Capitalogix

Cybersecurity for Beginners

In 2016, I received this e-mail from my oldest son.

Date: Saturday, October 22, 2016 at 7:09 PM
To: Howard Getson
Subject: FYI: Security Stuff

FYI - I just got an alert that my email address and my Gmail password were available to be purchased online.

I only use that password for my email, and I have 2-factor enabled, so I'm fine. Though this is further proof that just about everything is hacked and available online.

If you don't have two-factor enabled on your accounts, you really need to do it.

Since then, security has only become a bigger issue. I wrote about the Equifax event, but there are countless examples of similar events (and yes, I mean countless). 

When people think of hacking, they often think of a Distributed Denial Of Service (DDOS) attack or the media representation of people breaking into your system in a heist.

In reality, the greatest weakness is people; it's you ... the user.  It's the user that turns off automatic patch updating.  It's the user that uses thumb drives.  It's the user that reuses the same passwords.

 

via xkcd

Whether it's malicious or unintentional, humans are often the biggest security weakness. 

As proof, watch the first few minutes of the video below to watch a social engineer find out this man's email and gain access to his cell phone account. She locks him out of his account at the same time.

I started the video with the interesting part, so you don't have to search for it.

 

via Real Future 

As for passwords ... I recommend not knowing them.  You can't disclose what you don't know.  Consequently, I recommend a password manager like LastPass or 1Password.

Some other basic tips include: 

• Keep all of your software up to date (to avoid extra vulnerabilities)
• Don't use public wifi if you can help it (and use a VPN if you can't)
• Have a firewall on your computer and a back-up of all your important data
• Never share your personal information on an e-mail or a call that you did not initiate - if they legitimately need your information, you can call them back
• Don't trust strangers on the internet (no, a Nigerian Prince does not want to send you money)

How many cybersecurity measures you take comes down to two simple questions ... First, how much pain and hassle are you willing to deal with to protect your data? And, second, how much pain is a hacker willing to go through to get to your data?

It doesn't make sense to put all your data in a lockbox computer that never connects to a network ... nevertheless, it might be worth it to go to that extreme for pieces of your data.

Think about what the data is worth to you, or someone else, and protect it accordingly.

Here Are Some Links For Your Weekly Reading - November 22nd, 2020

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

Lighter Links:

• Every Business is a Software Whose Success is Defined By Data. (YourStory)
• Future of AI: Here's How Machines Become Sentient. (TheNextWeb)
• How China Could Shape the Future of Technology. (BBC)
• Dr. Fauci On Public Trust In Science. (HastingsCenter)
• Costco Will Deliver a 12-Month Long Private Flight Membership To Your Email If You Pay $17,500. (BusinessInsider)

 

Trading Links:

• If You Aren't Using AI, You're Falling Behind According to the US Patent and Trademark Office. (Forbes)
• Boom Times Have Returned for Venture-Backed Start-Ups. (CNBC)
• Venture Returns. (Points & Figures)
• Nasdaq-100 Stumbles Near Dot-Com Era Record Versus Dow. (TheOneDave)
• Top 10 Richest People In the World (1990-2019) | Visualization From Forbes Richest People. (YouTube)

 

A Look At Voting: 2016 vs 2020

In order for our electoral process to work, voting has to happen. 

For as long as I can remember, voting has been an issue - but this year turns that on its head.

If you believe the current counts, Trump is behind Biden but still has more votes than he received in 2016.

In this election, Biden tallied almost 79M votes while President Trump received 73M. In comparison, going back to 2016, Hillary Clinton won the popular vote with 66M votes to President Trump's 63M votes. 

via Washington Post

This year’s election had a massive difference in voter turnout.  In fact, more Americans voted in the 2020 election than in any other in more than 100 years.

To put that in context, if "Did Not Vote" had been a candidate in the 2016 Presidential Electioni, it would have won by a landslide. 

BrilliantMaps via 270ToWin

Only 8 states and Washington D.C. had high enough voter turnout to elect an actual candidate. 

For comparison - here's what 2020's results currently look like under the same circumstances. 

via Reddit (As of November 12th, 2020)

In 2016, "Did Not Vote" would have received 471 electoral college votes, but in 2020, it only grabs 105 votes. 

As an interesting side note, in 2016 neither candidate won a majority of the vote due to support for third-party candidates. In 2020, it seems Biden has narrowly grabbed a majority of the popular vote with 50.8%. 

The numbers vary slightly from source to source, but the data for these numbers primarily comes from the United States Elections Project. 

Here Are Some Links For Your Weekly Reading - November 15th, 2020

The  upcoming holiday season seems a little different this year.

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

Lighter Links:

• How Your Life Will Be Measured after You Die. (ThriveGlobal)
• Shapeshifting Materials Could Transform Our World inside Out. (Discover)
• Alexa Can Now Guess What You Want before You Even Ask for It. (ZDNet)
• Physics Can Solve Key Challenges Facing AI, Study Finds. (JPost)
• The Greatest Competitive Advantage May Not Be What You Think. (Entrepreneur)

 

Trading Links:

• Beyond Buffett – Does Value Investing Still Work? (Economist)
• Quant Shock that Never Could Happen' Hits Wall Street Models. (Bloomberg)
• The Overnight Business Boom that Took a Century. (Wall Street Journal)
• Biden's First 100 Days: Here's What to Expect. (NPR)
• The Pandemic is Revealing a New Form of National Power. (The Atlantic)

When Trading Worlds Collide: Timeless Wisdom & Evolutionary Technology with Matthew Piepenburg

Earlier in the Pandemic - in June - I had a Zoom meeting with Matthew Piepenburg of Signals Matter. Even though it was a private discussion, there was so much value in our discussion we decided to share parts of it here. 

While Matt's understanding of markets is based on Macro/Value investing, we use advanced AI and quantitative methods for our approach. 

As you might expect, there are a lot of differences in how we view the world, decision making, and the current market environment.  Nonetheless, we share a lot of common beliefs as well.   

Our talk explores a number of interesting areas and concepts.  I encourage you to watch it below. 

 

 

To summarize a couple of the key points, markets are not the economy, and normal market dynamics have been out the window for a long time. In addition, part of why you're seeing increased volatility and noise is that there are so many interventions and artificial inputs to our market system.

While Matt and I may approach the world with very different lenses, we both believe in "timeless wisdom". 

Ask yourself, What was true yesterday, today, and will stay true tomorrow? 

That is part of the reason we focus on emerging technologies and constant innovation ... they remain relevant. 

Something we can both agree on is that if you don't know what your edge is ... you don't have one. 

 

Hope you enjoyed the video.

Let me know what other topics you'd like to hear more about. 

Onwards!

Here Are Some Links For Your Weekly Reading - November 8th, 2020

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

Lighter Links:

• Video: An Exclusive Look inside Microsoft's Election Security War Room'. (ABCNews)
• Forget Traditional Election Maps – This is What the US Vote Really Looks Like. (NYPost)
• Taught by Nature: New Technology Inspired by the Animal Kingdom. (Flipboard)
• Psychedelic Psilocybin 101: The Science of Magic Mushrooms. (Flipboard)
• Want to Calm Your Anxiety in Just 8 Minutes? Neuroscience Says Take a Deep Breath and Listen to This. (Inc)
  
  

Trading Links:

• Texas Becomes First State to Top One Million COVID-19 Cases. (24/7 Wall St)
• Fears of Transition 'Chaos'. (Barrons)
• FTC Likely to Sue Facebook on Antitrust Violations by End of November. (Politico)
• Here Comes the next IPO Wave. (TechCrunch)
• Warren Buffett's Berkshire Hathaway Swings Back into Action, Spending a Net $4.8 Billion on Stocks and a Record $9 Billion on Buybacks in the 3Rd Quarter. (BusinessInsider)

The Art and Science of Economics

Today, I want to focus on one issue that's a commonality in trading and economics. 

It's the tendency for us, as humans to create stories about why things happen ... even in the absence of enough data to . 

The Federal Reserve Chairman, Jerome Powell, gave a speech in October with a dizzying amount of statistics. His portion starts around the 9:30 mark.

 

via Yahoo Finance

In this talk, he mentions a lot of interesting stats, but notice how many are focused on the change (or rate of change) within a relatively small window of the available data. 

Also, notice how he crafts a story around the direction of the numbers rather than acknowledging or contextualizing the numbers themselves.  This isn't inherently bad – but it's something to be aware of when interpreting what it means to you. 

When making decisions, the direction and intensity of movement are important, but so are more objective measures. 

Stories can help make us comfortable with a temporarily bad situation, but if you get lost in the story and aren't cognizant of the bad situation, it can be harder to correct. 

In trading, traders often tell themselves stories about why a movement happened, but markets and economies are more complicated than any heuristic. Those stories can be helpful retroactively - but they're rarely a powerful predictor. 

Economics and trading both have hard sciences behind them. You can look at technical indicators, you can look at historical events, and you can build algorithms with advanced technology that look for the patterns you miss. But it's what you do with those inputs that matters. 

Mark Perry wrote an article about why "it’s really hard to ‘beat the market’ over time."  In it, he states that over the 15-year investment horizon, 92.43% of large-cap managers, 95.13% of mid-cap managers, and 97.70% of small-cap managers failed to outperform on a relative basis.  Stated differently, over those 15 years (from June 30, 2003 to June 30, 2018), only one in 13 large-cap managers, only one in 21 mid-cap managers, and one in 43 small-cap managers were able to outperform their benchmark index.

It’s hard to admit to yourself that you aren't better than average. Nonetheless, over any period of time, this is true for half of us.  This "truth" is especially hard to accept for people who have achieved a lot in their lives and have the money to invest.

The trick is to find a way to separate "luck" from "skill" ... or to avoid being fooled by randomness.

We live in interesting times!  The signal-to-noise ratio is already tough to deal with ... and I suspect that we are in a period where we have to expect even more noise.

I've written a couple of posts on Economics that might help.  Here are a few of the more popular ones, if you are interested.

• The Disconnect Between The Stock Market and Consumers (August 2020)
• Eight Major Forces Shaping Our Economy (Nov 2018)
• Visualizing The Economy (November 2018)
• What Is The State of The Economy (September 2011)

What stories are you telling yourself about the economy? About the markets? About the election?

There's a difference between guessing and knowing, and knowing is more profitable!

Be careful! 

Getting Rid of Cognitive Biases

We make decisions all the time.  To make that easier, we use shortcuts to make processing more efficient, more effective, and more certain.

At least it feels that way to us.

Mental heuristics are great - they do often save us time or effort.  And, for many people, they enable better decision making. But, as with any generalization, there are exceptions that can be dangerous. 

That's where cognitive biases come in; we have biases toward how we remember things, how we view ourselves, how we make decisions, and what we make things mean.

We're all victims to them, to some extent. But hopefully, by understanding them and becoming aware of them,  we can limit their impact. 

Here's a great infographic with 50 of the most common cognitive biases. Click to see the full-size image. 

via VisualCapitalist 

For a bigger infographic with 180+ cognitive biases, click here. 

 

Are You Smart?

I know a lot of smart people.

I also know a lot of people that think they're smarter than they are (even the smart ones ... or, perhaps, especially the smart ones). 

It's common.  So common, in fact, that there's a name for it.  The Dunning-Kruger Effect.

Have you ever met someone who's so confident about what they think that they believe they know more than an expert in a field? That's the Dunning-Kruger effect. It's defined as a cognitive bias where a lack of self-awareness prevents someone from accurately assessing their own skills. 

Here's a graph that shows the general path a person takes on their journey towards mastery of a subject. 

via NC Soy

The funny thing about the above image... it's actually not a literal part of the paper on the Dunning-Kruger Effect. But it's now so commonplace that people report that chart as fact. A fitting example of the effect. 

David Fitzsimmons via Cagle Cartoons

In our daily lives, it can often be funny or frustrating to see the "victims" of this effect, but I'd warn you that we all have times where we're prone to this; and it's a sign of ignorance, not stupidity. 

This is a problem with all groups and all people. Even if you already know about the cognitive bias resulting from the Dunning-Kruger Effect, you're not immune. 

It should be a reminder to reflect inward - not cast aspersions outward. 

Two different ways that people get it wrong, first is to think about other people and it’s not about me. The second is thinking that incompetent people are the most confident people in the room, that’s not necessarily true.

Usually, that shows up in our data, but they are usually less confident than the really competent people but not that much... - David Dunning

To close out, even this article on the Dunning-Kruger presents a simplification of its findings. The U-shape in the graph isn't seen in the paper, the connection that lack of ability precludes meta-cognitive ability on a task is intuitive, but not the only potential takeaway from the paper. 

Regardless, I think it's clear we are all victims of an amalgam of different cognitive biases. 

We judge ourselves situationally, and assume "the best".  Meanwhile, we often assume "the worst" of others. 

We can do better ... it starts with awareness.

Progress starts by telling the truth.

Before You Vote: Getting Educated

Early voting has started, but, if all goes to plan, we'll know who will be the President on November 3rd. 

The fears of fake news and the growing echo chambers around candidates (and policies) mean it can be tough to truly make an educated decision. The reality is, most of our news sources are tinted by the lens of their ideology - which is okay. That means they're appealing to their targeted audience. 

That being said, it may also be worth looking at the same news story from a comparative news source from the other spectrum - or even better, a primary source when it comes to science/economics. 

Here's a chart that shows where news sources rank. You can click the image to go to an interactive version with more details. And, if you're curious about their methods, click here. 

via Ad Fontes Media

On top of reading various news sources, there are a couple of other tools I like: 

• FiveThirtyEight - Uses graphics to tell visual stories on valid statistics. Named after the number of electoral votes. Also has a visual presidential forecast. 
• RealClearPolitics - Aggregates news from various sources, as well as writing their own opinion pieces. Also has a good visual on the current state of the presidential, senate, and house races. 
• Brittanica ProCon - Tracks the stated positions of politicians on various issues. Can be sorted by candidate, and by issue. It also has a quiz you can take to assess which candidate you actually resonate with. 
• Politifact & FactCheck - Both sites fact check presidential statements, party statements, and more. We know politicians often lie by omission, or focus only on the specific stats that are relevant to their point. Fact-checking helps you gain a more holistic picture. 

 

As a last warning on believing anything you hear, most polls I've seen put Biden in the lead ... but if you remember 2016, you know the polls are working on incomplete information. Clinton had a lead on most polls and lost to President Trump. 

We live in interesting times!