Business

  • March Madness: The Quest For The Holy Grail

    March Madness is in full swing and will have the world's attention for a few more days. As you could guess – most brackets have already busted. Louisville lost, UC Irvine won, and Duke barely weathered UCF's onslaught. 

     

    190324 Duke

    via FanSided

    Lots of skill, lots of adrenaline and lots of natural talents (including amazing physical talents).  Here is a picture of 7'6 Tacko Fall. Tacko still looks taller than his opponents even when kneeling. 

    190324 Tacko
    via UCF Basketball

    The allure of March Madness is the same as gambling or trading.  These are all fertile grounds for emotion, biases, and statistics. 

    The holy grail is mighty elusive in March Madness (as in most things)  … For example, the odds of getting the perfect bracket is 1 in 9,223,372,036,854,775,808 (2.4 trillion based on a Duke Mathematician's formula that takes into account rank).  It's easier to win back-to-back lotteries than picking a perfect bracket. Nonetheless, I bet you felt pretty good when you filled out your bracket.

    Here's some more crazy March Madness Stats: 

     

    via Duke University

    Feeding the Madness

    "Not only is there more to life than basketball, there's a lot more to basketball than basketball." – Phil Jackson

     

    In 2017, I highlighted 3 people that were (semi) successful at predicting March Madness. A 13-year-old who used a mix of guesswork and preferences, a 47-year-old English woman who used algorithms and data science (despite not knowing the game), and a 70-year-old bookie who had his finger on the pulse of the betting world.  None of them had the same success even a year later.

    Finding an edge is hard – maintaining an edge is even harder.

    That's not to say there aren't edges to be found. 

    Bracket-choosing mimics the way investors pick trades or allocate assets. Some people use gut feel, some base their decisions current and historical performance, and some use predictive models. You've got different inputs, weights, and miscellaneous factors influencing your decision. That makes you feel powerful. But knowing the history, their ranks, etc. can be helpful in making an educated guess and they can also lead you astray. 

    The allure of March Madness is the same as gambling or trading. As sports fans, it's easy to believe we know something the layman doesn't. We want the bragging rights of that sleeper pick, of our alma mater winning, of the big upset. 

    You'd think an NCAA analyst might have a better shot at a perfect bracket than your grandma or your musical loving co-worker.

    In reality, several of the highest-ranked brackets every year are guesses. 

    The commonality in all decisions is that we are biased. Bias is inherent to the process because there isn't a clear cut answer. We don't have the answers to "who will win" and we don't have the answer to "what makes a perfect prediction". 

    Think about it from a market efficiency standpoint. People make decisions on many factors – sometimes irrational ones – and that creates inefficiencies & complexities. It can be hard to find those inefficiencies and capitalize on them – but they're there to be found. 

    In trading, that's where AI and advanced math come in – taking away our biases and identifying inefficiencies humans miss.

    Can machine learning also help in March Madness?

    “The greater the uncertainty, the bigger the gap between what you can measure and what matters, the more you should watch out for overfitting – that is, the more you should prefer simplicity” – Tom Griffiths

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    The data is there. Over 100,000 NCAA regular season games were played over the last 25+ years, and we generally have plenty of statistics about the teams for each season. There are plenty of questions to be asked on that data that may add an extra edge. 

    That being said, people have tried before with mediocre success. It's hard to overcome the intangibles of sports – hustle, the crowd, momentum – and it's hard to overcome 1 in 9.2 quintillion odds. 

    Two lessons can be learned from this:

    1. People aren't as good at prediction as they predict they are.
    2. Machine Learning isn't a one-size-fits-all answer to all your problems

     

    Something to think about. 

  • Celebrating 30 Years of the Internet [Infographic]

    "The internet is becoming the town square for the global village of tomorrow" – Bill Gates

    We take the internet for granted.  Honestly, we take a lot for granted.

    Do you remember a time before cell phones, before the internet, before all these science fiction realities.  Even when the internet started … do you remember dial-up … or when you needed dial-up for each individual site?

    In March of 1989, Tim Berners-Lee published “Information Management: A Proposal” which outlined his vision for what would soon become the World Wide Web. March 12th is the official anniversary.

    In celebration of 30 years of the internet, here’s an infographic on the timeline. Click to see the full thing. 

     

    Edit_AppInstitute-30yearsofwww-infographic
     via AppInstitute

    Think of the impact of that one paper has on so many aspects of our life. 

     

    Information Gathering 

    I remember being in law school, going to the library and scanning through microfiche (or actual books) to study or do research.

    I remember reading encyclopedias (and photocopying relevant articles). 

    I remember paying for newsletters that were mailed to me (or paying extra for fax delivery).

    Having access to more data or faster delivery was a huge advantage.

    Today, you have all the information you could ever ask for at the tip of your fingers … Google and Wikipedia are just the tip of the iceberg.

    There is almost too much information now.  It is hard to separate the signal from the noise.  It seems like anyone can find justification for almost anything.  The result is lots of data, but too little knowledge.

    Part of what is needed is a way to help people make better decisions about what to trust, what it means, and what to use.

     

    Social Interaction

    People record every moment, every intimate detail of their lives online, contrasted by a fear of strangers and letting children roam. 

    While riding around the neighborhood on your bike to see if your friends could come out to play is by no means outlawed – it does seem passé. 

    Chat rooms, Facebook, Online multi-player … many people's key friendships are born and kept online. 

    I remember my son, 13 years old at the time,  sending 10,000+ texts a month and thinking it was a phase. I was wrong. 

    The internet has radically changed the structure of relationships – for better, or often worse. 

     

    Privacy ( … or the lack of it)

    One of the biggest changes is that we as individuals have become productized. We take advantage of all these free resources at the cost of being pixeled and cookied into oblivion. We've chosen convenience over safety. 

    Remember, if you’re not paying for a product – you are the product.

    Little bits of our private information, demographics, and psychographics are sold to advertisers to create smarter ads, new offers, and realistically we have very little control over that.

    It’s been proven time and time again that these giants like Google and Facebook will find ways to sneak your data to advertisers even when it’s “illegal” with a slap on the wrist.

    Data protection is a massive issue not only for corporations but for individuals. While many companies are trying to manage your privacy while still monetizing your data, there are just as many companies who couldn’t care less.

    The GPDR – while frustrating for many – is a step towards protecting individuals.

    Every action has a reaction, and every benefit has a cost. The internet is an amazing tool – but it can also be a weapon. 

     

    What will the next 30 years of the internet hold?

    "The Internet will disappear. There will be so many IP addresses, so many devices, sensors, things that you are wearing, things that you are interacting with, that you won't even sense it. It will be part of your presence all the time. Imagine you walk into a room, and the room is dynamic. And with your permission and all of that, you are interacting with the things going on in the room." — Eric Schmidt

    It has been 30 years since inception, and there's radical growth. 

    We’ve gone from bit speeds to megabyte speeds. We’ve gone from crappy-quality video taking hours to download to streaming HD quality video live.

    How do imagine that the internet will evolve?

    What influence do you think the Internet of Things will have?

    It’s hard to foresee how innovation and regulation will change the internet, but it’s clear there will be change.

    We live in exciting times!

  • Here Are Some Links For Your Weekly Reading – March 17th, 2019

    The US grounded the Boeing 737 Max after similarities between two crashes. It's good they did, safety first, but it definitely caused some headaches coming back from Saskatchewan.  There's an interesting thought experiment here to understand the complexities that the airlines had to solve.

    Imagine a 737 holds 200 people and does 4 or 5 flights a day. American has 24 737s in its fleet. That means each day ~24,000 people are displaced on American Airlines alone. They're replacing those planes with smaller regional jets – meaning more flights, more small airports, and more delays. The logistical/supply chain dynamics are a nightmare. 

     

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

    Lighter Links:

     
     

    Trading Links:

  • Avoiding Death By Snowmobile: Part II

    Last year, I recounted my humbling via snowmobile. 

    I traveled to Saskatchewan, Canada and "sledded" with people who had been doing it since birth. 

    When I got there, everyone was in great spirits. Apparently, this is a sport done with day drinking, lots of laughter, and semi-reckless abandon.

    We split into groups: Insane, Merely Crazy, and the Turtles. I figured I was relatively safe with the Turtles … I was wrong. 

     

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    The machines are capable of gliding over the snow at speeds exceeding 120 miles per hour.  I wasn't going nearly that fast … but the beasts were harder to tame than I expected. 

    Despite crashing numerous times, totaling a sled, and being sore for weeks … I had so much fun on year one that I brought my son with me on year two. 

     

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    Last year, I recognized 2 things: 

    1. Humans are deletion creatures. That means they can hold seven things (plus or minus two) in their memory. While they were focused on fun, I was focused on how to stay on the sled
    2. You're supposed to stay on the sled, and leaning into the turn helps you do that … who'd've thunk it? 

    This year I learned a couple more: 

    1. People don't forget. Everyone remembered my less than skillful sledding. 
    2. Youth is wasted on the young. My son picked it up fast and was speeding as if he'd been on a sled his whole life (despite falls that would cause people with skulls that no longer have soft spots to proceed with caution). 
    3. When you find the right group of people, the fun gets more fun, and struggles seem less challenging. 

     

    While sledding is fun, it's the people that make the trip. 

    Likewise, it's the people you take with you through life that makes it so worth it. 

    Oh, and I did suck less this time … Progress!

     

  • Here Are Some Links For Your Weekly Reading – March 10th, 2019

    I was in Toronto this week – and it was COLD!

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    Daylight Savings Time just springed forward … and here in Texas, it is getting warmer.  Perhaps winter is over?

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

     

    Lighter Links

     

  • The Too True Story of “The Nail in a Fence”

    In the course of business this week, I noticed that certain comments and interactions triggered hurt feelings.

    Stress, high expectations, and a narrow focus often result in hurt feelings.

    Of course, I understand that a little conflict is normal (or even beneficial).  Yet, I guess I'm getting a little softer as I get older.

    It doesn't take "intent" to hurt someone's feelings (or to have your feelings hurt).  It can happen by a simple disagreement, a stubborn point of view, a dismissive comment, or even a judgmental look.

    Sometimes, the catalyst can be part of effective strategies.  And normally, people just brush off these smaller-scale disturbances with the excuse with: "I was angry"; or “I’m only human”; or "There is no place for cry-babies in business."  Nevertheless, it’s important to remember that we should strive to be better.

    To drive the point home further, here is the story of "The Nail in a Fence."  While you might have seen it before, it is worth reading again. 

     

    Nail In The Fence:

     

    Nail in woodThere once was a little boy who had a bad temper. His Father gave him a bag of nails and told him that every time he lost his temper, he must hammer a nail into the back of the fence.

    The first day the boy had driven 37 nails into the fence. Over the next few weeks, as he learned to control his anger, the number of nails hammered daily gradually dwindled down.

    He discovered it was easier to hold his temper than to drive those nails into the fence.

    Finally the day came when the boy didn't lose his temper at all. He told his father about it; and the father suggested that the boy now pull out one nail for each day that he was able to hold his temper.

    The days passed and the young boy was finally able to tell his father that all the nails were gone.

    The father took his son by the hand and led him to the fence. He said, "You have done well, my son, but look at the holes in the fence. The fence will never be the same. When you say things in anger, they leave a scar just like this one. You can put a knife in a man and draw it out. It won't matter how many times you say I'm sorry, the wound is still there."

    A verbal wound is as bad as a physical one.

     

    This story is a reminder to be mindful of cause and intent.  Hope it helps.

    Causing pain to others is one problem.  Causing pain to ourselves is another.

    Feeling and stoking anger is like taking poison and hoping the other person suffers.  It isn't efficient or practical.

    So, what about "Forgiving"?

    It doesn't have to be forgetting.  

    Forgiving removes the valence (or charge) from a situation or memory.

    It only takes a moment to create an emotional trigger (think about how you felt when you saw a high school bully in the hallway).  It is simple, evolution and natural selection favored species that remembered and avoided danger.  It is in our DNA.  But avoidance isn't always a great strategy … especially when it is blocking the attainment of something beneficial.

    Forgiveness is a way to disable or mute the emotional trigger (this is called "collapsing an anchor" in NLP). It's also a choice to move forward.

    Forgiveness is also a release of "claim".  When we are wronged, we expect an apology, retribution, restitution, or recognition.  And until we get it, we are stuck, waiting for it.  In a sense, forgiveness releases the stuck energy and makes it available for something else (hopefully, something better).

    Forgiveness changes the route and allows you to move forward.

    And I've found that good things happen more often when you are in motion.

    Who or what do you need to forgive?

    Onwards.

  • The Relationship Between Stock Exchanges and Indices

    Last year, I wrote about how the top 16 exchanges each have a market capitalization above $1 trillion.

    That's a staggering amount of money being traded; but, how much of is it traded well?

    82% of funds trailed their respective benchmarks over 15 years, and Indexes consistently beat stock pickers. 

    With the NYSE and NASDAQ being the two biggest stock exchanges, looking at them can provide a lot of insight. The NYSE has 2058 companies, and the NASDAQ has 2588. 

     

    5212017 stock-exchanges-and-indices

    via VisualCapitalist

     

    With active managers' struggle to beat the market, many investors have moved to index-tracking funds (as of last year, investors withdrew $1.2 trillion from actively managed U.S. funds since 2007, according to Morningstar). 

    My prediction, active management becomes a lot easier with AI and machine learning. You'll be hearing more about that from us soon. 

  • Funding Fintech’s Future

    I think it’s clear that Fintech is getting a lot of attention from the press, investors, and talent.  It is a hot space!

    Here is a chart showing the Fintech companies that got the most funding recently.

     

    Worlds-most-innovative-fintech-companies-2019-5b7c

    via howmuch

    Rapidly maturing sectors are payment processing, personal finance, and blockchain/crypto.

    • Payment Processing – Stripe received $685 million in funding last year and is valued at over $20B
    • Personal Finance – This is a broad market, but we're seeing the "average joe" empowered to make smarter personal finance decisions with companies like Robinhood, Acorns, and Credit Karma. Credit Karma raised $869M and is valued at approximately $4B
    • Blockchain – While crypto is currently out of favor for many, blockchain is still an exciting prospect. Opendoor is bypassing real estate agents and brokers to disrupt the housing market. Receiving over $1B in funding last year, it is currently valued at $3.7B.

    These are the sectors getting the most Fintech funding now (with payment processing the clear leader).

    In my opinion, real disruption is brewing in the personal finance & Wall Street sectors … and funding is ramping up there as we speak.

    This Fintech sector reminds me of biotech.   Solutions have to be more mature and fully-tested before unleashing them on the public.  But winners will Win!

    Wall Street is one of the smaller sections in this infographic.  Nonetheless, I think you'll be reading a lot more about this space soon.  Here are some of the companies worth noting.

    • Symphony  does secure communications for companies like JP Morgan and Goldman Sachs. It helps with internal communication, and client-centric communication, and has various bots and apps to decrease decision time. 
    • Addepar claims to "power the global financial system".  It's a performance reporting platform meant to provide better insights, and connect assets to goals. 
    • Carta does equity management; helping private & public companies manage their cap tables, investments, and equity plans. 

    Not seen on these lists are all the smaller companies at the beginning of their innovation cycle, and the companies doing their best to stay under the radar. More competitors and more opportunities mean more reason to keep your cards close to your chest. 

    The funding cycle is always two steps behind the innovation cycle, which means ideas we've been hearing about from the likes of Gartner will be seeing increased publicity soon. 

    I think 2019  will be a great year for innovation. What about you?

  • Here Are Some Links For Your Weekly Reading – February 17th, 2019

    NASA's Mars Opportunity Rover has officially lost contact with earth after a fierce dust storm. Its last message was "My battery is getting low and it's getting dark." The rover's original mission was scheduled for 90 days … it lasted 14 years. 

     

    Opportunity_rover_2xvia XKCD

     

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

     

    Lighter Links

     

  • Presenting at IBM Think! 2019

    This week, I spoke on stage at IBM's Think! 2019 conference in San Francisco. Our topic was "Gaining a Financial Edge through Fast Data and Analytics."  I think it went well (both the presentation and our exposure to lots of useful technology, talent, and opportunities).   

    Moscone Center was filled with people clamoring for information about artificial intelligence, big data, and flexible computing (think of it as being able to do what you want locally, in the cloud, or with a hybrid cloud … or through hardware or software).  That means solutions are becoming independent of how they are produced, delivered, or consumed.

    Here is a picture of our team there.

     

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    Another cool topic that got lots of attention was Quantum Computing.  Here is a picture of me with one of the first Quantum Computers.

     

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    Pretty Cool!  But, remember, the hype cycle precedes the adoption and benefits cycle.  This will be an interesting decade.

    The conference was in San Francisco.   That is where my oldest son lives. Lucky for him, the most romantic Valentine's Day dinner is one spent with your dad right?

     

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    I thought it was fun.  For them, at least there was Absinthe involved to dull the pain.