Capitalogix

AI Tools For Your Business

Last week, I talked about the time value of time - and the benefit of quality peer groups. 

On Friday, one of those peer groups spent hours talking about the promise and peril of generative AI. While some people remained skeptical or in fear of what tools like ChatGPT made possible. 

One of the members shared an AI tool directory that I thought was worth sharing as well. It's called Futurepedia.io 

via futurepedia.io

My contribution to the discussion was brief, but it amounts to this ... Nothing you're hearing about AI should scare you. It should scream opportunity.  You don't have to rush.  AI is at the beginning of a long upwards sloping cycle of impact and capability. However, AI isn't duct tape, and for most, it's not a business ... it's a tool to help you create a bigger future that wasn't possible before.  Much like "internet" companies came and went in the late 1990s ... yet almost every company uses the internet in ways that were unimaginable at the beginning of the cycle.

People often get stuck searching for 'something' (often a singular goal or result). But, in their myopia, they miss the possibility of 'or something better.' 

In my business, I'm rarely happy to settle for less than I'm aiming for ... but I am willing to happily take the 'or something better'. Nonetheless, it is hard to see (let alone be open to) other targets or possibilities when you myopically focus on achieving the lesser (but specific) goal or target you initially chose to focus upon.

So, here is a thought to ponder ...

What is opportunity, and when does it knock? It never knocks. You can wait a whole lifetime, listening, hoping, and you will hear no knocking. None at all. You are opportunity, and you must knock on the door leading to your destiny. You prepare yourself to recognize opportunity, to pursue and seize opportunity as you develop the strength of your personality, and build a self-image with which you are able to live -- with your self-respect alive and growing. ~ Maxwell Maltz

Imagine what you believe this tipping point indicates is possible personally and professionally.

Hope that helps. 

How'd These 2022 Predictions Fair?

As we brought in 2022, I asked the question:

What's going to happen as a result of the continuing pandemic, inflation, interest rates, the ongoing supply chain issues, and the growing anxiety and unrest brewing underneath the surface of the new normal? In January, we'll get to see VC's predictions. Before that, what do you expect to happen in 2022? - How'd These 2021 Predictions Fair?

I proceeded to share visualcapitalist's 2022 predictions: 

via visualcapitalist

Well, there was undoubtedly increased volatility. 

While the whole board isn't correct, there's a surprising amount of prediction accuracy. On some level, predictions benefit from being generally vague. Also, many of the predictions that may not seem as accurate "today" seemed more accurate at some point this year. For example, we heard a lot about NFTs in the first half of the year, and while Big Tech is currently laying off employees, there was massive growth this year. 

What are you surprised they got right? In what areas were the predictions most off-base? Why?

And, of course, what are your mega-trend predictions for 2023?

Interesting stuff! 

OpenAI's ChatGPT is Pretty Cool

One of my go to claims about AI is that it can do almost anything ... but it can't do everything. Specific AI systems are becoming incredibly robust. Last year, I wrote an article emphasizing how big of a jump GPT-3 was from past language processors.  I also shared a Seinfeld sketch created by GPT-3 that was so good it was almost unimpressive ... it just felt like a Seinfeld sketch. 

It feels like every week, there's a new breakthrough in pop AI. OpenAI just released ChatGPT (for free) to the public. The promise of ChatGPT is to give a cogent reply to conversational discussions. It can help you code, it can write a poem, can answer your questions, and more. The code it produces is stellar, and it can even create a convincing romantic comedy using characters from various famous shows. It does a lot very well, but it does have some failings. 

ChatGPT via OpenAI

 

GPT-3 is 100x bigger than any previous language AI model and comes pre-trained on 45TB of training text (499 billion words). It cost at least 4.6 million US dollars (some estimated as high as $12 million) to train on GPUs. The resulting model has 175 billion parameters. This was impressive enough, but ChatGPT is actually not based on GPT-3 but GPT3.5 an even more robust model that improved on the ability to answer in a way that feels natural. 

ChatGPT can talk about almost any topic you can think of, and even create prose that feels human; however, it's not perfect yet. 

Unfortunately, this chatbot fails in many of the same ways as its predecessors. To start, it can present false information as true because it's essentially a "stochastic parrot" basing its answers on statistical regularities in its data sources, not on an actual understanding of the world. As well, a lot of its answers can include meaningless fluff that sounds good but doesn't actually answer the question meaningfully ... almost like a high schooler that forgot to read the book before writing an essay. It also can't produce ASCII art despite the advancements in AI art we've recently discussed. 

Regardless of ChatGPTs faults, it's a very impressive piece of software. It can answer trivia like Google, write poetry and dialogue, it can pretend to engage in philosophic discussion, and it can help you correct your code or improve your writing. 

Here's a sonnet I had it write about Artificial Intelligence:

AI, the future's shining light,
A force that shapes our world anew,
A source of endless possibility,
A tool that cuts our burdens in two.

From language translation to deep learning,
AI's capabilities are vast and grand,
It helps us solve problems, find solutions,
And gives us new ways to understand.

But with great power comes great responsibility,
As AI transforms our world and lives,
We must ensure that it's used ethically,
That it helps, rather than subverts or deprives.

So let us embrace this technological marvel,
And use it wisely, for the common good,
For AI has the power to unravel
Our deepest mysteries, as well as hurdles.

 

It does what it is supposed to do very well. It is much more conversational and robust than previous chatbots. Obviously, it doesn't do everything well, and I doubt a chatbot will any time soon. Nonetheless, it is a step forward … and it will create ripples of progress.

What do you think?

Tech Company Layoffs

For all the drama at Twitter, they're not the only ones experiencing layoffs in the tech industry. Though, Elon is now (supposedly) trying to renege on his severance packages.  

via visualcapitalist

Meta and Amazon saw even steeper layoffs than Twitter. Is this a result of overhiring during the tech boom, or a sign of dire times? Time will tell.  

Stated reasons are economic uncertainty and poor performance, we're also seeing unsuccessful departments downsize - like Alexa. 

To help allay economic fears, payroll and wage data from the U.S. government are exceeding expectations, and the country’s unemployment rate is close to a half-century low. As well, tech jobs account for 3% of the workforce - and many of those laid off will be picked up by smaller companies. 

Even if the layoffs represent a short term reaction to what tech companies are seeing, hearing, or otherwise experiencing … they won't necessarily translate to long term bad news for our economy. 

The Rise of the Intangible

In the past, most profitable companies built or sold some sort of tangible product. The Titans of industry were automobile manufacturers, oil producers, land owners, etc.

Over the past 20 years, the Titans have changed dramatically. Now, the leaders are in tech, IP, and other intangible assets. Here is a chart showing the changing weight of tangible and intangible assets as part of the S&P 500’s total assets between 1975 and 2020.

 

 via visualcapitalist

By VisualCapitalist’s definition, intangible assets are holdings that don’t carry any physical or financial embodiment. This includes R&D, intellectual property, and computerized information such as data and software. Today, intangibles are worth over $21 trillion.

With technology becoming more ubiquitous, I think the trend will continue - which makes protecting your intangibles even more important. 

Patents and trademarks are a great way to build a moat between you and your competitors. Remember, however, that anything you get a patent on becomes public knowledge - so be careful with your trade secrets. 

What's The Dollar Milkshake Theory?

Right now, the US Dollar is outperforming other currencies - in part, because it's the Reserve Currency.

via Econofact

But, that's not necessarily a good thing.

One possible occurrence of this is called the Dollar Milkshake Theory.

It purports that the US dollar will suck up liquidity from the other currencies, creating a chain of events that will drive the US dollar even higher. Unfortunately, this increases the risk of debt defaults. Eventually, the dollar ends up drinking the liquidity from the entire world economy.

Think about it. If you're getting negative yields on your two-year bonds from other countries, after a certain point you would sell those investments and switch to US two-year treasury bonds. It's a slippery slope from there. 

If this is true, then it also has dangerous implications for crypto - which is already in peril after the FTX controversy. 

So, the question becomes, does the dollar's strength truly help us? What about the global economy? What do you think?

The Social Media Universe

We recently dove into what's happening at Twitter. Since that article, Elon wrote an ultimatum e-mail to his employees saying that if they wanted to stay, they would have to work harder and longer than before ... and that they would get three months severance if they chose to leave. In a result that might have surprised Elon, thousands of Twitter employees quit.  In response, Elon locked the doors, cut badge access, and attempted some damage control.

On top of that, you also have Meta having its own issues. 

With that, it's probably a good time to take a look at the social media landscape.  Here is an infographic that shows the relative popularity of various social media properties. 

 

via visualcapitalist

If you rank the top 10 social media by monthly users, Twitter isn't even on the list. Nor is it on the list for driving clicks. 

Meta and YouTube top the list - by a mile. 

As well, there's a growing network of smaller social media vying for a spot in the global paradigm, like Parler, Mastodon, or even Onlyfans.

Meaning there's a lot more chaos in the system. 

As always, chaos creates opportunity – in this case, both for new media and for brands to capitalize on the change in trends. 

The question is, will Facebook and Twitter survive the storm, and if not, what will take their place?

What's Up With Twitter?

Everyone knows that Elon Musk was sued by Twitter and 'forced' to buy Twitter for $44B.  Since then, the now-private company has made a lot of confusing decisions. 

To start, Musk publicly announced that the company was hemorrhaging money.  To try and remedy this, he began by firing approximately half the employees.  Key executives were fired.  Later, many more executives left on their own.  After the massive exodus, Elon supposedly reached out to some former employees asking them to come back.  He also ended remote work for employees. 

In an attempt to increase the company's profitability, he announced Twitter Blue, a paid subscription service that would give you a checkmark, and push your content to the top of users' feeds. 

via twitter

Unfortunately, users were quick to abuse the new verification system by pretending to be public figures and even public companies.  As a result, there was real tangible damage to stock prices. 

 via Twitter

Eli Lilly's drop also brought down its competitors.  Other companies got hit, including Lockheed Martin. 

Do you think those are the most influential 8 dollars ever spent in history?

As a result of the turmoil, advertisers are leaving Twitter in droves, and Twitter has paused Twitter Blue in America – though it remains up in some different geographies. 

On the surface, it looks like Twitter is being run into the ground.  It seems like Musk is throwing a lot of darts at the board and seeing what sticks.  He said as much when he promised that Twitter would do many dumb things as part of his strategy to innovate and find smart things to do.

Are the foibles simply the cost of the innovation needed to revitalize the company ... or signs of trouble for Twitter's future?

Even though I'm prone to bet on Musk, I think it's too early to believe you can predict the outcome.

What do you think?

How To Handle Scary Times

The last few weeks have been pretty volatile in the markets.  OPEC reduced oil production by 2 million barrels a day, the Dow saw its worst day since 2020, the British PM, Liz Truss, resigned after only six weeks, and currencies around the world (including the Pound) are dropping precipitously in value. 

With markets making new lows and volatility shaking out investors in both directions, I thought this would be an excellent time to talk about coping with losses and managing your anxieties during "scary times." I last shared this at the apex of COVID fear ... and it's just as relevant today. 

The Anxiety Antidote

"When the trough gets smaller ... the pigs get meaner." - Dan Sullivan

Many people are suffering from "I should have ...", or "if I would have ...", or "if I could have ..." thoughts.

The problem is that thoughts like those create more stress and distraction.  They are a lens focused on loss, difficulties, past events, things that are missing, and what you don't want.

Think of them as an unhealthy reflex that wastes energy, confidence, and time.

All We Have To Fear Is Fear Itself  

I often talk about market psychology and human nature.  The reason is that markets reflect the collective fear and greed of its participants... people tend to get paralyzed during scary times like these.

But it's not the economy that makes people feel paralyzed.  People feel paralyzed because of their reactions and their beliefs about the economy.  Your perceptions become your reality. 

A little examination reveals that most fear is based on a "general" trigger rather than a "specific" trigger.  In other words, people are afraid of all the things that could happen and are paralyzed by the sheer scope of possibilities.  These things don't even have to be probabilities in order to scare them.

You gain a competitive advantage as soon as you recognize that it's not logical.  Why?  Because as soon as you distinguish that fear as not necessarily "true", you can refocus your insights and energy on moving forward.  You can act instead of react.  You make better decisions when you come from a place of calm instead of fear... so create that calm. 

Even a challenging environment, like this, presents you with opportunities if you watch for them ... or even better, if you create them. 

The Scary Times Success Manual

The goal is to move forward and feel better.  Strategic Coach offers ten strategies for transforming negativity and unpredictability into opportunities for growth, progress, and achievement.  They call it the "Scary Times Success Manual," and what follows are some excerpts:

Forget about your difficulties; focus on your progress.

Because of some changes, things may not be as easy as they once were.  New difficulties can either defeat you or reveal new strengths.  Your body's muscles always get stronger from working against resistance.  The same is true for the "muscles" in your mind, your spirit, and your character.  Treat this whole period of challenge as a time when you can make your greatest progress as a human being.

Forget about events; focus on your responses.

When things are going well, many people think they are in control of events.  That's why they feel so defeated and depressed when things turn bad.  They think they've lost some fundamental ability.  The most consistently successful people in the world know they can't control events - but continually work toward greater control over their creative responses to events.  Any period when things are uncertain is an excellent time to focus all of your attention and energy on being creatively responsive to all of the unpredictable events that lie ahead.

Forget about what's missing; focus on what's available.

When things change for the worse, many desirable resources are inevitably missing - including information, knowledge, tools, systems, personnel, and capabilities.  These deficiencies can paralyze many people, who believe they can't make decisions and take action.  A strategic response is to take advantage of every resource that is immediately available in order to achieve as many small results and make as much daily progress as possible.  Work with every resource and opportunity at hand, and your confidence will continually grow.

Forget about your complaints, focus on your gratitude.

When times get tough, everyone has to make a fundamental decision: to complain or to be grateful.  In an environment where negative sentiment is rampant, the consequences of this decision are much greater.  Complaining only attracts negative thoughts and people.  Gratitude, on the other hand, creates the opportunity for the best thinking, actions, and results to emerge.  Focus on everything that you are grateful for, communicate this, and open yourself each day to the best possible consequences.

 Click here to download the full PDF version.

Final Thoughts

The VIX (Cboe's Volatility Index) is regarded as the "Fear Index".  While we saw spikes in early October, numbers are significantly lower than the spikes in 2020. 

But, numbers have remained higher than pre-pandemic.  To me, this shows how uncertain and anxious the average "trader" is with various global trends.  We can discuss all the long or short-term causes of the rises and falls of markets, but I don't think it does much good.  I let the algorithms worry about those.

I sound like a broken record, but volatility is the new normal.

• Markets exist to trade, and if there's no "excitement" on either side, trades don't happen
• Trades are getting faster, which means more information has to confuse both the buyer and the seller
• You're no longer competing solely against companies and traders like you.  It's like the cantina from Star Wars, you've got a bunch of different creatures (and bots) interacting and fighting with each other, trying to figure out how to make their way through the universe

Pair that with all the fear and uncertainty, and you've got a recipe for increased volatility and noise.  That means that the dynamic range of a move will be wider and happen in shorter periods of time than ever before.  You'll hear me echo this thought over the next few years as the ranges continue to expand and compress.  Cycles that used to play out over weeks now take days or hours.  The game is still the same, it just takes a slightly different set of skills to recognize where the risks and opportunities are. 

There's a difference between investing and trading. On some level, I believe some humans can still invest well (assuming that they do the research, find an edge, and minimize the fear, greed, and discretionary mistakes that negatively impact results.  However, for most people, believing that they can trade (personally) is dangerous. There are simply too many things to pay attention to – and the ratio of signal to noise is difficult to overcome as well.

The crucial distinction is between adding data and adding information.  Adding more data does not equal adding more information.  In fact, blindly adding data increases your chances of misinformation and spurious correlations.

Today's paradigm - both in life and in trading - is about noise reduction.  It's about figuring out what moves the needle and focusing only on that.

Said a different way, if you don't know what your edge is, you don't have one. 

Meanwhile, if you do know what your edge is (regardless of how scary the times are), keep calm and carry on.

Warren Buffet's Current Holdings

Warren Buffett is a legend for many reasons. Foremost among them might be that he’s one of the few investors who clearly has an edge … and has for a long time. From 1976 to 2017 his Sharpe ratio (excess return relative to risk) was approximately double the overall market. Berkshire Hathaway now has over $700 billion in assets – and is still performing well. 

While many people consider Buffett to be an investor,  I also consider him to be an entrepreneur.

At the age of six, he started selling gum door to door. Obviously, selling gum wasn’t the key to his path to riches.  So, how did he make his first million?  Here’s a video that explains it.

 

via Coolnimation

For context, he made his first million at age 30, which was in 1960. For context, a million dollars in 1960 would be worth about $8.5 million today.

Buffet has always been honest about his bread-and-butter “trick” …  he buys quality companies at a discount and holds on to them.

Genuine Impact recently put together a chart of Buffet's current holdings. 

Twitter via GenuineImpact

There's a lot fascinating about his holdings. It is fascinating to recognize how much the world has changed – and yet how much it stayed the same. It's also interesting to see the amount of individual stocks he owns, like Apple for example (122 Billion). Despite the relative density of stocks, if you think about the capital at play, it's pretty centralized.

Diversification is important, but for a human, too much becomes a distraction … so Buffet famously buys what he knows.

Another Buffet hallmark, most of his stocks pay a dividend.

I was also surprised to see that he has a bit of money in ETFs like SPY despite investing in many of the individual stocks from the S&P 500. 

While this is an interesting graph to look at, it's important to know that this is one way to invest and might be a great way to get from a lot of money to more money - but this might not be the portfolio that works for the average investor (or you). 

There is blood in the streets … asking “What would Warren do?” might be a great place to start.