In any case, there are growing reasons to be wary of Bitcoin as a viable long-term value store.
On top of the many reasons I've talked about in previous articles, I'm hearing many more people talk about it as if they are crypto experts. Consequently, it reminds me of the Dot.com bubble. Sure, the Internet continues to boom (but many of the early high-fliers don't exist today). Meanwhile, it's possible crypto will evolve like the Internet, but at this point, it's hard to discern how much of the success in crypto is luck versus skill.
There is a ton of demand and interest. But fear of missing out and enjoying the roller-coaster ride is not the basis of a long-standing Platform. Blockchain is a different story.
Back to Crypto … Even a blind squirrel finds a nut in a forest during a bull market.
Governments have a disincentive to allow alternate currencies (not backed by their government). In addition, another obstacle for cryptocurrency mining is the high cost of energy consumption.
Mining crypto takes a lot of electricity because when people are creating new coins they're really solving complex math puzzles with a 64-digit hexadecimal solution known as a hash. To solve those equations faster than your competitors you need massive data centers which can even overload local infrastructure.
It's increasingly expensive and energy-taxing to mine new coins. For context, it's estimated that the current annual power consumption for Bitcoin alone (not including other cryptocurrencies) rivaled the state of New York, and beat Norway.
To compare it to the tech giants, Bitcoin took 129 terawatt-hours of power consumption … Google took 12, and Facebook only took 5.
Many are looking for ways to decrease the energy consumption of mining cryptocurrency using methods like renewable resources.
Over the years, I've used a number of different assessment tests on myself and our team. It's a great way to help people better understand each other and the different forms of communication and problem-solving styles we use.
Here are several of the tests that have proven themselves time and again:
Kolbe: measures a person's instinctive method of problem-solving, and identifies the ways they will be most productive.
Predictive Index (PI) – helps you understand the way their traits manifest in relation to their true nature and their perceived role.
StrengthsFinder: helps people uncover their talents, so they can do more of those things each day.
On top of my normal tests, as a team of data scientists, it's always fun to see what's available.
For example, Ray Dalio recently created a personality assessment called PrinciplesYou that you can take for free. I've seen a number of articles claiming that the assessment is not only accurate, but that it also has impressive insights.
Less meaningful, but still fun, I also found a website that lets you test your performance on various reaction and memory tests. Unsure how scientific it is, but it was an interesting use of 10 minutes nonetheless.
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?
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.
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 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.
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).
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.
Last week, Microsoft won a contract to provide the U.S. army augmented reality ("AR") headsets. It's worth up to $21.9 billion over 10 years, and they'll be providing over 120,000 AR headsets. Porn has been the leader in VR/AR innovation, but it's unsurprising that war is also being used to drive innovation. Human nature is human nature.
Virtual reality (VR) and augmented reality have been around for a long time, but there's been a massive boom in innovation and interest over the last 3-5 years. Not only are the technologies becoming more affordable, but the animation is becoming more realistic, headsets are becoming more portable and longer-lasting, and our physical and virtual realities are beginning to blend.
We're moving towards a world where technology envelops every aspect of our lives … figuratively and literally. It's funny because I felt the same way in the late 90s as cell phones and the internet proliferated. It feels quaint in comparison to the ubiquity of technology today. Even our toasters are smart now.
The following (still fictional) video is thought-provoking. What happens when these new technologies are used to influence behavior, decision-making, and even your identity?
Like many things, these technologies make possible awesome new capabilities (if used well) and horrific consequences (if abused or used in authoritarian ways).
Your doctor or nutritionist could help you make better choices for yourself. Your therapist or coach could help you perceive and respond differently to the challenges life presents you. Marketers could better influence your purchases. Employers could better monitor and measure your performance and productivity. And governments will not be far behind … doing what they do. It all toes the line between beneficial and creepy.
Because of where we are in the adoption curve, it is becoming more common to discuss bioethics and AI ethics. Likewise, as we accelerate into an age of exponential technologies and mindsets, be prepared for increasing scrutiny of the promise versus the peril of various new technologies and capabilities.
We live in interesting times, and only getting more interesting as it goes!
Have you noticed that it's easier for most people to identify and solve someone else's problem than it is to do the same for themselves?
Humans are emotional creatures. As a result, our decision-making often suffers from fear, greed, and discretionary mistakes.
As an entrepreneur, I strive to be objective about the decisions I make. Towards that goal, using key performance indicators, getting different perspectives from trusted advisors, and relying on tried-and-true decision frameworks all help.
Combining all three creates a form of "mindfulness" that comes from dispassionately observing from a perspective of all perspectives.
That almost indifferent and objective approach is also where exponential technologies like AI excel. They amplify intelligence by helping make better decisions, take smarter actions, and continually improve performance.
I shot a video about mindfulness and the future of A.I.
Artificial intelligence is cool. The truth, however, is that AI is still relatively limited. Individual techniques (or algorithms) are good at "something". The challenge is that they only focus on what they need to come up with their answer, without considering a different perspective. While it is good at what it is good at, it isn't necessarily good at empathetically understanding that a different technique, which comes up with a different answer, might be "right" as well.
The future of AI likely will be based on swarm intelligence, where many specialist components communicate, coordinate, and collaborate to view a situation more objectively, better evaluate the possibilities, and determine the best outcome in a dynamic and adaptable way that adds a layer of objectivity and nuance to decision making.
One of the lessons I teach to our younger employees is that an answer is not THE answer. It's intellectually lazy to think you're done simply because you come up with a solution. There are often many different ways to solve a problem, and the goal is to figure out the one that comes up with the best results.
Even if you find THE answer, it is likely only THE answer temporarily. So, it is really just a step in the right direction that buys you time to learn, improve and re-evaluate.
Yes, that is Tom Hanks wearing a Bubba Gump shirt punching Covid-19.
So, what is an NFT, and why are they becoming so popular?
NFTs stand for non-fungible tokens, which are unique digital assets on the blockchain. They've been around since 2014, but only recently blew up in popularity. They're essentially collectibles … but digital.
An NFT might be an image, a gif, a video, etc. But, because they're given a unique code on the blockchain, the ownership and validity of that item can be tracked.
Surprisingly, owning that NFT does not give you copyright of that digital asset. In fact, some images have been made into multiple tokens, and some tokens include multiple pieces of art which have been sold individually. The digital files themselves are still infinitely reproducible … but that code on the blockchain is not.
In a sense, that means that NFTs are the digital equivalent of an autographed item.
In the past, when I've talked about Blockchain, digital art wasn't something I actively considered. Blockchain made sense to me as a way of proving provenance and helping establish the authorship and authenticity of an object – but I assumed it would be high-end physical art.
At the end of the day, if someone will pay for it, then you can sell it. That's part of the beauty of Capitalism. Most collectibles don't make sense from a macroeconomic value sense. They're worth something because of their value to their collectors.
Think about Beanie Babies, or Pokemon Cards, or even more mainstream collectibles like Sports Memorabilia or Whiskey.
While I won't say that "I get" the appeal of NFTs … I get it. As the world becomes increasingly digital, "real" and "tangible" have new meanings.
Is something not "real" just because it's digital?
It reminds me of a painting by René Magritte called "The Treachery of Images." The painting shows an image of a tobacco pipe. Below it, Magritte painted, "Ceci n'est pas une pipe," which is French for "This is not a pipe."
The famous pipe. How people reproached me for it! And yet, could you stuff my pipe? No, it's just a representation, is it not? So if I had written on my picture "This is a pipe", I'd have been lying! — René Magritte
If you're still a little lost, SNL had a funny skit last night with an NFT rap song. Enjoy.
I enjoyed the chart, and had a couple of different takeaways:
Many companies tried to capitalize on the streaming wave by launching half-baked streaming services, but it's clear that the pioneers are still extending their lead on the fast followers.
Despite Netflix already being the industry leader, they saw a 34% increase in 2020.
China's largest provider – Tencent Video – only has 120M users, which is about 8% of China's population. In contrast, Netflix has 74M US users, which is about 23% of the population.
The New York times is the only News subscription source big enough to make the list, yet it's at the very bottom with 6M users. Though, it did see a 61% increase in 2020.
Disney+ grew 95M in its inaugural year, which is a credit to the brand recognition Disney holds.
Interesting stuff and large numbers!
How will the world re-opening impact those numbers? How about 5 years from now? What do you think?
Will virtual reality and augmented reality start to impact these numbers?
With that much money and on the line, I expect this to remain an industry segment primed for innovation, growth … and a few surprises.
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