Capitalogix

Here Are Some Links For Your Weekly Reading - August 4th, 2019

 

 

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

 

Lighter Links:

• Being and Drunkenness: How to Party Like an Existentialist. (Aeon)
• When Navy Sailors & Marines Share a Ship, Karaoke Night Gets Complicated. (WSJ)
• Fewer American Women are Working Than Two Decades Ago. (Economist)
• Now Calling Balls and Strikes: Robot Umpires. (Wall Street Journal)
• The State of AI in 2019: Breakthroughs in Machine Learning, Natural Language Processing, Games, and Knowledge Graphs. (ZDNet)

 

Trading Links:

• This VC Firm Just Raised More Than $1 Billion to Invest in Moonshots: Term Sheet. (Fortune)
• Pentagon Puts $10B Contract on Hold After Trump Swipe at Amazon. (Politico)
• The Two Times in History Stocks Have Been this Expensive: 1929 and 2000. (Fortune)
• Stocks Plunge After Fed Cuts Rates for First Time since 2008. (CNBC)
• Opinion: This Highly Accurate Stock-Market Predictor Just Hit Its Most Bearish Level since the Internet Bubble. (MarketWatch)

Here Are Some Links For Your Weekly Reading - June 30th, 2019

Most people don't spend money on freemium games. These games rely on a small subset of "whales" to survive - players that spend absurd amounts of money on their games. Gacha games let players pay to "roll the dice" to unlock rare characters and collectibles similar to a "Loot Box" mechanic. 

Now, the US is trying to make this mechanic illegal for taking advantage of children with their "pay-to-win" mechanics. 

 

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

 

Lighter Links:

• Roger Goodell Net Worth and Salary History. (CNW)
• The Dark Forest Theory of the Internet. (OneZero)
• See the World's Oldest Trees by Starlight. (NationalGeographic)
• The Beauty and Madness of Sending a Man to the Moon. (Wired)
• Teams Autonomously Mapping the Depths Take Home Millions From The Ocean Discovery XPRIZE. (TechCrunch)

 

Trading Links:

• Business Conditions are at Their Worst Level Since the 2008 Financial Crisis. (MorganStanley)
• California Today: Would You Pay $195 to Take a Helicopter to Work? (NYT)
• What Yogi Berra Would Have Said about this Bull Market. (WSJ)
• Economies and Stockmarkets Do Not Always Match up Well.(Economist)
• How Politics Became the Main Driver of Financial Markets – And Why Investors Better Get Used To It. (MarketWatch)

Social Media Is Changing Everything: A Reprisal

I came across a post from 2009 about social media. 10 years later, with the knowledge of how much data we use today, it's quite a read.

Here it is in its full glory. 

Social Media Is Changing Everything: October 18th, 2009

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?

Welcome to the World of Socialnomics.  This video has a bunch of interesting statistics ... and is fun to watch. 

 

 

Other Resources:

• • Here is a link to a short-version of this video.
  • This reminds me of the "Shift Happens!" video.
  • Worth Looking At ... Here are the Stats.

Social Media Is Changing Everything: April 20th, 2019 

Looking at the stats from 2009 is pretty funny

• My son was using 472 MB of data a month
• Hulu had grown from to 373 million total streams in April 2009
• Only 25% of Americans in the past month said they watched a short video on their phone

For some context, I looked up the comparative numbers for 2018. 

• I picked a random month in 2018 ... in August my son used 10.85 GB of data. He doesn't text as often - but has sent/received 282,000 snapchats since downloading it 5 years ago.
• Hulu has over 20 million subscribers who streamed more than 26 million hours a day in 2018 
• People spend over five hours a day on their smartphones on average. 70% of web traffic happens on a mobile device, and more than 50% of videos are watched on mobile (93% of twitter videos). 

Here's what happens every minute of every day on the internet

via Lori Lewis and Chadd Callahan

 

A little different than 2009 ...

March Madness: The Quest For The Holy Grail

March Madness is in full swing and will have the world's attention for a few more days. As you could guess - most brackets have already busted. Louisville lost, UC Irvine won, and Duke barely weathered UCF's onslaught. 

 

via FanSided

Lots of skill, lots of adrenaline and lots of natural talents (including amazing physical talents).  Here is a picture of 7'6 Tacko Fall. Tacko still looks taller than his opponents even when kneeling. 

via UCF Basketball

The allure of March Madness is the same as gambling or trading.  These are all fertile grounds for emotion, biases, and statistics. 

The holy grail is mighty elusive in March Madness (as in most things)  ... For example, the odds of getting the perfect bracket is 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.

Here's some more crazy March Madness Stats: 

• 60 million tournament brackets were completed
• Companies expect $4 Billion of corporate losses due to employees tracking games
• The highest paid NCAA coach, Duke’s Mike Krzyzewski, makes a salary of $8,982,325
• It's expected to create $10 Billion in gambling (twice as much as the Super Bowl)

 

via Duke University

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 3 people that 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 feel, some base their decisions 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 be helpful in making 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 your 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 have the answers to "who will win" and we don't have the answer to "what makes a perfect prediction". 

Think about it from a market efficiency standpoint. People make decisions on many factors - sometimes irrational ones - and that creates inefficiencies & complexities. It can be hard to find those inefficiencies and capitalize on them - but they're there to be found. 

In trading, that's where AI and advanced math come in - taking away our biases and identifying 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

The data is there. Over 100,000 NCAA regular season games were played over the last 25+ years, and we generally have plenty of statistics about the teams for each season. There are plenty of questions to be asked on that data that may add an extra edge. 

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:

1. People aren't as good at prediction as they predict they are.
2. Machine Learning isn't a one-size-fits-all answer to all your problems

 

Something to think about. 

Avoiding Death By Snowmobile: Part II

Last year, I recounted my humbling via snowmobile. 

I traveled to Saskatchewan, Canada and "sledded" with people who had been doing it since birth. 

When I got there, everyone was in great spirits. Apparently, this is a sport done with day drinking, lots of laughter, and semi-reckless abandon.

We split into groups: Insane, Merely Crazy, and the Turtles. I figured I was relatively safe with the Turtles ... I was wrong. 

 

 

The machines are capable of gliding over the snow at speeds exceeding 120 miles per hour.  I wasn't going nearly that fast ... but the beasts were harder to tame than I expected. 

Despite crashing numerous times, totaling a sled, and being sore for weeks ... I had so much fun on year one that I brought my son with me on year two. 

 

 

Last year, I recognized 2 things: 

1. Humans are deletion creatures. That means they can hold seven things (plus or minus two) in their memory. While they were focused on fun, I was focused on how to stay on the sled
2. You're supposed to stay on the sled, and leaning into the turn helps you do that ... who'd've thunk it? 

This year I learned a couple more: 

1. People don't forget. Everyone remembered my less than skillful sledding. 
2. Youth is wasted on the young. My son picked it up fast and was speeding as if he'd been on a sled his whole life (despite falls that would cause people with skulls that no longer have soft spots to proceed with caution). 
3. When you find the right group of people, the fun gets more fun, and struggles seem less challenging. 

 

While sledding is fun, it's the people that make the trip. 

Likewise, it's the people you take with you through life that makes it so worth it. 

Oh, and I did suck less this time ... Progress!

 

Gil Brandt and the Innovation of Modern Football

I'm regularly surprised by the levels of innovation and strategic thinking that I see in football.

I've written posts about how much regular businesses could learn from watching football teams. That post talks about how even high school teams have a position-by-position depth chart. They have a game plan for their next opponent. They practice plays on both offense and defense. They watch game film of their past games and future opponents. And, they coach the team as a team, and the players individually. 

Often, simple ideas, applied consistently, are enough to win.

Last night I was at a Dallas Cowboys playoff game (note that is not an oxymoron) ... and I took a picture with this guy.

 

 

I see him at every game ... and every game he wears a different creative and well-thought-out costume. He sits on the 50-yard line, He wears Ferragamo shoes and a nice watch. Yet, something about this game captures his imagination.

Yesterday, I also had the honor of meeting Gil Brandt at the game. For those of you not familiar with him, he was the vice president of player personnel (or Chief Scout) of the Dallas from 1960 to 1989.  He helped Dallas grow into one of the most powerful and popular sports franchises in America. His innovative management and personnel systems are standard operating procedure today for many teams at the professional and collegiate levels nationwide. 

  

 

Many consider him the architect of the Dallas Cowboys. I'm not talking about the stadium or headquarters, I'm talking about their teams and ideas that were the catalyst to "America's Team".  I took this from his Wikipedia page.

He helped pioneer many of the scouting techniques used by NFL clubs today,^[2] such as:

• Creating a new scouting and evaluation system for prospects, which would later spread throughout the NFL. In the NFL Films' documentary series Finding Giants, Ernie Accorsi mentioned how then-general manager George Young built the New York Giants scouting process based on the Cowboys system.^[3]
• Using computers for scouting and talent evaluations. To achieve this level of automatization, the Cowboys had to systematically define which were the traits, measurable qualities and skills that could be expressed into numbers and formulas in order for a computer to understand them.^[4]
• Finding potential prospects in other sports such as: Bob Hayes, Cornell Green, Peter Gent, Toni Fritsch, Percy Howard, Ken Johnson, Ron Howard, Wade Manning, Manny Hendrix and Mac Percival. The Cowboys also set up hospitality suites for coaches at the NCAA basketball tournaments.^[5]
• Brandt was one of the first talent scouts to look outside of the United States and Canada for potential players. Kicker Toni Fritsch was discovered during a European tour.^[6]
• Made unconventional draft choices in lower rounds based on potential, even though at the time it wasn't known if the players would ever be a part of the National Football League. For example: Roger Staubach, Herschel Walker and Chad Hennings.
• The use of psychology tests to identify the mental and personality make-up of prospects.^[7]
• Finding players in the undrafted free agent and small college talent pool, such as Drew Pearson, Cliff Harris, and Everson Walls.^[8]
• Helped to create the NFL Scouting Combine as a centralization of the scouting evaluation process.

 

Gil Brandt is one step closer to joining the NFL's ultimate pantheon – The Pro Football Hall of Fame.  He has been nominated as a contributor finalist for the Class of 2019. The contributor category recognizes "individuals who made outstanding contributions to professional football in capacities other than playing or coaching."

He's an inspiration. Not only did he innovate how teams draft and measure talent ... he's the guy who figured out how to make cheerleaders an iconic symbol of a team and the game itself.

The Psychology Behind Gambling (and Everyday Traders)

Vegas and Wall Street share a lot in common. 

Over Time ... The House Wins

Casinos only offer to play games that they expect to win.  In contrast, gambling customers play even though they know the odds are against them.

Why does this happen?  The rush of a win, the chance of a big win, and random reinforcement are common factors that incent people to play lotto, go to a casino, or try to trade.

Chemicals like adrenaline and dopamine play a part as well.  Even in a sea of losses, your body can't help but crave the chemical reward of even a small win, 

The "House" knows this and engineers an experience that takes advantage of it.  

In the case of casinos, every detail is meticulously crafted to extract you from your money - from carpet patterns to the labyrinthian layouts, the music, the lights and even the games themselves. 

Here is an infographic that lays it out for you. 

Bojoko via DailyInfographic

Most people aren't gamblers ... the fear of losing big inhibits them.  However, when people were instructed to "think like a trader," they showed considerably less risk-aversion when gambling. 

 

The illusion of control convinces us we can overcome the statistics. 

 

When you almost get it right - when you miss the jackpot by one slot on a slot machine, when you just mistime a trade to get a big win - you're more likely to play longer, and place bigger bets ... because you're "so close". 

It's human nature to want to feel in control. 

This is why you find a lot of superstitious traders & gamblers. If you wear this lucky item of clothing ... if you throw the dice in this particular way ... if you check your holdings at this time every day ... you have control. 

There is a big difference between causation and correlation. 

It is not hard to imagine that the majority of a trader's activities do little to create a real and lasting edge.  

 

Skill vs. Luck

There are games of skill, and there are games of chance.

In a casino, poker and blackjack are considered games of skill.  In contrast, slot machines are considered a game of chance.

In trading, predicting markets is much different than using math and statistics to measure the performance of a technique.

Much of what we do is to figure out how to eliminate the fear, greed, and discretionary mistakes humans bring to trading.

In trading, "Alpha" is the measure of excess return attributed to manager skill, rather than luck or taking on more risk.

We believe in Alpha-by-Avoidance ... Meaning much of what we do is figure out what to ignore or avoid so that the majority of the games we play are games of skill rather than games of chance.

Are you playing the right game?

 

Here Are Some Links For Your Weekly Reading - July 22nd, 2018

 

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

Lighter Links

• The Boston Dynamics Robots Can Now Hunt You in the Woods. (DailyDot)
• What Cyber-War Will Look Like. (Scholars-Stage)
• The Mistakes You Make in a Meeting's First Milliseconds. (Wall Street Journal)
• Does Intermittent Fasting Work? Here's What It Can (And Can't) Do for You. (Cheatsheet)
• 'Never Underestimate Human Stupidity,' Says Historian Whose Fans Include Bill Gates and Barack Obama. (CNBC)

 

Trading Links

• Coinbase Says It Has Green Light to List Coins Deemed Securities. (Bloomberg)
• CRISPR Stocks Plummet over Study Pointing to Potential Adverse Effects. (FastCompany)
• Warren Buffett Donates $3.4-Billion to Gates Foundation and His Family's Charities. (Globe&Mail)
• The 24 Rules for Success Left behind by a Legendary Wall Street Banker. (Time)
• Scientists Discovered a Quadrillion Diamonds Hidden Deep within the Earth. (Inverse)

An Investment Guaranteed to Pay Dividends

I think about investments a lot ... that makes sense given my profession.

Yet, as my kids get older, there is an investment I made that paid-off in a big way ... and I want to share it with you.

Like many parents, I wanted to teach my children that, to a large extent, they control what happens to them. One of the first ways I did that was to set up a "compensation system" for them to earn video games.

Some parents try to limit the amount of time their kids spend watching TV or playing video games. I tried something different.  Instead, my kids earned their games by reading books.  Here is a photo from way back then.

 

 

Paid With Play.

Here's how it worked. When they were younger, 10 books was enough to earn a small game. When they finished a book, it was their right, and my obligation, to take them to the bookstore for us to pick up the next book together. Likewise, when they finished the requisite number of books, it was their right, and my obligation, to take them to the computer store or game store for them to choose any game they wanted.

When they finished a hundred books, they got a bonus of earning the next game system. That meant if they had a Nintendo, they could now also get a PlayStation 3 or Xbox 360.

How Can You Encourage a Jump to the Next Level?

There came a point when I wanted one of my sons to start reading grown-up books. He was comfortable reading a certain type of book, and didn't want to read the kind of books that I read.  So, I created a bonus system that counted a particular book as three books.  I didn't force him; I just let the easier path to a reward "whisper" in his ear what to read. Once he finished that, he never went back to teen fiction.

It Is a Great Way to Learn About Your Kids.

I also used the bookstore visits to get a sense of how the boys were doing. For example, I might say "I notice that you read five books in that series, maybe you'd like this book".  Or, "That sure is a lot of science fiction; what was the last biography you read?"  For the most part, though, I didn't care what they read.  The key was to get them to want to choose certain books for their own reasons.  Ultimately, their preference meant they were learning to love reading.

It Puts Them In Control of Their Destiny and Rewards.

My younger son likes competition. He also broke or misplaced many things. So, in order to earn back the Game Boy unit that he lost, I challenged him to read five books in five days. These weren't easy books either. It was designed to stretch him, and also to teach him that he could read a book a night. The bet was that he either finished all the books in the allocated time, or none of them counted towards games or Game Boys. On the other hand, if he read a book a night for two weeks, not only would he get to have his Game Boy back, the books would count towards a game too. It worked like a charm, and we were both happy.

So, Who Got the Better Bargain?

As they started to get into their teenage years, I needed to up the ante a little. So, 500 books meant they got a laptop of their choice. Both boys cashed in ... and probably felt like they were taking advantage of their dad.

I got what I wanted, though; both my boys love reading.  And know that they can accomplish anything they put their minds to … one step at a time.

 

 

That's an investment that pays dividends for a long time.

  

Inspiration Comes in Many Forms

Once a year, I go to the World BBQ Championship at Memphis in May. 

It's three days of friends, food, fun, and bad puns (like #AporkalypseNow and  #MeatDrinkAndBeMerry).

You've heard the phrase  "Put your money where your mouth is ..."  This year we sponsored a tent and brought some of the Capitalogix team to enjoy the festivities. 

 

 

Here's a look at what was cooking in our tent.  It had a Brazilian "churrasco" flair. 

 

Our Grill Master was Blake Carson, who took a traditional Brazilian Steakhouse cooking style – and innovated upon it – creating the Carson Rodizio kit (which started as a Kickstarter project).  

It is a multi-rotisserie rack that converts your favorite backyard grill into an open and spinning Brazilian style Steakhouse.  It's clever, functional, and cool ... and it's been used to win multiple barbecue championships.

I love to experience an entrepreneur's mind at work.  

It's not always about what you add.  Sometimes, it is about what you take away.  Less is often more. 

Here is a one-minute interview I shot with Blake last year.

 

 

For more on Carson Rodizio, here is their Facebook page.

Innovation, like opportunity, is all around you.

But it's not there for you if you don't see the opportunity, and seize it.