I enjoy looking at great disruptive companies and great examples of industries that are primed for disruption.
Think about how many companies have failed due to myopia... Radioshack couldn't understand a future where shopping was done online and Kodak didn't think digital cameras would replace good ol' film. Blockbuster couldn't foresee a future where people would want movies in their mailboxes, because "part of the joy is seeing all your options!" They didn't even make it long enough to see "Netflix and Chill" become a thing.
The Taxi industry had been ready for disruption way before Uber came along, yet, Uber may have mismanaged their opportunity. Taxis now have a chance to innovate back.
To run a taxi in New York you need a medallion. There are approximately 13.5 thousand medallions in NYC. In 2013, prices peaked at over 1.3 million dollars for a single medallion.
The medallion system has been broken for a long time. NYC taxis, in particular, were corrupt and the prices of medallions were artificially inflated by Bloomberg and de Blasio, and built on a debt bubble.
Taxis offered mediocre service, high rates due to artificial caps/greed, and often didn't take credit cards.
They didn't adapt and got disrupted. It's an age-old tale. The same tale as Blockbuster or Kodak; companies thinking linearly in an age of exponential change.
Taxi agencies had the infrastructure to edge ridesharing out and adopt friendlier policies but were slow to adopt the apps and convenience that modeled ridesharing.
It's clear that there's an increased demand for rides. Increased demand is likely caused by access in places that didn't previously have enough demand for a full taxi-service. Ridesharing means you can have drivers in small towns, rural areas, etc. Almost all the new demand is being monopolized by ridesharing.
Should it be, though?
Many would argue Uber's model isn't sustainable; neither are many of these gig-based companies like DoorDash. Uber has a product almost everyone uses, no inventory, very little staff, and despite "winning" the race, it lost $370 million in 2018 and $4.5 billion in 2017.
They gained market share by offering lower prices (even at a loss). They also incentivized an army of drivers to join based on flexible hours and side-income.
The road to profitability for these companies is uncertain.
Uber's low prices got it here, but prices have slowly raised, and AB5 in California has passed, though Uber is claiming exemption - it's likely their prices will jump again if forced to comply.
Rideshare companies are trying to convince workers that hour flexibility is worth the non-employee status, but I don't think that has any real basis. Gig workers can't unionize, have little labor protection and don't receive benefits.
The industry is in a period of massive disruption - but taxies have a chance to fight back. As the gig economy becomes regulated, the already defined system may regain an edge.
In the game of disruption, Uber was shortsighted. In the game of knowing their customers, Taxis were shortsighted.
Will taxies see a resurgence as Uber inevitably hikes up rates? Will autonomous fleets put drivers out of business as they will for long-haul freight?
When I think about the invention of the wheel, I think about cavemen. But that isn't how it happened.
Lots of significant inventions predated the wheel by thousands of years. For example, woven cloth, rope, baskets, boats, even the flute were all invented before the wheel (and apparently not invented by cavemen).
While simple, the wheel worked well (and still does). Even now, the phrase "reinventing the wheel" is used derogatorily to depict needless or inefficient effort. But how does that compare to sliced bread (which was also a pretty significant invention)?
Despite being a hallmark of innovation, it still took more than 300 years for the wheel to be used for travel. With a bit more analysis, it makes sense. In order to use a wheel for travel it needs an axle, and it needs to be durable, and loadbearing, requiring relatively advanced woodworking and engineering.
All the aforementioned products created before the wheel (except for the flute) were necessary for survival. That's why they came first. As new problems arose, so did new solutions.
Necessity is the mother of invention.
Unpacking that phrase is a good reminder that inventions (and innovation) are often solution-centric.
Too many entrepreneurs are attracted to an idea because it sounds cool. They get attracted to their ideas and neglect their ideal customer's actual needs.
If you want to be disruptive, cool isn't enough. Your invention has to be functional, and it has to fix a problem people have (even if they don't know they have it.) The more central the complaint is to their daily lives the better.
Henry Ford famously said: “If I had asked people what they wanted, they would have said faster horses.”
Innovation means thinking about and anticipating wants and future needs.
Your customers may not even need something radically new. Your innovation may be a better application of existing technology or a reframe of best practices.
Uber didn't create a new car, they created a new way to get from where you want with existing infrastructure and less friction.
My wife Jen came home with a new member of the family who met none of the criteria she wanted in a new puppy. However, we saw him at Operation Kindness and knew he was the one.
As well, Zeke signed his contract in time to help the Cowboys to a 35-17 win over the Giants. Jerry Jones announced their contract the same day as he rang the opening bell at the New York Stock Exchange in celebration of his $2.2 billion acquisition of Covey Park Energy.
After the Covey Park purchase, Comstock shares (a Frisco-based natural gas company) rose 12%, closing at $6.84.
Football season is officially underway! In honor of that, here's a look at each position's composite player!
As you might expect, different sports have a different ratio of ethnicities. For example, you might expect more Pacific Islanders in Rugby or Asians in Badminton.
The same is true for different positions on a football team. Apparently, offensive linemen are more likely to be white while running backs are more likely to be black.
Here is a visualization that shows what happens when you average the top players' faces in various positions?
While you may be thinking "this player must be unstoppable" ... statistically, he's average.
The "composite" NFL player would be the 848th best player in the league. He's not a starter, and he plays on an average team.
We found the same thing with our trading bots. The ones that made it through most filters weren't star performers. They were the average bots that did enough not to fail (but failed to make the list as top performers in any of the categories). The survivors were generalists, not specialists.
In an ideal world, with no roster limits, you'd want the perfect lineup for each granular situation. You'd want to evaluate players on how they perform under pressure, on different downs, against other players, and with different schemes.
That's what technology lets you do with algorithms. You can have a library of systems that communicate with each other ... and you don't even have to pay their salary (but you will need data scientists, researchers, machines, data, alternative data, electricity, disaster recovery, and a testing platform).
You won't find exceptional specialists if your focus is on generalized safety. Generalists are great, but you also have to be able to respond to specific conditions.
In Part 2, I talked about normalizing your habits and picking consistent, normalized metrics. This doesn't just work at the gym; it applies to life and business as well.
Today, I want to explain how and why this helps. To do so, we will talk about controlling your arousal states.
Chemically, most arousal states are the same. Meaning, the same hormones and neurotransmitters that make you feel fear also can make you feel excited. They affect your heart rate, respiration, etc. ... Though, the outside stimuli you experience likely determines how you interpret what is happening.
In most situations, a heart rate of 170 beats per minute is an indicator of extreme danger (or an impending toe-tag). If I felt my heart racing like that in a meeting, it might trigger a fight or flight instinct. I prefer conscious and controlled responses. So, I train myself to recognize what I can control and to respond accordingly.
One way I do that is by being mindful of heart rate zones during exercise.
My goal is to get as close to 170 bpm as I can, then stay in that peak zone for as long as possible.
Here is a chart showing a Fitbit readout of an exercise session.
As you can see, every time I reach my limit ... I get my heart rate back down. It becomes a conscious and controlled learned behavior.
Here is a different look that shows effort based on my maximum heart rate. It is from an app called Heart Analyzer.
Recognizing what this feels like is a form of biofeedback; it's not only gotten me better at controlling what happens after my heartrate reaches 170 but at identifying when I'm close – even without a monitor.
Now, when my heart rate is at 170 bpm (regardless of the situation), I don't feel anxious ... I think about what I want to do.
I currently use an Apple watch with the HeartWatch app to measure heart rate during the day. The Oura Ring is what I use to measure sleep and readiness.
These are useful tools.
It's the same with trading ... Does a loss or error harsh your mellow – or is it a trigger to do what you are supposed to do?
Getting used to normalized risk creates opportunity.
When you are comfortable operating at a pace, or in an environment, that others find difficult – you have a profound advantage and edge.
Elon Musk and Alibaba co-founder Jack Ma recently held a debate about AI at a conference in Shanghai. Their conversation was captured in a 46-minute video. Even if you don't watch all of it, it's interesting to see how these different thought archetypes position different issues.
My son, Zach, watched it and sent me some notes and takeaways.
Fascinating Stuff!
________
While they talk about Mars, education, and other topics, the discussion tends to revolve around AI.
In the video, Jack Ma comes off as optimistic and somewhat uninformed while Elon Musk comes off as so optimistic about AI that he's pessimistic about humans.
Musk's intelligence shines through, though he tends toward hyperbolic best- and worst-case scenarios.
With Jack Ma, I'm curious how heavily exogenous forces influenced the expression of his opinions. The conference took place in China and was partially sponsored by the Chinese government. As a result, I'm not sure how much of what Jack Ma said represented his true beliefs or fears. Taking into consideration State censorship and "spin," it isn't hard to imagine being encouraged to remind people that the Communist party is (and will remain) smarter than AI.
Jack takes positions that make people feel safe, while Elon is committed to pointing out potential dangers.
Elon focused on three main points. Here they are:
People Underestimate AI
Laymen often compare AI to a smart human, but it's much more than that. He uses the comparison that to a chimpanzee we're a strange alien, but AI's disparity may be even worse than that.
Humans vastly underestimate the scale of time. I think Tony Robbins makes the comment that we overestimate a year and underestimate 10. Elon's equivalent would be that we overestimate 10 years and underestimate 1000. On the scale of Earth's existence, humanity is blip. On the scale of human existence, our current level of technology is a blip.
We're wired to think locally and linearly, but not only are we at the very beginning of a 20-year innovation curve, but we also have a theoretical thousands-of-years to worry about.
The Biggest Mistake AI Researchers Make Is Thinking They're Intelligent
“I hope they’re nice … If you can’t beat them, join them. That’s what neuralink is about.” - Elon Musk
This is one of the ideas we talk about a lot at Capitalogix - but it's this idea that many researchers think they can predict AI despite messing up 99% of predictions ever. We constantly underestimate technology, we constantly underestimate change, and it's naive to think that won't continue to be true.
He uses an interesting comparison between our bandwidths. We're already so integrated to our phones and computers but the bandwidth is very different from a computer - or from his proposed neuralink.
Our input bandwidth has skyrocketed. We're always tuned in. Data downloads faster. We have more sources of data. Yet, our output bandwidth has slowed. As we spend more time on our phones instead of computers, we're less efficient.
Compare that to a computer with an exaflop of compute capability... a millisecond becomes an eternity. Our speech becomes a whale song. We're inefficient.
Our Biggest Concern Should Be The Proliferation of Consciousness
Sustainability, cryogenics, Mars, Neuralinks, biohacking, these are all attempts at expanding the scope and scale of human consciousness. Of hedging our bets against any number of potential bad futures.
Even if any potential doomsday has a minuscule probability of happening, why not prepare for them?
The probabilities are non-zero, the better we understand our universe, the better we can handle things here.
Jack Ma – AI Isn't A Threat
Jack's response to most of Elon's comments is that AI isn't a threat to jobs, to us, or to the world. Instead, it's an opportunity to change ourselves, an opportunity to understand people better and to better self-actualize.
He also states that it's an opportunity not to replace jobs but to work less. His ideal is three days a week. Giving us more time to enjoy being human.
Jack also believes that while AI is more clever, humans are smarter. His argument is that intelligence is experience-driven and that humans have created computers but no computers create humans. AI still isn't as good at the subjectivity of the human experience. Can a human determine if something is delicious? Can it write a comedy? He believes AI doesn't have the heart humans do.
The only thing that Elon and Jack really agreed on was that our biggest fear over the next 20 years is population collapse.
My Thoughts
We Should Go To Mars
Elon and Jack are at odds for various reasons, but I think a big part of the issue is that Jack Ma wants us to focus on improving the earth. He views Mars as a waste of time. Musk (and I) view these exercises as improving earth. It shouldn't be an "either/or" ... it should be an "and". We do need to do a better job on taking care of each other and our planet, but that shouldn't be at the expense of moonshots.
I like the 80/20 rule. In economics it's the Pareto Principle - 20% of the "causes" cause 80% of the effects. In personal finance, 80% of what you invest in should be safe and 20% can be alternative investments. In our office, it's 20% of your time being spent on "what if's".
For Earth, 80% of our focus should be on the incremental improvements we're eschewing, and 20% should be on moonshots. If even one of the moonshots we focus on (elongating human life, going to mars, hybridizing humans and computers) happens, they improve the quality of life exponentially.
Just Because We Can't Predict The Future Doesn't Mean We Shouldn't Try
During the debate, Elon said the goal should always be to "try to predict the future with less error."
While it's clear we can't solve tomorrow's issues because we can't predict them all, it doesn't mean there aren't actions we can take and questions that we can ask to better prepare our children for the future.
We Should Be Cautiously Optimistic About AI
I've always been taught to be cautious and to exhibit moderation. We don't know what's possible with AI. While that means there's a potential timeline where AI doesn't become Skynet, it also means there's a potential timeline where it does.
It's human hubris to not worry about AI ethics and to not keep those ideals in mind when creating a technology that will be ubiquitous.
In human history we've often weaponized tools that were intended for other uses. It's likely AI will be used in the same way (if not by AI, then by humans).
I like Jack's focus on the human aspect of AI and while it seems clear to me that Elon understands AI better, if we can manage to balance a focus on the human while growing the artificial, I think we'll go a lot farther.
Closing Thoughts
Humans are at the top of the food chain not because of any athletic dominance, but because of our intelligence and our ability to create tools that enhance our capabilities. Our tools define us as a species.
One key takeaway from the book was that technology should be an extension of humans. An example being the calculator on my phone. I'm not great at math, but I'm great at using my calculator to perform whatever math I need to. Donald Norman would argue that means for all functional purposes, I'm good at math.
As our tools evolve, we evolve.
To me, the fact that technology is growing so fast is heavily weighted towards a positive impact. There will be negative impacts, but they can be mitigated. I'm sure plenty of carriage operators were really bummed about the creation of the automobile.
I resonated with Musk's fears and joys because I felt he was championing that belief.
We don't know the answers, but we should be asking the questions and we should be preparing for the possibilities.
When your doctor tells you that you are fat, it is easy to discount (because you pay them to tell you that). When your massage therapist tells you that you are getting fat, you've got to listen (because they're trying to be nice to get a better tip).
Well, for the past two months, I've been getting back into fitness.
I used to be a competitive athlete. In the past, for me, exercise was about gaining an edge and competing better. In a sense, that is still true (just on a different field). Now, I work out to stay healthy, fit, and vital while managing the challenges of running a company, navigating an overbooked calendar, and traveling every week.
This is about focusing on the right things so you can best measure progress.
Normalizing your habits and picking the right metrics isn't just a habit for the gym. It's a habit you should pick up in life. If you don't set the right measuring stick you'll always be unhappy or underperform.
Plan forward – but measure backward ... you have to make sure you're not so focused on the horizon that you don't track what you've accomplished.
Normalizing the result makes this easier and better.
In running, for example, it is the time it takes me to finish one mile, while never going above 170 heartbeats per minute.
Meanwhile, in trading, we do this by comparing different opportunities based on a constant risk level (for example, the expected return for the next day of $1M, assuming a 2% maximum drawdown). It doesn't matter what market we trade, or how many trades the system makes ... we can make a fair comparison and get better insights about performance.
The Gig Economy: Uber's Woes
I enjoy looking at great disruptive companies and great examples of industries that are primed for disruption.
Think about how many companies have failed due to myopia... Radioshack couldn't understand a future where shopping was done online and Kodak didn't think digital cameras would replace good ol' film. Blockbuster couldn't foresee a future where people would want movies in their mailboxes, because "part of the joy is seeing all your options!" They didn't even make it long enough to see "Netflix and Chill" become a thing.
The Taxi industry had been ready for disruption way before Uber came along, yet, Uber may have mismanaged their opportunity. Taxis now have a chance to innovate back.
To run a taxi in New York you need a medallion. There are approximately 13.5 thousand medallions in NYC. In 2013, prices peaked at over 1.3 million dollars for a single medallion.
The medallion system has been broken for a long time. NYC taxis, in particular, were corrupt and the prices of medallions were artificially inflated by Bloomberg and de Blasio, and built on a debt bubble.
Taxis offered mediocre service, high rates due to artificial caps/greed, and often didn't take credit cards.
They didn't adapt and got disrupted. It's an age-old tale. The same tale as Blockbuster or Kodak; companies thinking linearly in an age of exponential change.
Taxi agencies had the infrastructure to edge ridesharing out and adopt friendlier policies but were slow to adopt the apps and convenience that modeled ridesharing.
via chartr
It's clear that there's an increased demand for rides. Increased demand is likely caused by access in places that didn't previously have enough demand for a full taxi-service. Ridesharing means you can have drivers in small towns, rural areas, etc. Almost all the new demand is being monopolized by ridesharing.
Should it be, though?
Posted at 05:31 PM in Business, Current Affairs, Ideas, Market Commentary, Trading, Travel, Web/Tech | Permalink | Comments (0)
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