Get more trading volume with the cTrader Store
Something you may or may not know is that over the past 12 to 18 months, one of the founders of Plus500 became a bit of an online influencer. Alon Gonen was the main backer of Plus500. He originally owned 40% of the business and provided the start up capital for the company.
He has started posting loads of short videos across different social media channels. Here he is talking about his new house where each family member gets their own mini house. In this video he drinks water from puddles to make a point about inflation. And in this one he says he went surfing during the Plus500 IPO – why go stand on a balcony and wave to people? Boring!
Looking for a new LP? Talk to ATFX Connect
Gonen also wrote a book that seems to be an attempt to put into words the philosophy he is trying to promulgate on those different social media channels. The book is called ‘Freedom to Think’ and I figured it would be fun to give it a read over the weekend and give all of you a synopsis-cum-review.
‘Freedom to Think’ is something like an autobiography mixed with an attempt to define a set of principles that we should try to live by. The general idea is to convey the ideal of the ‘Free Thinker’.
“As the years passed by, I realised that my life path has been unconsciously filled with principles, strategies, and unwritten rules,” he writes in the introduction. “When I encountered problems, I solved them on my own, and I realised that in other areas of my life, not just business, I use the same system to make informed decisions. Today I call these principles the system of free thought.”
Get a Match-Trader server today
Freedom to Think is not long but it’s meandering. Part of the book is autobiographical and covers Gonen’s life and career. Other parts cover topics like investing, general decision-making, working with business partners, and solutions to political problems. A decent chunk is also devoted to diet and nutrition.
Consequently there is a lot of ground covered and a lot of potential principals that make up the philosophical world of the ‘free thinker’. That being said, there are a few core principles that generally influence the whole, whether you are trying to start a CFD trading firm or figure out what food to eat.
One is to make the most profit with the least amount of effort. Gonen attacks the idea that hard work leads to a commensurate output in monetary terms. Instead he says that he founded Plus500, in part because he wanted to make a lot of money, but also because it was something like a ‘lazy’ option – it required the least amount of effort but produced the highest reward.
Launch copy trading on cTrader and MetaTrader with Brokeree
This also, he argues, applies to many different spheres of life. Bread became a staple of the human diet because, in its original form, it could easily provide a lot of the energy and protein we need to survive.
“I turned to computer studies and worked in gambling companies because I didn’t want to work hard and I was thinking about making a big profit with a little effort,” he writes. “The gambling industry only offers online services. I didn’t need logistics centres, inventory management, and things like that.”
The other big part of free thinking could be described as something like focusing solely on what is real and tangible, compared to what you’d like to be real and tangible.
For example, Gonen says that at school he realised all that mattered was being good at maths and physics, plus learning English. So he studied hard in those subjects and didn’t bother much with anything else.
Another component of this is to be sceptical and doubtful. Part of this is just normal – not taking what people say at face value. But another facet of it is what I’d define as not giving in to the human desire to overcomplicate. You see this manifest itself in Plus500’s operations. The company has withstood what you would assume is extreme pressure to add more ‘fat’ to its operations and has not done that. It still has no real analyst team, large trading team, or telephone support, for example.
From my perspective, as someone that follows the CFD world, a few anecdotes in the book were interesting. Firstly, Gonen’s maths nerd interest in gambling is something that I found very similar to Stuart Wheeler’s – the guy that founded IG Group.
The main difference seems to be that, although they share an interest in the theory and mathematics behind gambling, as well as the ‘joy’ of partaking in it, Gonen seems to have seen it much more as a money making means than Wheeler did.
There are also some fun stories about the founding of the company. Gonen’s first business was software that could work out how to bet in blackjack. He then set up a company that let people play backgammon online. This is actually not that unusual. eToro, AvaTrade, Markets.com, and a couple of other smaller brands all had one or more co-founders who previously worked in gambling.
As to why he founded the company, there is not that much detail here. Gonen says he read the report of a company in the industry – presumably IG Group – that had just made $300m in revenue. He realised that they could do the same thing but make it much simpler. Not a bad idea eh?
There is also a great tidbit about the partnership with Atletico Madrid. They did this because – something I didn’t know – Atletico is the most popular team in Europe as a ‘second team’. A sponsorship deal would have a big reach but not cause any kind of antagonism from rival fans.
The other funny point here was that they realised the original company logo would not stand out on the shirt – they tested it in a stadium before the partnership began. So they put the logo in a big white rectangle and the rest is history.
Perhaps the most striking thing is the degree to which Plus500’s operations do genuinely seem to mirror Gonen’s personality. Leaving aside the ‘little effort, maximum profit’ idea, it’s more stripping back what is unnecessary and focusing solely on what is needed and what works.
Again, this may seem like a minor point or not that big of a deal but it’s very hard to maintain and achieve. There is always the pressure, particularly when you are sitting on buckets of cash, to expand and add new personnel, products, or app features. The fact that Plus500 still only employs ~600 people, a third or even a quarter of some of its peers who it makes more than, both revenue and profit-wise, is remarkable and very much in line with the ideas that Gonen puts forward in the book.
“Simplify! Simplify! Simplify!” He writes. “ Things have a tendency to get complicated and people have a tendency to complicate things. Simplifying processes is difficult, but it is necessary to succeed. At Plus500, we had to provide a solution in all languages. Instead of employing large teams in all countries, we chose to go with one person who provided customer service and used Google Translate.”
This final line, which made me laugh, is also a good example of the point I’m making. There is something kind of ridiculous about a large, massively profitable company having someone respond to queries with Google Translate. But it worked. And if it works, isn’t that what ultimately matters?
The other part that was revealing, and kind of confirmed what I had previously suspected, is that the company holds a huge bias towards what you could describe as ‘elite’ employees. Gonen is open about the fact that he preferred to hire people with strong academic credentials. There is a long bit about why they hired ‘someone’, who is almost certainly the current CFO (who also often feels like the ‘real’ CEO – a topic for another article).
Plus500’s founders all studied at the Technion, which is the equivalent of somewhere like MIT or Imperial College. Technion graduates are the most likely, of any global university, to establish a company with a billion dollar valuation in the US.
This is something that also makes the company unique and probably impossible for others to replicate. I also wonder if the equivalent people were in the US or UK, whether they’d bother to start the company.
What I mean by that is, if you are, for example, an MIT or Imperial graduate with a physics or engineering degree, you can pretty much walk into a finance or tech job where you will make a lot of cash. It is much less likely that these people would start or go to work for a company like IG Group or CMC Markets, purely because other financial services firms are seen as more respectable and pay more.
In Israel the same dynamic does not exist. There are a decent number of technology companies, but the financial services industry is nowhere near as large or developed. Consequently, these guys setting up a business like Plus500 makes more ‘sense’ than it would in the US or UK.
Note that the same thing applies to people like Petr Valov or Dmitry Zaretsky. Would they have set up their successful companies had they not been in Russia? As Gonen notes in the book himself, Google would probably not exist if Sergey Brin had met Larry Page in Moscow, not San Francisco. The system you operate in matters.
The final part that I found interesting for the book as a whole were similarities to Nassim Taleb. To be honest, Taleb is more refined and well read (and pretentious) than Gonen is, or – at least – gives the impression of being. There are also a lot of areas where they would not agree.
Still, a core theme of Taleb’s books is to not take on risk which means you can blow up. And as a corollary of that, risk you should take should have minimum downside with large potential upside. That is the thinking behind tail risk hedging, for example. To me that fits pretty well with what Gonen says – minimum effort, maximum profit.
Another facet of Taleb’s thinking relates to the Lindy effect. In other words, if something – a book, an idea, a type of food – has been around for a long time, its longevity means it will probably be around for a long time to come. Not only that but there is typically some positive / wisdom to those things, whether it be religious ideas or something else.
Gonen, who is religious, covers a lot of the same ground. One of the rules he puts down is (I know…) called the ‘The Law of the Monkey’.
“What worked for a person in ancient times will work for him today,” writes Gonen. He even talks about some of the same random, niche things that Taleb obsesses over – the fact that shoes mean we don’t walk like we should and that you should only eat things that people did when they were hunter gatherers (Taleb says he only eats or drinks food / alcohol that is in the Bible).
Finally, both of them talk about money in similar terms. Gonen says that the primary reason he wanted to be rich was not buying a plane or getting a jacuzzi but simply freedom. The same is true of Taleb, who has said similar stuff many times.
Does that mean Gonen has been reading Taleb? Have they both just been reading Montaigne? Or if you are a rich guy who is good at maths and physics, do you just end up reaching a similar set of conclusions as to how you should live your life, even if it’s via a different path. I don’t know.
“One thing that [people] don’t know [about being a billionaire] is that before all the money and after all the money, happiness is exactly the same,” says Gonen in one recent TikTok video. “The one thing that is not the same is freedom. With endless freedom, it’s simply amazing. And with this freedom, I try to occasionally do good things as well.”
Sounds like that would make me a lot happier? Have a great week everyone.
