Wolfenstein of Wall Street: the gamification of trading

Games have conquered the world: the signs are plain to see. I’m not just talking about the ballooning casual market signified by the global domination of Candy Crush (AKA ‘crack-for-your-fingers’) and that harbinger of humanity’s imminent extinction known as Pokémon Go. Game mechanics are utilised by governments, private business and NGOs for all manner of purposes. ‘Gamification’ is currently promoting literacy, expanding the ranks of the US Armed Forces, crowdsourcing solutions to world hunger, and even imbuing Wall Street with the spirit of play.

This latter application of gamification raises some particularly interesting questions. To many detractors, gamifying stock trading simply confirms the assumption that the international markets are little more than a gilded playground: the black heart of ‘casino capitalism’. Say ‘Gamification of trading’ and you’re likely to conjure images of smarmy, twenty-somethings with more zits than sense, treating their portfolios like a bag of quarters for an arcade machine. Since 2008, this view is particularly acute given public attention on the irresponsible practices of professional stock market traders, popularised in hit movies like The Wolf of Wall Street and The Big Short. By the same token, many gamers and game devs are horrified at the idea that their beloved pastime is being ‘cynically exploited’ by financial fatcats to help keep the wheels of capitalism turning.

However, given the demonstrable value of gamification in applications as far flung as customer engagement, management, training and education, health and personal development, is it possible that the gamification of trading could contribute positively in the financial sector? Moreover, isn’t it rather belittling to assume that gamified trading should imply flippancy? Doesn’t it follow from this argument that games are inherently ‘childish’?

What actually is gamification?

Having been hyped to within an inch of its life ‒ almost beyond the point of meaning ‒ it is worth going back over what we mean by gamification (hint: it’s not just the addition of a trophy system to a website’s user interface). The complex definition is that gamification is a “process of enhancing services with (motivational) affordances in order to invoke gameful experiences and further behavioural outcomes.” In plain English, this means introducing game mechanics to enhance user engagement with a product or service. Note that I didn’t just say making your product or service more like a videogame ‒ it is more elemental than that.

The issue is one of psychology and the function of ‘play’ in human behaviour. An important part of matriculation to adult society is developing an understanding of the difference between ‘work’ and ‘play.’ Work is something that we (generally) don’t enjoy, but we do it out of necessity because it rewards us (financially, intellectually and so on). Play is synonymous with recreation and childishness, laziness and unproductivity ‒ gamers will most likely be familiar with this characterisation from their boy/girlfriends, bosses, mums etc. In short, play is something we’re supposed to grow out of.

However, play is also the way we learn essential life skills in our formative years. Additionally, it inspires creativity and ‒ this is key ‒ structures our behaviour in ways that we find gratifying. Play presents us with an objective and makes us feel good about pursuing it. Particularly in level-based play, we get a kick out of advancing towards a goal (completing secondary tasks along the way) according to pre-established rules. 

Gamification isn’t always especially sophisticated or even overtly ‘gamey.’ You could construe loyalty cards as a very basic form of gamification: rewarding customers with a free product following a set number of purchases (usually stamps, a visual que for the customer’s progress that further reinforces the sense of play). In fact, your free coffee feels less like a reward for loyalty and more like an accomplishment: like something that you’ve ‘won.’

Furthermore, we have a cultural understanding of what is meant by a game (rules, levels, lives, collectables and so on), so when we see these things in a product or service, it primes us for play. Collecting five stamps for a free coffee is pretty entry level, but commercial websites in a number of sectors allow players to ‘level up’ after a certain period, incorporate leader boards, competitive multiplayer and ‒ yes ‒ trophy systems, all to enhance the persuasive power of play. 

It is clear that gamification is enjoying a vogue, with the number of academic papers on the subject available from Google Scholar increasing from zero in 2010 to 230 in 2013. One of these papers predicted that over 50% of organizations managing innovation processes would gamify aspects of their business by 2015. The internet is also replete with start-ups offering gamification products on a B2B basis (more on these later).

And this stuff really does work ‒ when done properly. A literature review of studies on gamification by Juho Hamari of the University of Tampere observed unanimously positive results across a range of empirical research on the effects of gamification in commerce and education, particularly in terms of user engagement and retention of information.

To take one example, Nike has become a leader in gamification with its Nike+ service, which uses an activity tracker ‒ connected to a branded app ‒ that monitors users’ fitness regimes and converts calories burned to ‘CardioMiles’, effectively a common currency that can be used to purchase additional features. ‘Players’ can also enter into challenges with other runners, introducing a competitive element. As of 2014, Nike+ had amassed 28 million users worldwide.

Gamification can also flop if implemented badly. Too many businesses are of the opinion that simply tacking on meaningless points, badges and uniforms to their websites will boost user engagement. Brian Burke, industry analyst and author of the Gartner Special Report, “Gamification: Engagement Strategies for Business and IT” (writing in 2013), estimated that by 2014, 80 percent of gamified applications would fail to meet business objectives, primarily due to poor design. One particularly calamitous example was the now-defunct Google News Badges (introduced in 2011), which awarded badges to readers of Google News according to their favoured types of news (politics, sports, arts, etc.) The feature didn’t encourage users to read more frequently or widely, it simply charted their news preferences, so it never really caught on.

Online trading: a multi-billion-dollar massively multiplayer game 

While developments in the financial sector (particularly the influence of social media) have informed the trend towards gamification, there is a bigger picture. Gamified stock trading reflects a general democratisation of the sector, whereby the internet has permitted a greater number of part-time investors to interact with the stock markets in a shallower way (i.e. with less expertise but smaller stakes), with a decentralising effect on market trading. 

There is an inherently ludic aspect to stock market; even the parlance of ‘playing the stock market’ implies a ‘game’, where the goal is to amass as much information about the markets as possible to inform trades and your portfolio is your high score. Where in the past online traders would rely on subscriptions to different broker reviews and reports or ‒ better yet ‒ access to the Bloomberg terminal in order to gauge investments, increasingly trading decisions are made and shared via Facebook and Twitter. Mike Hamm, an experienced online trader cited in TraderDNA, has amassed a portfolio of $100,000 with trade decisions informed by articles shared on social media.

The democratisation of online trading through the internet has effectively transformed the sector into a massively-multiplayer online game. Taking note of this, a number of companies employ gamification to get more people involved in stock market trading. For example, a Singaporean startup MyHero has launched a free stock market app, TradeHero, allows novice traders to develop their skills without risking their lifesavings. The start-up (which boasts a playerbase of four million) is a user-generated community comprised of both relative greenhorns and validated ‘top traders’ (Heroes). The platform allows players to interact with and learn from these seasoned traders, view their track records, and emulate their strategies. Players invest using virtual money (TradeHero dollars), acquire knowledge and skills applicable to real-world markets in the process.

Barclays has developed a similar platform with its new startup, Stockfuse ‒ although it is utilised for recruitment. The bank’s virtual trading platform (open to University students in Emea, Asia Pacific and the Americas) helps identify promising candidates by allowing them to trade on virtual markets that are analogous to their real-world equivalents, demonstrating their trading chops without any risk to shareholders. The top regional players win job interviews with Barclays’ professional market analysis. 

The response to gamified trading from financial experts has been mixed. Chief Executive of Bell Direct, Arnie Selvarajah expressed reservations about trading being regarded as ‘too game-like,’ for fear of traders not taking the markets seriously and losing money as a result. I spoke to Adam Grunwerg, founder of forex education platform Investoo, who was more positive: "There are alot of gamified tools and products - websites such as StockTwits - which make trading more communal. A more financially conscious society can only be a good thing. Suddenly we get the average person talking about Facebook and Apple stock. Do I see more people being suckered in and losing money? Not necessarily - there are a host of online courses and videos that explain the risks, and industry regulation is getting better at protecting people"

Both of these perspectives have merit, and while I feel there is nothing inherently wrong with incorporating game mechanics into the sector, there still needs to be a prevalence of reputable trading forums with solid means of rating the viability of financial advice. For instance, Hotcopper uses a thumb up and thumb down feature that allows users to report and identify bad trading information.

That being said, there is unquestionably a darker side to this story. Binary options trading has (rightly) been labelled as casino gambling dressed up in the garb of financial speculation and I am very disturbed about the role gamification plays when applied to these products. For the uninitiated, binary options are a financial contract wherein the outcome is ‘all or nothing’ (hence binary). Punters purchase the right to buy or sell an instrument (ForEx, gold, indexes etc.) at a pre-agreed price (the ‘strike price’) within a set time frame. The buyer has to predict whether the option will finish above or below the strike price at its maturity date (call or put). If they predict correctly, they get a pay-out and if not, they lose their cash.

The catch is that the timeframe within which the option matures is usually tiny ‒ sometimes 60 seconds. Even the most qualified trader cannot possibly predict market fluctuations with minute-to-minute precision, making binary options a glorified game of odds or evens. If you need further proof of this characterisation, many casino websites and bookmakers allow players to purchase these financial products directly from their websites.

Given that binary options are practically casino games anyway, they lend themselves to gamification ‒ or rather the incorporation of mechanics and visual rewards that exploit the psychology of play in order to keep ‘traders’ hooked. One product from anyoption, ‘bubbles’, is touted on the company’s website as playing “like a high-octane “gambling” game with all of the anticipation and excitement that goes with it.” Essentially just a cosmetic upgrade for a broker’s interface, the trader chooses an asset and ‘inflates’ an onscreen bubble with however much they want to invest. The bubble is then dragged to wherever the trader believes the asset’s price will go relative to the trend line, with the profit percentage increasing the further away it is placed. The product is pretty crude, but it nevertheless psychologically rewards players for staking more cash (filling their bubble) and creating less favourable odds for themselves by maxing out their profit percentage stat (which can be jacked as high as 1000 per cent).

Binary options brokers are beginning to recruit directly from the gaming sector in order to maximise the capacity of gamification to enhance user engagement. MarketsPulse, one of the original binary options platform providers, recently appointed Mickey Winitsky as its CEO; a man with a long CV in the online gaming and gambling sector. Winitsky held a position as Affiliate Director & Head of SEO at NeoGames Technologies for 12 years before moving on to handling VP Clients at DMG, later joining Caesars Interactive Entertainment as Head of Acquisition and then going on to a COO role at Pariplay, a division Majesco Entertainment. These appointments and the focus on gamification appears to be paying dividends. According to Avi Mizrahi of Financial Magnates, some online binary options brokers have cited a 100% to 150% pickup in engagement metrics by gamifying their services. 

Conclusion

While I am sympathetic to reservations about gamified stock trading, it is symptomatic of a much larger trend towards decentralised, online trading in which communities of part-time ‘players’ circumvent the traditional fonts of market wisdom by sharing tips amongst themselves. It is clear that gamification can be utilised positively to introduce new people to the sector and foster a more egalitarian community of wannabee marketeers. As long as this community is tempered with viable information from the stock market, this could be a very positive development.

The educative value of virtual stock market platforms has yet to conclusively demonstrated, but these trading games (and that is what they are) demonstrate that stock market trading has always been a game, so it is no surprise that game mechanics befit the sector. I’m rather confident that a new generation of traders, their skills honed with virtual investments, could become the hedge fund managers of the future. The economic and moral implications of this deserve further attention ‒ but in a different post.