Market Commentary

  • The Heartbeat Of AI Is Still Human

    I'm proud of our team.  We have a shared sense of Mission, Values, and Purpose.

    Also, we understand that robots aren't coming for our jobs.  We're creating the robots, the AI, and the automation – and it's exciting!

    With that said, as tech becomes more capable, some will focus on the promise … while others will focus on the peril.

    We're seeing lots of hyperbolic promise and peril in the news cycle recently because of ChatGPT. Trends in technology news appear to come in cycles, with different names and topics but similar patterns. This is because, despite the constant evolution of technology and the world, human nature remains relatively unchanged.

    While browsing a library of our old content, I came across an old news story from a local news channel that discussed finding tech talent and featured Capitalogix.  Here's the article.  You can watch the video below. 

    via NBC DFW

    We are always hiring.

    It's not enough to invest in the right ideas or technologies.  You have to invest in the right people as well. 

    "Standing still is moving backward … so you don't only need new technology, you need a new level of data scientists – a new level of professional that can think about what's possible, rather than how to do what we want to do right now."

    Even though we've got an incredible edge now, I recognize that edges decay faster than ever.  The trick is to stay ahead.  

    The future is bright, and the best way to predict the future is to create it.

    Onwards!

  • Happy Chinese New Year!

    Chinese New Year happened this weekend.

    So, Gong Xi Fa Cai … which translates to "Best wishes for a prosperous New Year!"

    Often, Jennifer and I go to Indonesia to celebrate with Jen's family, but this time we stayed home and celebrated here. 

    29164via Statista

    On New Year's it is a lot easier to celebrate when you have a party to go to … The trick is finding the celebration in the first place.

    It's interesting to think about how many New Year celebrations there are.  In addition to Chinese New Year, Muslims have Hari Raya Idul Fitri; Jews have Rosh Hashanah; of course, there is January 1st (and many others).

    Which is correct?  I think the answer is all of them.  Regardless of your chosen New Year, it provides an opportunity to celebrate, share, reflect, plan, and commit to the right actions.  If you've already fallen off the wagon of your new year's resolutions, this can be your reason to get back on them. 

    As I think about it, the same principle applies to trading.  It's all a matter of perspective.

    At some level, there really isn't a correct answer as to which trading style is best.  The best technique is the one that works.  Trading styles go in and out of phase, and if you get too attached to a particular technique, you can too easily get detached from profit.  As any experienced trader can tell you, edges decay, people catch on, and trends change.

    As businesses increasingly adopt Artificial Intelligence, the way forward is becoming evident.  This involves utilizing AI to selectively activate and deactivate specific capabilities based on their effectiveness.

    In trading or business, while no single method is guaranteed to succeed, there is always a method that can be effective.  You just have to be flexible enough to know what you want and still be willing to accept something better.

  • The World’s Biggest Hedge Funds

    Hedge Funds have seen a downtick since COVID-19. There are still 15,000 of them (amounting to $4.5 Trillion in assets under management).

    Seventy percent of Hedge Funds are North American. 

    Visualcapitalist put together a guide to the 20 biggest funds. It puts the consolidation of wealth into perspective. 

    HedgeFunds_MAINNov30via visualcapitalist

    Unsurprisingly, Bridgewater tops the list by a wide margin with nearly double the assets of their closest competitor. And, despite poor performance by many funds, the overall state of the market means that many funds still saw growth. 

    The expansion of hedge funds may not always align with general market trends – and is not necessarily a reflection of the overall economic situation. However, studying and evaluating their growth and results can still be beneficial. 

  • AI Tools For Your Business

    Last week, I talked about the time value of time – and the benefit of quality peer groups. 

    On Friday, one of those peer groups spent hours talking about the promise and peril of generative AI. While some people remained skeptical or in fear of what tools like ChatGPT made possible. 

    One of the members shared an AI tool directory that I thought was worth sharing as well. It's called Futurepedia.io 

    Screen Shot 2023-01-13 at 9.39.19 PM

    via futurepedia.io

    My contribution to the discussion was brief, but it amounts to this … Nothing you're hearing about AI should scare you. It should scream opportunity.  You don't have to rush.  AI is at the beginning of a long upwards sloping cycle of impact and capability. However, AI isn't duct tape, and for most, it's not a business … it's a tool to help you create a bigger future that wasn't possible before.  Much like "internet" companies came and went in the late 1990s … yet almost every company uses the internet in ways that were unimaginable at the beginning of the cycle.

    People often get stuck searching for 'something' (often a singular goal or result). But, in their myopia, they miss the possibility of 'or something better.' 

    In my business, I'm rarely happy to settle for less than I'm aiming for … but I am willing to happily take the 'or something better'. Nonetheless, it is hard to see (let alone be open to) other targets or possibilities when you myopically focus on achieving the lesser (but specific) goal or target you initially chose to focus upon.

    So, here is a thought to ponder …

    What is opportunity, and when does it knock? It never knocks. You can wait a whole lifetime, listening, hoping, and you will hear no knocking. None at all. You are opportunity, and you must knock on the door leading to your destiny. You prepare yourself to recognize opportunity, to pursue and seize opportunity as you develop the strength of your personality, and build a self-image with which you are able to live — with your self-respect alive and growing. ~ Maxwell Maltz

    Imagine what you believe this tipping point indicates is possible personally and professionally.

    Hope that helps. 

  • How’d These 2022 Predictions Fair?

    As we brought in 2022, I asked the question:

    What's going to happen as a result of the continuing pandemic, inflation, interest rates, the ongoing supply chain issues, and the growing anxiety and unrest brewing underneath the surface of the new normal? In January, we'll get to see VC's predictions. Before that, what do you expect to happen in 2022? - How'd These 2021 Predictions Fair?

    I proceeded to share visualcapitalist's 2022 predictions: 

    6a00e5502e47b288330282e13fec75200b-600wi

    via visualcapitalist

    Well, there was undoubtedly increased volatility. 

    While the whole board isn't correct, there's a surprising amount of prediction accuracy. On some level, predictions benefit from being generally vague. Also, many of the predictions that may not seem as accurate "today" seemed more accurate at some point this year. For example, we heard a lot about NFTs in the first half of the year, and while Big Tech is currently laying off employees, there was massive growth this year. 

    What are you surprised they got right? In what areas were the predictions most off-base? Why?

    And, of course, what are your mega-trend predictions for 2023?

    Interesting stuff! 

  • OpenAI’s ChatGPT is Pretty Cool

    One of my go to claims about AI is that it can do almost anything … but it can't do everything. Specific AI systems are becoming incredibly robust. Last year, I wrote an article emphasizing how big of a jump GPT-3 was from past language processors.  I also shared a Seinfeld sketch created by GPT-3 that was so good it was almost unimpressive … it just felt like a Seinfeld sketch. 

    It feels like every week, there's a new breakthrough in pop AI. OpenAI just released ChatGPT (for free) to the public. The promise of ChatGPT is to give a cogent reply to conversational discussions. It can help you code, it can write a poem, can answer your questions, and more. The code it produces is stellar, and it can even create a convincing romantic comedy using characters from various famous shows. It does a lot very well, but it does have some failings. 

    Screen Shot 2022-12-16 at 1.09.55 PM
    ChatGPT via OpenAI

     

    GPT-3 is 100x bigger than any previous language AI model and comes pre-trained on 45TB of training text (499 billion words). It cost at least 4.6 million US dollars (some estimated as high as $12 million) to train on GPUs. The resulting model has 175 billion parameters. This was impressive enough, but ChatGPT is actually not based on GPT-3 but GPT3.5 an even more robust model that improved on the ability to answer in a way that feels natural. 

    ChatGPT can talk about almost any topic you can think of, and even create prose that feels human; however, it's not perfect yet. 

    Unfortunately, this chatbot fails in many of the same ways as its predecessors. To start, it can present false information as true because it's essentially a "stochastic parrot" basing its answers on statistical regularities in its data sources, not on an actual understanding of the world. As well, a lot of its answers can include meaningless fluff that sounds good but doesn't actually answer the question meaningfully … almost like a high schooler that forgot to read the book before writing an essay. It also can't produce ASCII art despite the advancements in AI art we've recently discussed. 

    Regardless of ChatGPTs faults, it's a very impressive piece of software. It can answer trivia like Google, write poetry and dialogue, it can pretend to engage in philosophic discussion, and it can help you correct your code or improve your writing. 

    Here's a sonnet I had it write about Artificial Intelligence:

    AI, the future's shining light,
    A force that shapes our world anew,
    A source of endless possibility,
    A tool that cuts our burdens in two.

    From language translation to deep learning,
    AI's capabilities are vast and grand,
    It helps us solve problems, find solutions,
    And gives us new ways to understand.

    But with great power comes great responsibility,
    As AI transforms our world and lives,
    We must ensure that it's used ethically,
    That it helps, rather than subverts or deprives.

    So let us embrace this technological marvel,
    And use it wisely, for the common good,
    For AI has the power to unravel
    Our deepest mysteries, as well as hurdles.

     

    It does what it is supposed to do very well. It is much more conversational and robust than previous chatbots. Obviously, it doesn't do everything well, and I doubt a chatbot will any time soon. Nonetheless, it is a step forward … and it will create ripples of progress.

    What do you think?

  • Tech Company Layoffs

    For all the drama at Twitter, they're not the only ones experiencing layoffs in the tech industry. Though, Elon is now (supposedly) trying to renege on his severance packages.  

    Tech-layoffs-2022-MAIN-1via visualcapitalist

    Meta and Amazon saw even steeper layoffs than Twitter. Is this a result of overhiring during the tech boom, or a sign of dire times? Time will tell.  

    Stated reasons are economic uncertainty and poor performance, we're also seeing unsuccessful departments downsize – like Alexa. 

    To help allay economic fears, payroll and wage data from the U.S. government are exceeding expectations, and the country’s unemployment rate is close to a half-century low. As well, tech jobs account for 3% of the workforce – and many of those laid off will be picked up by smaller companies. 

    Even if the layoffs represent a short term reaction to what tech companies are seeing, hearing, or otherwise experiencing … they won't necessarily translate to long term bad news for our economy. 

  • The Rise of the Intangible

    In the past, most profitable companies built or sold some sort of tangible product. The Titans of industry were automobile manufacturers, oil producers, land owners, etc.

    Over the past 20 years, the Titans have changed dramatically. Now, the leaders are in tech, IP, and other intangible assets. Here is a chart showing the changing weight of tangible and intangible assets as part of the S&P 500’s total assets between 1975 and 2020.

     

    Ds-tangible-vs-intangible-assets-1

     via visualcapitalist

    By VisualCapitalist’s definition, intangible assets are holdings that don’t carry any physical or financial embodiment. This includes R&D, intellectual property, and computerized information such as data and software. Today, intangibles are worth over $21 trillion.

    With technology becoming more ubiquitous, I think the trend will continue – which makes protecting your intangibles even more important. 

    Patents and trademarks are a great way to build a moat between you and your competitors. Remember, however, that anything you get a patent on becomes public knowledge – so be careful with your trade secrets. 

  • 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. 

     

    Ezgif.com-gif-maker (11)

    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?