Interview with a Volume-Weighted Average Person

[TL/DR: Proof has released a short whitepaper explaining our initial approach to designing a VWAP algo. Here we give an informal description of our philosophy. You can read the more traditional technical presentation here.]

“I’ve always been a fairly average guy,” Michael Smith says. “Starting with my name, so you could say I was born into it.”

He is sitting in his home office, surrounded by photos of his 5’4” wife Jennifer and their two kids. His Labrador retriever Bailey naps by his feet.

He looks a little anxious. “I don’t grant interviews very often,” he explains. “When I do, I feel like I have to give all of the media outlets a weighted share of my time, and it gets a bit overwhelming.”

I nod sympathetically. I ask his permission to turn on my recorder, which he grants.

“People think it’s probably easy, being the most average person in America,” he explains. “But it’s not. It requires constant vigilance. If I make even the tiniest slip, I have to correct it as quickly as possible.”

“Can you give me an example?” I ask.

“Cronuts,” he says forlornly. “They were all the rage when they first came out, and I love… loved them,” he corrects himself. “It was great for awhile. I’d have one for breakfast with my morning coffee while sitting at my desk at work and reading news on the internet. But one day I looked up, my cronut half-eaten, and I realized the moment had passed. No one else had a cronut. Everyone else in the office was back to bagels. I had waited too long, I was already behind the curve. I could hear the clock ticking so loudly in my head, my heart thumping in my chest. There was no time to waste, I had to catch up again as soon as possible, but without attracting attention.” He sighs.

“So what happened to the other half of the cronut?” I ask.

He winces. “I had to throw it out.”

It’s clearly a difficult topic for him, so I move on. “People might look to you to see what’s popular,” I say. “Do you ever worry that you might be creating trends rather than just reflecting them?”

“Oh sure,” he says. “That’s a fine line, and I have to be very careful to keep a sufficiently low profile. My kids don’t always appreciate that.” He gestures to a framed picture of his teenage daughter Sarah and his preteen son Josh. “Just last week Sarah wanted to pierce her nose, but we couldn’t allow it. Pierced noses just aren’t quite popular enough. But dad, she whined, I could post about it on TikTok and make it popular. I explained we don’t do things like that, not under my roof anyway.” He chuckles. “Of course, being mad about your parents not letting you get a piercing is incredibly common in her age group, so I’m very proud.”

“Let’s talk about your competitors,” I say. “Many people these days are vying for your title, using a variety of approaches. Some just look at averages over the last 20 or 30 days and use that information to decide how to behave today. Can you explain how your approach improves upon that?”

“Sure,” he begins. “It’s fairly simple. Let’s say for the last month or so, the most popular form of exercise has been outdoor yoga.”

I raise an eyebrow. “Is that true? And do you do yoga?”

“It’s just a hypothetical example,” he says. “And I own a yoga mat, but I’ve only used it a few times.”

“Got it,” I say. “Go on.”

“Okay, so suppose that’s true,” he continues. “The guy who’s just following the rolling averages, he gets out his yoga mat to go outside, right?”

“Right,” I say.

“But I look out the window, and it’s raining.”

“Then what do you do?” I ask.

“I look at more data,” he says. “I ask, at previous times in recent history when outdoor yoga was trending, but it was raining, what did people tend to do instead? And perhaps I find an answer like: three sit ups during the short break between streaming episodes on Netflix. And then I do that.”

“Makes sense,” I say. “But what about the newer breed of competitors who say they can do better using deep learning AI on a cloud-based blockchain?”

He shrugs. “Maybe there’s something to it,” he says. “I’m not resting on my laurels, we all have to keep learning and improving to stay relevant. I’m sure if you ask me again six months from now, I’ll tell you all about my new better approach. But I also believe in using the right tool for the job. I don’t really see much reason why a fancy espresso maker is better than a tea kettle if mostly what you’re trying to do is boil water. More bells and whistles means more ways to fail, so they better be damn sure it’s worth it. And I don’t think they are. I think some people like fancy things for the sake of fanciness alone. But not the average American.”

I nod my head. “Just one last question,” I promise. “Some of our readers might be confused. Since women are slightly more than 50% of the population, why is the most average person a man?”

“It’s a volume-weighted average,” he emphasizes. “And men are… well…”

He pats his protruding beer belly. “You get the idea.”