There has been a lot of discussion about consumer price inflation recently.
For a slightly different perspective and a longer-term view, take a look at this chart on VisualCapitalist. It shows the growth of $100 by asset class from 1970 - 2023.
I was surprised to see how little real estate grew ... but I wasn't surprised by the S&P 500 number.
The real estate number is more complicated than it appears on the surface (since it factors in leverage, property taxes, insurance, and other expenses). It also factors in the housing market crash, from which home prices took over a decade to recover.
For some context, here are some key events that highlight the difference between 1970 and 2023:
Technology
1970: First microprocessor introduced
2023: Artificial intelligence, Blockchain, and Quantum Computing are rapidly advancing
Space Exploration
1970: First lunar module lands on the Moon (Apollo 11)
2023: Private companies like SpaceX and Blue Origin lead the charge in space travel and exploration
Politics and World Events
1970: Cold War and Vietnam War dominate global politics
2023: Rise of globalization, social media, and geopolitical tensions between major world powers
Economy and Business
1970: Industrial economy dominates
2023: Service-based economy and e-commerce have transformed the way we work and shop
Communication
1970: Landline phones and snail mail are the primary means of communication
2023: Smartphones, social media, and instant messaging have revolutionized the way we connect and share information
These are just a few of the many events that highlight the significant differences between 1970 and 2023.
I’ve given a few speeches recently and have new subscribers to our weekly commentary (click here to sign up), so I thought it was a good time to write about the importance of data.
I revisit this topic about once a year because it’s important.
The Hidden Engine: Why Data Fuels Innovation
Technology and innovation are popular topics, but people often ignore what makes it all possible ... the hidden foundation, data.
Data is the lifeblood of modern businesses and the fastest-growing resource we have.
The quest to find and use data has created a modern-day “Wild West.” While AI is often positioned as a “Gold Rush,” data is the precious resource powering the race.
Another way to look at it is that data is the ammunition used by today’s tech titans in their battle for dominance.
In either case, it is easy to see that data is a scarce and valuable resource.
The Data Deluge: Finding Signal in the Noise
We’re living in an age of data explosion. Every day, a staggering 328.77 million terabytes of data are created, amounting to an estimated 120 zettabytes of new data by year’s end.
This rapid growth presents a challenge. Tech giants like Alphabet, Amazon, Apple, Facebook, and Microsoft all hold unprecedented data troves, creating a race for ownership and control. Regulations struggle to keep pace with this digital stampede.
Rapid growth means little time to create adequate rules. Everyone’s jumping to own more data than the next and to protect that data from prying eyes.
As a great example of this, I often warn people to keep their intellectual property off of ChatGPT or other hosted language models.
But here’s the real concern: Are we losing sight of the signal in all this noise? Just having vast amounts of data isn’t enough. The true value comes from extracting meaningful insights – the nuggets of gold buried within the data avalanche.
To Do The Impossible, Make The Invisible Visible
Collecting basic data and using basic analytics used to be enough, but it is not anymore. The game is changing.
I also see it trading, but it’s pervasive in every industry and our personal lives as well.
For example, traders used to focus on price data ... but there has been an influx of firms using alternative data sets and extraordinary hardware and software investments to find an edge. If you’re using the same data sources as your competitors and competing on the same set of beliefs, it’s hard to find a sustainable edge.
Understanding the game others are playing (and its rules) is important. However, that’s only table stakes.
Figuring out where you can find extra insight or where you can make the invisible visible creates a moat between you and your competition and lets you play your own game.
Here is a quick high-level video about Data as fuel for your business. Check it out.
It is interesting to think about what’s driving the new world (of trading, technology, AI, etc.), which often involves identifying what drove the old world.
Decoding the New World: Data as the Catalyst
Understanding today’s driving forces – like AI – often involves examining what propelled past eras.
History has a way of repeating itself. Even when it doesn’t repeat itself, it often rhymes.
Before e-mails, fax machines were amazing. Before cars, people were happy with horses and buggies.
The key to unlocking new economic realities lies in fresh perspectives.
In this new world, new or better data is often the game-changer. It’s the alternative dataset that allows us to approach challenges and opportunities from entirely new angles.
Before data analytics, businesses relied on intuition and limited information. Now, data empowers us to see patterns and make data-driven decisions, propelling innovation at an unprecedented pace.
These comparisons help explain the importance of data in today’s new world economics.
One of the more recent shifts is in the value of synthetic data.
Synthetic data can mimic the statistical properties of real-world data, making it useful for a variety of purposes.
For example, synthetic data can be used to train machine learning models when collecting traditional data is impractical or presents privacy concerns. It is also used in various other applications, such as data privacy, testing and development, data augmentation, simulation and modeling, risk assessment and management, and enhancing data quality.
You don’t have a competitive advantage if you use the same data and the same process as other people. That’s why understanding how to recognize and capture synthetic data is important. It can shift your perspective, add dimensionality, help you solve different problems, and create transformative results.
In the very near future, I expect these systems to be able to go out and search for different sources of information. It's almost like the algorithm becomes an omnivore. Instead of simply looking at market data or transactional data, or even metadata, it starts to look for connections or feedback loops that are profitable in sources of data that the human would never have thought of. – Howard Getson
While data is the foundation, it’s about transforming your data into actionable insights.
By identifying your real business, the KPIs of success, and what data you’re underutilizing, you can massively improve the efficiency and effectiveness of your business and create new products that transform your future.
In a word of caution, there are two common mistakes people make when making data-driven decisions. First, people often become slaves to the data, losing focus on the bigger picture. This is the same mistake people make with AI. Both are tools, not the end goal. Second, even the most insightful data can’t predict black swans. It’s essential to exercise caution and prepare for the unexpected.
The future of data is bright, but it’s also littered with potential challenges. Privacy concerns and data misuse are hot-button topics, as are fake news and the ability of systems to generate misleading data. In addition, as we gain access to more data, our ability to separate signal from noise becomes more important.
One of the biggest problems facing our youth—and really all of us—is how much information is thrust at us every waking moment of the day. No previous generation has had this much access to data. As a result, many are actually less informed than in the past. Soundbites become the entire news story, and nuance gets lost in the echo chambers.
The question becomes, how do you capitalize on data without becoming a victim of it?
This is obviously an approximation, but it's an interesting one nonetheless.
Social Security is the largest draw, but it is also one of the public services at the highest risk of failure due to an increasingly large aging population (with fewer active workers contributing to the system).
Unsurprisingly, Health and National Defense are the next biggest draws from your taxes. Medicare and Medicaid are expensive, and we do have the largest military force, by a large margin. We spend more on defense than the following ten countries combined.
It's interesting to see ... but I might add a cent to my tax dollar if it meant they'd fix all these potholes.
In fact, I hit five million "butt-in-seat" miles on American Airlines in 2019 (back when frequent flyer programs were about flying frequently rather than credit card spending).
It is 2024, and I am now just below 5.5M. That means I averaged a little over 100,000 miles per year, even through the COVID shutdown.
Yes, I expect that my travel will slow down. But as I traveled, I didn't expect it to continue at the pace it did.
Nonetheless, it has been good for me, and the time spent traveling has been productive.
I have a different workflow when I travel, and it works for me.
Ultimately, I believe that good things happen when you are in motion!
Many people, however, are focused on the hassle.
The practical realities of travel mean I spend some time thinking about the things airlines do well or poorly. Nonetheless, I appreciate the benefits more than the frustrations.
As you probably noticed, Airline Status means much less today than it used to (which is why it feels even more important to get). Every week, the airlines seem to make the space between seats smaller while the time it takes to find overhead luggage space gets shorter. It seems like most airlines could change its slogan to "We are not happy until you're not happy."
Yet the planes themselves are getting better. Here, for example, is what an empty 787 looks like.
It looks more like a set from Star Trek than the hellscape passengers complain about regularly.
If you really don't like commercial flying, you can fly on any of the "economical" private options like JetSmarter or WheelsUp. Or, better yet, you could be like this guy and buy the world's only private Boeing 787 Dreamliner.
This week, New York experienced a 4.8 earthquake. Now, a few days later, we're going to have a solar eclipse. Can you imagine this happening even a few hundred years ago? We'd be burning witches at the stake to try and appease the heavens.
Here are some of the posts that caught my eye recently. Hope you find something interesting.
This lighthearted post has something to do with artificial ... but nothing to do with artificial intelligence.
While doing my weekly reading and web browsing (which is how I pick those links you probably think an algorithm selects), I happened upon a post about Michael Jackson on Twitter (now called X), and I enjoyed it (or at least was drawn to click and watch it).
It's funny to look back on, but Zach used to dance to Michael Jackson's songs on stage at his Elementary School talent shows or at random restaurants. There was no choreography ... but lots of movement. I still smile when I think about it.
You might smile (or shake your head) while watching this short video chronicling the evolution of Michael Jackson's face changes from birth to death.
It's a staggering difference. I won't pretend to know what led him to make the changes, but they're substantial.
That being said, his music is both timely and timeless - which is very rare. He managed to make music in each era that fit in with the times but still felt very Michael Jackson.
March Madness is in full swing and will have the world's attention for a few more days. As you can guess, almost no one has a perfect bracket anymore. Yale beat Auburn, James Madison beat Wisconsin, Michigan State beat Mississippi State, and by the end of day 1, only 2,000 brackets remained intact. That's .008% of all brackets submitted.
Before 24/7 sports channels, people watched the weekly show "The Wide World of Sports." Its opening theme promised "The thrill of victory and the agony of defeat!" and "The human drama of athletic competition." That defines March Madness.
The holy grail is mighty elusive in March Madness (as in most things). For example, the odds of getting the perfect bracket are 1 in 9,223,372,036,854,775,808 (2.4 trillion based on a Duke Mathematician's formula that takes into account rank). It's easier to win back-to-back lotteries than picking a perfect bracket. Nonetheless, I bet you felt pretty good when you filled out your bracket.
In 2018, it was estimated that March Madness generated $10 Billion in gambling (twice as much as the Super Bowl)
Feeding the Madness
"Not only is there more to life than basketball, there's a lot more to basketball than basketball." - Phil Jackson
In 2017, I highlighted three people who were (semi) successful at predicting March Madness: a 13-year-old who used a mix of guesswork and preferences, a 47-year-old English woman who used algorithms and data science (despite not knowing the game), and a 70-year-old bookie who had his finger on the pulse of the betting world. None of them had the same success even a year later.
Finding an edge is hard - Maintaining an edge is even harder.
That's not to say there aren't edges to be found.
Bracket-choosing mimics the way investors pick trades or allocate assets. Some people use gut feelings, some base their decisions on current and historical performance, and some use predictive models. You've got different inputs, weights, and miscellaneous factors influencing your decision. That makes you feel powerful. But knowing the history, their ranks, etc., can help make an educated guess, and they can also lead you astray.
The allure of March Madness is the same as gambling or trading. As sports fans, it's easy to believe we know something the layman doesn't. We want the bragging rights of that sleeper pick, of our alma mater winning, of the big upset.
You'd think an NCAA analyst might have a better shot at a perfect bracket than your grandma or musical-loving co-worker.
In reality, several of the highest-ranked brackets every year are guesses.
The commonality in all decisions is that we are biased. Bias is inherent to the process because there isn't a clear-cut answer. We don't know who will win or what makes a perfect prediction.
Think about it from a market efficiency standpoint. People make decisions based on many factors — sometimes irrational ones — which can create inefficiencies and complexities. It can be hard to find those inefficiencies and capitalize on them, but they're there to be found.
In trading, AI and advanced math help remove biases and identify inefficiencies humans miss.
Can machine learning also help in March Madness?
“The greater the uncertainty, the bigger the gap between what you can measure and what matters, the more you should watch out for overfitting - that is, the more you should prefer simplicity” - Tom Griffiths
That being said, people have tried before with mediocre success. It's hard to overcome the intangibles of sports - hustle, the crowd, momentum - and it's hard to overcome 1 in 9.2 quintillion odds.
Two lessons can be learned from this:
People aren't as good at prediction as they predict they are.
Machine Learning isn't a one-size-fits-all answer to all your problems.
In January, Elon took to Twitter and announced that the first human recipient had received an implant and was showing promising neuron spike detection.
Neuralink designed PRIME to record and transmit neural data to interpret brain activity into movement intention. The PRIME Brain-Computer Interface empowers disabled individuals by enabling them to communicate and engage with the world in innovative and impactful ways, such as regaining the ability to speak and interact with others. In the future, advancements in the PRIME Brain-Computer Interface could even assist individuals with spinal cord injuries learn to walk again.
The first patient was 29-year-old Noland Arbaugh, a complete quadriplegic who had lost sensation and suffered paralysis from below the shoulders after sustaining a spinal injury during a diving accident eight years ago.
When we first began receiving updates about him, we were excited to hear that he could use a computer cursor. That was a big step ... and the start of many others. Now, we're being told that he recently used the technology to stay up all night playing a video game called Civilization 6.
Similarly, in 2022, a completely paralyzed man used his brand-new brain implant to ask his caregivers for a beer.
It sounds like a joke, but these are the types of stories that make me optimistic. Both examples highlight a new capability ... but also a deeper purpose, freeing the human to enjoy being human and enhance the quality of their life.
This is a great reminder. Media coverage often focuses on the fear of an increasingly tech-driven world, and what it means for humanity ... but the best uses of technology allow us to be more human.
What used to be science fiction is becoming reality, and possibilities are becoming inevitabilities.
The Growth of 100 Dollars since 1970
There has been a lot of discussion about consumer price inflation recently.
For a slightly different perspective and a longer-term view, take a look at this chart on VisualCapitalist. It shows the growth of $100 by asset class from 1970 - 2023.
via visualcapitalist
I was surprised to see how little real estate grew ... but I wasn't surprised by the S&P 500 number.
The real estate number is more complicated than it appears on the surface (since it factors in leverage, property taxes, insurance, and other expenses). It also factors in the housing market crash, from which home prices took over a decade to recover.
For some context, here are some key events that highlight the difference between 1970 and 2023:
Posted at 09:28 PM in Business, Current Affairs, Ideas, Market Commentary, Trading, Trading Tools | Permalink | Comments (0)
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