Trading Tools

  • Getting To Next: How Thoughts Become Things

    Two weeks ago, I introduced Innovation Activity Centers which are the building blocks for my technology adoption model.InnovationActivityCenters2

    Today, I have a video and a worksheet for you that goes into the overarching Technology Adoption Model Framework. It explains how thoughts become things and how ideas scale with respect to capability, audience, and monetization.

    The four base stages of this framework are: Capability –> Prototype –> Product –> Platform. 

    It's a great use of 20 minutes. Check it out.

     

     

    While the Technology Adoption Model Framework stages are important, the ultimate takeaway is that you don't have to predict what's coming, only how human nature works in response to the capabilities in front of them.

    It's a bit cliche, but to paraphrase Wayne Gretzky, you just have to skate to where you think the puck is going to be. 

    Desire fuels commerce.  As money fuels progress, desire grows … and so does the money funding that path. As such, the path forward is relatively easy to imagine.

    This isn't about predicting specific technologies, but rather about the capabilities people will want.  I think of it as anticipating the natural path.  It is easier to ride the wave than it is to fight nature.

    Each stage is really about the opportunity to scale desire and adoption.

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

    If you understand what is coming, you don't have to build it, but you can figure out where you want to build something that will benefit from it.

    This model is fractal.  It works on many levels of magnification or iteration.

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

    For example, as a Product transforms into a Platform, it becomes almost like an industry of its own.  Consequently, it becomes the seed for a new set of Capabilities, Prototypes, and Products.

    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. 

    In the video, I walk you through several examples of companies, their innovations, and how they fit into each stage. I even used Capitalogix as an example. 

    I'm also attaching a fillable PDF of the form we used so that you can run through this with your business as well. 

    Tech Adoption Model for Entrepreneurs (1)

    As I continue to refine and work with this framework, I look forward to improving it and sharing it with you all. 

    As the world continues to change faster and more dramatically, this framework will help you anticipate changes, and it will also help you take advantage of them. 

    If you have any questions or comments about the idea, or how to implement it, feel free to reach out. 

    Onwards! 

  • Here Are Some Links For Your Weekly Reading – June 6th, 2021

    252233

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

    Lighter Links:

     
     

    Trading Links:

  • Make News Beautiful Again

    My mother watches the news religiously. To her credit, she watches a variety of sources and creates her own takeaways based on them. Regardless, there's a common theme in all the sources she watched – they focus on fear or shock-inducing stories with a negative bias. As you might guess, I hear it when I talk with her.

    While I value being informed, I also value things that nourish or make you stronger (as opposed to things that make you weak or less hopeful).

    Negativity Sells. 

    Sure, news sources throw in the occasional feel-good story as a pattern interrupt … but their focus skews negative.  History shows that stories about improvement or the things that work simply don't grab eyeballs, attention, or ratings consistently.

    The reality is that negativity sells. If everything were great all the time, people wouldn't need to buy as many products, they wouldn't need to watch the news, and this cycle wouldn't continue.

    It's worth acknowledging and understanding the perils our society is facing, but it's also worth focusing on the ways humanity is expanding and improving.

    As a brief respite from the unending doom and gloom of mainstream media, Information Is Beautiful has a section of their site focused on "Beautiful News".

    It's a collection of simple data visualizations for positive trends, it's updated daily, and can be sorted by topic.

     

    Screen Shot 2021-06-06 at 2.20.21 PM

    Beautiful News via Information Is Beautiful

    If you're looking for more "good news", here's a list of 10 sources focusing on good news. 

  • The Law and Flaw of Averages

    The law of averages is a principle that supposes most future events are likely to balance any past deviation from a presumed average.

    Take, for example, flipping a coin. Should you get 5 "Heads" in a row, you'll assume the next one must be "Tails" despite the fact that each flip has a 50/50 chance of landing on either. 

    Even from this example, you can tell it's a flawed law. While there are reasonable mathematical uses of this law, in everyday life, this "law" mostly represents wishful thinking. 

    Crisis-of-2008

    It's also one of the most common fallacies seen in gamblers and traders. 

    Perhaps you heard the story about how the U.S. Air Force discovered the 'flaw' of averages by creating cockpits based on very complex mathematics surrounding the average height, width, arm length, etc. of over 4,000 pilots. Despite engineering the cockpit to precise specifications, pilots crashed their planes on a too regular basis. 

    The reason?  With the benefit of hindsight, they learned that very few of those 4,000 pilots were actually "average". Ultimately, the Air Force re-engineered the cockpit and fixed the problem. 

    It's a good reminder that 'facts' can lie, and assumptions and interpretations are dangerous. It's why I prefer taking decisive action on something known, rather than taking tentative actions about something guessed. 

     

    via ReasonTV

     

  • Here Are Some Links For Your Weekly Reading – May 23rd, 2021

    4Whamond

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

    Lighter Links:

     

    Trading Links:

  • My Recent Podcasts with Dan Sullivan & Brett Kaufman

    I recently did two interviews I want to share with you. The first was done with Dan Sullivan and Steven Krein for Strategic Coach's Free Zone Frontier podcast… and the second was with Brett Kaufman on his Gravity podcast. 

    Please listen to them.  They were quite different, but both were well done and interesting. 

    Free Zone Frontier with Dan Sullivan and Steve Krein

    Free Zone Frontier is a Strategic Coach group (and podcast) about creating "Free Zones." It refers to the green space where entrepreneurs can collaborate and create without competition.

    It's a transformative idea for entrepreneurial growth. 

    In my episode, we focused on topics like building your own future, how decision-making frameworks and technology can extend your edge, and what it takes to get to the next level.   I realize there is a lot of Strategic Coach jargon in this episode, but it is still easy to understand, and there was great energy and an elevated conversation about worthy topics.

    As an aside, Steve Krein happens to be my cousin, and we joined Strategic Coach entirely separately before realizing we had joined the same group. 

    The podcast is 47 Minutes. I hope you enjoy it.

     

    Or click here to listen on: Spotify, Google Podcasts, Apple Podcasts 

    Gravity Podcast with Brett Kaufman

    Normally, I talk about business, mental models, and the future of AI and technology, but Brett Kaufman brought something different out of me. 

    Brett's Gravity Project is about living with intention, community, consciousness, and connection. He focuses on getting people to share their life experiences … with the intent that others can see themselves in your story. 

    In my talk with Brett, we do talk about the entrepreneurial journey … but we also probe some deep insights by discussing the death of my younger brother, how my life changed almost immediately upon meeting my wife, and why love is the most powerful and base energy in the universe. 

    This was not a typical conversation for me (a different ratio of head-to-heart), but it was a good one (and I've had a lot of people reach out because of this podcast). 

    The episode is 65 minutes. I hope you enjoy it. 

     

    Click here to listen on: Spotify, Apple Podcasts, Listen Notes

    Let me know what you think.

  • WallStreetBets Analysis: Market Crashes & Oreos

    During the Robinhood & Gamestop debacle, I wrote an article about r/WallStreetBets where I essentially said that most of the retail investors that frequent the site don't know what they're doing, but there is the occasional real post with strong research you would see at a real firm. 

    As an example of good research done by the subreddit, here's a link to a post where a user (nobjos) analyzed 66,000+ buy and sell recommendations by financial analysts over the last 10 years to see if they had an edge. Spoiler: maybe, but only if you have sufficient AUM to justify the investment in their research. 

    There are also posts that show a clear misunderstanding of markets, and more jokes than quality posts, but I saw a great example of correlation ≠ causation. 

    In the past I've posted about the Superbowl Indicator and the Big Mac Index, but what about Oreos?

    The increasingly-depraved debuts of Oreos with more stuffing indicate unstable amounts of greed and leverage in the system, serving as an immediate indicator that the makings of a market crash are in place. Conversely, when the Oreo team reduces the amount of icing in their treats, markets tend to have great bull runs until once again society demands to push the boundaries of how much stuffing is possible.

    https://en.wikipedia.org/wiki/List_of_Oreo_varieties https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets

    1974: Double Stuf Oreo released. Dow Jones crashes 45%. FTSE drops 73%.

    1987: Big Stuf Oreo released. Black Monday, a 20% single-day crash and a following bear market.

    1991: Mini Oreo introduced. Smaller icing ratios coincide with the 1991 Japanese asset price bubble, confirming the correlation works both ways and a reduction of Oreo icing may be a potential solution to preventing a future crash.

    2011: Triple Double Oreo introduced. S&P drops 21% in a 5-month bear market

    2015: Oreo Thins introduced. A complete lack of icing causes an unprecedented bull run in the S&P for years

    2019: The Most Stuf Oreo briefly introduced. Pulled off the shelf before any major market damage could occur.

    2021: The Most Stuf Oreo reintroduced. Market response: ???

     - LehmanParty via Reddit

    It's surprisingly good due diligence, but also clearly just meant to be funny. It resonates because we crave order and look for signs that make markets seem a little bit more predictable.

    Funny-mealso-me-meme-about-making-healthy-choices-but-also-eating-crap-like-all-stuf-oreos

    The problem with randomness is that it can appear meaningful. 

    Wall Street is, unfortunately, inundated with theories that attempt to predict the performance of the stock market and the economy. The only difference between this and other theories is that we openly recognize the ridiculousness of this indicator.

    More people than you would hope, or guess, attempt to forecast the market based on gut, ancient wisdom, and prayers.

    While hope and prayer are good things … they aren’t good trading strategies.

    A good reminder that even if you do the work, if you're looking at the wrong inputs, you'll get a bad answer. 

    Garbage in, garbage out. 

  • Timeless Wisdom From Socrates

    Small distinctions separate wise men from fools. Perhaps one of them has to do with what the wise man deems important.

    Socrates' Triple Filter

    In ancient Greece, Socrates was reputed to hold knowledge in high esteem.  One day an acquaintance met the great philosopher and said, "Do you know what I just heard about your friend?"

    "Hold on a minute," Socrates replied. "Before telling me anything, I'd like you to pass a little test. It's called the Triple Filter Test."

    "Triple filter?"

    "That's right," Socrates continued.  "Before you talk to me about my friend, it might be a good idea to take a moment and filter what you're going to say. That's why I call it the triple filter test.

    The first filter is Truth.  Have you made absolutely sure that what you are about to tell me is true?"

    "No," the man said, "Actually I just heard about it and…"

    "All right," said Socrates. "So you don't really know if it's true or not. Now let's try the second filter, the filter of Goodness.  Is what you are about to tell me about my friend something good?"

    "No, on the contrary…"

    "So," Socrates continued, "You want to tell me something bad about him, but you're not certain it's true.  You may still pass the test though, because there's one filter left.  The third filter is Usefulness.  Is what you want to tell me about my friend going to be useful to me?"

    "No, not really."

    "Well," concluded Socrates, "If what you want to tell me is neither true, nor good, nor even useful … then why tell it to me at all?"

    With all the divisiveness in both media and in our everyday conversations with friends, family, and strangers … this is a good filter for what you say, what you post, and even how you view markets. 

    How Does That Apply to Me or Trading?

    The concept of Socrates' Triple Filter applies to markets as well.

    When I was a technical trader, rather than looking at fundamental data and scouring the news daily, I focused on developing dynamic and adaptive systems and processes to look at the universe of trading algorithms to identify which were in-phase and likely to perform well in the current market environment.

    As we've transitioned to using advanced mathematics and AI to understand markets it becomes even more true. 

    Filter Out What Isn't Good For You.

    In contrast, there are too many ways that the media (meaning the techniques, graphics, music, etc.), the people reporting it, and even the news itself, appeals to the fear and greed of human nature.

    Likewise, I don't watch TV news anymore either. It seems like story after story is about terrible things. For example, during a recent visit with my mother, I listened to her watch the news.  There was a constant stream of "oh no," or "oh my," and "that's terrible". You don't even have to watch the news to know what it says.

    It's also true with what you feed your algorithms. Garbage in, garbage out. Just because you can plug in more data, doesn't mean that data is adding value. Deciding what not to do, and what not to listen to is equally as important as deciding what to do. 

    Artificial intelligence is exciting, but artificial stupidity is terrifying. 

    What's The Purpose of News for You?

    My purpose changes what I'm looking for and the amount of attention I pay to different types of information. Am I reading or watching the news for entertainment, to learn something new, or to find something relevant and actionable?

    Socrates_quote_to_move_the_world_we_must_first_move_ourselves_5420

    One of my favorite activities every week is looking for new insights and interesting articles to share with you and my team.  If you aren't getting my weekly reading list on Fridays – you're missing out. You can sign up here. 

    Getting back to Socrates' three filters and the business of trading, I often ask myself: is it important, does it affect our edge, or can I use it as a catalyst for innovation?

    There's a lot of noise out there competing for your attention. Stay focused. 

    Onwards!

     

  • Gaining Insight & Ideas from Hedge Fund Letters

    Most Hedge Fund letters are hard to come by. They're sent to their investors and are not generally posted publicly. 

    However, Milton Financial Market Research Institute puts out a quarterly collection of letters they've curated since 2016. 

    These letters contain a lot of insight into not only the performance and approach of the funds but also the markets and the world as a whole. 

     

    Screen Shot 2021-04-23 at 10.29.07 AMvia Milton FMR

    This is a valuable resource to gain a more holistic view of the markets and the fund industry.

    Hope it helps.

    Also, please let me know if you are aware of other sources like this.

  • Is Cryptocurrency Here to Stay?

    I've always been a fan of Blockchain, but I've always been a bit more cautious of cryptocurrencies. 

    Blockchain is the technology foundation behind cryptocurrencies and an important enabling technology for the next generation of technological innovation.

    This week Coinbase went public at an astronomical valuation.  They were backed by venture capital firms like Andreessen Horowitz and Union Square Ventures.

    This makes sense to me because the VCs were able to capitalize on the "Fear of Missing Out" and "Animal Spirits" driving the market without the concentration risk of a particular cryptocurrency.  In a sense, it is the same reason I am bullish on Blockchain itself.

    Making sense of cryptocurrencies, however, is tougher for me to justify. There are over 1000 currencies out there – and the list is growing.  But valuation isn't really about first-mover advantages or features … You also must consider government policies and regulations and a host of other issues.

    Consequently, it's hard to recommend putting money in any coin as an investment.

    Speculating (or "trading") is a different conversation. 

    Clearly, there is a lot of money being made and lost … but how much of those gains and losses can be attributed to luck and how much to skill?  A better question is … If you traded cryptocurrencies, how much of your gains or losses would be due to luck versus skill?

    For the past few years, it felt as if the buzz had died down a little. Despite that, Bitcoin prices and many other cryptocurrencies continued to increase in value – though with much more volatility than normal investments. 

    This week, Dogecoin (a cryptocurrency that started as a meme) jumped from $.07 a coin to $.35 a coin, capitalizing on press and support from Elon Musk.  But it's not the only cryptocurrency doing well. 

     

    Top-10-growing-cryptocurrencies-2020-updated-47cfvia How Much

    A lot of the jump in the price of many coins recently coincided with the GameStop trading surge and was likely driven by the sentiment of those same retail traders. 

    Crypto's are interesting, in part, because they're a digital currency decentralized over a peer-to-peer network.

    The more people are willing to accept it as a medium of exchange, the more valuable it becomes (and the more it becomes a stable store of value).

    Supposedly, decentralization provides it safety from censorship and government interference – meaning it has value as an international currency, and as a currency for black-market transactions.  But, in my opinion, that remains to be seen (and I consider it unlikely for most cryptocurrencies).

    However, the worth of a Bitcoin clearly isn't just based on sentiment (on one hand, there are desires to avoid fiat currency vagaries, government interventions and scrutiny, while having a fair price discovery method, etc.  … on the other hand, there are also the costs to mine a Bitcoin, transaction fees, etc. and crypto has recently been under fire for its huge environmental impact).

    Compared to a reserve currency – whose worth is primarily influenced by trade value and other macroeconomic factors – watching crypto's volatility can be scary. 

    That being said, as adoption increases and more businesses enable it, it's possible that it will continue to legitimize. For the time being, I remain a long-term skeptic because there is too much working against it. 

    For an extra laugh, here's a still relevant video from 2017 on why you should invest all your money in Bitcoin. 

     

    via AwakenWithJP