Current Affairs

  • Creating Your Annual Plan

    It is that time of year, again.  We are in the midst of our annual planning for 2023.

    The process is relatively straightforward.  We start by deciding what the company's three highest priority goals are. With those goals as the base, each department (and manager) creates a big three that represents what they can do to reach the company's big three. From there we dive into quarterly rocks, SMARTs (goals that are specific, measurable, actionable, relevant, and timed), as well as the explicit tactical steps it will take to accomplish what we set out to achieve. 

    The meetings are going well.  There is a lot of back-and-forth idea sharing, negotiating, and priority setting.

    Nonetheless, I had a sneaking suspicion that sometimes what seemed like a dialogue, was really multiple monologues. 

    The reason for the disconnect (or misconnect) was that the participants had fundamental beliefs, at a higher level than we were discussing, that were at odds with each other. 

    I shot two videos that I think help teams get to alignment.

    Thinking About Your Thinking

    The first discusses several techniques to enhance your decision-making. 

     

    One of the ideas is something called "Think, Feel, Know." Basically, it explains that you have to deal with superficial thoughts before getting to deeper feelings. Then, you have to deal with those feelings before you get to "knowing". 

    Another technique discussed in the video involves adding time to look for "insights" after working on something.  Those insights are often the seeds for something greater.

    Chunking Higher

    The second is on how to chunk high enough that you can start from a place of agreement.  Exploring distinctions from there is relatively easy.

    I'll add one more concept for good measure … Start with the end in mind. Alignment happens in stages.  Before you can truly get alignment on what to do next, you have to get agreement and alignment about where you are and where you want to go.

    With that said, another important component of meaningful communication is a shared understanding of a common language.  Words can mean different things to different people.  Simply agreeing on a "word" is different than agreeing on a common meaning.

    To summarize these concepts:

    1. Make sure you have a common language
    2. Begin with the end in mind
    3. Start with the highest level of agreement
    4. Make distinctions from there

    Hope that helps. 

  • Happy Thanksgiving 2022!

    I hope you all had a Happy Thanksgiving! 

    This year, we continued our tradition of going to the Cowboys game – then having a big dinner together afterward.

    I got to spend time with both my sons and my first grandchild (who didn’t seem to want her picture taken while there was so many other things to investigate).

     

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    Thanksgiving is a reminder to be grateful for the blessings in your life – big and small. But it's also a time to be thankful for the challenges in your life – and the opportunities for growth.

    Often, when I think about what I want, the first thing I think of is what I don't want. Similarly, when I think about what's going well (or something worthy of being thankful for), I first think about what has been difficult or isn't above minimum standards yet.  Some things change quickly.  Apparently, human nature isn't one of them.

    Challenges are often hidden gold mines. Instead of thinking about them being obstacles for you, recognize that getting past them creates an obstacle for competitors. In other words, figuring out a strategy to achieve these lofty goals creates a new status quo and a sustainable competitive advantage.

    At Capitalogix, we often talk about "finding a way," "creating breakthroughs," and "setting new standards."  The reason is that most things an innovator wants are just outside their current capabilities (otherwise, they'd already have them).  

    Dealing with this on a daily basis requires a resilient mindset and the ability to be comfortable with being uncomfortable. 

    Having no problems either means you're blind to your flaws or aren't playing a big enough game (which is a problem in itself). 

    So, I am thankful for my health, my family and friends, and the quality of my life. But, I am also thankful for the stress, the challenges, and the opportunity to face a continually better class of challenges that forge a path to a bigger future.

    Happy Thanksgiving!

  • What’s The Dollar Milkshake Theory?

    Right now, the US Dollar is outperforming other currencies – in part, because it's the Reserve Currency.

    image from econofact.org

    via Econofact

    But, that's not necessarily a good thing.

    One possible occurrence of this is called the Dollar Milkshake Theory.

    It purports that the US dollar will suck up liquidity from the other currencies, creating a chain of events that will drive the US dollar even higher. Unfortunately, this increases the risk of debt defaults. Eventually, the dollar ends up drinking the liquidity from the entire world economy.

    Think about it. If you're getting negative yields on your two-year bonds from other countries, after a certain point you would sell those investments and switch to US two-year treasury bonds. It's a slippery slope from there. 

    If this is true, then it also has dangerous implications for crypto – which is already in peril after the FTX controversy. 

    So, the question becomes, does the dollar's strength truly help us? What about the global economy? What do you think?

  • The Social Media Universe

    We recently dove into what's happening at Twitter. Since that article, Elon wrote an ultimatum e-mail to his employees saying that if they wanted to stay, they would have to work harder and longer than before … and that they would get three months severance if they chose to leave. In a result that might have surprised Elon, thousands of Twitter employees quit.  In response, Elon locked the doors, cut badge access, and attempted some damage control.

    On top of that, you also have Meta having its own issues. 

    With that, it's probably a good time to take a look at the social media landscape.  Here is an infographic that shows the relative popularity of various social media properties. 

     

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    via visualcapitalist

    If you rank the top 10 social media by monthly users, Twitter isn't even on the list. Nor is it on the list for driving clicks. 

    Meta and YouTube top the list – by a mile. 

    As well, there's a growing network of smaller social media vying for a spot in the global paradigm, like Parler, Mastodon, or even Onlyfans.

    Meaning there's a lot more chaos in the system. 

    As always, chaos creates opportunity – in this case, both for new media and for brands to capitalize on the change in trends. 

    The question is, will Facebook and Twitter survive the storm, and if not, what will take their place?

  • What’s Up With Twitter?

    Everyone knows that Elon Musk was sued by Twitter and 'forced' to buy Twitter for $44B.  Since then, the now-private company has made a lot of confusing decisions. 

    To start, Musk publicly announced that the company was hemorrhaging money.  To try and remedy this, he began by firing approximately half the employees.  Key executives were fired.  Later, many more executives left on their own.  After the massive exodus, Elon supposedly reached out to some former employees asking them to come back.  He also ended remote work for employees. 

    In an attempt to increase the company's profitability, he announced Twitter Blue, a paid subscription service that would give you a checkmark, and push your content to the top of users' feeds. 

    Screen Shot 2022-11-11 at 5.54.04 PMvia twitter

    Unfortunately, users were quick to abuse the new verification system by pretending to be public figures and even public companies.  As a result, there was real tangible damage to stock prices. 

    That-fake-verified-tweet-cost-eli-lilly-billions-v0-txbw9br3edz91
     via Twitter

    Eli Lilly's drop also brought down its competitors.  Other companies got hit, including Lockheed Martin. 

    Do you think those are the most influential 8 dollars ever spent in history?

    As a result of the turmoil, advertisers are leaving Twitter in droves, and Twitter has paused Twitter Blue in America – though it remains up in some different geographies. 

    On the surface, it looks like Twitter is being run into the ground.  It seems like Musk is throwing a lot of darts at the board and seeing what sticks.  He said as much when he promised that Twitter would do many dumb things as part of his strategy to innovate and find smart things to do.

    Are the foibles simply the cost of the innovation needed to revitalize the company … or signs of trouble for Twitter's future?

    Even though I'm prone to bet on Musk, I think it's too early to believe you can predict the outcome.

    What do you think?

  • How To Handle Scary Times

    The last few weeks have been pretty volatile in the markets.  OPEC reduced oil production by 2 million barrels a day, the Dow saw its worst day since 2020, the British PM, Liz Truss, resigned after only six weeks, and currencies around the world (including the Pound) are dropping precipitously in value. 

    With markets making new lows and volatility shaking out investors in both directions, I thought this would be an excellent time to talk about coping with losses and managing your anxieties during "scary times." I last shared this at the apex of COVID fear … and it's just as relevant today. 

    The Anxiety Antidote

    "When the trough gets smaller … the pigs get meaner." - Dan Sullivan

    Many people are suffering from "I should have …", or "if I would have …", or "if I could have …" thoughts.

    The problem is that thoughts like those create more stress and distraction.  They are a lens focused on loss, difficulties, past events, things that are missing, 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 its participants… people tend to get paralyzed during scary times like these.

    But it's not the economy that makes people feel paralyzed.  People feel paralyzed because of their reactions and their beliefs about the economy.  Your perceptions become your reality. 

    A little examination reveals that most fear is based on a "general" trigger rather than a "specific" trigger.  In other words, people are afraid of all the things that could happen and are paralyzed by the sheer scope of possibilities.  These things don't even have to be probabilities in order 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 challenging 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, your spirit, and your character.  Treat this whole period of challenge as a time when you can make your greatest progress as a human being.

    Forget about events; focus on your responses.

    When things are going well, many people think they are in control of 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.  Any period when things are uncertain is an excellent time to focus all of your attention and energy on being creatively responsive to all of the unpredictable events that lie 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 take advantage of every resource that is immediately available in order to achieve as many small results and make as much daily progress as possible.  Work with every resource and opportunity at hand, and your confidence will continually grow.

    Forget about your complaints, focus on your gratitude.

    When times get tough, everyone has to make a fundamental decision: to complain or to 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 that you are grateful for, communicate this, and open yourself each day to the best possible consequences.

     Click here to download the full PDF version.

    Final Thoughts

    The VIX (Cboe's Volatility Index) is regarded as the "Fear Index".  While we saw spikes in early October, numbers are significantly lower than the spikes in 2020. 

    image from i.imgur.com

    But, numbers have remained higher than pre-pandemic.  To me, this shows how uncertain and anxious the average "trader" is with various global trends.  We can discuss all the long or short-term causes of the rises and falls of markets, but I don't think it does much good.  I let the algorithms worry about those.

    I sound like a broken record, but volatility is the new normal.

    • 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 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 shorter periods 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 now take 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. 

    There's a difference between investing and trading. On some level, I believe some humans can still invest well (assuming that they do the research, find an edge, and minimize the fear, greed, and discretionary mistakes that negatively impact results.  However, for most people, believing that they can trade (personally) is dangerous. There are simply too many things to pay attention to – and the ratio of signal to noise is difficult to overcome as well.

    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.

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

    Said a different way, if you don't know what your edge is, you don't have one. 

    Meanwhile, if you do know what your edge is (regardless of how scary the times are), keep calm and carry on.

  • Warren Buffet’s Current Holdings

    Warren Buffett is a legend for many reasons. Foremost among them might be that he’s one of the few investors who clearly has an edge … and has for a long time. From 1976 to 2017 his Sharpe ratio (excess return relative to risk) was approximately double the overall market. Berkshire Hathaway now has over $700 billion in assets – and is still performing well. 

    While many people consider Buffett to be an investor,  I also consider him to be an entrepreneur.

    At the age of six, he started selling gum door to door. Obviously, selling gum wasn’t the key to his path to riches.  So, how did he make his first million?  Here’s a video that explains it.

     

    via Coolnimation

    For context, he made his first million at age 30, which was in 1960. For context, a million dollars in 1960 would be worth about $8.5 million today.

    Buffet has always been honest about his bread-and-butter “trick” …  he buys quality companies at a discount and holds on to them.

    Genuine Impact recently put together a chart of Buffet's current holdings. 

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    Twitter via GenuineImpact

    There's a lot fascinating about his holdings. It is fascinating to recognize how much the world has changed – and yet how much it stayed the same. It's also interesting to see the amount of individual stocks he owns, like Apple for example (122 Billion). Despite the relative density of stocks, if you think about the capital at play, it's pretty centralized.

    Diversification is important, but for a human, too much becomes a distraction … so Buffet famously buys what he knows.

    Another Buffet hallmark, most of his stocks pay a dividend.

    I was also surprised to see that he has a bit of money in ETFs like SPY despite investing in many of the individual stocks from the S&P 500. 

    While this is an interesting graph to look at, it's important to know that this is one way to invest and might be a great way to get from a lot of money to more money – but this might not be the portfolio that works for the average investor (or you). 

    There is blood in the streets … asking “What would Warren do?” might be a great place to start.

  • Here Are Some Links For Your Weekly Reading – October 16th, 2022

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

    Lighter Links:

    Trading Links:

  • The World’s Population in 2022

    The world will reach 8 billion people at some point this year.  That is a new (and potentially scary) milestone. 

    Part of the concern stems from how fast population is growing.  Consider that the world’s population has doubled during the last 50 years … and the geographic distribution of the population has changed as well. Here is an infographic that highlights some interesting trends.

    image from www.visualcapitalist.com via visualcapitalist

    If you want to look at where the economy is going over time, you don't have to guess to wildly.  Population growth is a primary clue.  Consequently, focus on where the most children are being born – or where relatively more children are being born recently.  For example, economists don’t have to work too hard to figure out how many 18-year-olds will exist somewhere in the next 15 years – they start by counting the 3-year-olds.

    While China, India, and the U.S. top the world's population lists (with the U.S. dramatically behind China and India), many countries are creeping up the list. In fact, Lagos, Nigeria's largest city, is expected to the world's biggest megacity by the end of the century. Many of the world's highest growth rates are found in Africa. 

    As another "surprise," India is set to pass China as the world's most populous country. Meanwhile, much of Europe's populations are contracting. 

    The U.S. is still growing – but is not matching the rates of emerging countries in Asia and Africa. 

    The world is expected to reach a population of around 10 Billion before 2100.  With that said, many expect the number to decrease from there. 

    Interesting?

    How do you think this will affect the next 20 years? 

  • The Swish Machine

    Rube Goldberg machines impress me more often than not. Here's a 70-step outdoor machine that covers a lot of ground … all to put a basketball in a hoop. It took a month to create, and another month to get working. 

     

    via Creezy

    I love stuff like this because it reminds me of life. Looking backward, you see how all the pieces go together. As you're going through it, it feels random and sometimes like you're moving backward or that your effort isn't directly contributing to your goal.

    Nonetheless, it all comes together in the end.

    Onwards!