do when you need to kickstart a new, risky company? You get venture capitalists involved, of course. The team is on the prowl for a couple million dollars in seed funding so they can start developing 2.0.

But there are reservations. Getting slick venture capitalists on board potentially brings a different political dynamic. VC investors want to see big returns, and how will that jell with the original intent of giving away the profits to countercultural groups? I ask Akseli, but his hacker mentality is already fired up with the idea of messing with something new. “Robin Hood 1.0 was able to assimilate the hedge fund structure, so why not also do it for the venture-funded start-up structure. It’s too good not to try. We do mimicry of Wall Street hedge funds and mimicry of Silicon Valley start-ups”.

Underlying this is a realisation that the power dynamics of Big Finance are shifting. In the US, it is not just the banks and funds of Wall Street in the finance game. There are also the West Coast digital tech gods, waging a new cold war on the traditional financial markets, armed with apps, payment gadgets and internet monopolies. If the waves of power are changing, a subversive surfer might reposition themselves, and that is what Robin Hood is doing.

The team still has the feel of innocents, though, feeling out the contours of the dark side of money. The nervous energy is tangible, and each night in Milan they try to bring it back down to earth, standing on the balcony of the Macao squat, drinking beers, smoking cigarettes. Pekko methodically describes how to make whisky. Finns enjoy such practical matters. They are notoriously quiet, but underneath it lies a self-contained disdain for information that is unnecessary. As core team member Harri Homi wryly confides, “It’s great to break open the black box of finance. But my life I like to just live and leave it as a black box. I do not understand why I do things.”

Long Term Capital Management was an enormous hedge fund that famously went bust in 1998 after the advanced financial theories they based their trading on ended up being out of sync with the reality of the world. Robin Hood faces a similar dynamic. Their radical financial theories could either be complete revelation, or complete hocus-pocus, and there’s no guarantee that their Parasite algorithm carries on working. In this gambit to fuse together algorithmic trading, blockchain technology, Silicon Valley and artistic activism into one epic hack of the financial system, the team in in unchartered waters.