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

  • Setting Yourself Up For Success

    We're about to usher in a new year – along with its promise and pressure.

    We get a fresh start.  We look forward to what we will achieve – but history says we rarely achieve everything we hope (it is also true that we rarely achieve things we don’t hope for).

    So, dream big dreams!

    Personally, I’m excited about 2019. Despite the volatile market and uncertain political climate, Capitalogix has spent almost 20 years preparing for where we are today. 

    Regardless of the outcome, we are doing things that seemed like science fiction even a few years ago.  

    I commissioned this image to remind our team to keep shooting higher.

     

    How Can It Be Impossible If We're Already Doing It_GapingVoid

     

    Resilience, resourcefulness, and a worthy goal are the keys to many entrepreneurial success stories.

    In the spirit of New Year's Resolutions – I’ll add that a deliberate approach to goals is important too.

    Commit to your bigger, directional compass, goals. 

    Once you know what your long-term goal is, it is relatively easy to plan out the steps you need to achieve that goal.  Achieving smaller goals reinforces success, builds momentum, and makes continued progress feel more likely.

    Extra points if you make them SMARTs (Specific, Measurable, Attainable, Realistic, and Time-Sensitive).

    It's not "I want to lose weight this year" it's "I want to exercise at least three times a week and track my calories daily so I lose at least 1 pound each month."

    Actions speak louder than words, and your words can distract you. 

    If your goal is to win first place at a competition, focus on the metrics of a first-place finish instead of the medal. This makes the goal concrete and sets an internal locus of control on your victory.  This also means that you don't need to tell others your goal too soon. Studies show that when you announce your intention to a goal in public, you decrease the likelihood of you succeeding

    Ask yourself: 

    Are the people around you the right people? Are you putting your money where your mouth is? Are you taking ownership of your actions, even when you can find excuses not to?

    It's okay to misstep, it's okay to get stuck – but recognize what you've done and move forward. 

    Often the most frustrating thing that any of us feel on a regular basis is to want something really bad, and not be able to get it right away.

    It's getting so that it's increasingly rare to find people who are truly willing to put in the requisite time necessary to get the traits or items they want.  Our world today is trying to teach us that we must get what we want immediately; that it's our right.  And that's why so many of us are jealous, smoke or drink, are overweight, use drugs, etc. …

    Life is NOT like school.

    In school, you can trick yourself into thinking you're doing great if you cram for exams and get decent scores. It is possible to get fairly good grades for a while that way.

    But you don't learn it.  You're likely to just remember it until the exam is over… maybe.

    In school, you can fool the system and yourself.  In the rest of the world, success leaves clues (and an imprint on you and your behavior patterns).

    Real life is like a farm.

    On the farm, you must choose what to plant.  Then, you must move the rocks, buy the seeds, till the soil, plant the seeds, buy and maintain the equipment, pull weeds, keep the pests away, water the crops, fertilize, etc.  And, for the most part, it’s not one and done … you need to keep up with what’s needed every day!

     

    Depositphotos_2758787_xl-2015

    Follow the plan, and with some luck, you’ll harvest a decent crop at the end of the season.

    Life is like this, too.  You can't "cram" in life. 

    Don't be fooled.  Overnight successes often take a lot longer than you’d think to gestate.

    Luck often takes a lot work.  

    Put the effort in today and you'll get luckier and luckier.  Will it be immediate?  Probably not.  Beat this into your head… Anything truly worth having is worth the time, the effort, and the sacrifice you need to invest in order to get it.

    My grandkids one day will look back and say "Wow, our grandpa sure was in the right place at the right time." And to a certain degree, they're right … but it took a lot of work to be this lucky. 

    It's also important (once you've accomplished your goal) to set new goals. Capitalogix has a 20-year plan from today, and that's because I never got comfortable with what we'd accomplished.

    If you're standing still, you're moving backward. 

    Here's to a successful 2019 and an even more successful 2040.  

    Onwards!

  • The Carrot or the Stick – The Motivation Trap

    Recently, my buddy John Hittler (founder of Evoking Genius, and a great leadership coach) released a book called The Motivation Trap. Inc says it's one of the 10 leadership books that should be on your radar going into 2019

     

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    The premise is that motivation is an exhaustible resource … it can be used in spurts, but isn't a good long-term strategy. Sustainble success takes a more nuanced approach. 

    Instead of trying to tell you more about it, I went ahead and shot a video with him, to let him explain. Check it out.

     

     

    This book (and Benjamin Hardy's book) recognizes that it's hard to fight mother nature.

    Understanding the natural path is a lot easier than fighting it.

  • How Does America Use Its Land?

    America is big and pretty heavily populated.  Surprisingly, 28% of the land is owned by the government (check out this YouTube video). 

    As you might guess, the eastern US holds almost no federal land while the Western US has states that are primarily federal land (Nevada is 84.9% federal land). 

    Bloomberg had an interesting series of infographics that covered America's land use and relative profitability.

    To start, can you guess what takes up the most space … 

     

    Cows. 

     

    Over 41% of the land in the contiguous US revolves around livestock and livestock feed. The farmland used to feed us is an afterthought in comparison – it makes sense when people talk about cows' environmental effect. 

    Screen Shot 2018-12-19 at 10.55.18 AMDave Merrill and Lauren Leatherby via Bloomberg

    Urban areas make up only 3.6% of land use – but four out of five Americans live there (and this area accounts for about 40% of GDP). 

    The map below gives us a rough idea of the split of U.S. land.  

    Screen Shot 2018-12-19 at 11.21.58 AM

    Dave Merrill and Lauren Leatherby via Bloomberg

    Urban growth is outpacing other categories, but we're also doing a good job of repairing forestland.  According to The Land Report magazine, the land owned by the top landowning families has grown to be larger than Florida – and is continuing to grow. 

    There are a couple extrapolations that you can make from this information – but I'm curious  … what do you take from this?

  • The Psychology Behind Gambling (and Everyday Traders)

    Vegas and Wall Street share a lot in common. 

    Over Time … The House Wins

    Casinos only offer to play games that they expect to win.  In contrast, gambling customers play even though they know the odds are against them.

    Why does this happen?  The rush of a win, the chance of a big win, and random reinforcement are common factors that incent people to play lotto, go to a casino, or try to trade.

    Chemicals like adrenaline and dopamine play a part as well.  Even in a sea of losses, your body can't help but crave the chemical reward of even a small win, 

    The "House" knows this and engineers an experience that takes advantage of it.  

    In the case of casinos, every detail is meticulously crafted to extract you from your money – from carpet patterns to the labyrinthian layouts, the music, the lights and even the games themselves. 

    Here is an infographic that lays it out for you. 

    Casino-psychology-infographicBojoko via DailyInfographic

    Most people aren't gamblers … the fear of losing big inhibits them.  However, when people were instructed to "think like a trader," they showed considerably less risk-aversion when gambling. 

     

    The illusion of control convinces us we can overcome the statistics. 

     

    When you almost get it right – when you miss the jackpot by one slot on a slot machine, when you just mistime a trade to get a big win – you're more likely to play longer, and place bigger bets … because you're "so close"

    It's human nature to want to feel in control. 

    This is why you find a lot of superstitious traders & gamblers. If you wear this lucky item of clothing … if you throw the dice in this particular way … if you check your holdings at this time every day … you have control. 

    There is a big difference between causation and correlation. 

    It is not hard to imagine that the majority of a trader's activities do little to create a real and lasting edge.  

     

    Skill vs. Luck

    There are games of skill, and there are games of chance.

    In a casino, poker and blackjack are considered games of skill.  In contrast, slot machines are considered a game of chance.

    In trading, predicting markets is much different than using math and statistics to measure the performance of a technique.

    Much of what we do is to figure out how to eliminate the fear, greed, and discretionary mistakes humans bring to trading.

    In trading, "Alpha" is the measure of excess return attributed to manager skill, rather than luck or taking on more risk.

    We believe in Alpha-by-Avoidance … Meaning much of what we do is figure out what to ignore or avoid so that the majority of the games we play are games of skill rather than games of chance.

    Are you playing the right game?

     

  • A Quick Visit to Park City as a Noobie Skier

    Humpty Dumpty tried skiing … and is leaving with 10 fingers and 10 toes still attached in all the right places!

     

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    Skillful skiers relax and let physics do a lot of the work.  I used muscles way too much and way too often.

    When I was done, I was WIPED!!!!  

    Nevertheless, it was a lot of fun … and I plan on doing it again.

    Thanks Randy Garn for shaming into trying this. Park City, Utah was beautiful.

     

    181215 Park City Resort Utah

     

  • A Change of Pace: Picasso by Theme

    I often share examples of functional data science – using data to give insight into our economy, into our impact on the planet, and more. 

    Sometimes, it's nice to appreciate a beautifully made infographic purely for its creation and function. 

    This won't change your life (or help you make investment decisions) … nevertheless, hopefully, you will appreciate it. 

    Pablo Picasso was a prolific and vastly misunderstood artist during his time. He created tens of thousands of works that span countless topics.   

    National Geographic published a painting/infographic depicting the different phases and influences in Picasso's career. It leverages the techniques, colors, and shapes Picasso predominantly used to help immerse you in his art. The size of each category reflects the number of artworks in the category. 

    Click the image to see it in full size, with descriptions of each section. 

    Picasso-art-og.ngsversion.1524110468648.adapt.1900.1

    Alberto Lucas Lopez via National Geographic

  • Is Mars Going to be an Escape Hatch For Rich People?

    Elon Musk recently said that there's a 70% chance he goes to Mars. Their follow-up questions was this… 

    Is Mars going to be an escape hatch for rich people?

    I thought his response brought some interesting points to light. Check it out (his answer starts @ 22 seconds in).

     

    via Axios

    "Really the ad to go to Mars would be like Shackleton's ad to go to the Antarctic. It's going to be hard. There's a good chance of death … going in a little can through deep space."

     

    Elon is a controversial character; he may be the closest we have to a real life Bruce Wayne, but  he's also been forced to stepdown as Chairman of Tesla, has many controversial tweets, and is widely considered an eccentric. 

    That being said … I have to respect what he's accomplished, and his approach to his businesses. 

    Elon comes from the mindset of "what's possible?" not "how can I make the most money consistently over time?"

    When asked why you climb the mountain, the answer doesn't have to be profound … because it's there, or to see if I can are valid answers. 

    If you need rationale, Dr. Zubrin, President of the Mars Society puts it eloquently. 

     

    NASA's Ames Research Center via YouTube
     

    Human expansion has been furthered greatly by selfish endeavors – and that's okay. 

    What's your metaphorical flight to Mars? What's the idea that you want to make a reality? You can accomplish a lot when you're aligned with your goals.