Capitalogix

Can We Rewrite History?

The problem with history is it rarely tells the whole story.

Ideally, history would be presented objectively, recounting facts without the influence of societal bias, the perspective of the victor, or the storyteller's slant. But achieving this is harder than it seems.

Think about your daily life – it is filled with many seemingly innocuous judgments about your perception of the economy, what's happening in the markets, who is a hero, who deserves punishment,  and whether an action is "Just" or "Wrong". 

I'm often surprised by how frequently intelligent people violently disagree on issues that seem clear-cut to them.

It's like a fish in water not realizing it's in water ... Most people don't realize the inherent biases and filters that inform their sense of the world or reality.

This post is an attempt to highlight the importance of diverse perspectives and information sources in building well-informed viewpoints.

Even though most people would agree that genuinely understanding history requires a clear picture, free from bias ... I think it's apparent that history (as we know it) is subjective. The narrative shifts to support the needs of the society reporting it. 

The Cold War is a great example where: during the war, immediately after the war, and today, the interpretation of the causes and events has changed.  

But while that's one example, to a certain degree, we can see it everywhere. We can even see it in the way events are reported today. News stations color the story based on whether they're red or blue, and the internet is quick to jump on a bandwagon even if the information is hearsay. 

Now, what happens when you can literally rewrite history?

“Every record has been destroyed or falsified, every book rewritten, every picture has been repainted, every statue and street building has been renamed, every date has been altered. And the process is continuing day by day and minute by minute. History has stopped.“ - Orwell, 1984

That's one of the potential risks of deepfake technology. As it gets better, creating "supporting evidence" becomes easier for whatever narrative a government or other entity is trying to make real.

On July 20th, 1969, Neil Armstrong and Buzz Aldrin landed safely on the moon. They then returned to Earth safely as well. 

MIT recently created a deepfake of a speech Nixon's speechwriter William Safire wrote during the Apollo 11 mission in case of disaster. The whole video is worth watching, but the speech starts around 4:20. 

MIT via In Event Of Moon Disaster

Can you imagine the real-world ripples that would have occurred if the astronauts died on that journey (or if people genuinely believed they did)? Here is a quote from the press response the Nixon-era government prepared in case of that disaster.

"Fate has ordained that the men who went to the moon to explore in peace will stay on the moon to rest in peace." - Nixon's Apollo 11 Disaster Speech

Today, alternative histories are becoming some people's realities. Why? Media disinformation is the cause and is more dangerous than ever.

Alternative history can only be called that when it's discernible from the truth, and unfortunately, we're prone to look for information that already fits our biases. 

Today, we also have to increasingly consider the impacts of technology. Deepfakes are becoming more commonplace - with popstar Drake even using AI in a recent record. Now, that was apparent - but scarily, research shows that most can't tell a deepfake from reality (even if they think they can.)

As deepfakes get better, we'll also get better at detecting them, but it's a cat-and-mouse game with no end in sight.

In Signalling theory, it's the idea that signallers evolve to become better at manipulating receivers, while receivers evolve to become more resistant to manipulation. We're seeing the same thing in trading with algorithms. 

In 1983, Stanislav Petrov saved the world. Petrov was the duty officer at the command center for a Russian nuclear early-warning system when the system reported that a missile had been launched from the U.S., followed by up to five more.  Petrov judged the reports to be a false alarm and didn't authorize retaliation (and a potential nuclear WWIII where countless would have died). 

But messaging is now getting more convincing.  It's harder to tell real from fake.  What happens when a world leader has a convincing enough deepfake with a convincing enough threat to another country?  Will people have the wherewithal to double-check? What about when they're buffeted by these messages constantly and from every direction?

As we increasingly use AI for writing and editing, there is a growing risk of subtle changes being made to messages and communications. This widespread opportunity to manipulate information amplifies the capacity and potential for people to use these technologies to influence people's perceptions. As a result, we must be increasingly cautious about how the data we rely on may be altered, which could ultimately affect our perceptions and decisions.

Despite the risks, I'm excited about the promise and the possibilities of technology. But, as always, in search of the good (or better), we have to acknowledge and be prepared for the bad.

Ideally, history would be presented objectively, recounting facts without the influence of societal bias, the perspective of the victor, or the storyteller's slant. But achieving this is harder than it seems.

Think about your daily life – it is filled with many seemingly innocuous judgments about your perception of the economy, what's happening in the markets, who is a hero, who deserves punishment,  and whether an action is "Just" or "Wrong". 

I'm often surprised by how frequently intelligent people violently disagree on issues that seem clear-cut to them.

It's like a fish in water not realizing it's in water ... Most people don't realize the inherent biases and filters that inform their sense of the world or reality.

This post is an attempt to highlight the importance of diverse perspectives and information sources in building well-informed viewpoints.

Even though most people would agree that genuinely understanding history requires a clear picture, free from bias ... I think it's apparent that history (as we know it) is subjective. The narrative shifts to support the needs of the society reporting it. 

The Cold War is a great example where: during the war, immediately after the war, and today, the interpretation of the causes and events has changed.  

But while that's one example, to a certain degree, we can see it everywhere. We can even see it in the way events are reported today. News stations color the story based on whether they're red or blue, and the internet is quick to jump on a bandwagon even if the information is hearsay. 

Now, what happens when you can literally rewrite history?

“Every record has been destroyed or falsified, every book rewritten, every picture has been repainted, every statue and street building has been renamed, every date has been altered. And the process is continuing day by day and minute by minute. History has stopped.“ - Orwell, 1984

That's one of the potential risks of deepfake technology. As it gets better, creating "supporting evidence" becomes easier for whatever narrative a government or other entity is trying to make real.

On July 20th, 1969, Neil Armstrong and Buzz Aldrin landed safely on the moon. They then returned to Earth safely as well. 

MIT recently created a deepfake of a speech Nixon's speechwriter William Safire wrote during the Apollo 11 mission in case of disaster. The whole video is worth watching, but the speech starts around 4:20. 

MIT via In Event Of Moon Disaster

Can you imagine the real-world ripples that would have occurred if the astronauts died on that journey (or if people genuinely believed they did)? Here is a quote from the press response the Nixon-era government prepared in case of that disaster.

"Fate has ordained that the men who went to the moon to explore in peace will stay on the moon to rest in peace." - Nixon's Apollo 11 Disaster Speech

Today, alternative histories are becoming some people's realities. Why? Media disinformation is the cause and is more dangerous than ever.

Alternative history can only be called that when it's discernible from the truth, and unfortunately, we're prone to look for information that already fits our biases. 

Today, we also have to increasingly consider the impacts of technology. Deepfakes are becoming more commonplace - with popstar Drake even using AI in a recent record. Now, that was apparent - but scarily, research shows that most can't tell a deepfake from reality (even if they think they can.)

As deepfakes get better, we'll also get better at detecting them, but it's a cat-and-mouse game with no end in sight.

In Signalling theory, it's the idea that signallers evolve to become better at manipulating receivers, while receivers evolve to become more resistant to manipulation. We're seeing the same thing in trading with algorithms. 

In 1983, Stanislav Petrov saved the world. Petrov was the duty officer at the command center for a Russian nuclear early-warning system when the system reported that a missile had been launched from the U.S., followed by up to five more.  Petrov judged the reports to be a false alarm and didn't authorize retaliation (and a potential nuclear WWIII where countless would have died). 

But messaging is now getting more convincing.  It's harder to tell real from fake.  What happens when a world leader has a convincing enough deepfake with a convincing enough threat to another country?  Will people have the wherewithal to double-check? What about when they're buffeted by these messages constantly and from every direction?

As we increasingly use AI for writing and editing, there is a growing risk of subtle changes being made to messages and communications. This widespread opportunity to manipulate information amplifies the capacity and potential for people to use these technologies to influence people's perceptions. As a result, we must be increasingly cautious about how the data we rely on may be altered, which could ultimately affect our perceptions and decisions.

Despite the risks, I'm excited about the promise and the possibilities of technology. But, as always, in search of the good (or better), we have to acknowledge and be prepared for the bad.

Here Are Some Links For Your Weekly Reading - May 12th, 2024

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

Lighter Links:

• Practical Optimism Can Be Learned. A Psychiatrist Explains How and Why Your Well-Being Depends on It. (FastCompany)
• AI Therapy Bots Have Risks and Benefits and More Risks. (Scientific American)
• AI Systems are Already Skilled at Deceiving and Manipulating Humans. (ScienceDaily)
• ChatGPT and the Future of the Human Mind. (Every)
• Anthropic AI Launches a Prompt Engineering Tool that Generates Production-Ready Prompts in the Anthropic Console. (MarkTechPost)

Trading Links:

• Wall Street Regulator Moves to Ban Election Betting, Escalating Fight Over New Market. (Politico)
• The Right Kind of Asshole. (Every)
• Jim Simons, Math Genius Who Conquered Wall Street, Dies at 86. (NYT)
• How Did Jim Simons's Firm Make $100 Billion? He Told His Secrets to Our Reporter. (Wall Street Journal)
• Blackstone Says the Real-Estate Market is Bottoming. Here are 7 Ways It's Getting Ahead of the Situation. (Insider)

Talking Trading With Matthew Piepenburg

In 2020, I had a Zoom meeting with Matthew Piepenburg of Signals Matter.  Even though it was a private discussion, there was so much value in our discussion we decided to share parts of it online. 

Four years later, I still think it's a great watch. 

While Matt evaluates markets based on Macro/Value investing, I'm much more interested in advanced AI and quantitative methods. 

As you might expect, there are a lot of differences in how we view the world, decision-making, and the market.  Nonetheless, we share a lot of common beliefs as well.   

Our talk explores several interesting areas and concepts.  I encourage you to watch it below. 
 

 
Even though this video is four years old, the lessons remain true – markets are not the economy, and normal market dynamics have been out the window for a long time.  In addition, part of why you're seeing increased volatility and noise is because there are so many interventions and artificial inputs to our market system.

While Matt and I may approach the world with very different lenses, we both believe in "timeless wisdom". 

Ask yourself, What was true yesterday, today, and will stay true tomorrow? 

That is part of the reason we focus on emerging technologies and constant innovation ... they remain relevant. 

Something we can both agree on is that if you don't know what your edge is ... you don't have one. 

Hope you enjoyed the video.

Let me know what other topics you'd like to hear more about. 

Onwards!

Is Big Tech Faking AI?

Last week, I shared an article about Amazon's "Just Walk Out" technology – and how it likely required a team of human validators and data labelers.

My takeaway from the article was that we're right at the peak of inflated expectations and about to enter the trough of disillusionment. 

Gartner via Wikipedia 

One of my friends sent me this video, which he found in response.

 

via Sasha Yanshin

It's a pretty damning video from someone who is frustrated with AI - but it makes several interesting points. The presenter discusses Amazon's recent foible, Google's decreasing search quality, the increase of poorly written AI-crafted articles, GPTs web-scraping scandals, and the overall generalization of responses we see as everyone uses AI everywhere. 

Yanshin attributes the disparity between the actual results and the excitement surrounding AI stocks to the substantial investments from technology giants. But as most bubbles prove, money will be the catalyst for amazing things — and some amazing failures and disappointments too.

His final takeaway is that, regardless of its current state, AI is coming and will undoubtedly improve our lives. 

If I were to add some perspective from someone in the industry, it would be this. 

AI Is Overdelivering in Countless Ways

There will always be a gap between expectations and reality (because there will always be a gap between the hype and adoption cycles). AI is already seamlessly integrated into your life. It's the underpinning of your Smartphones, Roombas, Alexas, Maps, etc. It has also massively improved supply chain management, data analytics, and more. 

That's not what gets media coverage ... because it's not sexy ... even if it's real. 

OverHype has existed for much longer than AI has been in the public eye. An easy example is the initial demo of the iPhone, which was almost totally faked,

Having created AI since arguably the mid-90s, the progress and capabilities of AI today are hard to believe. They're almost good enough to seem like science fiction. 

The Tool Isn't Usually The Problem 

Artificial Intelligence is not a substitute for the real thing—and it certainly can't compensate for the lack of the real thing. 

I sound like a broken record, but AI is a tool, not a panacea. Misusing it, like using a shovel as a hammer, leads to disappointment. And it doesn't help if you're trying to hammer nails when you should be laying bricks. 

ChatGPT is very impressive, as are many other generative AI tools. However, they're still products of the data used to train them. They won't make sure they give you factual information; they can only write their responses based on the data they have.

If you give an AI tool a general prompt, you'll likely get a general answer. Crafting precise prompts increases their utility and can create surprising results. 

Even if AI independently achieves 80% of the desired outcome, it still did it without a human, a salary, or hours and days of time to create it. 

Unfortunately, if you're asking the wrong questions, the answers still won't help you. 

That's why it matters not only that you use the right tool but also that you use it to solve the right problem. In addition, many businesses lose sight of the issues they're solving because they get distracted by bright and shiny new opportunities. 

Conclusion

Sifting the wheat from the chaff has become more complicated — and not just in AI. Figuring out what news is real, who to trust, and what companies won't misuse your data seems like it has almost become a full-time job. 

If you take the time, you will see a lot of exciting progress. 

Public perception is likely to trend downward in the next news cycle, which is to be expected. After the peak of inflated expectations comes the trough of disillusionment. 

Regardless, AI will continue to become more capable, ubiquitous, and autonomous. The question is only how long until it affects your business and industry. 

 - via Don't Walk Out on AI Just Yet

What's the most exciting technology you've seen recently?

Here Are Some Links For Your Weekly Reading - May 5th, 2024

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

Lighter Links:

• 'GPT-4 is the Dumbest Model Any of You Will Ever Have to Use' Declares OpenAI CEO Sam Altman as He Bets Big on a Superingtelligence. (TomsGuide)
• Eight Newspaper Publishers Sue OpenAI Over Copyright Infringement. (CNBC)
• Elon Musk's Plan for AI News. (BigTechnology)
• The Children Who Remember Their Past Lives. (Washington Post)
• An AI Startup Made a Hyperrealistic Deepfake of Me That's So Good It's Scary. (TechReview)

 

Trading Links:

• Move Over, Mounjaro. Eli Lilly Has Another Blockbuster in the Making. (MotleyFool)
• Why You May Soon Be Drinking Synthetic Coffee. (Wall Street Journal)
• David (US Newspapers) vs. Goliaths (OpenAI & Microsoft): Battle of AI Chatbots. (TheAIJournal)
• The UAE is Using a Wealth Fund to Gain Diplomatic Sway. (Economist)
• When It Comes to TikTok, the World's Democracies Have Played the Sucker for Far Too Long. (NYT)

S&P 500 Performance In April

"What goes up must come down" is a well-known aphorism. So is, "Actions have consequences, and so do inactions."

On one hand, I try not to think about or predict markets (because I recognize the futility of trying to predict something random to me). On the other hand, it is an election year, and my opinion matters as a proxy for what people like me think or feel in an election year. So, with that in mind, I expected to see a brief market correction blamed on various geopolitical instabilities and partisan weaknesses, followed by a long and steady push higher as we approach the November elections.

What do you think? Is the market's move downwards the start of something bigger, or is it just a temporary correction before a push higher into November?

Looking closer, 10 of 11 sectors in the S&P 500 lost money in April. 

 

via FinViz

Not to mention, for the past few years, the top 20 stocks have contributed almost exclusively to the success of the S&P 500. In 2023, the top 20 stocks drove 7.08% of the 7.55% return. 

Those stocks are almost exclusively AI & Tech Stocks. 

Often, people look to the S&P as a sign of the economy, but this is a helpful reminder that markets are not the economy. 

As we look at the S&P, it's also interesting to look at the top stocks over the past 40 years. Visual Capitalist compiled a chart that ranks the top S&P 500 stocks by calendar year returns.

 

via Visual Capitalist

Qualcomm's 2620% return in 1999 is hard to imagine, especially with Tesla's 743% percent growth from 2020 being a distant 2nd place. 

In case you were wondering, Qualcomm's growth in 1999 was primarily driven by patents for Code Division Multiple Access (CDMA) technology, which was the infrastructure for "fast" wireless internet access and the 3G network.