Capitalogix

The Law and Flaw of Averages

The law of averages is a principle that supposes most future events are likely to balance any past deviation from a presumed average.

Take, for example, flipping a coin. Should you get 5 "Heads" in a row, you'll assume the next one must be "Tails" despite the fact that each flip has a 50/50 chance of landing on either. 

Even from this example, you can tell it's a flawed law. While there are reasonable mathematical uses of this law, in everyday life, this "law" mostly represents wishful thinking. 

It's also one of the most common fallacies seen in gamblers and traders. 

Perhaps you heard the story about how the U.S. Air Force discovered the 'flaw' of averages by creating cockpits based on very complex mathematics surrounding the average height, width, arm length, etc. of over 4,000 pilots. Despite engineering the cockpit to precise specifications, pilots crashed their planes on a too regular basis. 

The reason?  With the benefit of hindsight, they learned that very few of those 4,000 pilots were actually "average". Ultimately, the Air Force re-engineered the cockpit and fixed the problem. 

It's a good reminder that 'facts' can lie, and assumptions and interpretations are dangerous. It's why I prefer taking decisive action on something known, rather than taking tentative actions about something guessed. 

 

via ReasonTV

 

Here Are Some Links For Your Weekly Reading - May 30th, 2021

Here are some of the posts that caught my eye recently. Hope you find something interesting.

Lighter Links:

• Michio Kaku On His Lifelong Search For The God Equation'. (PBS)
• The Human Genome Has Finally Been Completely Sequenced After 20 Years. (NewScientist)
• Map Shows Which Counties are Home to the Highest Number of Excessive Drinkers in the United States. (FOX News)
• Are U.S. Officials Under Silent Attack? (NewYorker)
• Chicago’s Predictive Policing Program Told a Man He Would Be Involved with a Shooting – But Didn't Know If He Would Be the Shooter or the Victim. (TheVerge)

 

 

Trading Links:

• Billionaire David Rubenstein Says 'Unrealistic' To Think Government Will Stop Cryptocurrency From Being What Investors Want. (News)
• Why Amazon Bought MGM and What It Means for Apple. (TheInformation)
• Economic Growth In a Time of Disequilibrium. (KPMG)
• Is Inflation Coming? If So, How To Protect Your Portfolio? (SeekingAlpha)
• Legendary Investor Jeremy Grantham Called the Dot-Com Bubble and the 2008 Financial Crisis. He Told Us How 4 Indicators Have Lined Up for What Could Be 'The Biggest Loss of Perceived Value From Assets that We Have Ever Seen.' (Insider)

The Ever Expanding Space Industry

Elon Musk is an interesting guy ... and SpaceX and his other projects are exciting companies that have the potential to 'leave a dent in the Universe.' But he is only one player in a surprisingly deep field. 

SpaceTech Analytics put out a great report on the overall landscape of the growing space industry including many infographics and benchmarks to help you chunk information and analyze it (as a relative layman). 

• One Pager
• 30-Page Teaser
• 165-Page Full Report

via SpaceTech Analytics

Here are some highlights of the reports if you don't want to spend the time:

• There are over 10,000 space industry companies globally, and the U.S. has the most with 5,582 space-focused companies (which is almost 10x of the UK who is in second place) 
• Money invested in the industry has passed $4 Trillion USD for the first time ever as a result of the increased competition and attention
• Navigation/mapping, cloud solutions, and manufacturing are the biggest sectors by company density
• And, orbital delivery for SpaceX's starship was approximately $500/kg compared to $20,000/kg on NASA's space shuttle in large part due to improvements in launch technology

It's fun to look at SpaceX, Virgin Galactic, or Blue Origin ... but it's encouraging to see so many meaningful players and projects. 

We take for granted the immense phase shift in technology. You have more computing power in your pocket than we first used to go to the moon. 

As humans, we're wired to think locally and linearly. We evolved to live our lives in small groups, to fear outsiders, and to stay in a general region until we die. We're not wired to think about the billions and billions of individuals on our planet, or the rate of technological growth - or the minuteness of that all with regard to the expanse of space.  

However, today's reality necessitates we think about the world, our impact, and what's now possible for us.

The space industry has a lot of potential to enhance the quality of life on earth, without expecting populations to leave the planet. 

Many of our greatest innovations came as a result of the pursuit of space travel. A recent example can be seen with SpaceX's Starlink striving to give people without access to stable internet a long-term solution. 

Space was a major inflection point for today's innovation, but now we can look toward A.I., new medical technologies, and so much more. 

It's hard to comprehend the scale of the universe and the scale of our potential ... but that's what makes it worth exploring!

 

Carl Sagan via  YouTube

 

Innovation Activity Centers

In many of my recent talks, I've been focusing on a technology adoption model for entrepreneurs. It is a framework that explains how thoughts become things and how ideas scale with respect to capability, audience, and monetization.

The four base stages are: Capability –> Prototype –> Product –> Platform. 

You can listen to me talk about it in more detail on my recent podcasts, I'm also working on a separate video about this. 

From a different perspective, each stage of the Framework requires the following Innovation Activity Centers. 

I shot a video going into more detail. Check it out. 

 

 

Understanding the Technology Adoption Framework and the Innovation Activity Centers makes it easier to understand and anticipate the capabilities, constraints, and milestones that define the path forward.

We are making lots of progress refining these models, and they are the basis for our plans to expand our Amplified Intelligence Platform.

Ultimately, frameworks aren't important if you aren't using them. 

If you have questions about this, or how you might use these models, feel free to reach out to me. 

Here Are Some Links For Your Weekly Reading - May 23rd, 2021

Here are some of the posts that caught my eye recently. Hope you find something interesting.

Lighter Links:

• Clearly AI is Going To Win. How People are Going To Adjust is a Fascinating Problem'. (3QuarksDaily)
• How AI-Powered Ships Can Help Us Collect Valuable Data About the Ocean. (ThePrint)
• How the Personal Computer Broke the Human Body. (Vice)
• How Jewish is Leonard Cohen's Hallelujah? A Forward Investigation in 9 Verses. (Forward)
• The 5-Second Rule: Science Debunks Food Myth that Stretches Back to Gengis Khan. (Inverse)

 

Trading Links:

• More Investors Than Ever are Borrowing To Buy Stocks. Here's What this Really Means For the Market. (MarketWatch)
• Governments are Deploying 'Wartime-Like' Efforts to Win the Global Semiconductor Race. (CNBC)
• Space Inc: 10,000 Companies, $4T Value ... and 52% American. (Forbes)
• The Pandemic Changed Where Americans Live. (Wall Street Journal)
• The Billionaire Creator of Ethereum Already Expected the Collapse of Cryptocurrencies. (Entrepreneur)

Powering Bitcoin

In April, I talked about Coinbase's public offering and the top 10 growing cryptocurrencies. 

In the past couple of weeks, many currencies have reached record highs, and then seen a steep drop-off. Some say it was due to Elon Musk's SNL appearance, others say it was due to Tesla stopping support of Bitcoin short term. Still others say it was just due.

In any case, there are growing reasons to be wary of Bitcoin as a viable long-term value store.

On top of the many reasons I've talked about in previous articles, I'm hearing many more people talk about it as if they are crypto experts.  Consequently, it reminds me of the Dot.com bubble. Sure, the Internet continues to boom (but many of the early high-fliers don't exist today).  Meanwhile, it's possible crypto will evolve like the Internet, but at this point, it's hard to discern how much of the success in crypto is luck versus skill.   

There is a ton of demand and interest.  But fear of missing out and enjoying the roller-coaster ride is not the basis of a long-standing Platform. Blockchain is a different story.

Back to Crypto ... Even a blind squirrel finds a nut in a forest during a bull market. 

Governments have a disincentive to allow alternate currencies (not backed by their government).  In addition, another obstacle for cryptocurrency mining is the high cost of energy consumption. 

 

via visualcapitalist

Mining crypto takes a lot of electricity because when people are creating new coins they're really solving complex math puzzles with a 64-digit hexadecimal solution known as a hash. To solve those equations faster than your competitors you need massive data centers which can even overload local infrastructure. 

It's increasingly expensive and energy-taxing to mine new coins. For context, it's estimated that the current annual power consumption for Bitcoin alone (not including other cryptocurrencies) rivaled the state of New York, and beat Norway. 

To compare it to the tech giants, Bitcoin took 129 terawatt-hours of power consumption ... Google took 12, and Facebook only took 5. 

Many are looking for ways to decrease the energy consumption of mining cryptocurrency using methods like renewable resources. 

Biden's $4T Economic Plan Visualized

Biden campaigned heavily on an economic plan centered around bolstering the middle class, taxing the wealthy, and investing in healthcare and green energy infrastructure. There are other aspects of his plan - but those were the focuses.   

Now that he's President and proposing his $4 Trillion economic plan, we can take a better look at where he intends to spend that money. 

The NY Times put together a data visualization to put the plan in context. 

Here's the simplified version: 

via NY Times

And here it is with more detail: 

 

via NY Times

 

Much of the money President Biden intends on using to pay for this plan will come from higher taxes on the wealthy, and 15 years of higher taxes on corporations. With another portion of the money being invested in the IRS to crack down on tax evasion. 

Many people, both Republicans and Democrats alike, have fears about the new plan. 

Time will tell if the benefits outweigh the detriments, and what portion of his plan he actually accomplishes. 

Frankly, I'm not sure how much of what was talked about were trial balloons and negotiation anchor points or his intended outcomes?

Time will tell.  We sure do live in interesting times!

Here Are Some Links For Your Weekly Reading - May 16th, 2021

Here are some of the posts that caught my eye recently. Hope you find something interesting.

Lighter Links:

• Daniel Kahneman: Clearly AI is Going To Win. How People are Going to Adjust is a Fascinating Problem. (TheGuardian)
• Artificial Intelligence vs Machine Learning vs Deep Learning: What Exactly is the Difference?(AnalyticsVidhya)
• The Average American Utters 80 to 90 Curse Words Every Day. Here's Why It's Good For You.(Flipboard)
• US Intel Chief: Chinese Space Station is a Threat to National Security. (Futurism)
• Future Science: The Promise of Human Regeneration – Forever Young. (TheFuturist)

 

Trading Links:

• Covid Economy: What Economists Got Right (And Wrong). (BBC)
• Blockchain Will Thrive Once Innovators and Regulators Work Together. (CoinTelegraph)
• Maybe SPACs Were a Bad Idea After All. (TechCrunch)
• The New World of "Going Public" – Pros & Cons of IPO vs. SPAC vs. Direct listing. (Angel)
• Nobel Winner Daniel Kahneman's New Book On Bad Decisions Has a Lot To Say About Market Overconfidence and Money Mistakes. (CNBC)

My Recent Podcasts with Dan Sullivan & Brett Kaufman

I recently did two interviews I want to share with you. The first was done with Dan Sullivan and Steven Krein for Strategic Coach's Free Zone Frontier podcast... and the second was with Brett Kaufman on his Gravity podcast. 

Please listen to them.  They were quite different, but both were well done and interesting. 

Free Zone Frontier with Dan Sullivan and Steve Krein

Free Zone Frontier is a Strategic Coach group (and podcast) about creating "Free Zones." It refers to the green space where entrepreneurs can collaborate and create without competition.

It's a transformative idea for entrepreneurial growth. 

In my episode, we focused on topics like building your own future, how decision-making frameworks and technology can extend your edge, and what it takes to get to the next level.   I realize there is a lot of Strategic Coach jargon in this episode, but it is still easy to understand, and there was great energy and an elevated conversation about worthy topics.

As an aside, Steve Krein happens to be my cousin, and we joined Strategic Coach entirely separately before realizing we had joined the same group. 

The podcast is 47 Minutes. I hope you enjoy it.

 

Or click here to listen on: Spotify, Google Podcasts, Apple Podcasts 

Gravity Podcast with Brett Kaufman

Normally, I talk about business, mental models, and the future of AI and technology, but Brett Kaufman brought something different out of me. 

Brett's Gravity Project is about living with intention, community, consciousness, and connection. He focuses on getting people to share their life experiences ... with the intent that others can see themselves in your story. 

In my talk with Brett, we do talk about the entrepreneurial journey ... but we also probe some deep insights by discussing the death of my younger brother, how my life changed almost immediately upon meeting my wife, and why love is the most powerful and base energy in the universe. 

This was not a typical conversation for me (a different ratio of head-to-heart), but it was a good one (and I've had a lot of people reach out because of this podcast). 

The episode is 65 minutes. I hope you enjoy it. 

 

Click here to listen on: Spotify, Apple Podcasts, Listen Notes

Let me know what you think.

WallStreetBets Analysis: Market Crashes & Oreos

During the Robinhood & Gamestop debacle, I wrote an article about r/WallStreetBets where I essentially said that most of the retail investors that frequent the site don't know what they're doing, but there is the occasional real post with strong research you would see at a real firm. 

As an example of good research done by the subreddit, here's a link to a post where a user (nobjos) analyzed 66,000+ buy and sell recommendations by financial analysts over the last 10 years to see if they had an edge. Spoiler: maybe, but only if you have sufficient AUM to justify the investment in their research. 

There are also posts that show a clear misunderstanding of markets, and more jokes than quality posts, but I saw a great example of correlation ≠ causation. 

In the past I've posted about the Superbowl Indicator and the Big Mac Index, but what about Oreos?

The increasingly-depraved debuts of Oreos with more stuffing indicate unstable amounts of greed and leverage in the system, serving as an immediate indicator that the makings of a market crash are in place. Conversely, when the Oreo team reduces the amount of icing in their treats, markets tend to have great bull runs until once again society demands to push the boundaries of how much stuffing is possible.

https://en.wikipedia.org/wiki/List_of_Oreo_varieties https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets

1974: Double Stuf Oreo released. Dow Jones crashes 45%. FTSE drops 73%.

1987: Big Stuf Oreo released. Black Monday, a 20% single-day crash and a following bear market.

1991: Mini Oreo introduced. Smaller icing ratios coincide with the 1991 Japanese asset price bubble, confirming the correlation works both ways and a reduction of Oreo icing may be a potential solution to preventing a future crash.

2011: Triple Double Oreo introduced. S&P drops 21% in a 5-month bear market

2015: Oreo Thins introduced. A complete lack of icing causes an unprecedented bull run in the S&P for years

2019: The Most Stuf Oreo briefly introduced. Pulled off the shelf before any major market damage could occur.

2021: The Most Stuf Oreo reintroduced. Market response: ???

 - LehmanParty via Reddit

It's surprisingly good due diligence, but also clearly just meant to be funny. It resonates because we crave order and look for signs that make markets seem a little bit more predictable.

The problem with randomness is that it can appear meaningful. 

Wall Street is, unfortunately, inundated with theories that attempt to predict the performance of the stock market and the economy. The only difference between this and other theories is that we openly recognize the ridiculousness of this indicator.

More people than you would hope, or guess, attempt to forecast the market based on gut, ancient wisdom, and prayers.

While hope and prayer are good things ... they aren’t good trading strategies.

A good reminder that even if you do the work, if you're looking at the wrong inputs, you'll get a bad answer. 

Garbage in, garbage out.