Capitalogix

Here Are Some Links For Your Weekly Reading - May 24th, 2020

 

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

 

Lighter Links:

• We are Doing in a Few Months What Would Normally Take a Drug Development Process Years to Do' with AI. (ZDNet)
• Findings From The AI Index Annual Report. (Stanford-AI)
• Terrifying Black Light Videos Show How Easy It Is to Catch Coronavirus. (BGR)
• Why Zoom Meetings are So Dissatisfying. (Economist)
• Travelers Now Scoring $700 Business Class Flights to Europe with Sneaky Loophole. (DMarge)

 

Trading Links:

• Hertz Files for Bankruptcy after 16,000 Employees Were Let Go. (Forbes)
• One Chart to Catch You up on 2020 ... And the Economy. (HowardLindzon)
• Second Stimulus Check Proposes $1,200 Extra with Round 2. Here's the Situation. (CNet)
• The World's 25 Richest Billionaires Have Gained Nearly $255 Billion in Just Two Months. (Forbes)
• What History Tells Us about the Accelerating AI Revolution. (Wall Street Journal)

Putting 2020's Job Losses in Perspective

Despite rolling re-openings, the economic effects of this "great lockdown" are still mounting. 

More than 36 million unemployment claims have been filed in the last two months - with 3 million coming last week. Over 14.7% of the population is unemployed. 

via NY Times

That being said, just like with COVID-19 cases, we're past the peak. 

Unfortunately, also like COVID-19 cases, the consequences are protracted, and we're unsure if any of our treatment plans are truly alleviating the problem. 

The speed of this shutdown and its impact on employment has been almost unprecedented.

(April 17th, 2020) via visual capitalist

During the Great Depression, unemployment reached 24.9%, and there is no modern equivalent. Today, that would leave 41 million Americans out of work. But the short-term effects of this lockdown are significantly worse than anything in recent memory. 

Luckily, the current crisis is happening on a much faster scale than any of the previous examples. The aforementioned crises generally took several years to happen with unemployment peaking at the tail-end of the recessions. Perhaps we have already passed the peak in only two months?  Same story, different topic ... are the financial markets.  The hit was deeper and quicker than in previous crises, as long as you think the damage has already been done.

Due to this situation stemming from a global pandemic, which resulted in a forced lockdown ... there is an argument to be made for this not being a normal crash.  As a result, there's room for optimism (or skepticism).

Frankly, this is an unprecedented situation.  Governments have taken massive action.  We all know they don't do these types of things during good times.  The question is will it be enough, and if so, for how long? 

Also, actions have consequences.   If governments can really do this, and it works, then why wouldn't they continue?

I suspect because it doesn't really work ... or at least, too much of a good thing is bad for you too.

As normal economic activity resumes, I look forward to seeing how much of the damage is temporary. There are clearly industries that were hit hard - air travel, hotels, etc. - but almost all industries expect to see a rebound. 

Meanwhile, even though Georgia reopened, their initial jobless claims are still rising. Unemployment tracks the business cycle, so as businesses and spending ramp back up, the response should accelerate.  But, it's unclear when that will happen and how protracted the pain will be.

As a reminder, though the lockdown is ending, the economic effects will ripple for a long-time. The length of the ripples depends on our response. 

We live in interesting times!

Selective Attention: What Are You Missing?

Sticking with the philosophy theme, I encourage you to watch this video below on selective attention. 

Daniel Simons' experiments on visual awareness have become famous.  The primary conclusion drawn from his research is that we can miss incredibly obvious things, right in front of us, if our attention is focused elsewhere.

While watching the video, count how many passes the team in white makes. 

This is worth doing so you experience it yourself.

OK, click the video to do it now.

via Daniel Simons and Christopher Chabris (Click Here To Read The Full Paper)

First, did you get the number of passes correct? Second, did you see the gorilla?

If you have already seen this video or heard of the study, it's much easier, but most people absolutely miss the Gorilla, despite it not being hidden. 

Think about how often your focus blinds you to the obvious.

This next video demonstrates "change blindness".  In an experiment, 75% of the participants didn't notice that the experimenter was replaced by a different person.

 

via Derren Brown

Warning: Objects In Your Attention Span Are Fewer Than You Perceive.

It's well known that we often miss objects in our field of view due to limited attention and change blindness, but, it's true with more than just sight. Moment by moment, the brain selectively processes information it deems most relevant. Experiments, like these, show the limits of our capacity to encode, retain, and compare visual information from one glance to the next. 

More importantly, this suggests that our awareness of our visual surroundings is far more sparse than most people intuitively believe.  Consequently, our intuition can deceive us far more often than we perceive.

 

via Pickles

As an entrepreneur, when I focus fully on something, it's as if everything else goes away. That level of focus can be a gift - but it can also be a curse. In Genius Network, we have a form we fill out at the beginning of each meeting. In it is a diagram where you rate your score on 8 factors: physical environment, career, money, health, friends & family, significant other, personal & intellectual growth, and fun & recreation

It's rare that I'm fully succeeding in all 8 ... we only have so much focus and bandwidth, it's inevitable I'll miss things. Clearly, in an information-rich environment, attention is a scarce and essential resource. So, pay attention (or automate the things you know need to be done right, every time).

What are you currently prioritizing, and what's falling to the side due to that focus? What are you missing?

Hope this was a helpful reminder. Let me know what you think about posts like this.  Thanks.

Active Management In The Wake of Pandemic

It's apparent that the first 4 months of the year have been anything but normal ... Challenging to say the least.

The increased volatility and noise tested active managers' mettle intensely and often. While even a blind squirrel finds a nut in a forest (for example, during a bull market ...) this type of environment provides an increased opportunity for both under and outperformance as luck and skill collide. 

History will show that the majority of funds struggled in the first quarter of 2020 - driven by the volatility and uncertainty in the midst of a global pandemic.

Investors pulled out ~$33 billion when asset values initially plunged. Yet, the rush to cash was only the beginning, in the first quarter, asset value plunged $366 billion. Redemptions hit large hedge funds the hardest. Meanwhile, funds with less than $1 billion under management only lost $1.6 billion to net redemptions. 

That being said, as is often the case in both volatile and bear markets - people are checking out the state-of-the-art active management strategies. Interest in hedge funds is at a three-year high, as many people fear that what used to work simply isn't good enough anymore.

I suspect that technology-enhanced strategies will gain ground during the next few years as A.I. and exponential technologies get better and gain traction in asset management, risk control, and data management.  Algorithms will improve, hardware will get faster, digital signal processing will become more accurate, and it will be easier to identify and produce data sources that increase the efficiency, effectiveness, or certainty of outcomes.  The likely result will be a reduction in the cost to produce a unit of alpha, which bodes well for forward-looking investors.

As we slowly move toward normalcy, what can we expect to see?

Institutional Investors are optimistic as well.  Here are selected responses from a survey of 125 institutions.

via Institutional Investor

94% of respondents said that their institutions had done a good job managing response to COVID-19, with 44% believing they'd done very well. This contrasts with their belief on how the government handled the crisis, but shows an opportunity for a strong rebound for businesses. 

In past weeks, I've focused on this crisis as an opportunity for reflection and growth. Personally, I continue to brainstorm ways to combine the old way and the new way to create something better. Institutional Investors express similar sentiment here. 

via Institutional Investor 

As of 4/21/2020, 66% of respondents believe the focus should be on the health of the public, that will likely soon shift to stabilizing the economy, and subsequently shift to growing the economy. 

I believe we'll see similar responses from active managers and from entrepreneurs. This is an opportunity to improve operations, adopt better practices, and set higher standards. 

It doesn't make sense to shoot for going back to where we were.  This much pain and effort likely creates the fertile ground for something better.

Onwards! 

Here Are Some Links For Your Weekly Reading - May 3rd, 2020

 

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

Lighter Links:

• China Has Started a Grand Experiment in AI Education. It Could Reshape How the World Learns. (TechReview)
• I Have Seen the Future And It's Not the Life We Knew. (The Atlantic)
• Army Ranger School is a Laboratory of Human Endurance. (Outside)
• Watch Picasso Make a Masterpiece. (YouTube)
• Michael Jordan Reportedly Once Turned down a $100 Million Appearance Fee. (FTW)

 

Trading Links:

• Buffett's Berkshire Posts Nearly $50 Billion Loss as Coronavirus Causes Pain. (Reuters)
• Bets against the Stock Market Rise to Highest Level in Years. (Wall Street Journal)
• NYSE Research Shows Humans on Exchange Floor Limit Volatility, COO Says. (Cheddar)
• Nasdaq, Cboe Fix Feeds Facing Options Overload. (WatersTechnology)
• China's National Blockchain Will Change the World. (CoinDesk)

 

Elon Musk's Twitter Tirade

Elon Musk wiped $14 billion dollars (9.5%) off Tesla's value with one tweet. 

He went on a Twitter tirade focused on the unfairness of COVID-19 lockdowns, on selling all of his personal possessions, and singing the Star-Spangled Banner. 

The tweet that took the cake was "Tesla stock price is too high imo" (in my opinion).

via Elon Musk

Musk also announced that he and his girlfriend, Grimes (who is a musician), are scheduled to have their baby on Monday.

Back to business ... remember that Musk has run afoul of the SEC for tweeting about Tesla shares in 2018, when he tweeted about potentially taking Tesla private. That is was recently settled. As part of that, Musk agreed to a pre-approval process for tweets that included public statements that could move Tesla's stock price. 

Perhaps he forgot? 

Sometimes, less is more!

Here Are Some Links For Your Weekly Reading - April 26th, 2020

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

Lighter Links:

• Harvard Professor Wants to Ban Homeschooling Because It's Authoritarian'. (NYPost)
• Amazon Asks Workers to Request Leave If They Continue Staying at Home. (EnGadget)
• You Can Now Download the Government's Controversial Contact Tracing App. (Timeout)
• A Startup is Pitching a Mind-Uploading Service that is 100 Percent Fatal. (TechReview)
• Burning Man is Going Virtual, and So are the Orgies. (Vice)

 

Trading Links:

• This Pandemic is Over. Let's Stop the Economic Suicide, and Get Back to Work. (RealClearMarkets)
• Negative Oil Prices Were a Warning, Not an Anomaly. (Bloomberg)
• Ken Fisher on Nixing the VIX. (RCM)
• Hedge Funds are on Defense and Testing the Stamina of a $5 Trillion Stock Rally. (Bloomberg)
• Who's On Top in the S&P 500 Before and After the Coronavirus?(SeekingAlpha)

The Age of AI: How Far Is Too Far?

Let's take a break from talking about the Coronavirus to talk about something else that will affect the global population. 

Of course, it's the pace of innovation and the effects of AI. I've been on the record for years saying things like

• AI will transform the planet much like electricity did
• Data will be more valuable than oil 
• And, the only thing more impressive than our population growth is our technology growth 
• Or, from the precautionary side, Artificial intelligence isn't a substitute for lack of the real thing

It can be difficult to have a nuanced discussion around AI online. There's a lot of PopSci around it, people conflate a very diverse range of algorithms and intentions into the general "AI", and realistically when you get too in-depth into what algorithms are best for what problems, most people lose interest. 

That's why I'm personally a proponent of any discussions around AI. Awareness is important, and if more people can understand the basics, then some subset of them will become better educated... rinse and repeat. 

Robert Downey Jr. and YouTube partnered for an 8-part docuseries on the Age of AI. I've only watched one episode, but that episode did a decent job of addressing the highest-level issues with AI. 

 

via YouTube Originals

I won't go through the whole video with you - because  you're quarantined and I think it's worth watching, but there are a couple of points I wanted to re-emphasize. 

Your Data Is Becoming More Important, Not Less Important

"Everyone's concerned about identity theft. Meanwhile, they're giving all their data for free on the internet. I'm what I like. I'm what I don't like. I'm where I go, I'm who I know. I'm what I search. I'm my thumbprint. I am my data" - will.i.am

My son, Zach, has ultimately given up on privacy - his argument is that everyone's information is out there anyway. Even my eldest son, Ben, who is a cybersecurity expert, has semi-resigned himself to his data being out there. He takes many precautionary measures but recognizes that he's not truly anonymous. 

In the video, Will.I.Am is getting an authentic reproduction of his face, mannerisms, and voice - they even got the pimple he had during the day of filming. In doing so, he specifically asks for the voice to be a bit robotic. He does this "for his mom" but in reality, it's to make clear - this is a robot, not me. It's avoiding the Uncanny Valley. 

We're at an intersection where it's going to become harder to decide what's real and what's fake. With deepfake video and audio, protecting your personal brand and identity becomes difficult, and simultaneously more important. 

The Path Forward

The road to AI supremacy is long and fraught with booby traps, potential missteps, and ethical issues. Questions like "how far is too far?" will have to be answered, and countries will likely strive to unite around shared rules of ethical AI. 

If there's anything that makes me confident about our ability to successfully travel that road, it's looking at humanity's ability to adapt. The reality is, we've been working symbiotically with "machines" since the very beginning, but our definition of the machine simply continues to improve. It's fractal, and each time the technology we're adopting gets bigger, so does the eventual positive effect on day to day life. 

AI adoption is a big step, but the positive effect it can have on our lives is astronomical. 

Onwards!

What Can My Dogs Teach Us About Trading?

I wrote this back in 2008. With minor updates, it seems relevant again.

Some dogs run fast; other dogs do tricks … my 100-pound lab, Duke's best talent was his ability to remain immobile in almost any situation (some call it "laziness" … I prefer "calm" or being "even-tempered").

At the other end of the spectrum are our two small dogs, Boo and Jasper. Boo, our 20-pound mix between a Beagle and a Boston terrier. Let's just say that he has a higher metabolism than Duke. 

When Boo hears a noise, he lets out an involuntary, barely audible, sound.  His body becomes rigid and his head cocks.  He becomes alert and carefully tunes his ears to their most sensitive setting, seeking any information that will help identify the "danger." He's now primed for the next intrusion.

Usually, there are no other disturbances to follow, and the noise is cataloged and soon forgotten. His alertness level slowly subsides over the next 10-15 minutes or so.  He'll go back to napping, a little more fitfully this time … and just a little bit on edge.

Things get a little more interesting when another noise surfaces shortly after the first one.  What could once be dismissed now must be treated as a threat – and just to be safe, a threat of the highest order.  Now the appropriate response is a series of barks, nervous glances, pacing, rushing off in the direction of the noise to investigate, and a barrage of barks meant to sound more menacing than the source of the noise.  Who or what is it? How much harm can they cause? How grave is the threat?

Jasper, our high-anxiety mutt, is never off alert. He doesn't know what's a threat, and what's not, so he's always creating threats out of nothing and riling up our other dogs. 

Duke is a different story.  Nothing upsets Duke more than Boo or Jasper getting on high alert.  The same noise that prompted Jasper and Boo to become alert does nothing to Duke.  However, the first time that they make noise,  Duke becomes alert. The second time they make noise, Duke starts vocalizing; and the third time, all 4 of our dogs start yapping. Once they start yapping, then the neighbor's dogs start yapping, and suddenly our neighborhood is a cacophony of dog barks.

The same thing happens in the market with people.

In the market, it is the second noise - and subsequent noises - that creates the equivalent of the Homeland Security "Red Alert." Once an elevated level of alertness has been established, it takes a long period of relative calm for it to subside.  And when on "Red Alert" … any additional noises (for example, the responses of the other market participants) - big or small - will highlight, magnify, and further validate the issue.

But, like in the story "The Boy Who Cried Wolf," even legitimate threats are ignored after too many false alarms (or prolonged periods of constant alert).  So, bad news about the economy isn't as likely to get people excited after the past few weeks.

As people (or bots) become "used" to today's new normal, It'll be interesting to see what sprouts up. The longer away from the initial episode, the more real the effect can be attributed. 

The unfortunate reality is that the Boo and Jasper style "overreaction" to a crisis can exacerbate the long-term effects of the crisis. To balance that, on the macro level, a stronger pandemic response has been shown to increase economic recovery.

This has been the theme from the beginning. Don't personally panic, but respond aggressively on the city, state, and national level. 

Food for thought. 

Building Your New Normal

Last week, I introduced the idea of a new normal. 

As a small business owner, in the midst of this pandemic, I'm not thinking about what's necessary to continue doing what I was doing yesterday. I'm focused on what I can do to prepare for tomorrow. Things won't go back to the way they were, but they will go back to normal. Only, it will be a new normal. It's a good lesson in being attached to a result, not a medium for a result. 

The "new normal" is a topic that has been coming up in a lot of different places, because of the situation in which we all find ourselves. 

These Are Not Unprecedented Times

I've heard a lot of people use the phrase "these are unprecedented times" but they're not. Ignoring how many different industry-disrupting era's we've had (think the Dot Com Bubble), we've also had numerous pandemics, and we're better prepared to handle them today than at any other time in history.  

Here is a short video from Simon Sinek that I thought was relevant, well-done, and inspiring. I encourage you to watch it.

 

via Simon Sinek

What Comes Next?

"I'm not worried about what I do, I'm worried about why I do it." - Simon Sinek

After some time, things will go back to "normal." Your goal for today should be to sow the seeds to today that prepare you for that day. I'll backtrack a step and acknowledge, if you're struggling to survive, survival comes first. Regardless, you need to make sure you're asking yourself the right questions.

When you ask better questions, you get better answers. 

What will you need when it's back to business as usual? How can you help others better themselves through this period? Who can you help?

If the theme for right now is building a new normal, one of my life's themes is the belief in moonshots and exponential thinking. 

Your response to this pandemic should be the same as your response to disruptive innovation. 

You should be attracted to a result, not a medium, and paying attention to how you can capitalize on the wave. 

Blockbuster, RadioShack, Kodak, all went out of business due to shortsighted myopia in the face of change. 

Opportunity or Chaos ... You get to decide!

Onward!