Market Commentary

  • Changing the Course of History

    A little over a week ago, a deepfake of Ukrainian President Volodymyr Zelenskyy was used to try and convince Ukraine's soldiers to lay down their arms and surrender against Russia.  On top of being shared on social media, hackers got it onto news sites and a TV ticker as well. 

    While it's not explicitly known that Russia did this – there's a long history of Russian cyberwarfare, including many instances of media manipulation. 

    Luckily, while the lip-sync was okay in this video, several cues helped us know it was fake. 

    Unfortunately, this is only the tip of the iceberg.  Many deepfakes aren't as easy to discern.  Consequently, as we fight wars (both physical and cultural), manipulated videos will increasingly alter both perceptions and reality. 

    Even when proven to be fake, the damage can persist.  Some people might believe it anyway … while others may begin distrusting all videos from leaders as potential misinformation. 

    That being said, not all deepfakes are malicious, and the potential for the technology is attractive.  Production companies are already using it to splice in actors who might have aged or died into scenes in movies.  Deepfake technology can also be used to allow a celebrity to sell their likeness without having to waste their time doing all the filming necessary to produce the intended finished product. 

    Deepfake technology also allows us to create glimpses into potential pasts or futures.  For example, On July 20th, 1969, Neil Armstrong and Buzz Aldrin landed safely on the moon.  They then returned to Earth safely as well.   What if they didn't?  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 "fake history" speech starts around the 4:20 mark. 

    "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

     

    MIT via In Event Of Moon Disaster

    Conclusion

    “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

    In an ideal world, history would be objective; facts about what happened, unencumbered by the bias of society, or the victor, the narrator, etc.  On some level, however, history is written by the winners.  Think about it … perceived "truth" is shaped by the bias and perspectives of the chronicler.

    Consequently, history (as we know it) is subjective.  The narrative shifts to support the needs of the society that's reporting it. 

    The Cold War with the Soviet Union was a great example.  During the war, immediately thereafter, and even today, the interpretation of what transpired has repeatedly changed (both here and there).  The truth is that we are uncertain about what we are certain about.

    But while that was one example, to a certain degree, we can see this type of phenomenon everywhere.  Yes, we're even seeing it again with Russia.

    But it runs deeper than cyber-warfare.  News stations color the story told based on whether they're red or blue, and the internet is quick to jump on a bandwagon even if the information is hearsay.  The goal is attention rather than truth.

    Media disinformation 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. 

    As deepfakes get better, we'll likely get better at detecting them.  But it's a cat-and-mouse game with no end in sight.  Signaling Theory posits that signalers evolve to become better at manipulating receivers, while receivers become more resistant to manipulation. 

    I'm excited about the possibilities of technology, even though new capabilities present us with both promise and peril. 

    Meanwhile, "Change" and "Human Nature" remain constant.

    And so we go.

  • Cat Poop Coffee … Yum!

    My wife is currently in Indonesia – and inflation is rising.  What a perfect time to revisit the world’s most expensive coffee. 

    Indonesia is famous for coffee.  For example, “Sumatra” is their biggest island – with “Java” coming in close behind (and both are synonymous with coffee).

    They also make one of the most expensive coffees in the world … Luwak Coffee.

    It is a very particular coffee, created using a very peculiar process.

    In traditional coffee production, the cherries are harvested, and the beans are extracted, before being shipped to a roaster, ground into a pulp, and brewed by a barista at your local Starbucks.

    In contrast, with Luwak coffee, something different happens.

    The coffee cherries are harvested by wild animals.

    Specifically, they’re harvested by the Asian Palm Civet, a small, cat-like animal that absolutely loves the taste of coffee cherries.

    But, if the civets eat the cherries, how can they still be used to make coffee?

    Here comes the gross part—the civets eat the coffee cherries, but their digestive tract can’t effectively process the beans, only the flesh surrounding them.

    When the partially digested, partially fermented beans are eventually excreted, coffee producers harvest them.  The beans are then cleaned, roasted, and used to make astonishingly expensive (“with retail prices reaching up to $1300 per kilogram”) coffee.

    Now, is the coffee that mind-blowing?

    No, not really.  In fact, many critics will openly call it bad coffee, or as Tim Carman, food writer for the Washington Post put it, “It tasted just like…Folgers.  Stale.  Lifeless.  Petrified dinosaur droppings steeped in bathtub water.  I couldn’t finish it.”

    To be fair, the Luwak coffee industry is not really about coffee … it is about an experience.  When I toured a plantation near Ubud, Bali, a smiling tour guide greeted and led me on an in-depth exploration of the forested property, where I was allowed to immerse myself in the various spices, roots, beans, and civets used to produce this one-of-a-kind coffee.  

    Here is a video I shot of the process.

     

    If you think about it, I paid a premium to drink exotic cat poop coffee.  Kind of strange!

    I wouldn’t drink coffee made from people’s poop (or even domestic cat poop).

    It’s the story that allows this not-so-awesome coffee to fetch awesome prices.  People are paying for the experience, not the commodity itself.

    The same is true when you buy Starbucks.  The coffee at 7-Eleven is cheaper – and Consumer Reports tell us that McDonald’s coffee is better.

    Nonetheless, I’d still rather drink at Starbucks.

    We live in an Experience Economy.

  • A Look at Codebases

    When I was a child, NASA got to the Moon with computers much less sophisticated than those we now keep in our pockets.

    At that time, when somebody used the term "computers," they were probably referring to people doing math.  The idea that businesses or individuals would use computing devices, as we do now, was far-fetched science fiction.

    Recently, I shared an article on the growing "compute" calculations used in machine learning.  We showed that the amount of compute used in machine learning has doubled every six months since 2010, with today's largest models using datasets up to 1,900,000,000,000 points.

    This week, I want to take a look at lines of code.  Think of that as a loose proxy showing how sophisticated software is becoming.

     

    Screen Shot 2022-03-11 at 4.31.30 PMvia informationisbeautiful

    As you go through the chart, you'll see that in the early 2000's we had software with up to approximately twenty-five million lines of code.  Meanwhile, today, the average car uses one hundred million, and Google uses two billion lines of code across their internet services. 

    For context, if you count DNA as code, the human genome has 3.3 billion lines of code.  So, while technology has increased massively – we're still not close to emulating the complexity of humanity. 

    Another thing to consider is that when computers had tighter memory constraints, coders had to be deliberate about how they used each line of code or variable.  They found hacks and workarounds to make a lot out of a little.

    However, with an abundance of memory and processing power, software can get bloated as lazy (or lesser) programmers get by with inefficient code.  Consequently, not all the increase in size results from increasing complexity – some of it is the result of lackadaisical programming or more forgiving development platforms.

    In better-managed products, they consider whether the code is working as intended as well as reasonable resource usage. 

    In our internal development, we look to build modular code that allows us to re-use equations, techniques, and resources.  We look at our platform as a collection of evolving components. 

    As the cost and practicality of bigger systems become more manageable, we can use our intellectual property assets differently than before. 

    For example, a "trading system" doesn't have to trade profitably to be valuable anymore.  It can be used as a "sensor" that generates useful information for other parts of the system. It helps us move closer to what I like to call, digital omniscience. 

    As a result of increased capabilities and capacities, we can use older and less capable components to inform better decision-making.

    In the past, computing constraints limited us to use only our most recent system at the highest layer of our framework.

    We now have more ways to win.

    But, bigger isn't always better – and applying constraints can encourage creativity.

    Nonetheless, as technology continues to skyrocket, so will the applications and our expectations about what they can do for us.

    We live in exciting times … Onwards!

  • Artificial Intelligence Is Great, Artificial Stupidity Is Scary

    When I first got out of Law School in the 1980s, "professionals" didn't type … that was your assistant's job (or the "typing pool," which was a real thing too).

    At that point, most people couldn't have imagined what computers and software are capable of now.  And if you tried to tell people how pervasive computers and 'typing' would be … they would have thought that you were delusional.

    My career has spanned a series of cycles where I was able to imagine what advanced tech would enable (and how businesses would have to change to best leverage those new capabilities).

    Malcolm Gladwell suggests that it takes 10,000 hours of focus and effort for someone to become an expert at something.  While that is not necessarily true or accurate, it's still a helpful heuristic.

    Today, we can do research that took humans 10,000 hours in the time it took you to read this sentence.  Moreover, technology doesn't forget what it's learned – As a result, technological memory is much better than yours or mine.  Consequently, the type and quality of decisions, inferences, and actions are better as well.  Ultimately, we will leverage the increased speed, capacity, and capabilities of autonomous platforms.  While that is easy to anticipate, the consequences of these discontinuous innovations are hard to predict.  Things often take longer to happen than you would think.  But, when they do, the consequences are often more significant and more far-reaching than anticipated.

    Still, technology isn't a cure-all.  Many people miss out on the benefits of A.I. and technology for the same reasons they didn't master the hobbies they picked up as an adolescent. 

    I shot a video discussing how to use technology to create a sustainable creative advantage.  Check it out. 

     

     

    Many people recognize a "cool" new technology (like A.I.), but they underestimate the level of commitment and effort that mastery takes. 

    When using A.I. and high-performance computing, you need to ask the same questions you ask yourself about your ultimate purpose. 

    • What's my goal?
    • What do I (or my systems) need to learn to accomplish my goal?
    • What are the best ways to achieve that goal (or something better)?

    Too many companies are focused on A.I. as if that is the goal.  A.I. is simply a tool.  As I mentioned in the video, you must define the problem the right way in order to find an optimal solution. 

    Artificial Intelligence is a game-changer – so you have to approach it as such. 

    Know your mission and your strategy, recognize what you're committing to, set it as a compass heading and make deliberate movement in that direction. 

    I end the video by saying, "Wisdom comes from making finer distinctions.  So, it is an iterative and recursive process… but it is also evolutionary.  And frankly, that is extraordinarily exciting!"

    I hope you agree.

    Onwards!

  • A Look At Gas Prices

    Gas prices feel very high right now … but are they? Well, obviously, yes. But, the degree is less than most of us would guess. 

    H5fgxoifi3k81schi854 via usinflationcalculator (Interactive Version)

    This chart shows the real cost of gas based on inflation. It also goes back to 1992. It makes a pretty obvious case for inflation being the real culprit. That being said, the rise is still worth watching. On the one hand, the rise in gas prices isn't unprecedented; on the other hand, a surge this sharp has only happened five times in the past 30 years … and it's been over a decade since the last time it happened.

  • Doom And Gloom From Charlie Munger

    In case inflation wasn't stressing you out enough, Berkshire Hathaway's Vice Chairman, Charlie Munger, channeled Nouriel Roubini in his tirade on the dangers of inflation. 

     

    via Yahoo Finance

    For context, the CPI has inflation rising at the fastest rate in over 40 years. Meanwhile, Munger's current working hypothesis is that our currency will become worthless over the next hundred years. 

    Munger paints a dire picture – but there are a lot of "what-ifs." The infusion of cash into the economy during the pandemic certainly pushed us in a dangerous direction (despite saving the economy). However, 100 years is a long time, and there are many steps we can take as an economy to slow that snowball. One of those includes the continuing scale of innovation. As new technologies arise, and the value chain of industries changes, so does the economics of our nation. 

  • The Future of Spaceflight

    When I talk about exponential technologies, I almost always end up discussing Tesla and SpaceX. 

    Elon Musk is an interesting guy.

    220220 Elon

    Whether they end up doing everything they say they're going to, his companies massively accelerate the rate at which capabilities turn into products and platforms for future growth.

    I recently shared the Elon quote: "Stop being patient and start asking yourself, how do I accomplish my 10-year plan in 6 months?  You'll probably fail, but you'll be a lot further along than the person who simply accepted it was going to take 10 years!"

    I don't know if he really said it.  Nonetheless, it sounds like him … and I agree with the sentiment.

    The New Space Race.

    When I was young, the Space Race captured the heart and souls of Americans.  But, for the past few decades, it was in the background.  Recently, that has changed.  The space race is getting hot again.  Resources are pouring into this area, and SpaceX is leading the pack. 

    In 2018, I shared excitement that the boosters he used were reusable.  Today, people are talking about how the newest ship, Starship, could render other rocket programs obsolete. 

     

    Cost-of-space-flight-chartvia visualcapitalist

     

    While there's always room for competition, I can see many programs falling far behind if they haven't been focusing on reusability.  Assuming Starship delivers on its promises (keeping in mind that Elon is often over-confident about his timeline), it will be cheaper and more versatile than anything out there. 

    I think it's naive to assume that other companies aren't doing interesting things … but by the time they release anything comparable, it's possible that SpaceX will already dominate the market. 

    The economics of reusable rocketry isn't yet cost-effective for most potential customers, but Musk is undoubtedly moving the needle in the right direction. 

    Hopefully, he can continue to raise the expectations of both consumers and producers.  The results could be out-of-the-world.

    Right now, suborbital trips from Virgin Galactic and Blue Origin cost between 250K to 500K per trip – and trips to actual orbit cost over $50 million. 

    However, I believe the cost of space travel – and space tourism – will drop radically within my lifetime. 

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

    Even though we've only been talking about space travel, there are so many other exponential technologies that this applies to just as well.

    Onwards!

  • Here Are Some Links For Your Weekly Reading – February 13th, 2021

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

    Lighter Links:

     

    Trading Links:

  • Functional Mapping: Nature’s Desired Path

    There's a concept in design and transportation called Desire Paths. 

    The desired path is the path that users take despite the intended path by the builder of a community or application. 

    Here's a great example. 

    6tj18p093vb81Reddit via itstartswithani

    And, here's a whole community forum focused on desire paths. 

    It's often easier to take advantage of human nature … or just nature … than fight against it. 

    To that effect, I shot a short video on how this relates to your business and tech adoption. I call it functional mapping. Check it out. 

     

    Understanding the natural path for both technology and your clients makes it easier to understand and anticipate the capabilities, constraints, and milestones that define your path forward.   That means you actually have to understand the different types of users and what they expect to do.

    6a00e5502e47b28833026bded38d1b200c-600wi

    Each stage is really about the opportunity to scale desired capabilities and automation.

    It isn't really about building the technology, rather, it is about supporting the desire.

    You don’t have to get it right.  You just have to create momentum in the right direction.   Meaning, if you understand what is coming, you don't have to build it … but you should figure out where you want to build something that will move things in the right direction.

    You’ve probably heard me talk about how Capabilities become Prototypes. Then Prototypes become Products.  And, ultimately, Products become Platforms.

    This model is fractal.  That means it works on many levels of magnification or iteration.

    What first looks like a product is later seen as a prototype for something bigger.

    SpaceX's goal to get to Mars feels like their North Star right now … but once it's achieved, it becomes the foundation for new goals.

    This Framework helps you validate capabilities before sinking resources into them. 

    It helps you anticipate which potential outcomes you want to accelerate.  Rather than simply figuring out what the easiest next step is … you have to figure out which path is the best next step to your desired outcome.

    The world is changing fast! Hope you're riding the wave instead of getting caught in the riptide!

  • The Future of the Blockchain

    Last week, I talked about market performance in 2021.  A decent portion of that article talked about cryptocurrency and the recent downturn (after a stellar 2021).  I'm a skeptic by nature, so it's hard for me to get behind any specific coin (even Bitcoin) at this point in time.

    This week, I had a conversation with good friends, including John Raymonds, about the topic as well.  John is much more active in the space and brought up some good points.  Something I noticed was how the level of discussion is starting to elevate and mature. People are beginning to think about secondary and tertiary value propositions. The conversation even made me think about repurposing some of our underutilized hardware in our server room for some crypto-related purposes.

    So, today, I want to focus on a different aspect of the equation … the potential value propositions of cryptocurrency as a technology – and the blockchain. 

    To start, I want to talk about Industrial Revolutions.  In part because we're at another inflection point. 

    A Look at Industrial Revolutions

    The Industrial Revolution has two phases: one material, the other social; one concerning the making of things, the other concerning the making of men. - Charles A. Beard

    There are several turning points in our history where the world changed forever.  Former paradigms and realities became relics of a bygone era. 

    Tomorrow's workforce will require different skills and face different challenges than we do today.  You can consider this the Fourth Industrial Revolution.  Compare today's changes to our previous industrial revolutions. 

    Each revolution shared multiple similarities.  They were disruptive.  They were centered on technological innovation.  They created concatenating socio-cultural impacts.

    Since most of us remember the third revolution, let's spend some time on that. 

    Here's a map of the entire "internet" in 1973. 

     

    6a00e5502e47b2883301bb096809ce970d-600wi

    Reddit via @WorkerGnome.

    Most of us didn't use the internet at this point, but you probably remember Web1 (static HTML pages, a 5-minute download to view a 3Mb picture, and of course … waiting for a website to load over the dialup connection before you could read it).  It was still amazing.

    Then Web 2.0 came, and so did everything else we now associate with the internet; Facebook, YouTube, ubiquitous porn sites, Google.  But, with Web 2.0 also came user tracking, advertising, and we became the "product."  Remember, you're not the customers of those platforms – advertisers are.  And if you're not the customer, you're the product. And when you're not the customer, there's no reason for the platforms not to censor your thoughts to control the narrative. 

    Putting You In Control

    Web3 (and the blockchain and its reliant technologies) brings the power back to the people. 

    Primarily due to decentralized access with equal treatment for everyone.  Governments are already being pressured by Bitcoin and other cryptocurrencies.  But so are banks and brokerages, due to smart contracts and Ethereum.  Soon, even VCs will be impacted due to OHM fork treasuries or initial DEX offerings. 

    As Web3 gets more mature, so will decentralized finance.  Meaning, big banks, governments, ISPs, and more will have less control over the applications and uses of the technology. 

    If handled correctly, that means competition can discourage the productization of your digital presence.

    Removing Barriers

    There are many practical ways this would impact your life – but let's look at one that's already happening. 

    El Salvador recently made Bitcoin legal tender.  Talking about all the reasons this happened is beyond the scope of this article, but it does make El Salvador an excellent case study for the possibilities. 

    To start, it's now easier and quicker to buy a beer there (with Bitcoin) than it is in the US with cash.  It also stabilizes pricing in a civil war, because it's easy to move both in and out of the country. 

    Consequently, it also means that their currency holds its value as they travel to other places. 

    Let's take this to the extreme.  Let's say someone was to convert all their net worth to Bitcoin, and put it in a hardware wallet.  They could conceivably memorize their seed phrase, throw the wallet in a fire, and fly to El Salvador with only the clothes on their back.  After finding a way to scrounge up the money to buy another hardware wallet through random acts of labor … they would be in a completely new country with their entire net worth and no other footprint.  It's scary – especially for governments and their taxing authority.  But, it creates a new set of potentials and freedom.

    Now, take it a step further.  What would the world look like if you had all your health data, insurance, etc., with you anywhere you travel?  The world becomes your oyster in a way that was almost impossible before. 

    And that's only the beginning. 

    But, to bring it back to my skepticism again, there are a lot of roadblocks, inferences, and time in between today and the decentralization of the internet and finance.  And for now, that thought experiment only really works if you're willing to move to El Salvador.  The larger countries seem to be doing everything they can to discourage the adoption of cryptocurrencies. Though I think the smaller countries view this as a chance to become one of the new hubs of the world.

    However, maybe it's time for this quote by Elon Musk: 

    "Stop being patient and start asking yourself, how do I accomplish my 10 year plan in 6 months? You will probably fail but you will be a lot further ahead than the person who simply accepted it was going to take 10 years."