Thursday was Halloween … even though my son is old enough that he doesn’t want to go trick or treating with me (who could guess why) he still bought me a costume so we could dress up for our annual Capitalogix Costume Contest.
They said one size fits all … but they didn't say it would fit well.
Around the world, people are protesting – with amazing representation from our youth. The sparks that started these blazes may seem small, but they're indicative of great unrest. In Chile, there was a hike in metro prices … in Lebanon, a tax on WhatsApp… in Hong Kong, a proposed extradition bill.
These sparks brought light to deep-rooted inequalities, frustrations, and government control. As a result, we're seeing the protests continue even after the initial complaint is addressed.
It's harrowing seeing the need for protests and the violence from both sides that inevitably occur, but it's encouraging to see these people fighting for their rights and equality and instrumenting change.
Here are some of the posts that caught my eye recently. Hope you find something interesting.
Peak Capital is running an online roundtable in November with our CIO John DeTore, John Mauldin, Sam Stovall. You can check with them to get the full answers from the various panelists, but I wanted to share some of John's answers ahead of time.
It's a lot of information, so I'm going to split it between two weeks.
Peak: Let's kick things off in a very different way. It is April 2021 and we just completed the first 100 days of the Warren Administration. What are you most concerned or excited about?
John:
(Listen, I can see that she is trying to do good things for humanity: Free healthcare, tuition, and so forth will help people. But, ahem, it isn’t free, is it. Taxpayers pay for it. So, the stock market "don’t likey".)
Despite one’s political leanings, and there are a lot of interesting ideas being kicked about, the market will hate a flirtation with socialism. The market is probably off 20% from November 2020 (or its previous high if it became obvious she was winning earlier than November). Many analysts in April 2021 are looking for a bottom. They are early.
Remember the Obama recovery? (in RED below, it's the only one where the recovery is obviously not symmetrical.) While he shouldn’t be blamed for the financial crisis he inherited, he immediately moved to work on healthcare while we were in the depths of the crisis. Taxes increased, and regulations expanded. We can see how that recovery was different than any other in recent history, drawn around 2011:
I doubt that Warren will do any better with the economy and I fear she will do worse.
Thinking about how inaccurate political polling has become, I believe economic forecasting errors have also risen dramatically. Formerly reliable indicators and data points seem less reliable in today's market. How are you addressing this reality?
Statistical analysis is relatively easy and can be learned in a few college classes. Forecasting is maddeningly hard and often largely based on the forecaster’s training, assumptions, biases, and experience.
What happened to the notoriously inaccurate polls of 2016?
Party affiliation, likelihood of voting, age, sex, state of residence all affect candidate choice — even the most careful survey will find that the sample pool is different than the total voting population. All pollsters adjust their sample demographics to what they assume the voting population is. But how many of each will show up on the big day?
Many pollsters in 2016 assumed they could use the turnout in 2012. The election had a large black, young, liberal turnout … are we surprised given the first black U.S. president was elected? Did we think Hillary would get the same response? Most pollsters did, but does that make sense? Several pollsters who saw Trump as having a decent chance were publicly describing this specific statistical error.
Regarding economic forecasting: It suffers from the same phenomenon.
Example: we can dutifully correlate “yield curve inversion” to subsequent recessions. And I read about this about 50 times a day when the curve inverts. But let’s look a little deeper:
Economic forecasting is an art best practiced by people who understand the economy. Which means most of us should stop doing it.
Peak: How will the trade war with China get resolved?
John: It won’t. Trump famously started his trade war tour with claims that it's easy to win a trade war with China because they have so much more to lose. He thought they would be the first to resolve USMCA, the UK post-Brexit, Europe, and various Asian markets would follow … even India.
He is correct they have more to lose … much more, since they hardly buy anything from us. But to me, this was an obvious tactical mistake by the master negotiator. President Xi feels no pressure. His limo still has fuel, his meals are still exquisite, and there is no political pressure on him. It would benefit their economy to cave to Trump, but they have no incentive. They play the long game.
Trump is right to pressure them and even to play hardball. We might get real intellectual property relief. It will be quite a slog … my prediction is there will be a string of broken promises, and once we have concessions they won’t live up to their end of the bargain.
If Trump is really hard on them, they will just drag their feet for 5 years and try again. It will shave a couple of percent off their GDP. No one in China will complain.
Peak: What is the long-term impact of Brexit?
John: I fear the real result is to box Brussels into a difficult position. The UK is leaving because politically the EU is too left-leaning and quick to impose their views on member countries. The UK will survive this better than the EU will. The only saving grace is that the UK was a reluctant participant in the first place … retaining the Pound as their currency.
This does open the possibility, though, that the relations with one of our strongest partners improves. US-UK relations are due to be renegotiated and this could be material. In fact, to me this looks like the UK is trading in Europe for the US as their best buddy. I think they will do fine.
Worry it hurts Europe.
Peak: Is impeachment a threat to the stock market?
John: Continue to believe this is political theater and not a serious impeachment case. It's unclear what the charge is or whether the house will even take a vote.
As an influence on the market, its probably already there. For instance, if the impeachment effort dissolved, it would be enough for the stock market to eek up to new highs, maybe breakthrough.
But if the market begins to believe that the Senate could actually convict … the market would react badly.
Peak: Could the Turkey-Syria conflict spiral out of control?
John: It could. It’s not clear how badly this could hurt the US economy though.
I doubt any of us really know what is going on behind closed doors. The U.S. has no primary fight in that battle. Turkey, Russia, and Iran all have strategic interests. We have issues with all three, but if “the enemy of my enemy is my friend” what we are really all about is diminishing Iran’s influence.
We will not be obvious about what we want. It will not be public what is being said to Putin and Erdogan. It will be a quagmire of deception and influence.
But it won’t shave multiple percents off our GDP or cause our stock market to drop 10%. (If it does, BUY)
Peak: Recessions are typically not formerly declared until months after they actually began. What is the probability the U.S. economy is in a recession by next June that would impact the 2020 election?
John: The economy is strong, unemployment low, confidence high. There are small snippets of bad news that come out all the time and are ignored by the stock market.
The question implies, I think, that GDP would decline both in the 1st and 2nd quarters of 2020.
The combination of full employment, strong profitability, and very low rates rarely ever happens. When you are at the summit of a mountain, every path leads downhill. It's not that things aren’t good, they are. It’s just that it’s hard to see them improving much from here … every macroeconomic variable is maxing out.
Certainly, it could happen. After many months of >200K new payroll, we are reaching what could be called full employment. We have worked our way through a shadow economy of functionally unemployed, returning people to the workforce that was shed in the 2008 financial crisis (they weren’t retired after all). Interest rates are of course very low.
It would take more than this to really hurt the stock market though. Over the long-term, it’s surprising how S&P forecast eps yield are tracked by 10-year Treasuries.
Here are some of the posts that caught my eye recently. Hope you find something interesting.
Here are some of the posts that caught my eye recently. Hope you find something interesting.
It's been a good weekend in the Getson household.
My wife Jen came home with a new member of the family who met none of the criteria she wanted in a new puppy. However, we saw him at Operation Kindness and knew he was the one.
As well, Zeke signed his contract in time to help the Cowboys to a 35-17 win over the Giants. Jerry Jones announced their contract the same day as he rang the opening bell at the New York Stock Exchange in celebration of his $2.2 billion acquisition of Covey Park Energy.
After the Covey Park purchase, Comstock shares (a Frisco-based natural gas company) rose 12%, closing at $6.84.
As a funny coincidence, @CowboysNation realized Jerry Jones owns ~88.6m shares of Comstock Resources. The value of Jerry Jones's shares in Comstock went up ~89m; not a bad way to cover Zeke's contract.
My seats are fully booked for the season, but if you're interested in being on the waitlist to come to a game, you can sign up for a chance here.
Here are some of the posts that caught my eye recently. Hope you find something interesting.
Elon Musk and Alibaba co-founder Jack Ma recently held a debate about AI at a conference in Shanghai. Their conversation was captured in a 46-minute video. Even if you don't watch all of it, it's interesting to see how these different thought archetypes position different issues.
World AI Conference via New China TV
My son, Zach, watched it and sent me some notes and takeaways.
Fascinating Stuff!
________
While they talk about Mars, education, and other topics, the discussion tends to revolve around AI.
In the video, Jack Ma comes off as optimistic and somewhat uninformed while Elon Musk comes off as so optimistic about AI that he's pessimistic about humans.
Musk's intelligence shines through, though he tends toward hyperbolic best- and worst-case scenarios.
With Jack Ma, I'm curious how heavily exogenous forces influenced the expression of his opinions. The conference took place in China and was partially sponsored by the Chinese government. As a result, I'm not sure how much of what Jack Ma said represented his true beliefs or fears. Taking into consideration State censorship and "spin," it isn't hard to imagine being encouraged to remind people that the Communist party is (and will remain) smarter than AI.
Jack takes positions that make people feel safe, while Elon is committed to pointing out potential dangers.
Elon focused on three main points. Here they are:
People Underestimate AI
Laymen often compare AI to a smart human, but it's much more than that. He uses the comparison that to a chimpanzee we're a strange alien, but AI's disparity may be even worse than that.
Humans vastly underestimate the scale of time. I think Tony Robbins makes the comment that we overestimate a year and underestimate 10. Elon's equivalent would be that we overestimate 10 years and underestimate 1000. On the scale of Earth's existence, humanity is blip. On the scale of human existence, our current level of technology is a blip.
We're wired to think locally and linearly, but not only are we at the very beginning of a 20-year innovation curve, but we also have a theoretical thousands-of-years to worry about.
The Biggest Mistake AI Researchers Make Is Thinking They're Intelligent
“I hope they’re nice … If you can’t beat them, join them. That’s what neuralink is about.” – Elon Musk
This is one of the ideas we talk about a lot at Capitalogix – but it's this idea that many researchers think they can predict AI despite messing up 99% of predictions ever. We constantly underestimate technology, we constantly underestimate change, and it's naive to think that won't continue to be true.
He uses an interesting comparison between our bandwidths. We're already so integrated to our phones and computers but the bandwidth is very different from a computer – or from his proposed neuralink.
Our input bandwidth has skyrocketed. We're always tuned in. Data downloads faster. We have more sources of data. Yet, our output bandwidth has slowed. As we spend more time on our phones instead of computers, we're less efficient.
Compare that to a computer with an exaflop of compute capability… a millisecond becomes an eternity. Our speech becomes a whale song. We're inefficient.
Our Biggest Concern Should Be The Proliferation of Consciousness
Sustainability, cryogenics, Mars, Neuralinks, biohacking, these are all attempts at expanding the scope and scale of human consciousness. Of hedging our bets against any number of potential bad futures.
Even if any potential doomsday has a minuscule probability of happening, why not prepare for them?
The probabilities are non-zero, the better we understand our universe, the better we can handle things here.
Jack Ma – AI Isn't A Threat
Jack's response to most of Elon's comments is that AI isn't a threat to jobs, to us, or to the world. Instead, it's an opportunity to change ourselves, an opportunity to understand people better and to better self-actualize.
He also states that it's an opportunity not to replace jobs but to work less. His ideal is three days a week. Giving us more time to enjoy being human.
Jack also believes that while AI is more clever, humans are smarter. His argument is that intelligence is experience-driven and that humans have created computers but no computers create humans. AI still isn't as good at the subjectivity of the human experience. Can a human determine if something is delicious? Can it write a comedy? He believes AI doesn't have the heart humans do.
The only thing that Elon and Jack really agreed on was that our biggest fear over the next 20 years is population collapse.
We Should Go To Mars
Elon and Jack are at odds for various reasons, but I think a big part of the issue is that Jack Ma wants us to focus on improving the earth. He views Mars as a waste of time. Musk (and I) view these exercises as improving earth. It shouldn't be an "either/or" … it should be an "and". We do need to do a better job on taking care of each other and our planet, but that shouldn't be at the expense of moonshots.
I like the 80/20 rule. In economics it's the Pareto Principle – 20% of the "causes" cause 80% of the effects. In personal finance, 80% of what you invest in should be safe and 20% can be alternative investments. In our office, it's 20% of your time being spent on "what if's".
For Earth, 80% of our focus should be on the incremental improvements we're eschewing, and 20% should be on moonshots. If even one of the moonshots we focus on (elongating human life, going to mars, hybridizing humans and computers) happens, they improve the quality of life exponentially.
Just Because We Can't Predict The Future Doesn't Mean We Shouldn't Try
During the debate, Elon said the goal should always be to "try to predict the future with less error."
While it's clear we can't solve tomorrow's issues because we can't predict them all, it doesn't mean there aren't actions we can take and questions that we can ask to better prepare our children for the future.
We Should Be Cautiously Optimistic About AI
I've always been taught to be cautious and to exhibit moderation. We don't know what's possible with AI. While that means there's a potential timeline where AI doesn't become Skynet, it also means there's a potential timeline where it does.
It's human hubris to not worry about AI ethics and to not keep those ideals in mind when creating a technology that will be ubiquitous.
In human history we've often weaponized tools that were intended for other uses. It's likely AI will be used in the same way (if not by AI, then by humans).
I like Jack's focus on the human aspect of AI and while it seems clear to me that Elon understands AI better, if we can manage to balance a focus on the human while growing the artificial, I think we'll go a lot farther.
Closing Thoughts
Humans are at the top of the food chain not because of any athletic dominance, but because of our intelligence and our ability to create tools that enhance our capabilities. Our tools define us as a species.
I recently read a book by Donald Norman called Things That Make Us Smart: Defending Human Attributes In The Age of The Machine. It was written in the early '90s but holds up surprisingly well.
One key takeaway from the book was that technology should be an extension of humans. An example being the calculator on my phone. I'm not great at math, but I'm great at using my calculator to perform whatever math I need to. Donald Norman would argue that means for all functional purposes, I'm good at math.
As our tools evolve, we evolve.
To me, the fact that technology is growing so fast is heavily weighted towards a positive impact. There will be negative impacts, but they can be mitigated. I'm sure plenty of carriage operators were really bummed about the creation of the automobile.
I resonated with Musk's fears and joys because I felt he was championing that belief.
We don't know the answers, but we should be asking the questions and we should be preparing for the possibilities.
That's one small step for man, one giant leap for mankind. – Neil Armstrong
Yesterday was the 50th anniversary of the Apollo 11 moon landing mission. This remains one of mankind's biggest achievements and a testament to dreaming big.
One – An Apollo 11 homage from Woodwork on Vimeo.
Here are some of the posts that caught my eye recently. Hope you find something interesting.
While I was at Camp Kotok, my son found CogX, an AI and emerging technologies conference held in London. They had speakers from academia, governments, and industry to give a more holistic view of AI and emerging technologies.
They put all their keynotes online, for free.
He watched a few and sent me his feedback. Here are a couple of his key takeaways, but I encourage you to watch yourself and make your own.
We recently shared a video on this topic. Myopia is a big issue even with experts. People get distracted by the sea of opportunities and forget to focus on one.
As well, culturally, we get caught up in exciting long-term applications, like self-driving cars, instead of capitalizing on low-hanging fruit.
"Don't confuse a clear vision for a short time horizon"
The Googles and the Facebooks of the world are accomplishing a lot – and tackling real problems, but their efficiency is next to nil.
There are also a lot of niche or esoteric problems that they'll likely never attempt. Small businesses have the ability to be much more creative, agile, and risky.
Small business powers economies, and it also powers AI. That being said, smaller companies can learn a lot from the current digital leaders. For example, learning to apply basic AI, instead of complex applications half-finished sitting on a shelf, or, by using AI on supporting aspects of their business instead of jumping straight to overhauling their core business.
The secret to better AI is in better analysis of better data. The applications are secondary.
Many people are focused to heavily on the vision, without taking into account the steps to get there. Infrastructure and other foundational aspects need to be in place.
We need to scale investment in projects and the information available in industries.
Today's big force functions are Data and Talent. We still haven't ironed out the interaction between humans and AI. As we make that easier, you'll see average people being able to create wonderful things with AI – instead of creation being limited to PhDs.
Eric Daimler, during a roundtable on AI Capital, referenced Jevon's Paradox – the idea that increasing fuel efficiency doesn't decrease fuel consumption, it increases it. He equates this to the current bottlenecks in AI, and where AI will end up. People didn't predict the car, they didn't predict the app store, and they can't predict what the future of AI will look like.
Charles-Edouard Bouée, of Roland Berger, sees a mass evolution of AI coming – with AI being anywhere and everywhere.
China currently has an advantage due to their size, policies, and willingness to leapfrog technologies. As competition increases, future leaders will leverage 6 points:
The top-tier companies were created in technological waves. During the industrial revolution, leaders were in commodities – Steel, Oil, Railroad. Intel, Cisco, and more were built on the personal computer, the internet, and mobile phones. Apple, Google, and Amazon were built on digital and smartphones.
The next wave is going to be built on AI. It's going to be built on AI becoming ubiquitous and commoditized. AI is at its most powerful when it becomes human-centric, not just problem centric. The transition is in human/AI connection and on building platforms that enable mass-interaction with AI. Once we've accomplished that, we'll see another explosion in AI.
Think about our infatuation with the Internet-Of-Things. As a people, we've become much more experience-centric than product-centric. You've also seen it in VR/AR – and especially with millennials.
What are your thoughts?