Capitalogix

AI Meets Dr. Seuss

Dr. Seuss was recently in the news for stopping the release of 6 of its books. 

Whether it was a marketing ploy or not, I've been seeing a lot more Dr.Seuss content. 

To start, here's a video of an A.I. written Dr. Seuss book with animation. 

 

via Calamity AI

In addition, here's an A.I. remastered World War II cartoon written by Dr. Seuss with a character named Private Snafu. It's one episode of a series of shorts that were banned post-WWII, and it's one of the more tame episodes.  For an extra piece of trivia, the name of Private Snafu and his series of shorts was based on the military acronym for "Situation Normal: All F***ed Up". 

It's an interesting piece of history ... enjoy. 

 

via Adam Maciaszek

While produced by Warner Bros., these shorts which were made for the US military did not have to go through the Production Code Administration and thus got away with raunchier humor, foul language, and what we would today categorize as racist propaganda against the Japanese and Germans. 

While it's okay to acknowledge that we should be doing better today, I also think it's interesting and informative to watch older materials in the context and time period they were written. 

Racism isn't okay, but if you don't know history, you're doomed to repeat it, and art can be discussed and enjoyed within that context as well.  

 

A Quick Look At American Debt

Markets are not the economy, but it's still important to understand and follow economics.

One of the unfortunate "trends" of 2020 was the increase in debt at various levels. Now, debt can be a good thing ... it greases the international wheels and can be an important part of long-term financial plans for countries (in the same way you or I might use it.)

But too much of a good thing is a bad thing, and doing that math gets pretty complicated on the national level. 

To help put it in perspective, I want to look at the U.S. debt on different scales. 

First, you can look at this US Debt Clock for a staggering interactive visualization of the inflows and outflows in America. Click the image to watch it update in real-time.  I encourage you to look at some of the components tracked.  It made me think about our future differently.

 

via US Debt Clock (4/9/21)

The U.S. has a GDP of about $22 Trillion and our national debt is currently over $28 Trillion, but our net worth is still approximately $120 trillion. 

For more perspective: 

• The global economy has hugely increased in size in the last 50 years as developing nations prosper. The average global GDP per capita has gone from ~$1000 to over $10,000 in my lifetime.
• The U.S. has the largest percentage of the world's debt, but Japan has the worst debt-to-GDP rate at over 224% (compared to America's approximately 127%)
• During 2020, debt held by the US public increased by $4.2 billion - the largest dollar increase in history. A large part of that increase in debt was due to the federal deficit which was reported at $3.1 billion
• Over 39% of U.S. Federal debt is foreign-owned, though we earn more from our assets abroad than we pay to foreign investors
• The average American has over $90,000 in debt, and approximately 80% of Americans are in debt 

What about on the state level?

As a result of snowballing debt, President Biden's $1.9T economic stimulus package promised $350B in direct aid to states. 

Forbes via HowMuch

To help understand the image, Texas is actually a great case study. Texas's bubble is big because it has one of the highest total debt levels, but is green because its debt ratio is pretty good at 62.5%. 

California has the highest total debt, but is very light pink, stating that its debt ratio isn't bad.  Some states' liabilities outweigh their assets by a factor of 4x or 5x which is scary. 

This is a helpful illustration of the delicate balance of taking on debt. It's okay to take on large amounts of debt if you have a reasonable belief that revenue outstrips interest. To contrast that, some of these states have unsustainable debt levels - and only survive because they're a part of a bigger whole - the U.S. - and have an extra safety net. 

What about Consumer Debt?

Most of America's debt is Federal - but consumer debt accounts for a non-trivial portion as well.  Here's a chart that shows the change in U.S. Household debt since 2003. 

Federal Reserve Bank of NY via HowMuch

Student, Auto, and Home Owner loans have all increased substantially - with the cost of student loans raising over 500%. Almost every category of consumer debt has increased. 

While our country has gotten richer, and the standard of living has increased, we also have more people living in large amounts of debt. 

Things To Consider

These charts are startling. Debt is a powerful tool ... but comes with risk as well. The question is, are we as a country and individuals managing the risk appropriately?

It's hard to look at these charts and say that there isn't an issue. The hope is that the government stimulus packages will make a difference - but Band-Aids won't fix the root of the problem and can even lull people into a false sense of security. 

What do you think the solution is?

 

The Rise of Augmented Reality

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?  

 

Keiichi Matsuda via  Vimeo

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!

 

 

Mindfulness & Exponential Technologies

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.

Hope that helps. 

 

Here Are Some Links For Your Weekly Reading - April 4th, 2021

Happy Easter!

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

Lighter Links:

• CDC Says Travel is Safe for Fully Vaccinated People, But Opposes Non-Essential Trips. (NPR)
• Here's the Story Behind the Amazing Moscone Center Vaccine Playlist. (SF Chronicle)
• April Fools' Day: 10 Stories that Look Like Pranks But Aren't. (BBC)
• How NFL Teams Use Sophisticated AI Projections in the Draft. (ESPN)
• Mark Cuban On the Company that Made Him a Billionaire: Why He Knew It Would Succeed Despite Many Naysayers. (CNBC)

 

Trading Links:

• The Microchip Shortage Explained: How It's Impacting Car Prices and the Tech Industry. (USAToday)
• The New Stock Influencers Have Huge and Devoted Followings. (Wall Street Journal)
• 3D Printed Architecture that Shows Why this Trend is the Future of Modern Architecture. (YankoDesign)
• What the U.S. Can Learn From China's Infatuation With Infrastructure. (Wall Street Journal)
• The Death of the American Mall Was a Warning Sign that Our Dystopian Future Was Closer Than We All Thought. (BusinessInsider)

 

Tracking Shipments with Import Yeti

While I'm not really in a supply chain business, they are interesting to me because they do with physical things, many of the same things I do with virtual things.

Supply chains use complex systems to achieve "simple" goals.  Figuring out how to streamline processes is both an art and science. 

Global supply chains remind me of the complicated machinery and gearing that goes into a finely made analog watch ... the watchmakers know that even if you don't know how the watch was made or what a mechanism does, it's still interesting to watch it tick and admire the engineering. 

Recently I found a website - ImportYeti - that tracks over 60 million companies' sea shipment records.   Here is an example showing Tesla.

via Import Yeti

It uses bills of lading and other public information to tell you information about the frequency of shipments, the suppliers, and what they delivered.

There is a ton of interesting information here.  Hope you find some creative ways to use it. 

If you are interested in this, I also suggest looking at Eli Goldratt's The Goal, which describes the "Theory of Constraints," which deals with how bottlenecks limit performance. 

 

What Are NFTs?

This month an NFT by an artist named Beeple sold at Christie's for over $60 million. That sentence raises more questions than it answers. 

To make it even stranger, here's an example of Beeple's art. 

via Beeple

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. 

 

via SNL

 

 

 

 

Let My People Go ... Outside

Last night was the first night of Passover, a family-centric holiday that recounts the biblical story of the Exodus of the ancient Israelites from Egypt into the Promised Land. For me, it's a reminder to appreciate what we have – and how we stand on the shoulders of those who came before us. 

One of the memorable phrases from Exodus is when Moses says "Let my people go!"  For generations, people assumed he was talking to the Pharoh about his people's freedom. For modern Jews, after a week of eating clogging matzoh, matzoh balls, and even fried matzoh ... for many Jews "Let my people go" takes on a different meaning.

A friend asked me what part of the matzoh do the balls come from?  I don't know ... but I hope the matzoh ball fairy brought you some good ones. 

Apparently (according to my youngest son), Sea Shanties are en vogue with today's youth. So, here's a pirate Passover song. 

 

via Six13

For Jews, a notable part of the ritual dinner is naming each of the 10 plagues that rained over Egypt and saying "never again".

Perhaps, this year, COVID-19 gets added to the list? 

Just like the Jews making it through slavery, the plagues, and 40 years wandering through the wilderness and desert before entering the Promised Land ... We are approaching the post-COVID promised land after a year of being stuck inside. 

With the coming of spring, the re-opening of the world, and the reminders from the stories of Exodus and Easter - it's a great time to do a mental and physical "spring cleaning". Mine your experiences for the things you want to keep doing (or continue not doing) as things go back to "normal".  

Hope you had a great weekend. 

Onwards!

 

Spotting a Bubble

I spend a lot of time doing research ... not the way data scientists do, but I enjoy keeping an eye on the pulse of things. 

Recently, I've noticed increasing talk about bubbles. One of the most obvious potential "bubbles" being the relatively stable bullish performance of the markets, despite the lack of a full economic recovery. 

Interestingly, Ray Dalio's bubble indicator says that stocks aren't at dangerous levels, though it does say the top 5% of the top 1,000 US companies are in an extreme bubble. Many of those companies are emerging technology companies. 

via Ray Dalio

So, without making a prediction, caution is probably fair, but recognize that people aren't blaring sirens and running with their arms flailing in the air. 

Instead of focusing as much on today's bubbles, I thought I'd share a great summary on "how to spot a bubble" by Barry Ritholz. 

He suggests 10 elements: 

1. Standard Deviations of Valuation: Look at traditional metrics –  valuations, P/E, price to sales, etc. — to rise two or even three standard deviations away from the historical mean.

2. Significantly elevated returns:  The S&P500 returns in the 1990s were far beyond what one could reasonably expect on a sustainable basis. The years around Greenspan’s “Irrational Exuberance” speech suggest that a bubble was forming:

1995    37.58
1996    22.96
1997    33.36
1998    28.58
1999    21.04

And the Nasdaq numbers were even better.

3. Excess leverage: Every great financial bubble has at its root easy money and rampant speculation. Find the leverage, and speculation won’t be too far behind.

4. New financial products: This is not a sufficient condition for bubble, but it does seems that each major bubble has new products somewhere in the mix. It may be Index funds, derivatives, tulips, 2/28 Arms.

5. Expansion of Credit:  This is beyond mere speculative leverage. With lots of money floating around, we eventually get around to funding the public to help inflate the bubble. From Credit cards to HELOCs, the 20th century was when the public was invited to leverage up.

6. Trading Volumes Spike: We saw it in equities, we saw it in derivatives, and we’ve seen it in houses: The transaction volumes in every major boom and bust, almost by definition, rises dramatically.

7. Perverse Incentives: Where you have unaligned incentives between corporate employees and shareholders, you get perverse results — like 300 mortgage companies blowing themselves up.

8. Tortured rationalizations: Look for absurd explanations for the new paradigm: Price to Clicks ratio, aggregating eyeballs, Dow 36,000.

9. Unintended Consequences: All legislation has unexpected and unwanted side effects. What recent (or not so recent) laws may have created an unexpected and bizarre result?

10. Employment trends:  A big increase in a given field — real estate brokers, day traders, etc. — may be a clue as to a developing bubble.

11. Credit Spreads: Look for a very low spread between legitimately AAA bonds and higher yielding junk can be indicative of fixed income risk appetites running too hot.

12. Credit Standards: Low and falling lending standards are always a forward indicator of credit trouble ahead. This can be part of a bubble psychology.

13. Default Rates: Very low default rates on corporate and high yield bonds can indicates the ease with which even poorly run companies can refinance. This suggests excess liquidity and creates false sense of security.

14. Unusually Low Volatility: Low equity volatility readings over an extended period indicates equity investor complacency.

via Barry Ritholz, June 9th, 2011

There are many ways to make money trading ... and even more ways to lose money trading.  If it were easy, everyone could do it.  There is a mix of art and science combined with hard-to-quantify factors at play.

But, survivorship bias is big in trading because hindsight is 20/20. It's easy to look at a popped bubble and say "oh, obviously that was a bubble" ... but if it was that easy, trading wouldn't be so hard.

Trends continue until they don't ... but at some point, they don't, and that's where people get hurt. 

My gut tells me it is time to pay closer attention.

Onwards!

 

 

The Gap and The Gain: A Different View of my TEDx Talk

Sometimes I write posts about business ideas I've found to be particularly helpful. Today, I am writing about a concept that I would call "foundational," called the Gap and the Gain (which was created by Dan Sullivan of Strategic Coach). The base concept is simple – nonetheless, understanding and applying it can have transformative effects. The central concept is that you can be successful and happy or successful and unhappy ... and the difference between the two is likely how you choose to measure your results. 

Are you focused on the gap (all the things you still don't have) or the gain (all the things you already have)? 

As an entrepreneur whose business is based on innovation, one of my unique abilities is being able to think about what's possible ... and then find the golden thread from where we are to where we want to be. It's why I believe one of the "secrets to success" is to become comfortable being uncomfortable. Why? Because almost anything you want is beyond your current capabilities (otherwise, you'd already have them). Being able to transform the goal into a directional compass leading you in the right direction is easy for me, and gives me energy.

But, that unique ability comes with a pretty obvious drawback ... I'm never where I want to be (because I'm constantly looking at the horizon, and as I move towards it, the horizon continues moving). This is the curse of many entrepreneurs. They live and die without a fulfilling sense of accomplishment because they're always focused on the next mountain. The progress that they've made getting to here, and the confidence they built getting to here, raise the bar of what's possible.  Instead of focusing on the progress and wins that got them where they are, they monomaniacally focus on the gap between the current reality and their new shiny goal.

The distance between where you currently are and where you want to go should be motivating. In fact, I'd argue that the ability to stretch your vision further is a skill you should reward rather than punish. It is simply a matter of perspective. Measure from where you started, but don't lose sight of the bigger future. One pushes you from behind, and the other pulls you forward. 

That's the gap and the gain, and it's a great lesson that is useful in businesses and life in general. Ultimately, you're in control. You get to decide what you focus on, what it means, and what you choose to do.

Personally, probably the most important way this lesson has impacted me was in making more of the time left with my dad while he was dying. 

 

 

That video is about a year that brought my Dad's death, the forced sale of my company by venture capitalists, and a divorce (in that order).  In many respects, it was a horrible year ...  a year where it would have been easy to focus on the gap rather than the gain. 

Luckily, sometimes, life's darkest days bring the greatest gifts … if you are willing to look for them.

One of my biggest takeaways from that struggle was about the time value of life.

In finance, the "time value of money" refers to the principle that money's purchasing power varies over time (meaning, money today has more purchasing power than money later). In part, this is because the value of money at a future point in time might be calculated by accounting for other variables (like interest earned, or inflation accrued, etc.).

It occurred to me that a similar calculation applied to life ... or living.

During the last part of my dad's life, it was easy to focus on what we were lacking ... time ... we would have done almost anything for a little more time. 

 

 

In his last year, things that used to be unimportant, or even mildly irritating, took on increased importance. For example, a dinner together became almost a sacred event; a kiss goodnight was truly heartfelt, and saying goodbye meant something ... because it could be the last time.

Because of that focus, he took more "life" out of that time. Necessity is often the mother of invention.  While I wouldn't have chosen the situation, it changed his mindset (frankly, it changed our mindset), and as a result, we increased the amount of life we squeezed out of that little bit of time. 

Obviously, the choice to make more of life shouldn't wait for the death of a loved one or a similar crisis. 

We can choose to focus on what we want and what we gained to make the most life out of whatever time we're given. 

I spent a lot of that year moving away from pain when I could have been moving toward opportunity. I'm grateful I learned that lesson before he passed. 

To close, I want to leave you with a lesson from my dad that really stuck with me. 

The difference between good and great is infinitesimal. People who are good take advantage of opportunities ... but people who are great create them.   ~ Jacob Getson

It's a conscious choice we can all make.

Hope that helps. 

If you want to learn more about the specifics of the "Gap and the Gain," Ben Hardy wrote a great article on the subject.