Capitalogix

Cap And Frown: The Future of Higher Education

Many of my friends have children either in high school or college. 

Watching various graduation ceremonies - it's clear that this was an abnormal year for graduates.  That being said, I've been impressed with the sense of greater community that being isolated from your local community can give. 

via The Atlantic

The coronavirus pandemic has put schools and students in an interesting predicament. 

While the short-term ramifications have mainly targeted students, the long-term ramifications will also greatly impact schools. 

Lockdown orders have put massive financial stress on schools. Scrambling to get students educated, building online materials, purchasing software, etc. all take massive amounts of money. On top of that, many universities have had to issue refunds for various services that students weren't able to receive. 

We often think about how severely the pandemic and quarantine have affected hotels and air travel, but education was hit equally as hard. 

I'm interested to see how schools will recover. Some universities are staying online for the fall semester, some are downsizing and cutting programs,  some are reducing tuition ... but many are afraid of their financial model breaking under the pressure (regardless of the size of their endowment). 

With nearly infinite education available online for free (including from universities), this could be a chance for a new educational model... time will tell. 

What do you think is going to happen?

Putting 2020's Job Losses in Perspective

Despite rolling re-openings, the economic effects of this "great lockdown" are still mounting. 

More than 36 million unemployment claims have been filed in the last two months - with 3 million coming last week. Over 14.7% of the population is unemployed. 

via NY Times

That being said, just like with COVID-19 cases, we're past the peak. 

Unfortunately, also like COVID-19 cases, the consequences are protracted, and we're unsure if any of our treatment plans are truly alleviating the problem. 

The speed of this shutdown and its impact on employment has been almost unprecedented.

(April 17th, 2020) via visual capitalist

During the Great Depression, unemployment reached 24.9%, and there is no modern equivalent. Today, that would leave 41 million Americans out of work. But the short-term effects of this lockdown are significantly worse than anything in recent memory. 

Luckily, the current crisis is happening on a much faster scale than any of the previous examples. The aforementioned crises generally took several years to happen with unemployment peaking at the tail-end of the recessions. Perhaps we have already passed the peak in only two months?  Same story, different topic ... are the financial markets.  The hit was deeper and quicker than in previous crises, as long as you think the damage has already been done.

Due to this situation stemming from a global pandemic, which resulted in a forced lockdown ... there is an argument to be made for this not being a normal crash.  As a result, there's room for optimism (or skepticism).

Frankly, this is an unprecedented situation.  Governments have taken massive action.  We all know they don't do these types of things during good times.  The question is will it be enough, and if so, for how long? 

Also, actions have consequences.   If governments can really do this, and it works, then why wouldn't they continue?

I suspect because it doesn't really work ... or at least, too much of a good thing is bad for you too.

As normal economic activity resumes, I look forward to seeing how much of the damage is temporary. There are clearly industries that were hit hard - air travel, hotels, etc. - but almost all industries expect to see a rebound. 

Meanwhile, even though Georgia reopened, their initial jobless claims are still rising. Unemployment tracks the business cycle, so as businesses and spending ramp back up, the response should accelerate.  But, it's unclear when that will happen and how protracted the pain will be.

As a reminder, though the lockdown is ending, the economic effects will ripple for a long-time. The length of the ripples depends on our response. 

We live in interesting times!

Working From Home... Forever?

Almost everyone - barring essential workers - has been working from home for over two months at this point. 

So, on some level, we all have a pretty good understanding of the pros and cons of the work-from-home lifestyle. Despite some of the potential detriments, many companies are realizing that productivity hasn't dropped the way they expected. 

In fact, Twitter CEO Jack Dorsey, just announced that henceforth his employees won't have the obligation of coming into the office. They can work from home forever if that's what they choose. 

via Dilbert (September 1995)

It's interesting to see how fast this pandemic changed "normal" in regard to business operations, shopping, etc. It is another reminder of how adaptable humans and society are – and how that has helped us survive and thrive throughout time. 

My team has been working remotely since the beginning of March, and so far they've stepped up to the challenge. I've been impressed with the productivity, the hours they've worked, and the connection and collaboration achieved despite the loss of physical proximity.  I've heard similar stories from friends around the globe, in many industries.

Nonetheless, I don't believe that the level of remote work and productivity we've experienced will continue.  Several things contributed to this level of productivity and output.  First, the world shut down and people had little else to do.  Second, during scary times, doing something productive and feeling like you are contributing are both comforting and therapeutic.   Third, I feel like people felt that it was an "all hands on deck" emergency, where many companies or industries were fighting for survival. 

Time kills all things ... and part of adapting is to make the "New", well, "Normal".

That doesn't mean that remote work is bad.  Nor does it mean that we can't learn from the experience.  It is just that the shiny newness will fade and human nature will kick back in as we settle into the new normal.

Texas is supposedly "Open for Business" – but our office will remain mostly unused.  A survey of our team found that 75% didn't believe it was smart or safe to return to the office yet. 

Our next target date is June 15th.  In the meantime, the office is open for people who want or need it.  We just don't expect many to be there.

We are better at the skills, tools, and mindsets that make remote work possible or profitable.  Still, I'm curious how time and human nature will affect the level of work done in the next month (compared to what was done or achieved in the prior month).  What we do now really does have the power to change the future.

Personally, to keep productivity up while at home, I've dedicated a certain space - and time - to work. That routine, combined with not muddying the space with other activities, has been helpful. A side benefit is that I've also made time for mindfulness and exercise.  Combine that with healthier food (meaning way fewer restaurant meals or entertainment calories) and the health benefits are obvious.

What habits do you want to bring back to your world when it re-opens?

I'm also curious to hear about the methods and tools you're using to stay productive.   

Onwards.

Selective Attention: What Are You Missing?

Sticking with the philosophy theme, I encourage you to watch this video below on selective attention. 

Daniel Simons' experiments on visual awareness have become famous.  The primary conclusion drawn from his research is that we can miss incredibly obvious things, right in front of us, if our attention is focused elsewhere.

While watching the video, count how many passes the team in white makes. 

This is worth doing so you experience it yourself.

OK, click the video to do it now.

via Daniel Simons and Christopher Chabris (Click Here To Read The Full Paper)

First, did you get the number of passes correct? Second, did you see the gorilla?

If you have already seen this video or heard of the study, it's much easier, but most people absolutely miss the Gorilla, despite it not being hidden. 

Think about how often your focus blinds you to the obvious.

This next video demonstrates "change blindness".  In an experiment, 75% of the participants didn't notice that the experimenter was replaced by a different person.

 

via Derren Brown

Warning: Objects In Your Attention Span Are Fewer Than You Perceive.

It's well known that we often miss objects in our field of view due to limited attention and change blindness, but, it's true with more than just sight. Moment by moment, the brain selectively processes information it deems most relevant. Experiments, like these, show the limits of our capacity to encode, retain, and compare visual information from one glance to the next. 

More importantly, this suggests that our awareness of our visual surroundings is far more sparse than most people intuitively believe.  Consequently, our intuition can deceive us far more often than we perceive.

 

via Pickles

As an entrepreneur, when I focus fully on something, it's as if everything else goes away. That level of focus can be a gift - but it can also be a curse. In Genius Network, we have a form we fill out at the beginning of each meeting. In it is a diagram where you rate your score on 8 factors: physical environment, career, money, health, friends & family, significant other, personal & intellectual growth, and fun & recreation

It's rare that I'm fully succeeding in all 8 ... we only have so much focus and bandwidth, it's inevitable I'll miss things. Clearly, in an information-rich environment, attention is a scarce and essential resource. So, pay attention (or automate the things you know need to be done right, every time).

What are you currently prioritizing, and what's falling to the side due to that focus? What are you missing?

Hope this was a helpful reminder. Let me know what you think about posts like this.  Thanks.

A Look At Razors (No, Not That Kind)

In philosophy, a razor is a rule of thumb that allows one to eliminate unlikely solutions or actions in relation to a hypothesis. They're called razors because they shave off those unlikely explanations. 

Most people have heard of Occam's Razor ... even if you don't recognize the name, I bet you recognize the idea of abductive reasoning. 

When presented with competing hypothetical answers to a problem, one should select the answer that makes the fewest assumptions.

Essentially, the fewer assumptions a solution requires, the more likely it is to be true. As with any rule of thumb, it's a good starting point but is not definitive. There are plenty of exceptions to the rule.  It is still a good starting point for intellectual conjecture. 

I recently found out there are more philosophical razors, and they're all interesting.  Here are some of the more interesting ones:

• Hanlon's Razor - Never attribute to malice that which is adequately explained by stupidity;
• Hitchens' Razor - What can be asserted without evidence can be dismissed without evidence; and
• Alder's Razor (also known as Newton's Flaming Laser Sword) - What cannot be settled by experiment is not worth debating.

I've had to remind myself about Hanlon's Razor a lot recently.  Also the other kind ...

 

As I told my mother on a Coronavirus Quarantine Mother's Day, "Yes, I know I need a haircut and a shave."  

I'm planning on getting them on May 19th, because our part of Texas is opening up to a new normalcy that week.

I hope you are doing well and staying positive.

Looking forward to seeing people in real life again soon!

Active Management In The Wake of Pandemic

It's apparent that the first 4 months of the year have been anything but normal ... Challenging to say the least.

The increased volatility and noise tested active managers' mettle intensely and often. While even a blind squirrel finds a nut in a forest (for example, during a bull market ...) this type of environment provides an increased opportunity for both under and outperformance as luck and skill collide. 

History will show that the majority of funds struggled in the first quarter of 2020 - driven by the volatility and uncertainty in the midst of a global pandemic.

Investors pulled out ~$33 billion when asset values initially plunged. Yet, the rush to cash was only the beginning, in the first quarter, asset value plunged $366 billion. Redemptions hit large hedge funds the hardest. Meanwhile, funds with less than $1 billion under management only lost $1.6 billion to net redemptions. 

That being said, as is often the case in both volatile and bear markets - people are checking out the state-of-the-art active management strategies. Interest in hedge funds is at a three-year high, as many people fear that what used to work simply isn't good enough anymore.

I suspect that technology-enhanced strategies will gain ground during the next few years as A.I. and exponential technologies get better and gain traction in asset management, risk control, and data management.  Algorithms will improve, hardware will get faster, digital signal processing will become more accurate, and it will be easier to identify and produce data sources that increase the efficiency, effectiveness, or certainty of outcomes.  The likely result will be a reduction in the cost to produce a unit of alpha, which bodes well for forward-looking investors.

As we slowly move toward normalcy, what can we expect to see?

Institutional Investors are optimistic as well.  Here are selected responses from a survey of 125 institutions.

via Institutional Investor

94% of respondents said that their institutions had done a good job managing response to COVID-19, with 44% believing they'd done very well. This contrasts with their belief on how the government handled the crisis, but shows an opportunity for a strong rebound for businesses. 

In past weeks, I've focused on this crisis as an opportunity for reflection and growth. Personally, I continue to brainstorm ways to combine the old way and the new way to create something better. Institutional Investors express similar sentiment here. 

via Institutional Investor 

As of 4/21/2020, 66% of respondents believe the focus should be on the health of the public, that will likely soon shift to stabilizing the economy, and subsequently shift to growing the economy. 

I believe we'll see similar responses from active managers and from entrepreneurs. This is an opportunity to improve operations, adopt better practices, and set higher standards. 

It doesn't make sense to shoot for going back to where we were.  This much pain and effort likely creates the fertile ground for something better.

Onwards! 

Here Are Some Links For Your Weekly Reading - May 3rd, 2020

 

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

Lighter Links:

• China Has Started a Grand Experiment in AI Education. It Could Reshape How the World Learns. (TechReview)
• I Have Seen the Future And It's Not the Life We Knew. (The Atlantic)
• Army Ranger School is a Laboratory of Human Endurance. (Outside)
• Watch Picasso Make a Masterpiece. (YouTube)
• Michael Jordan Reportedly Once Turned down a $100 Million Appearance Fee. (FTW)

 

Trading Links:

• Buffett's Berkshire Posts Nearly $50 Billion Loss as Coronavirus Causes Pain. (Reuters)
• Bets against the Stock Market Rise to Highest Level in Years. (Wall Street Journal)
• NYSE Research Shows Humans on Exchange Floor Limit Volatility, COO Says. (Cheddar)
• Nasdaq, Cboe Fix Feeds Facing Options Overload. (WatersTechnology)
• China's National Blockchain Will Change the World. (CoinDesk)

 

Elon Musk's Twitter Tirade

Elon Musk wiped $14 billion dollars (9.5%) off Tesla's value with one tweet. 

He went on a Twitter tirade focused on the unfairness of COVID-19 lockdowns, on selling all of his personal possessions, and singing the Star-Spangled Banner. 

The tweet that took the cake was "Tesla stock price is too high imo" (in my opinion).

via Elon Musk

Musk also announced that he and his girlfriend, Grimes (who is a musician), are scheduled to have their baby on Monday.

Back to business ... remember that Musk has run afoul of the SEC for tweeting about Tesla shares in 2018, when he tweeted about potentially taking Tesla private. That is was recently settled. As part of that, Musk agreed to a pre-approval process for tweets that included public statements that could move Tesla's stock price. 

Perhaps he forgot? 

Sometimes, less is more!

Beyond The Snap: Business Lessons From Football

The NFL draft happened this week, despite the Quarantine.

I was happy to distract myself from the economy and news cycles.

Football is something I used to love to play. And it is still something that informs my thoughts and actions.

Some lessons relate to being part of a team, while others relate to the coaching or management side of things.

Some of these lessons stem back to youth football ... but I still learn things watching games – and even more from watching Dallas Cowboys practices at The Star. 

Think about it, even in middle school, the coaches have a game plan. There are team practices and individual drills. They have a depth chart, which lists the first, second, and third choice to fill certain roles.  In short, they focus on the fundamentals in a way that most businesses don't.

The picture, below, is of my brother's high school team way back in 1989.

To re-state, most businesses are less prepared for their problems than an 8th-grade football team. Now, that sounds offensive to some of you, but if you think about it ... it's pretty true. 

Losing to An 8th Grade Team

I shot this video right before the COVID-19 shutdown.  I encourage you to watch it.  I think it's 3 minutes well spent.

 

Teams think about how to improve each player, how to beat this week's problem, and then how to string together wins to achieve a higher goal. 

Contrast that with many businesses. Entrepreneurs often get myopic ... they get focused on today, focused on survival, and they lose sight of the bigger picture and how all the pieces fit together. 

The amount of thought that goes into football - which is ultimately a game - is a valuable lesson for business. 

What about when you get to the highest level? If an 8th-grade football team is equivalent to a normal business, what about businesses that are killing it? That would be similar to an NFL team. 

Let's look at the Cowboys. 

Practice Makes Perfect

How you do one thing is how you do everything. So, they try to do everything right. 

Each time I've watched a practice session I've come away impressed by the amount of preparation, effort, and skill displayed.

During practice, there's a scheduled agenda. The practice is broken into chunks, and each chunk has a designed purpose and a desired intensity. There's a rhythm, even to the breaks.

Every minute is scripted. There's a long-term plan to handle the season ... but, there was also a focus on the short-term details and their current opponent.

They alternate between individual and group drills. Moreover, the drills run fast ... but for shorter time periods than you'd guess. It is bang-bang-bang – never longer than a millennial's attention span. And they move from drill to drill – working not just on plays, but the skillsets as well (where are you looking, which foot do you plant, how do you best use your hands, etc.).

They use advanced technology (including advanced player monitoring, biometric tracking, and medical recovery devices ... but also things like robotic tackling dummies and virtual reality headsets). 

They don't just film games, they film the practices ... and each individual drill. Coaches and players get a cut of the film on their tablets as soon as they leave. It is a process of constant feedback, constant improvement, or constant renewal. Everything has the potential to be a lesson. 

Beyond The Snap

The focus is not just internal, on the team. They focus on the competition as well. Before a game, the coaches prepare a game plan and have the team watch tape of their opponent in order to understand the tendencies and mentally prepare for what's going to happen.

During the game, changes in personnel groups and schemes keep competitors on their toes and allow the team to identify coverages and predict plays. If the offense realizes a play has been predicted, they call an audible based on what they see in front of them. Coaches from different hierarchies work in tandem to respond faster to new problems. 

After the game, the film is reviewed in detail. Each person gets a grade on each play, and the coaches make notes for each person about what they did well and what they could do better.

Think about it ... everyone knows what game they are playing ... and for the most part, everybody understands the rules, and how to keep score (and even where they are in the standings). Even the coaches get feedback based on performance, and they look to others for guidance. 

Imagine how easy that would be to do in business. Imagine how much better things could be if you did those things.

Challenge accepted.

Here Are Some Links For Your Weekly Reading - April 26th, 2020

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

Lighter Links:

• Harvard Professor Wants to Ban Homeschooling Because It's Authoritarian'. (NYPost)
• Amazon Asks Workers to Request Leave If They Continue Staying at Home. (EnGadget)
• You Can Now Download the Government's Controversial Contact Tracing App. (Timeout)
• A Startup is Pitching a Mind-Uploading Service that is 100 Percent Fatal. (TechReview)
• Burning Man is Going Virtual, and So are the Orgies. (Vice)

 

Trading Links:

• This Pandemic is Over. Let's Stop the Economic Suicide, and Get Back to Work. (RealClearMarkets)
• Negative Oil Prices Were a Warning, Not an Anomaly. (Bloomberg)
• Ken Fisher on Nixing the VIX. (RCM)
• Hedge Funds are on Defense and Testing the Stamina of a $5 Trillion Stock Rally. (Bloomberg)
• Who's On Top in the S&P 500 Before and After the Coronavirus?(SeekingAlpha)