Capitalogix

Dinner With Robert F Kennedy Jr.

I just got back from the Genius Network Annual Event. It was a great event.  Members and guests included Verne Harnish, Dan Sullivan, and Daymond John.

This year, Joe Polish interviewed Robert F. Kennedy Jr. at the conference.  To make it didn't seem like a political event, they didn't tell people he was coming until after the event was sold out. 

Kennedy stayed to have dinner with a few members later that night. At the dinner, he answered questions from the attendees. 

 

 

RFK is an interesting guy ... he's a newly declared Independent who was a lifelong Democrat. Democrats think he's a conservative. Conservatives think he's a liberal.

It is a little confusing.  And most people probably don't know what to think. 

I'll be frank. He did much better than I expected.  He's undoubtedly a politician. Answers were prudent; he gave nuanced opinions to avoid stepping on too many toes. He was clearly knowledgeable about foreign policy and history. He was sharp. And it is easy to argue that he is more coherent than some of our other options. 

I'm still making my own decisions about who I'll vote for in the coming election. But I hope there's a space in modern politics for comment sense and bipartisanship - something I think RFK offers. 

At this point in history, can decent ideas and a centrist approach from an Independent gain any real traction?

I voted for Ross Perot, but if you remember, he got 0 electoral college votes, despite getting approximately 20% of America to vote for him. Could this be another situation like that?

Politics has always been divisive, and the internet and technology have made it more so. On the one hand, it's very hard for a moderate opinion to gain traction. On the other hand, both parties are largely sick of their options. 

Do you think he has a chance?

On a lighter note, the dinner was hosted at Tom Mello's house, who has bought replicas of K.I.T.T., Herbie, and the Delorean from Back To The Future. 

I couldn't help myself. I had to make this video. 

 

Buckle-Up ... Instead of heading Back to the Future, we are headed for an election year.

The Cost Of Thinking Linearly In Today's Age

Humans can’t do a lot of things.

Honestly, the fact that we’re at the top of the food chain is pretty miraculous. 

We’re slow, we’re weak, and we’re famously bad at understanding large numbers and exponential growth. 

Our brains are hardwired to think locally and linearly.

It’s a monumental task for us to fathom exponential growth … let alone its implications. 

Think how many companies have failed due to that inability … RadioShack didn’t foresee a future where shopping was done online.  Kodak didn’t think digital cameras would replace good ol’ film.  Blockbuster dismissed a future where people would want movies in their mailboxes because they were anchored to the belief that “part of the joy is seeing all your options!” They didn’t even make it long enough to see “Netflix and Chill” become a thing. 

 

via Diamandis

Human perception is linear.  Technological growth is exponential.

There are many examples.  Here is one Diamandis calls “The Kodak Moment.”

In 1996, Kodak was at the top of its game, with a market cap of over $28 billion and 140,000 employees.

Few people know that 20 years earlier, in 1976, Kodak had invented the digital camera.  It had the patents and the first-mover advantage.

But that first digital camera was a baby that only its inventor could love and appreciate.

That first camera took .01 megapixel photos, took 23 seconds to record the image to a tape drive, and only shot in black and white.

Not surprisingly, Kodak ignored the technology and its implications.

Fast forward to 2012, when Kodak filed for bankruptcy – disrupted by the very technology that they invented and subsequently ignored.

via Diamandis

Innovation is a reminder that you can’t be medium-obsessed.  Kodak’s goal was to preserve memories.  It wasn’t to sell film.  Blockbuster’s goal wasn’t to get people in their stores; it was to get movies in homes.  

Henry Ford famously said: “If I had asked people what they wanted, they would have said faster horses.” Steve Jobs was famous for spending all his time with customers but never asking them what they wanted.

Two of our greatest innovators realized something that many never do.  Being conscientious of your consumers doesn’t necessarily mean listening to them.  It means thinking about and anticipating their wants and future needs.

Tech and AI are creating tectonic forces throughout industry and the world.  It is time to embrace and leverage what that makes possible.  History has many prior examples of Creative Destruction (and what gets left in the dust).

Opportunity or Chaos …  You get to decide.

Onward!

Investment Themes Since The 1950s

I tend to focus on the themes that are impacting industry and the world ... but when I started this blog back in 2008, I was much more focused on investment themes ... why were markets doing what they were doing, both on the micro and the macro scale? 

Based on data from Morgan Stanley, visualcapitalist just put together a chart that looks at the key investment themes from each decade since 1950. It's a great retrospective. 

via visualcapitalist

In the 1950s, we saw a post-war boom in European stocks, followed by a shift into "blue chip stocks."

When I grew up, my grandparents advocated for blue chip stocks, and they held their investments until the day they died ... 

By the 1990s, when I started paying attention to markets, tech startups were taking over, and stocks weren't primarily held for years and years. Instead, they were getting calculated in weeks and months; people were trying to capitalize on a "quick trend."

Now, a quick trend can last under a day, and the average holding time for a stock (based on trading volume) is calculated in seconds. 

Where will investments go in the '20s? We're currently seeing massive investment in tech, specifically the platforms that enable burgeoning tech, like NVIDIA. We also see a disconnect in U.S. equity markets, with 43% of global investment, but 26% of the world's economic output.

I think that, plus the growth in emerging markets, will result in a massive shift. Time will tell. 

What do you think? 

Riding The Data Wave - Data Is Becoming a New Asset Class

Data is the fastest-growing commodity, and is today’s “wild west” and the battlefield of today’s tech titans.  We talk about AI as this gold rush, but data is the underpinning of it all. 

A staggering 328.77 million terabytes of data are created daily, which means around 120 zettabytes of data will be generated this year. 

Video is still growing rapidly, but so is IoT, with more than 15% annual growth.  There are now almost 20 billion connected devices. 

Alphabet, Amazon, Apple, Facebook, and Microsoft all have unprecedented amounts of data (and power).

Rapid growth means little time to create adequate rules. Everyone’s jumping to own more data than the next and to protect that data from prying eyes.

As a great example of this, I often warn people to keep their intellectual property off of ChatGPT or other hosted language models. 

I also see it trading, but it’s pervasive in every industry and our personal lives as well. 

Collecting basic data and using basic analytics used to be enough ... but not anymore.  The game is changing. 

For example, traders used to focus on price data ... but there has been an influx of firms using alternative data sets and extraordinary hardware and software investments to find an edge.  If you’re using the same data sources as your competitors and competing on the same set of beliefs, it’s hard to find a sustainable edge. 

Understanding the game others are playing (and the rules of that game) is important.  However, that’s only table stakes.

Figuring out where you can find extra insight, or where you can make the invisible visible, creates a moat between you and your competition and lets you play your own game.

Here is a quick high-level video about Data as fuel for your business.  Check it out.

 

 

It is interesting to think about what’s driving the new world (of trading, technology, AI, etc.), which often involves identifying what drove the old world.

History has a way of repeating itself.  Even when it doesn’t repeat itself, it often rhymes.

With that said, the key to unlocking the pathway to the new world often comes from a new or alternative data set that lets you approach the problem, challenge, or opportunity from a different perspective.

Before e-mails, fax machines were amazing.  Before cars, people were happy with horses and buggies.

These comparisons help explain the importance of data in today’s new world economics.

 

gapingvoid

Data as the New Oil

Petroleum has played a pivotal role in human advancement since the Industrial Revolution.  It fueled (and still fuels) our creativity, technology advancements, and a variety of derivative byproducts.  There are direct competitors to fossil fuels that are gaining steam, but I think it’s more interesting to compare petroleum to data due to their parallels in effect on innovation.

Pumping crude oil out of the ground and transforming it into a finished product is not a simple process.  Yet, it is relatively easy for someone to understand the process at a high level.  You have to locate a reservoir, drill, capture the resource, and then refine it to the desired product – heating oil, gasoline, asphalt, plastics, etc. 

The same is true for data.

You've got to figure out what data you might have, how it might be useful, you have to figure out how to refine it, clean it, fix it, curate it, transform it into something useful, and then how to deliver it to the people that need it in their business. And even if you've done this, you then have to make people aware that it's there, that it's changing, or how they might use it. For people who do it well, it's an incredible edge. – Howard Getson

In a sense, data fuels the information economy much like oil fuels the industrial economy.  The amount of power someone has can be correlated to their control of and access to these resources.  Likewise, things that diminish or constrain access or use of these resources can lead to extreme consequences.

Why Data Is Better Than Oil

The analogy works, but it’s just that, an analogy, and the more you analyze it, the more it falls apart.  Unlike the finite resource that is oil, data is all around us and increasing at an exponential rate, so the game is a little different:

• Data is a renewable resource. It’s durable, it’s reusable, and it’s being produced faster than we can process it.
• Because it’s not a scarce resource, there’s no urge to hoard it – you can use it, transform it, and share it knowing that it won’t diminish.
• Data becomes more valuable the more you use it.
• As the world’s oil reserves dwindle, and renewable resources grow in popularity and effectiveness, the relative value of oil drops. It’s unlikely that will happen to data.
• Also, while data transport is important, it’s not expensive the way oil is.  It can be transported and replicated at light speed.

Using alternative data gives traders an advantage, but it doesn’t always have to be confidential or hard-to-find information.  Traders now have access to vast amounts of structured and unstructured data. A significant source that many overlook is the data produced through their own process or the metadata from their own trades or transactions.

In the very near future, I expect these systems to be able to go out and search for different sources of information. It's almost like the algorithm becomes an omnivore. Instead of simply looking at market data or transactional data, or even metadata, it starts to look for connections or feedback loops that are profitable in sources of data that the human would never have thought of. – Howard Getson

In a word of caution, there are two common mistakes people make when making data-driven decisions.  First, people often become slaves to the data, losing focus on the bigger picture. It’s the same mistake people make with AI.  Both are tools, not the end goal.  Second, even the most insightful data can’t predict black swans. It’s important to exercise caution.  Prepare for the unexpected. 

The future of data is bright, but it’s also littered with potential challenges.  Privacy concerns and data misuse are hot-button topics, as are fake news and the ability of systems to generate misleading data.  In addition, as we gain access to more data, our ability to separate signal from noise becomes more important.

I think one of the biggest problems facing our youth - and really all of us - is how much information is thrust at us every waking moment of the day.  No previous generation has had this much access to data.  As a result, many are actually less informed than in the past.  Soundbites become the entire news story, and nuance gets lost in the echo chambers. 

The question becomes, how do you capitalize on data without becoming a victim of it? 

Food for thought!

Here Are Some Links For Your Weekly Reading - October 8th, 2023

Reports of bed bug infestations in Paris are so bad the government is deploying sniffer dogs to inspect trains.

 

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

Lighter Links:

• Why Collaboration With Generative AI is So Tricky—And How to Make It Work. (Fortune)
• AI-Assisted Decision-Making. (Every)
• 10 Questions to See If You Have a Great Idea. (Entrepreneur)
• At What Age Do You Hit the Peak of Your Career? (Economist)
• Rethinking Flow States by Introducing 9 Antecedents. (PsychologyToday)

 

Trading Links:

• Visualizing the Pyramid of Financial Risk. (Advisor)
• The Invisible Hand: AI in Financial Markets and Algorithmic Trading. (Medium)
• India Surpassed China as the World's Most Populous Country this Year. (UnitedNations)
• 10 Fast Food Chains Ranked by Average Sales Per Store in the U.S. (Infographic)
• Even Michael Lewis Can't Make a Hero Out of Sam Bankman-Fried. (NYT)

The Global Stock Market In One Chart

In 2021, we looked at the (then) $94 Trillion Global GDP. 

Today, I found a chart focusing on the $109 Trillion Global Stock Market.

While there are certainly still fears about recessions, downturns, and more, nonetheless, it's good to see some growth. To understand more about the market-cap-to-GDP ratio, check out this link. 

Unsurprisingly, the U.S. and China dominate the list, accounting for over 50% of the global market themselves. Even less surprisingly, emerging markets saw the most growth last year. 

Visual Capitalist points out that U.S. stocks have often outperformed other wealthy nations over the past several decades. 

If an investor put $100 in the S&P 500 in 1990, this investment would have grown to about $2,000 in 2023, or four-fold the returns earned in other developed countries.

The U.S. has been the leader in this space for as long as I can remember, but as emerging countries start to gain their footing, it's likely our percentage of the pie will decrease. Hopefully, the pie gets bigger as that happens. 

What do you think will happen?

Here Are Some Links For Your Weekly Reading - October 1st, 2023

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

Lighter Links:

• The Sphere's First Show Looks Like It Was a Mind-Blowing Spectacle. (TheVerge)
• How to Use ChatGPT's New Image Features. (Wired)
• Nvidia Outlines Jensen 'Huang's Law' of Computing. (Tom's Hardware)
• They Studied Dishonesty. Was Their Work a Lie? (NewYorker)
• Sam Altman Says AI Systems Will Automate Some Tasks But Also Lead to 'New and Much Better Jobs'. (Insider)

 

Trading Links:

• Money Mentor Trading Podcast – Sunny Harris Interviews Howard Getson. (Podcasters)
• ‘AI is Not a Writer:' Why the Writers' Strike Deal Matters Beyond Hollywood. (TheHustle)
• How to Copyright Your AI Creations. (HackerNoon)
• Elon Musk Says One of His Ventures Will Reach a $1 Trillion Market Cap by 2030. (TheStreet)
• A Top Economist Who Studies AI Says It Will Double Productivity in the Next Decade: ‘You Need to Embrace this Technology and Not Resist It'. (Fortune)

How To Build A Business 101

My son attended Russell Brunson's annual Clickfunnels conference.  They produce some of the most accessible marketing content we've found.

 

Me and Russell at the Cowboys V. Texans Game in 2016

When attending a conference, the main goal is to extract one key insight and an actionable item to boost your business ... even if you're well-versed in the subject.

After events, we conduct debriefing sessions to distill our most significant takeaways and get alignment.

This year's central theme was integrating disparate elements (in this case, "funnels") into a cohesive system and cyclical approach to drive sustainable growth.  Russell made a compelling point: many so-called "businesses" are really just a string of promotions.  According to his definition, a true business requires recurring revenue and continuity.

Aspiring entrepreneurs often impulsively shift from one idea or product to the next.  They hastily launch their ventures, make a modest profit, and swiftly move on to the next endeavor, trying to stay on top of trends.  Unfortunately, they neglect product development and fail to maintain their existing promotions in their haste to get to "next."  Consequently, their businesses become incredibly fragile, susceptible to external shocks such as the unexpected disruptions of events like COVID-19, sudden market crashes, or social media platform crackdowns, which can ultimately lead to their demise

Like most great lessons, it's fractal.  If you've been paying attention, you'll see how we've shared this idea before.  So, I want to tell the same story from those other perspectives. 

Selling Picks and Shovels

Most of us have heard the old adage about selling picks and shovels during the gold rush.

During a gold rush, many people rush to the goldfields to strike it rich by finding valuable gold nuggets.  However, most gold rush participants do not find gold.

 

Often, the people who make the most money are the ones selling picks and shovels (goods and services) to the speculators.  Said a different way, profits often flow to people who provide the systems and infrastructure that enable others to dream of a bigger and better future. 

It's not sexy, but it's reduced risk, consistent demand, and a long-term perspective.  When the mine dries up, you move on to the next mine and patiently stack your gold nuggets. 

And, there's a plethora of opportunity that isn't selling picks and shovels.  You can build temporary lodgings, open a bar, and of course, you can't forget the world's oldest profession ... trading. 

 

Leveraging AI

It's easy to compare the AI race to the gold rush, but it's much more than that.  Both the AI race and the gold rush generated significant hype and excitement.  In both cases, there's a sense of a potentially life-changing opportunity, which attracts a herd of energized early movers looking for their big break.  Just as gold prospecting was a risky and uncertain endeavor with no guarantee of success, the AI race is characterized by uncertainty and fear.  Many are afraid, not just of losing their jobs, but of how to best use the technology. 

As a result, you see a sea of people adopting every new app they can find, all to continue treading water in their business. 

This occurs because people forget that AI is simply a tool – not the goal.  They get blinded by the bright shiny objects, those glitters of gold near the top, that they don't do the hard work to find the bigger nuggets below the ground.  All those tools are great, just like the promotions Russell mentioned.  However, they're often distractions from building or buying something custom to your needs and focused on your bigger future. 

To raise the stakes a bit, one of the biggest difference between the AI race and the gold rush, is the lasting impact.  While the gold rush did lead to some lasting economic and infrastructural changes in certain areas, the AI race is going to significantly transform entire industries, economies, and societies over the long term.

The Capitalogix Advantage: A Solid Platform For Success

In our office, we think of this idea as the difference between a capability, a prototype, a product, and a platform.  Building a platform (and a community) is how you become an institution and a game-changer.

When you start with that mindset, you can be the picks and shovels, you can be the hotels and hospitals, but you can also be the miner looking for the next big thing.  That's what Capitalogix does for ourselves and our joint venture partners. 

Continuity and recurring revenue create the bandwidth for innovation and ideation. 

We have developed a fault-tolerant infrastructure because we have experienced fires, floods, Internet failures, the Snowpocalypse, bad data, missing data, and human error … not to mention Trump Tweets or COVID-19.  That means our tools are built on a solid infrastructure supported by extensive experience. 

And, while we've pivoted since inception, our vision and our "why" haven't.  Joint ventures and new technologies are steps on our journey to our vision, not short-term promotions and distractions. 

It's a small distinction with a massive impact. 

When you're exploring the Wild West, whether it's in a gold rush, an AI boom, or in the world of e-commerce, your chances of success rise rapidly with a goal, a why, and a plan. 

Hope that helps.  

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...