Capitalogix

Media Bias and You in 2023

Information is Power.

Consequently, your choice of information source heavily contributes to your perceptions, ideas, and worldview.

Coincidently, news sources are a lightning rod for vitriol and polemic.

I am still somewhat surprised by the abject hatred I hear expressed toward a particular news source by those who hold an opposing bias.  This often leads to claims of fake news, delusion, and partisan press.  Likewise, it is common to hear derision toward anyone who consumes that news source.

Perhaps the reality is that most sources are flawed – and the goal should simply be to find information that sucks less?

It's to the point where if you watch the news, you're misinformed, and if you don't watch the news, you're uninformed. 

News sources aren't just reporting the news ... they're creating opinions and arguments that become the news.  Moreover, many consumers don't care enough to think for themselves or to distinguish facts from opinions.

Here's a chart that shows where news sources rank on various scales.  It has default options and over 1400 sources you can add to the interactive version.  You can click the image to go to an interactive version with more details.  It gets updated every year, and this year's just got released.

via Ad Fontes Media

I once spent fifteen minutes arguing about how you know whether the information in this chart is accurate.  If you're curious about their methods, click here. 

The "new normal" is to distrust news agencies, big companies, the government, and basically anyone with a particularly large reach. 

Perhaps even more dangerous is the amount of fake news and haphazard research shared on social media.  Willful misrepresentations of complex issues are now a "too common" communication tactic on both sides ... and the fair and unbiased consideration of issues suffers.  

Social media spreads like wildfire, and the damage is done by the time it has been debunked (or proven to be an oversimplification).  Once people are "convinced," it is hard to get beyond that. 

In reality, things aren't as bleak as they seem.  People agree on a lot more than they say they do.  It is often easier to focus on "us" versus "them" rather than what we agree upon jointly.  This is true on a global scale.  We agree a lot.  Most Democrats aren't socialists, and most Republicans aren't fascists ... and the fact that our conversation has drifted there is intellectually lazy.

This idea that either side is trying to destroy the country is clearly untrue (OK, mostly untrue).  There are loonies on the fringes of any group, but the average Democrat is not that unlike the average Republican.  You don't have to agree with their opinions, but you should be able to trust that they want our country to succeed. 

I don't know that we have a solution.  But there is one common "fake news" fallacy I want to explain at least a little. 

It's called the Motte and Bailey fallacy.  It's named after a style of medieval castle prioritizing military defense.

Launceston Castle via Chris Shaw, CC BY-SA 2.0

On the left is a Motte, an artificial mound often topped with a stone structure, and on the right is a Bailey, the enclosed courtyard.  The Motte serves to protect not only itself but also the Bailey. 

As a form of argument, an arguer conflates two positions that share similarities.  One of the positions is easy to defend (the Motte), and the other is controversial (the Bailey).  The arguer advances the controversial position, but when challenged, insists they're only advancing the moderate position.  Upon retreating, the arguer can claim that the Bailey hasn't been refuted or that the critic is unreasonable by equating an attack on the Bailey with an attack on the Motte. 

It's a common method used by newscasters, politicians, and social media posters alike.  And it's easy to get caught in it if you don't do your research. 

Conclusion

As a society, we're fairly vulnerable to groupthink, advertisements, and confirmation bias. 

We believe what we want to believe ... so it is hard to change a belief (even in the face of contrary evidence). 

But, hopefully, in learning about these fallacies, and being aware, we do better. 

I will caution that blind distrust is dangerous – because it feels like critical thought without forcing you to think critically.

Distrust is good ... but too much of a good thing is bad. 

Not everything is a conspiracy theory or a false flag.

Do research, give more credence to experts in a field - but don't blindly trust them either.  How well do you think you're really thinking for yourself?

We live in a complicated world that is getting more complex. 

Hopefully, knowing this encourages you to get outside your bubble and learn more about those with whom you disagree.

Who knows ... Something good may come from it?

The Illusion of Choice

What happens doesn't matter nearly as much as what you make it mean ... and what you choose to do. 

For example, Dallas has been 100+ degrees almost all summer, and nothing stops.  You'll see people running outside, dogs walking, sports being played.  My son plays 8+ hour rugby tournaments in that heat, and no one bats an eye. 

Growing up in New England, we were woefully underprepared for that heat.  The world would stop.  On the other hand, 8 inches of snow was nothing, but a little bit of ice ... and Texas shuts down. 

Snow isn't 'good' or 'bad' … and neither was the change of plans.

Perspective.

Fund managers recognize the importance of sensibly diversifying risks and opportunities.

Be that as it may, as Mother Jones reported in the wake of the 2009 financial crisis, the nation's ten largest financial institutions held 54% of our total financial assets (compared to the 20% they held in 1990).  Meanwhile, the number of banks has dropped from almost 15,000 to barely 4,000. 

via Statista

Many people are shocked by a chart like this.  It must be 'bad' to have so much controlled by so few, right? 

But it isn't hard to find a version of this story playing out in other industries:  Print Media,  Music,  Broadcast Channels, and Consumer Products … this type of consolidation happens for a reason.

A firm that marshals more resources gains a competitive advantage and has more ways to win.

They benefit from economies of scale, transactional leverage, better distribution and partners, and more ways to diversify risks.  In addition, if they work to communicate, collaborate, and coordinate their actions (and data), they can unlock opportunities that others don't have (or can't see).

Here is a Chart Showing Some of the 'Winners' at that Game.

The following chart highlights our "Illusion of Choice."  A surprisingly significant portion of what you buy comes from one of these ten mega-companies (Kraft, Coca-Cola, PepsiCo, Kellogg's, Nestlé, Proctor & Gamble, Mars, Johnson & Johnson, General Mills, and Unilever).

It's amazing to see what these giants own or influence.  Click the picture to see a bigger version.

via visualcapitalist

Here is a more specific example.  You probably think you are familiar with Nestlé.  It is famous for chocolate.  But did you realize it was an almost $300 billion corporation … and the biggest food company in the world?  Nestlé owns nearly 8,000 different brands worldwide and takes a stake in (or is partnered with) many others.  This network includes shampoo company L'Oreal, baby food giant Gerber, clothing brand Diesel, and pet food makers Purina and Friskies.

Kind of cool?  Mostly terrifying...

Here Are Some Links For Your Weekly Reading - September 3rd, 2023

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

Lighter Links:

• Jimmy Buffett, 'Margaritaville' Singer and Mogul, Dies: 'He Lived His Life Like a Song'. (USAToday)
• Three Traits of a Task You Can Automate. (Gradient)
• Using ChatGPT to Make Better Decisions. (HarvardBusinessReview)
• The Strange, Secretive World of North Korean Science Fiction. (ArsTechnica)
• Tens of Thousands at Burning Man Told to Conserve Water and Food After Heavy Rains Leave Attendees Unable to Leave Nevada Desert. (CNN)

 

Trading Links:

• In Jackson Hole, Central Bankers See Old Economic Models Failing. (Axios)
• Decoding the Economics of a Soft Landing. (VisualCapitalist)
• The ‘Fidelity Mafia' Behind Big Crypto. (Wall Street Journal)
• Why We Need to Be Realistic About Generative AI's Economic Impact. (WEForum)
• OpenAI Launches a ChatGPT Plan for Enterprise Customers. (TechCrunch)

Gartner's 2023 Hype Cycle For Emerging Technologies

I share an article about Gartner’s Hype Cycle for Emerging Technologies each year.  It does a great job of documenting what technologies are reaching maturity and which technologies’ ascents are being enhanced by the cultural zeitgeist (hype, momentum, great timing, etc.).

Creating a report like this requires a unique mixture of technological analysis and insight, an acute understanding of human nature, and a lot of common sense.

Identifying which technologies are making real waves (and thus will impact the world more) is a monumental task.  Gartner’s report is a great benchmark to compare with your perception of reality.

A quick look back at past reports shows that 2021 saw the inclusion of NFTs and advancements in AI.  It also focused on the increasing ubiquity of technology.  2022 built on those trends, recognizing that we were moving towards immersive experiences, faster digital transformations, and the adoption of exponential AI capabilities.  For reference, click here to see what Gartner predicted last year.

Meanwhile, let’s look at the 2023 version of Gartner’s Hype Cycle for Emerging Technologies report.  2023 has some meaningful changes – and is best understood by where things are placed on Gartner’s framework called the “Hype Cycle.”

What’s a “Hype Cycle”?

As technology advances, it is human nature to get excited about the possibilities ... and to get disappointed when those expectations aren’t met. 

At its core, the Hype Cycle tells us where in the product’s timeline we are – and how long it likely will take the technology to hit maturity.  It attempts to tell us which technologies will survive the hype and have the potential to become a part of our daily lives. 

Gartner’s Hype Cycle Report is a considered analysis of market excitement, maturity, and the benefit of various technologies.  It aggregates data and distills more than 2,000 technologies into a concise and contextually understandable snapshot of where various emerging technologies sit in their hype cycle.

Here are the five regions of Gartner’s Hype Cycle framework:

1. Innovation Trigger (potential technology breakthrough kicks off),
2. Peak of Inflated Expectations (Success stories through early publicity),
3. Trough of Disillusionment (waning interest),
4. Slope of Enlightenment (2nd & 3rd generation products appear), and
5. Plateau of Productivity (Mainstream adoption starts). 

Understanding this hype cycle framework enables you to ask important questions like “How will these technologies impact my business?” and “Which technologies can I trust to stay relevant in 5 years?”

That said - it’s worth acknowledging that the hype cycle can’t predict which technologies will survive the trough of disillusionment and which ones will fade into obscurity. 

What’s exciting this year?

Before focusing on this year, it’s important to remember that, in 2019, Gartner shifted towards spotlighting new technologies at the expense of technologies that would normally persist through multiple iterations of the cycle.  This change helps account for the increasing number of innovations and technology introductions we are exposed to compared to the norm when they first started producing this report.  As a result, many of the technologies highlighted over the past couple of years (like Augmented Intelligence, 5G, biochips, the decentralized web, etc.) are now represented within newer modalities or distinctions. 

It’s also worth noting the impact of the pandemic on the prevalent technologies. 

For comparison, here’s my article from 2019, and here’s my article from 2015.  Click on the chart below to see a larger version of this year’s Hype Cycle.

 

via Gartner

Last year’s themes were:

1. Evolving/Expanding Immersive Experiences,
2. Accelerated Artificial Intelligence Automation, and
3. Optimized Technology Delivery (digital businesses)

This year, the key technologies were bucketed into four major themes.

• Emergent AI represents the technologies that increase workforce productivity and differentiation from competitors.  The hallmark technology of this theme is Generative AI, but another exciting one is AI Simulation - where environments and people can be replicated virtually to run simulations and ask questions.  Imagine being able to create a digital replica of yourself (or a specialist in different disciplines) to bounce ideas off of ... or to create a virtual advisory board to help process tough issues or test the response to various situations, opportunities, or challenges.
• Developer Experience (DevX) is precisely what it sounds like.  Enhancing the developer suite of technologies not only enhances your engineering team but also helps attract and retain high-level employees.  Value Stream Management Platforms (VSMP) is a good example of this.  VSMP is intended to optimize product delivery from end to end. 
• Pervasive Cloud focuses on how cloud computing is evolving.  This theme is also focused on creating an end-to-end use case.  In an ideal world, this enables easy and automated operational scaling, lots of cloud-native tools, and stability improvements.  A sample technology under this umbrella would be WebAssembly, a lightweight virtual machine and binary code format that would enable secure, high-performance applications on your web pages. 
• Last but not least, we have Human-Centric Security and Privacy.  In response to growing security concerns, this theme recognizes the pressure companies face to create cultures and systems that value and protect security.  AI Trust, risk, and security management (AI TRiSM) is the culmination of this effort and represents a holistic approach to governance, reliability, efficacy, and more.  This will be an important frontier to develop as we innovate faster. 

Last year, the main focus was on the spread of emerging technologies.  Last year’s themes focused on the ubiquity of AI in all facets of life – and the increasing immersiveness of these technologies. 

This year, the focus seems to be on responding to that increasing ubiquity.  It’s about building systems that help adopt these new technologies efficiently ... while also protecting yourself from making mistakes at lightspeed. 

Of course, I’m always most interested in the intersection of AI and other spaces.  Last year, AI became a lighthouse for businesses to work toward.  It’s continued to shine a light this year.  In my opinion, this points towards the increasing maturity and adoption of AI.  The opportunity cost of adopting AI into your business is continuing to decrease.

Meanwhile, these systems are also becoming more autonomic, self-managing, and self-learning.  I’m excited to see Gartner emphasizing what this does for humans - not what it takes away from them.  Remember, the heart of artificial intelligence is human - and it continues to free us up to be more human.  

 

As we reach new echelons of AI, you’ll likely see increasing examples of over-hype and short-term failures.  You often miss a rung on the ladder as you reach for new heights, but it doesn’t mean you should stop climbing.  More importantly, it doesn’t mean failure or even a lack of progress.  Challenges and practical realities act as force functions that forge better, more robust, resilient, and adaptable solutions that do what you want (or something better).  It just takes longer than you initially wanted or hoped.

To paraphrase a quote I have up on the wall in my office from Rudiger Dornbusch ... Things often take longer to happen than you think they will, and then they happen faster than you thought they could. 

Many of these technologies have been hyped for years - but the hype cycle differs from the adoption cycle.  We often overestimate what we can do in a year and underestimate what we can do in ten years. 

I say it often ... we live in interesting times!

Which technologies do you think will survive the hype?

Let me know what you think.

Onwards!

Humanizing The Exceptional

How automated is too automated? 

“To speak to a representative, say … representative …. “ 

“Representative.” 

“Sorry I didn’t catch that … would you like for me to repeat the options menu?” 

“NO” 

“Sorry I didn’t catch that … please state wh…” 

“REPRESENTATIVE” 

“Sorry, all of our representatives are busy helping others at the moment ... Goodbye.” 

*CALL ENDS* 

 

How many of us have been in this scenario when on the phone with an airline, insurance company, or any other automated call center?

Where are the people?  Why can’t I speak to a human?  

 

One of my son’s few memories of my Dad involved listening to him going through a scenario like this with a late 1990s version of an auto-attendant.  It was funny.  My Dad became increasingly incensed that he couldn’t get to an actual human being.  It devolved into: “Shut up!  Stop talking!  I’ll give you $50 if you let me talk with a real person.” And it went downhill from there.

The reality is that despite these systems being frustrating, they save companies time, money, and resources.  And, in an ideal world, they streamline callers into organized categories, making for a more efficient experience.  They’re clearly working on some level because you’re seeing increased adoption of A.I. chatbots and digital support systems. 

For what it’s worth, I predict that AI-enabled chatbots are about to be huge!  The evolution of this technology is going to take the place of people in marketing, sales, consulting, coaching, and even therapy.

But does the efficiency or effectiveness it creates justify the lack of human connection?  Why did so many of the legacy call systems get rated so poorly?

I came across an article highlighting a trendy new restaurant in Venice, Italy.  They serve the best dishes from several popular restaurants from across the city!  They must have a massive kitchen and extensive staff to take on such a task, right?  Wrong.  This restaurant is fully automated; you order and receive food via … vending machines. 

My first reaction was this … the convenience is fantastic, but you lose so much of the community and human interaction that you enjoy when going to a traditional restaurant.  As I continued to read, however, the article explained that in order to “humanize” the restaurant, it is used as a meeting place for food tastings, community gatherings, and question-and-answer sessions. 

Humanity and automation merged beautifully.   

Semi-Automated Often Beats Fully Automated  

Systemize the predictable so you can humanize the exceptional

— Isadore Sharp, Four Seasons

Earlier, I mentioned automated call centers, and how frustrating they can be.  I’ve come in contact with several who have found a great balance in how they automate their system.  

Often, the automated answers allow calls to be organized before reaching their intended destination or to answer frequently asked questions.  Either way, it reduces the need to transfer calls to find the correct department or gets the caller the information they need without tying up phone lines and wasting their and the receptionists’ time with basic questions.  

“There’s a lot of automation that can happen that isn’t a replacement of humans, but of mind-numbing behavior.”

— Stewart Butterfield

This quote highlights the point of automation!  Expedite the menial tasks, which in turn frees up the people working to provide a far more attentive experience.   

 

Humans tend to look for ways to increase efficiency in all aspects of their world.  But we are social creatures, craving meaningful connection and community.  Therefore, the human element will not only persist but remain vital.

Here Are Some Links For Your Weekly Reading - August 27th, 2023

 

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

Lighter Links:

• Advice for Non-Technical People on Building Their AI Knowledge.(Year2049)
• Stuart Kauffman: The "Adjacent Possible" -- And How It Explains Human Innovation. (TED)
• America's Electrical Grid is an Incredible Feat of Engineering—And Its Biggest Bottleneck. (Every)
• An AI's Guide to Thriving in the Robot Apocalypse: Insights From an Empathetic Algorithm.(HackerNoon)
• Forgetting: Not a Flaw, But a Brain's Hidden Feature of Memory.(NeuroScienceNews)
• The Longevity Skeptic – Biochemist Calls BS On Extending Human Lifespan. Is He Right? (Nautilus)

 

Trading Links:

• Some of the Thorniest Questions About AI Will Be Answered in Court.(Wall Street Journal)
• Finding the Wisest Ways to Global AI Regulation. (Spectrum)
• Alternative Data Revenues May Exceed Traditional Data by 2029.(MarketsMedia)
• At $3.5 Billion, Michael Jordan is Now the Richest Basketball Player Ever. (TheStreet)
• France to Spend Over $215M to Destroy Surplus Wine as Demand Continues to Plummet.(TheMessenger)

Camp Kotok: Back Again!

I was just in Maine at Camp Kotok, a private gathering of economists, fund managers, and other financial industry professionals. 

There was limited phone service or access to the Internet… so people had to talk with each other.  And unlike most of my schedule, almost everything happened outside.  Discussions, while vigorous, often take place while fishing or grilling. 

At a past Camp Kotok, I did this interview with Bob Eisenbeis, Cumberland Advisors' Vice Chairman & Chief Monetary Economist.  Check it out. 

 

Cumberland Advisors via YouTube

 

Camp Kotok is an interesting place. The event transformed from a simple retreat after 9/11 ... when many attendees experienced the WTC collapse and came together for some fellowship and to discuss their experiences.  From then on, attendance grew, and the gathering evolved. 

As a side note, before the gathering became known as Camp Kotok, it was referred to as the “Shadow Fed” (in part because of the people who attend).

Attendees are bound to “Chatham House Rules” (participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed).  However, general thoughts, ideas, forecasts, and comments can be discussed and published.

On this trip, I talked with David Kotok about the event, what it means, and how it’s grown.

The intent of the participants (and the environment) helps create a platform for meaningful and productive conversations about the opportunities and obstacles facing America and the world. 

Every year, I come back with new ideas and fresh perspectives on things I forget to think about. 

AI was on everyone's mind.  The financial industry is changing quickly, and I’m confident that advanced technology will become an even bigger driver. 

In general, economically, the mood was cautiously optimistic to bullish. 

Remember, it is an election year!

Social Media Is Changing Everything ... 10+ Years Later

In 2009, I wrote an article highlighting the audacious amount of texts and data my then-16-year-old son was using compared to the rest of the family ... It's funny to look back on.

Here is an excerpt from that post. 

_______

My son won't use e-mail the way I did. So how will people communicate and collaborate in the next wave of communications?

 Here is a peek into the difference that is taking hold.  I was looking at recent phone use.  The numbers you are about to see are from the first 20 days of our current billing cycle.

• My wife, Jennifer, has used 21 text messages and 38 MB of data.
• I have used 120 text messages and 29 MB of data.
• My son, at college, used 420 text messages, and is on a WiFi campus so doesn't use 3G data.
• My son, in high school, used 5,798 text messages and 472 MB of data.

How can that be?  That level of emotional sluttiness makes porn seem downright wholesome. 

But, of course, that isn't how he sees it.  He is holding many conversations at once.  Some are social; some are about the logistics of who, what, when, where and why … some are even about homework.  Yet, most don't use full sentences, let alone paragraphs.  There is near instant gratification.  And, the next generation of business people will consider this normal.

Is social media a fad? Or is it the biggest shift since the Industrial Revolution?

_______

Fourteen years later, I send more text messages than my son, and we both use multiples of that amount of data a month. 

I also remember scoffing at my son having his phone on hand at meetings - that it was a distraction. And yet, here I am, phone on my desk at meetings. But, e-mail is just as important as it was in 2009. 

One of the things we miss in discussions about generations is that the trends of the younger generation are often adopted by the previous - even if they're not as tech literate. 

Technology changes cultures for better or worse ... but it's hard to look at the impact of social media and believe it hasn't been deleterious. 

The promise and peril of technology! 

"Is The Stock Market Going To Crash?!"

I usually don't concern myself with looking at stock charts anymore, but I still like paying attention to what people say about them ... 

Recently, I saw this image posted.

via r/StockMarket

So, will the market attract buyers … or sellers?

Personally, I expect volatility.  

Why?  

Because markets exist to trade, and it tends to generate those trades by 'shaking' the weak holders.  

A big move up here will trigger a lot of buying (and short-covering by weak bears).  

While a big move down will trigger a lot of selling (as Bulls fear the long-anticipated next leg down).

I also recognize that we're entering an election year. So there's still time for a correction before a sustained rally.

Here's the problem.  Even though I still enjoy the mental exercise of going through these scenarios, I recognize how little value they add.

You can look at any point in history and find articles and charts that tell you the world is ending, or that the fear is overblown and we're going to get to the other side, and there's a pot of gold waiting for you. 

It's easy to use charts to explain what happened. It is a lot harder to use charts to predict what is about to happen.

I still keep my ear to the ground because I like having a feeling for the sentiment around both experienced investors and your average Joe.  Conventional trading wisdom says that crowds are usually wrong at turning points.  That doesn't mean they are always wrong (still, it makes sense to notice when Smart Money clearly disagrees). 

Knowing these things doesn't make any difference in the decisions I make about trading ... because I let the computer make those decisions.  Nonetheless, it makes me feel better. 

So, is the stock market going to crash?  Who knows?  Anyone that pretends they know is full of it.  There are too many factors at play to decide whether the market is going to crash.

From my perspective, it doesn't make sense to try to predict something random.

On the other hand, if you don't know what your edge is ... you don't have one.

Algorithmic trading is about creating more ways to win. 

To be effective, algorithmic trading is about switching from lower expectancy positions to higher expectancy positions.

In general, here is how that works.

Understand that you can make trading decisions based on market patterns, trends, sentiment, statistics, behavioral economics, game theory, reversion to the mean, or countless other methods.  Further, realize that no technique works all the time ... but there is always a technique that works (even if that means getting out of the market). 

There is an advantage in tracking each of these to gain a perspective of perspectives (in order to identify an advantage or opportunity in real-time as it happens). For example, you could measure and calculate a blend of your confidence in an algorithm or technique and how it is performing.  This creates the opportunity to switch into and out of various techniques and markets as things change.

Having an edge in trading often comes down to information asymmetry. This means knowing more, faster, better, or different things than what others are using to make decisions.

Hope that helps.

Here Are Some Links For Your Weekly Reading - August 20th, 2023

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

Lighter Links:

• AI Expert Max Tegmark Warns that Humanity is Failing the New Technology's Challenge. (Wall Street Journal)
• Gartner Hype Cycle Places Generative AI on the ‘Peak of Inflated Expectations'. (VentureBeat)
• Intuition: What It is and How It Works. (PsychologyToday)
• Why You Have to Walk So Far to Your Gate at the Airport. (CNN)
• Scientists Build Humanoid Robot that Can Pilot a Plane. (Futurism)

 

Trading Links:

• China's 40-Year Boom is Over. What Comes Next? (Wall Street Journal)
• Radio Shack Set For a Major Retail Comeback. (TheStreet)
• Amazon Relaunches Shipping Service that Competes With FedEx and UPS. (TheMessenger)
• Why Generalist Investors Will Always Win. (TechCrunch)
• Coinbase Wins Approval to Offer Federally Regulated Crypto Futures Trading to Eligible US Customers. (TheTrade)