Thoughts about the markets, automated trading algorithms, artificial intelligence, and lots of other stuff

  • What To Do When Optimization Takes The Fun Out of Everything …

    I recently saw a Reddit thread comparing McDonald’s and Hot Wheels in the 1990s with their modern counterparts. The images were meant to show how much color, character, and personality seemed to have disappeared.

    via r/SipsTea

    Millennials tend to think everything was better in the ’90s, and while that’s demonstrably not true, corporate design was less brutalist.

    The comparison felt a little nostalgic, but it got me thinking about a real business problem: What happens when companies focus so much on optimization that they lose sight of what made people love them in the first place?

    Capitalism Rules

    Capitalism is remarkably good at creating things people want. Competition gives entrepreneurs a reason to build better products, take risks, challenge established players, and find entirely new markets. McDonald’s made fast food an experience, not just a meal. Hot Wheels made a little toy car feel like an adventure.

    But success changes the incentives.

    Once a company has established its position, the challenge can shift from making a better product to making the existing product more efficiently. Can we reduce manufacturing costs? Simplify the experience? Remove a feature without hurting sales? Improve margins by another fraction of a percent?

    Individually, these decisions can make perfect sense. Collectively, they can produce something that works just fine but feels like a shell of what it used to be. The magic fades, and trouble sits just off in the horizon, waiting for a disruptor to bring it to light.

    You can see a similar pattern around town. Compared with much of the architecture and construction many of us remember from the 1990s, so much new development can feel repetitive and interchangeable. There are understandable reasons for that, from construction costs and zoning requirements to financing constraints and the economics of building at scale. Still, it’s worth asking what gets lost when efficiency and predictability dominate every decision.

    You can even see it in trading. Over-optimize a strategy against its own backtest, and you can curve-fit your way to a beautiful equity curve that has nothing to do with how markets actually behave going forward.

    Don’t Optimize On The Wrong Metrics …

    The irony is that optimizing away these qualities may be the very things that once differentiated the business. Color. Character. Craftsmanship. Surprise. The little details that make someone choose your product even when a cheaper or more convenient alternative exists.

    When every competitor follows the same playbook, optimization can become a race to the bottom. Everyone gets a little more efficient, but nobody gives customers a compelling reason to care.

    That creates an opportunity, too. When established companies leave customers wanting more, a competitor can win by bringing back what was lost or by creating something entirely new that incumbents have stopped looking for.

    For entrepreneurs, the question isn’t whether to optimize. Of course we should. The question is what we’re optimizing for, and whether our metrics capture the things customers actually value.

    Are we measuring what matters, or just what’s easy to measure? Are we improving the experience, or simply reducing the cost of delivering it? And when we look at our own products five or ten years from now, will we see something more useful, more distinctive, and more valuable, or just more cheaper & more efficient?

    The goal shouldn’t be to preserve everything the way it was. It should be to make progress without losing the spark.

    As you continue to use exponential technologies, it becomes more important to decide how much you prioritize your ‘Why’ over your ‘What’ and ‘How’.

  • Can We Predict The Future?

    New technologies fascinate me … As we approach the Singularity, I guess that is becoming human nature. 

    Ray Kurzweil (a well-respected futurist, inventor, and entrepreneur) optimistically predicts accelerating returns and exponential progress, arguing that 21st-century technological advances will be far more significant and disruptive than those of previous centuries. Kurzweil believes: “The next century won’t feel like 100 years of progress—it will feel like 20,000.”

    However, a tension exists between our ability to imagine grand futures and our struggle to execute the how—the messy, uncertain work of getting there.

    Nassim Nicholas Taleb (a noted expert on randomness, probability, complexity, and uncertainty) reminds us that, “We often overestimate what we know and underestimate uncertainty.” Likewise, “continuous forward motion” can sometimes lead to dead ends, and speed without thoughtful direction can be dangerous.

    This is true in part because technology adoption often depends more on human nature than on technology’s absolute value. 

    This post is about embracing the paradox: valuing vision while practicing the discipline of small, progressive steps.

    Dreaming vs. Doing

    Recognize that the future is co-authored by dreamers and doers.

    In a 1966 interview, Marshall McLuhan discussed the future of information with ideas that now resonate with AI technologies. He envisioned personalized information, where people request specific knowledge and receive tailored content … like ChatGPT.

    Although McLuhan was against innovation, he recognized the need to understand emerging trends to maintain control and know when to “turn off the button.” 

    Prophecy vs. Navigation

    While we revere “prophetic” moments, most successful outcomes arise from continuous adjustment—not perfect foresight.

    Peter Drucker famously said, “The best way to predict the future is to create it.”

    I’ll say it a different way … It’s more useful to view innovation as navigation, rather than prophecy.

    Like evolution, Success isn’t about strength or certainty — it’s about the ability to adapt quickly and course-correct as conditions change. This mindset urges leaders to embrace agile, resilient strategies that can respond rapidly to emerging opportunities and threats.

    The forecast is almost always wrong … but an adaptive process survives being wrong.

    With that said, activity is not progress if it doesn’t lead you in the right direction. Sometimes, continuous course correction can lead a team in circles. Pausing for periodic reflection and creating feedback loops helps prevent innovation drift. 

    Not all predictions are created equal; we seem to have a better idea of what we want than how to accomplish it. 

    The farther the horizon, the more guesswork is involved. Compared with the prior video on predictions from the mid-1900s, this 1995 internet video seems downright prophetic. 

    via YouTube

    The Distinction Between Envisioning Outcomes and Creating Practical Paths to Them.

    There’s a lesson there. It’s hard to predict the future, but that doesn’t mean you can’t skate to where the puck is moving. Future success goes to those who can quickly sense shifts, reorient, make appropriate decisions, and take action.

    Even when the path ahead is unclear, it’s relatively easy to pick your next step … and then the next. As long as you are moving in the right direction and keep taking steps without stopping, the result is inevitable. 

    In Uncharted Territory, It’s Better to Use a Compass Than a Map

    The distant future may be fuzzy, but our willingness to keep moving—and keep learning—tips the odds in our favor.

    Reflect on the value of looking ahead, not for certainty but for direction.

    Don’t worry if you can’t see your intended destination. Just focus on your next step and trust the journey.

    Remember, there is always a best next step.

    Onwards!

  • Which Colleges Produce the Most Pro Athletes?

    I love data. Often that means diving deeply into heavy or complex issues … but sometimes it means looking at which schools send the most players to the pros, because a friend forwards it to you.

    via NCAA

    It’s not particularly surprising that a school with the vanity to include “the” in its official branding sends the most players to play in the NFL. Though after Nick Saban’s run with Alabama, it may be surprising that they fell short of THE Ohio State.

    I couldn’t find a great NBA companion infographic, but their website lists the most powerful pipeline schools.

    1. Kentucky (29)
    2. Duke (24)
    3. UCLA (14)
    4. Arizona (12)
    5. Arkansas/Gonzaga/Kansas/USC (11)

    It’s nice to see my alma mater (Duke) still producing so much NBA talent after Coach K; I guess there’s a reason they rank among the Blue Bloods.

    In football and basketball, the familiar powerhouses dominate. Rugby tells a different story.

    My son (who helps write these posts) follows professional rugby and decided to do research into which schools produced the most pros. You probably won’t recognize the names, but here they are: Lindenwood, Life University, and St. Mary’s. They’re smaller schools that put a real emphasis on varsity rugby, focusing their athletic resources on sports where they can compete at a high level rather than trying to match the budgets of larger universities in sports like football and basketball.

    The same is true in business: you don’t have to outspend the giants if you pick the arena where your edge compounds. Talent doesn’t always follow the biggest budgets, and success doesn’t always mean trying to compete in everything. Sometimes, it’s about finding the right niche, investing in it, and building a program that consistently produces great results.

    You don’t need to compete at everything against everyone. Have you found your niche?

  • What an 8th-Grade Football Team Knows That Most Businesses Forget

    Hopefully you missed it, but the Dallas Cowboys lost a match to the previously 0-4 Tampa Bay Buccaneers. It was not our best showing.

    Obviously, the Cowboys’ ownership group has done many things right. For the 11th straight year, the Dallas Cowboys are the world’s most valuable sports team, worth an estimated $17 billion—the first to cross the 11-figure threshold and billions beyond their closest competitor.

    They’ve mastered winning in business, even when they struggle on the field.

    So, even though the $17 billion team lost Sunday, its playbook is still worth copying.

    Jerry Jones does a lot right in building his “Disney Ride.” But the coaches and players also offer great real-world business lessons.

    Business Lessons From the NFL

    I’m regularly surprised by the levels of innovation and strategic thinking I see in football.

    I used to love playing football, and it still informs my thoughts and actions.

    Some lessons relate to teamwork, while others relate to coaching or management.

    Some of these lessons stem back to youth football … but I still learn from watching games – and even more, from watching Dallas Cowboys practices at The Star. 

    Think about it …  even in middle school, the coaches have a game plan. There are team practices and individual drills. They have a depth chart listing the first, second, and third choices to fill specific roles. In short, they focus on the fundamentals in ways that most businesses don’t.

    The picture below is of my brother’s high school team (way back in 1989). While a lot has changed since then, much of what we will discuss in this post remains timeless.

    Today

    Losing to an 8th Grade Team

    The scary truth is that most businesses are less prepared for their challenges than an 8th-grade football team. That might sound disrespectful, but if you think about it … it’s pretty accurate.

    Here is a short video highlighting what many businesses can learn from how organized sports teams operate, especially in setting goals and preparing for challenges.

    via YouTube.

    If you’re skimming, here are the key takeaways from the video.

    What Businesses Can Learn From Football

    • Build a system. Teams have clear roles, defined responsibilities, and a shared goal.
    • Prepare to win. Practice, study your competition, and develop a game plan before you need it.
    • Adapt in real time. When the defense surprises you, call an audible. Business strategies should be just as flexible.
    • Learn from the tape. Review what worked, what didn’t, and what you can do better next time.
    • Coach your people. Talent matters, but consistent coaching develops it and makes your team better.

    Let’s look at the Cowboys. 

    Practice Makes Perfect

    How you do one thing is how you do everything. So, they try to do everything right. 

    Each time I’ve watched a practice session, I’ve left impressed by the preparation, effort, and skill on display.

    During practice, there’s a scheduled agenda. The practice is broken into chunks, each with a designed purpose and a desired intensity. Even the breaks have a rhythm.

    Every minute is scripted. There’s a long-term plan for the season … but they also focus on short-term details and the current opponent.

    They alternate between individual and group drills. Moreover, the drills run fast … but for shorter periods than you’d guess. It is bang-bang-bang – never longer than a player’s attention span. They move from drill to drill, working not just on plays but also on skill sets (where you look first, what your read is, which foot you plant, how to best use your hands, etc.).

    They use advanced technology to get an edge (including player geolocation monitoring, biometric tracking, medical recovery devices, robotic tackling dummies, and virtual reality headsets). 

    They don’t just film games; they film the practices … and each player’s individual drills. Coaches and players get a personalized cut on their tablets when they leave. It is a process of constant feedback and constant improvement. Everything becomes the raw material for learning and improvement. 

    Beyond The Snap

    The focus isn’t just on the players and the team. It’s also about the competition.

    Before a game, coaches develop a plan and study film to understand their opponent’s tendencies and prepare players for what they’ll face.

    During the game, teams change personnel and formations to keep opponents guessing. Players read the defense, recognize patterns, and adjust. If the offense sees that the defense is anticipating a play, they call an audible. Coaches at different levels work together to identify problems and respond quickly.

    After the game, they review the film. Coaches grade players on individual performance and identify what each person did well and where they can improve. The goal isn’t just evaluation. It’s to get better.

    Think about it. Everyone knows what game they’re playing, understands the rules, and knows how to keep score. They can see how they’re performing and where they stand. Even coaches are held accountable, evaluated on results, and encouraged to learn from others.

    The Bigger Lesson

    Vince Lombardi famously began training camp by reminding his players, “Gentlemen, this is a football.” His point was simple: master the fundamentals. How you do the little things shapes how you do everything else.

    Football teams don’t just show up on game day and hope to win. They develop their players, study their opponents, practice their plays, and review their mistakes. They focus on winning this week, but also on stringing together wins (wherever they may be, even if it has nothing to do with the game itself) to accomplish something bigger.

    They have a system for getting better.

    Many businesses don’t. Entrepreneurs can get caught up in the day-to-day grind, react to whatever is urgent, and lose sight of how the pieces fit together.

    Football is ultimately a game, but the preparation behind it is anything but casual. Businesses can learn a lot from that discipline.

    What does that look like at a higher level? If an 8th-grade football team already beats most businesses, what would it look like if a business played at an NFL level?

    Now imagine bringing that same level of clarity, preparation, feedback, and accountability to business. How much better could your organization become?

  • Thriving In Uncertainty: The Scary Times Success Manual

    People seem rattled right now, don’t they?

    Between persistent inflation, geopolitical uncertainty, gas prices, trade tensions, and fears about where the economy and markets are headed, there’s plenty to make people uneasy.

    Even though markets and the economy are not the same thing, many voters believe they are. Consequently, as we near midterm elections, I suspect the government will push every button and pull every lever it can to build momentum leading into November.

    We’re in a particularly partisan election year, punctuated by seemingly endless negative news cycles.

    Now, on to the real point … those things don’t matter and shouldn’t steal your focus. Why? Because that’s the playing field we all have to navigate.

    There will be winners and losers. The key distinction lies in whether you choose to focus on opportunities or risk. 

    So I thought this would be a great time to revisit how to cope with losses and manage your anxieties in “scary times.” 

    The Anxiety Antidote

    During scary times, many people struggle with “I should have …”, “if I would have …”, or “if I could have …” thoughts.

    The problem is that thoughts like those create more stress and distraction. 

    I’m reminded of a quote.

    “When the trough gets smaller … the pigs get meaner.” – Dan Sullivan

    Pigs-feeding-at-trough

    Negative focus highlights loss, difficulties, past events, missing things, and what you don’t want.

    Think of them as an unhealthy reflex that wastes energy, confidence, and time.

    All We Have To Fear Is Fear Itself  

    I often talk about market psychology and human nature. The reason is that markets reflect the collective fear and greed of their participants… people tend to get paralyzed during scary times like these.

    But the economy isn’t what makes people feel paralyzed. People feel paralyzed because of their reactions and their beliefs about the economy. Your perception becomes your reality. 

    A little examination reveals that most fear is based on a “general” trigger rather than a “specific” trigger. In other words, people fear everything that could happen and are paralyzed by the sheer scope of possibilities. These things don’t even have to be probabilities to scare them.

    You gain a competitive advantage as soon as you recognize that it’s not logical. Why? Because as soon as you distinguish that fear as not necessarily true, you can refocus your insights and energy on moving forward. You can act instead of react. You make better decisions when you come from a place of calm instead of fear… so create that calm. 

    Even a tough environment like this presents you with opportunities if you watch for them … or even better … if you create them. 

    The Scary Times Success Manual

    The goal is to move forward and feel better.

    Strategic Coach offers ten strategies for transforming negativity and unpredictability into opportunities for growth, progress, and achievement. They call it the “Scary Times Success Manual,” and what follows are some excerpts:

    Forget about your difficulties; focus on your progress.

    Because of some changes, things may not be as easy as they once were. New difficulties can either defeat you or reveal new strengths. Your body’s muscles always get stronger from working against resistance. The same is true for the “muscles” in your mind, spirit, and character. Treat this period of challenge as a time to make your greatest progress as a human being.

    Forget about events; focus on your responses.

    When things are going well, many people think they control events. That’s why they feel so defeated and depressed when things turn bad. They think they’ve lost some fundamental ability. The most consistently successful people in the world know they can’t control events – but continually work toward greater control over their creative responses to events. Periods of uncertainty are an excellent time to focus all your attention and energy on being creatively responsive to the unpredictable events ahead.

    Forget about what’s missing, focus on what’s available.

    When things change for the worse, many desirable resources are inevitably missing – including information, knowledge, tools, systems, personnel, and capabilities. These deficiencies can paralyze many people, who believe they can’t make decisions and take action. A strategic response is to use every resource immediately available to achieve as many small results as possible and make as much daily progress as possible. Focus on recognizing and using every resource and opportunity, and your confidence will continually grow.

    Forget about your complaints; focus on your gratitude.

    When times get tough, everyone must make a fundamental decision: complain or be grateful. In an environment where negative sentiment is rampant, the consequences of this decision are much greater. Complaining only attracts negative thoughts and people. Gratitude, on the other hand, creates the opportunity for the best thinking, actions, and results to emerge. Focus on everything you are grateful for, communicate this, and open yourself to the best possible consequences.

    For more, check out the full version below:

     Click here to download the full PDF version.

    Final Thoughts

    We can speculate and pontificate all day about the short-term causes of the markets’ gains and losses, but I don’t think it does much good. I let the algorithms worry about those. It’s the larger trends we have to stay on top of.

    I sound like a broken record, but volatility is the new normal. Here’s why:

    • Markets exist to trade, and if there’s no “excitement” on either side, trades don’t happen.
    • Trades are getting faster, which means more information has to disturb or confuse both the buyer and the seller.
    • You’re no longer competing solely against companies and traders like you. It’s like the cantina from Star Wars; you’ve got a bunch of different creatures (and bots) interacting and fighting with each other, trying to figure out how to make their way through the universe.

    Pair that with all the fear and uncertainty, and you’ve got a recipe for increased volatility and noise. That means that the dynamic range of a move will be wider and happen in a shorter period of time than ever before. You’ll hear me echo this thought over the next few years as the ranges continue to expand and compress. Cycles that used to play out over weeks often now take just days or hours. The game is still the same; it just takes a slightly different set of skills to recognize where the risks and opportunities are. 

    Today’s paradigm – both in life and trading – is about noise reduction. It’s about figuring out what moves the needle and focusing only on that.

    The crucial distinction is between adding data and adding information. Adding more data does not equal adding more information. In fact, blindly adding data increases your chances of misinformation and spurious correlations.

    My final comment is that there’s a difference between investing and trading, and while humans can invest, if you’re “personally” still trying to trade – you’re likely playing a losing game. If you don’t know what your edge is, you don’t have one. 

    If you’re investing, I’ll advise you to act like a robot. If you removed fear and greed from your decision-making, what would you do?

  • A Look at the Stock Market over the Years …

    When there’s uncertainty and fear, I often find it helpful to step back and look at things from a broader perspective. In this case, it’s looking at the boom in the stock market over the past 15 years.

    Chart comparing the size of the world's largest stock markets in 2011 versus today

    via visual capitalist

    At first glance, it’s nice to see the relative growth in prosperity. A reminder that, overall, things keep improving.

    One of the things I like about this chart is that it makes a complicated idea feel pretty simple:

    The financial world you’re investing in today isn’t the same financial world you were investing in 10 or 15 years ago.

    Look at how the world’s largest stock markets have shifted since 2011. The U.S. has remained dominant, but the relative size and importance of other markets have changed dramatically. China grew rapidly. India has climbed the rankings. Japan and major European markets have moved around.

    The leaderboard moves, and that’s worth remembering when the current market feels difficult.

    There is plenty to be stressed about right now. Markets are noisy. Headlines are relentless. Some days it feels like every new piece of information is another reason to worry.

    But zoom out.

    Over longer periods, markets have grown, adapted, and created new opportunities. Companies that didn’t exist become enormous. Entire industries emerge. New technologies reshape economies. Capital moves toward new ideas and new opportunities.

    The world changes. And, over time, it tends to get bigger and more productive along the way.

    That doesn’t make the difficult periods any less difficult. It just puts them in perspective.

    We tend to experience markets one day at a time, while progress happens over decades.

    That’s an important distinction.

    It’s also why we think about markets as adaptive systems. The patterns that worked yesterday don’t necessarily remain the patterns that matter tomorrow. The goal isn’t to predict exactly what the world will look like ten years from now.

    It’s to build systems that can recognize when the world is changing — and adapt with it.

    Because if this chart teaches us anything, it’s that change is constant.

  • Take A Look At Our Nerds …

    Eight years ago, the local news did a story about Capitalogix — not about AI, but about how hard it is to find great tech talent. AI wasn’t the headline back then. It is now.

    Finding real talent has only gotten harder since then. Demand for tech talent has risen, success requires stronger mathematical, statistical, and creative problem-solving skills, and AI is changing the playing field in many ways (including taking over parts of many jobs).

    And that’s only part of why I’m proud of our team!

    The robots aren’t coming for our jobs. We’re creating the robots, the AI, and the automation. 

    The secret to great AI is that it still has a heartbeat. 

    Here’s the article. You can watch the video below. 

    via NBC DFW

    It’s not enough to invest in the right ideas or technologies. You also have to invest in the right people. Here’s what I told them back then:

    “Standing still is moving backward … so you don’t only need new technology, you need a new level of data scientists —  a new level of professional that can think about what’s possible, rather than how to do what we want to do right now.”

    Looking back at that story eight years later is pretty funny … looking at how our tech stack has changed, how our team has evolved, and yet how singular our direction has remained.

    That’s probably the part of this story I like most. The specific technologies will keep changing. The names will change. Some of the things we’re excited about today will eventually become obsolete.

    That’s okay.

    The point was never to bet on one particular technology. It was to build a team and a culture that keeps asking, What’s possible now? And then goes and tries to build it.

    Even though we’ve got an incredible edge now, I recognize that edges decay faster than ever. The trick is to stay ahead.

    I can predict that the future is bright… and I know the best way to predict the future is to create it.

    Onwards!