Market Commentary

  • Where Do We Go From Here?

    Yogi Berra once said, “It's tough to make predictions, especially about the future.”

    I don’t normally post articles where I predict things. Nonetheless, I feel the need to comment on what is happening in America and what I suspect happens next.

    My political beliefs are not really important here. But for context, I am somewhat fiscally conservative and somewhat socially liberal. It puts me pretty squarely in the middle.

    As an entrepreneur and citizen, I feel compelled to find the "signal-in-the-noise" to understand and anticipate the game that’s being played, what the playing field looks like, and the best way forward.

    Divide_0

    For all the front stage calls for "unity & healing", behind the curtain, the actions of both sides aren't supporting the words they're saying. 

    When the Democrats first announced the second impeachment, I assumed it was designed to steal news cycles (a nice trick that Trump taught them) and time cycles to minimize potential damage till the inauguration. Meaning that any time they forced the Trump administration to spend discussing what was happening or defending themselves was time taken away from political gamesmanship and last-minute actions that the new administration would have to deal with later.

    Meanwhile, perhaps the reason Mitch McConnell has been sending mixed signals about protecting Trump is to avoid angering a meaningful portion of his base – while preparing to create the space to launch his new post-Trump Republican leadership slate (and a powerful Trump hurts those plans).

    Ultimately, however, I do not believe that either party really wants to pursue impeachment fully at this point. Consequently, I suspect that the Biden administration will slow down the impeachment (and morph it into other strategies and tactics). I can’t imagine that the new administration will want to give Donald Trump even more of a public forum to broadcast his messages to the whole world (considering what's happening with Big Tech removing his platform).  It makes more sense to move on and shift focus.

    Strategically, it seems more likely that they’ll go for a censure. With that, I suspect that they will attempt to strip post-presidency benefits and courtesies (including financial, access, and information).  Further, it wouldn’t surprise me if they find a way to prohibit him from having any public lands or things (like airports) named after him. This would accomplish three things.  First, Democrats would consider it a win and a signal to the world.  Second, it would hit Trump where it hurts (in his ego and legacy). Third, it would also support the new Republican leadership's goals by minimizing the chance that Trump could limit McConnell's power or fracture the party further.

    Consequently, the real attempts to prevent Trump (or his family) from running for president will be accomplished via felony charges out of places like New York, Georgia, or DC.  Even though the motivations may be political, I don’t think it will be a political process.  Kind of like what they did to Al Capone.  That means that I expect both parties to help various prosecutors keep Trump busy, weaken him, and limit his future impact.

    As for the markets, to some extent, what goes up must come down. The pendulum swung pretty far and was propped there for longer than most thought possible. Clearly, we are due for a correction.

    Global economic weakness (and falling GDPs), along with the pandemic (and challenges with a vaccine rollout), will all contribute to short term volatility.

    However, I think the Democrats will be far less committed than Trump was to propping markets up in the short term. They would prefer any reversion to the mean to happen quickly – so they can blame it on the prior administration.

    With that said, the midterm elections are coming up quickly (and control of the Senate likely to be an even hotter topic). Consequently, I expect the Democrats to push hard to help the markets recover coming into the end of their first year.

    Of course, all of these thoughts are speculation and may not come true. 

    I’d love to hear your thoughts.

    We certainly live in interesting times.

  • Elon Musk Is The Richest Person In The World

    On the 7th, it was announced that Elon Musk's wealth passed Jeff Bezos's $185 Billion net worth to become the wealthiest person in the world. This is driven by Musk's many companies – SpaceX, The Boring Company, OpenAi, Neuralink, and of course, Tesla.

    ErJJUk3VkAEwDzzThat valuation comes after Tesla's market value passed $700 Billion for the first time. His company is worth more than Toyota, Volkswagen, Hyundai, GM, and Ford combined (despite not having nearly the distribution) based on Market Capitalization.

    Screen Shot 2021-01-10 at 2.55.18 PMvia EEAGLI

    NIO, BYD, and Xpeng should be on the list, but their market cap has increased so rapidly it seems the list used missed it. 

    With Tesla's almost meteoric rise, it raises the question of whether the value is based on the ongoing global expansion, or speculation driven primarily by traders believing other traders want it as well.  To put it in perspective, Tesla's revenue has been rising 50% a year, which is impressive, but the stock has increased 800% in a year. Its P/E ratio is over 1400. As well, Tesla's revenue is less than a tenth of many of the companies on this list – and many of the companies are launching their own electric vehicles. 

    To better compare the companies, a much better test is enterprise value which takes into consideration the company's debt obligations. 

    Screen Shot 2021-01-10 at 3.12.18 PMvia Radiatin

    This shows that Tesla is still very impressive – just slightly less impressive than the markets would have you believe. They have clearly taken on less debt than many of those companies, and their market cap likely helps them take on cheaper loans when they do pursue more debt. 

    I have a lot of faith in the future of Tesla as a company – but as a reminder, at the height of the 1990s tech bubble, Yahoo was worth more than all of the newspaper companies in the US. Toyota alone brings in 10x the revenue that Tesla currently does, and manufactures 25x as many cars. 

    Regardless – congratulations to Musk for the achievement. If you were curious how he intends to use his "newfound" wealth, Musk is committed to using his money for two major goals 1) Sustainable energy and 2) extending life/consciousness beyond Earth. 

    I guess you have to shoot for the stars … or at least planets.

  • Language Is A Limitation

    Man acts as though he were the shaper and master of language, while in fact language remains the master of man. - Martin Heidegger

    Words are powerful. They can be used to define reality, obscure reality, or create reality. Words can be constructive or destructive … uplifting or demoralizing. 

    In a sense, the power of words is seemingly limitless.  But that power cuts both ways. Language is also the cause of many of our problems. 

    We created language to aid social interactions and to facilitate our understanding of the world.  However, language also remains a constraint in how we perceive the world and a limitation on our understanding of new things (e.g., ideas, advances in technology, etc.).

    Before I go into where language fails us, it’s important to understand why language is important.

    Language Facilitates Our Growth

    Because without our language, we have lost ourselves. Who are we without our words? – Melina Marchetta

     

    Languageasalimit

     

    Language is one of the major keys to advanced thought. As infants, we learn through watching our environment, reading faces, and learning to infer things from body language. As we begin to understand "language," our brains develop faster.  In this context, language isn't limited to the spoken word – intelligence grows with the catalyst of language, whether it's vocalized or not.

    It's this ability to cooperate and share expertise through language that has allowed us to build complex societies and advance technologically – but it is becoming an increasingly inadequate tool as the world becomes more complex.

    Language as a Limitation

    When it comes to atoms, language can be used only as in poetry. The poet, too, is not nearly so concerned with describing facts as with creating images. -Niels Bohr

    In Buddhism, there's the idea of an Ultimate Reality and a Conventional Reality. The Ultimate Reality is the objective nature of something, and the Conventional Reality is tied inextricably to our cognition – heavily influenced by our language.

    Language conveys cultural values and biases, personal values and biases, and influences how we perceive “reality.” Linguistic differences create a wedge between various political groups – even when people probably want similar things.  In these cases, differences in language and perception create strife (rather than define it). 

     

    Ohsnapreality

     

    We use language and our past to sift and categorize existence into heuristics instead of exploring the true nature of things (in part because if you're trying to survive in the jungle, shortcuts increase your chance of survival by saving time and energy … and accuracy is secondary to survival). 

    On the other hand, when you're trying to expand the breadth and depth of humanities' capabilities, those same heuristics become shackles (or at least blinders). Ultimately, they can lead to issues like groupthink and echo chambers that limit not only innovation but communication. 

    Look at groups like Democrats v. Republicans or Israelis v. Palestinians. In reality, there are more similarities than differences. Nonetheless, on a day-to-day basis, each of them focuses more on their differences than finding collaborative solutions for life's tougher problems (or focusing on the things they do agree upon).

    Throwing rocks at our enemies also counterintuitively makes us feel better and promotes in-group unity. The problem is it comes at the cost of progress and true unity. 

    This is not to say that there aren't real (and important) differences between those groups. It simply recognizes that part of the problem is our willingness to accept "get-to-next" compromises rather than seeking understanding and committing to coming up with real and complete solutions.

    Humans Are The Real Black Box

    But if thought corrupts language, language can also corrupt thought - George Orwell

    People often refer to Artificial Intelligence as a "black box" – because the complexity and coding of the algorithms, etc. make it mysterious to a layman. But, Artificial Intelligence is programmed; it is precise and predictable. It is only influenced by the coding used to create it and the data fed to it; this creates its own form of transparency (and bias). 

    Meanwhile, humans are nuanced and (to some extent) non-rational creatures. We’re prone to cognitive biases, fear, greed, and discretionary mistakes. We create heuristics on previous experiences, and we can’t process information as cleanly or efficiently as a computer. 

    When humans explain their own behavior, they’re often inaccurate – what we hear is more likely a retrospective rationalization or confabulations than a summary and explanation of the choices they made.

    All-in-all, it results in a lot of confusion in trying to understand world events, each other, and even ourselves. 

    Conclusion

    I have friends on both sides of the political divide in America, and once you get past the rhetoric – there's a lot more in common than it seems. Excluding extremist groups, most are looking for unity, the "truth", and solutions to the problems in front of us.

    Conflict is often a symptom, not the disease.

    On a smaller scale, inside my company, I focus on creating a universal lexicon for our "intellectual shortcuts" because alignment starts with shared understanding.  If the language I'm using means something else to another team member, even if we think we're moving toward the same goal, we'll slowly stray further and further apart. 

    As a practical matter, spending too much time moving away from each other (or measuring the distance we are from each other) creates a self-fueling irritation that becomes increasingly annoying, and ultimately caustic. 

    Today's problems can't be fixed purely with semantics and semiotics, but they are not bad places to start. 

    If we start from a place of agreement and common desire to pursue something worthwhile, the distinctions will call us forward rather than pull us apart.

    I hope this helps.  Let me know what you think!

  • Google’s Year In Search

    While 2021 already feels like a long year – taking a look at the search trends from 2020 reminds us how much we can pack into a year.

    Google tracks the terms people search for using its platform.  Over time, the data about what people search for (and how many people are searching for it, and how long that topic stays relatively interesting to them) is interesting in and of itself.

    An infographic like this is interesting and valuable as a normalized contextual map of the "shock" and "awe" ripples felt by humans as a result of events (real or imagined) that happened around them.  

    It's worth noting that each graph is on a 100% scale, so "Death" having no drop off means it had a relatively consistent search history throughout the year. 

    The visualization is in chronological order to help highlight major events as they happened in 2020 (which is different than presenting the most searched terms in rank order). 

     

    V78l5due4b561via Roshaan Khan

    The only constants were death, Tesla, and TikTok … sounds about right. 

    It might be interesting to see a similar graph of the relative air-time given to topics on various news sources (e.gl, Fox News, MSNBC, Breitbart, NYTimes, WSJ, Washington Post, etc.).  The comparison of the word cloud, the intensity, the frequency, and the duration of the coverage would be interesting as well.  So would a comparison of your social media news feed to your choice of news source.

    On a different note, as I think back on last year, what's really crazy about this list is how many major events didn't make it (for example,  the wildfires, the Hong Kong protests, murder hornets, nuclear threats, cyber-attacks, Zoom, market crashes, etc.).

    The data is also somewhat biased.  While this is a global list, it's clearly dominated by India and the USA. That has a lot to do with the tech stack populations are allowed to use.  Remember that countries like China, Russia, Iran, and North Korea prevent their citizens from using the same "Internet" that we use and "encourage" them to use approved tools to surf, chat, or search. As such, their searches didn't impact Google's findings fully.

    you want to see more about this, Google put together a video and a more comprehensive list

    Best wishes for a great 2021.

    Onwards!

  • Getting To Here: Primal King Podcast

    Here is a podcast worth listening to at the beginning of a new year.

    A friend of mine, Derek Wilson, interviewed me about mindsets, decision-making, and calling the future you want into existence.

    I think it's a good episode,  and it feels very fitting as we start the new year. Check it out.  Or download a transcript made with Otter.AI

     

    Screen Shot 2021-01-02 at 11.26.13 PMv2

     

    You can also find his podcast on Apple Podcasts.

    Best wishes for a great 2021!

  • Do Candles Smell Worse?

    Covid-19 rates are still rising in many places, and there's an unexpected consequence …

    Candle companies are getting much more negative reviews. Angry people everywhere seem to be reporting that the candles have no smell!  With Covid, perhaps they need to check if they've lost their sense of smell or taste (and whether they have a mild fever). 

    Katie Petrova, on Twitter, did some research to check if there was really a correlation. 

    En2drsoXUAMNU6tvia Katie Petrova

    And the results were as expected. In 2020, consumer ratings for scented candles declined much more than unscented candles, and there are spikes in reviews mentioning lack of scent during months with increased cases. 

    Since the beginning of this year, the proportion of reviews mentioning lack of scent grew from < 2% in January to close to 6% in November.

    That being said, unscented candle reviews are lowering too … which makes you think about the confounding variables. Are sales simply increasing to the point where reviews (and thus negative reviews) are increasing? Is it a result of people being bored/frustrated at home?

    I'd be curious to see how much candle (or other home scent improving products) purchases increased during 2020.

  • Trends To Watch Due To The Pandemic

    The pandemic has affected many things beyond basic health. Increasingly, I see research showing meaningful increases in pornography consumption, suicide rates, and a host of other trends that are shaping our world today … but, in the longer-term, it is also affecting the face of tomorrow. 

    Flexible Workplaces

    In May, after only several months of lock-down, I was surprised how many businesses decided that they had no intention of ever requiring their employees to come back into the office

    As we close in on a year in the pandemic, I am surprised how easily we adapted to the new normal.  Even with a vaccine in sight, I suspect many of the adaptations will remain.

    Personally, I like going to the office.  Most days, I still do … even though a tiny fraction of our people are there.

    With that said, I know that our business matured.  We are better at the skills, tools, and mindsets that make remote work possible or profitable. We've gotten better at deciding what's a meeting (versus an e-mail or an online chat). People are working hours that are more comfortable for them, and we see meetings happen both earlier and later than they used to, before the quarantine. 

    As a macro trend, we also see a flight from urban centers.

     

    Migration-from-urban-areas

    via visualcapitalist

    I keep hearing about people moving far from their work-places.  Ultimately, they decided that remote work enables a new form of freedom for them – to live where they want, regardless of what they do (or who they do it for).

    Over time, I'm curious how a remote workforce will impact the quality and the amount of work done. 

    Adding to my initial concerns, flexible workspaces cause (or exacerbate) other issues, including cybersecurity, digital collaboration, defining the new workday, and a host of other challenges. 

    Digital Explosion

    I remember the early 2000s and the distress I felt watching how many time cycles my son "wasted" being on his phone (which to me, at that time, seemed like "all-the-time"). But, in retrospect, that was nothing

    Flash forward to 2019, and everything was even more "digital" and "smart."  Refrigerators, exercise bikes, billboards, and more all had screens, and 2-year-olds were already digitally literate. "All-the-time" took on a whole new meaning.

    Somehow, the pandemic still took our reliance on the digital world (or our augmented alternate reality) to the next level. 

     

    PAN Graph for HEALTH Survey

    via Alaska DHSS

    Kids are also getting less physical activity and human contact, and spending much more time online.  Contributing to this is the reality that much of their academics have been forced online.  Likewise, adults also are shifting more of their attention and activity cycles to the digital world.

    Continued screen-time increases coincide with video game revenue spiking and Internet traffic increasing by more than 50% worldwide. 

    As the world opens up, I still expect digital reliance numbers to stay above pre-COVID benchmarks. People's reliance on digital to feed their need for information, entertainment, and companionship is growing.

    Changing Business Landscape

    Starting with consumers, we've seen a massive movement toward frictionless and touchless payment. Even physical stores are prioritizing getting in and out without having to deal with another human. In addition, there's a massive move toward delivery services for groceries and meals

    On top of the changes to normal retail services, reliance on online shopping has increased, while the time it takes for electronic purchases to your door has decreased. Combined, these factors will terraform commerce.  Consequently, this year was likely an inflection point for e-commerce penetration … and, from that perspective, life will never be the same again.

     

    Ecommerce-forecastvia visual capitalist

    Despite the growth of online retail, many small businesses that couldn't move online are struggling, and many have already gone under. 

    Which leads to the next trend …

    Increasing Wealth Stratification

    While small business owners and front line workers have been struggling, billionaires saw their wealth increase by over half a trillion dollars

    Part of this is due to government aid toward large companies, part of it is due to tax laws, and part of it is due to the digital rise mentioned in the previous section. The big tech companies were already thriving, and the pandemic created a positive inflection point. 

    Despite those gains, the pandemic hit millennials and small businesses hard. 

     

    200928_millennial-covid-impact_fullwidthvia Morning Consult

    The longer the economy is affected by COVID-19 measures, the larger the wealth inequality will grow, and the more people you can expect looking for government assistance. The strong will thrive while others will suffer increasingly from learned helplessness.

    Obviously, the 2020 quarantine has created impacts in many other areas – including family stress, community isolation, political radicalization, etc. Moreover, these effects won't be isolated to this year – and we should expect many to impact our "new normal" for years to come.

    Some people consider this a challenge. I think it's the playing field. It's going to be true for everyone. What you make it mean, and what you choose to do, it is up to you.  Some will be like a cork, floating on the water, going where the tide takes it. Others will recognize the situation as an opportunity and thrive.

    The impact has been global, but the choices you make are local … and they are still your to make.

    Here is to making 2021 our best year yet!

    Onwards!