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There's immense power in asking the right questions.
Finding the right answers can be valuable too - but I'd argue finding the right questions is more important than finding the right answers.
To some extent, if you ask the right questions, the answers don't matter as much as how easy it was to find appropriate answers, proof of progress, or meaningful momentum.
I shot this short video on the power of asking the right questions. Check it out.
The exercise of asking the right questions is really an exercise in the power of framing - of digesting or accessing information differently. There's power even in the reframing of the same question: "How do I survive the pandemic shelter-in-place quarantine?" vs. "In what ways has the pandemic shelter-in-place quarantine improved my relationships (or productivity, or health)?"
In my experience, asking someone what they want often results in a response about what they don't want. Yet, when the obstacle becomes the path forward it becomes easier to find the "hidden" gift.
You control what you make things mean and how things make you feel. In many respects, this is the difference between feeling sad or happy or feeling like a victim versus someone in control of their destiny. Your ability to control your perception is the difference between feeling like life happens to you or for you.
It's the same when tackling a research problem. When I hear "it can't be done" my first thought is usually "It can be done ... just not the way you were thinking about it."
The most important advances in society were impossible until they weren't. The examples are too numerous to list. But imagine telling someone in the middle ages that you could communicate with people around the globe in real-time, while seeing their faces, and sharing documents. They'd try you as a witch faster than you could say "Zoom!"
The term Moonshot, in a technology context, is an ambitious, exploratory, and ground-breaking project that was considered to be impossible (like going to the Moon).
Success is often a function of using Moonshots to set direction, then asking the right questions, being willing to see things differently, and finding a way to move in the right direction while gaining capabilities and confidence. As long as you are doing those things, the trick is to keep going until you get there. The result is inevitable if you do those things and don't give up.
In philosophy, a razor is a rule of thumb that allows one to eliminate unlikely solutions or actions in relation to a hypothesis. They're called razors because they shave off those unlikely explanations.
Most people have heard of Occam's Razor ... even if you don't recognize the name, I bet you recognize the idea of abductive reasoning.
When presented with competing hypothetical answers to a problem, one should select the answer that makes the fewest assumptions.
Essentially, the fewer assumptions a solution requires, the more likely it is to be true. As with any rule of thumb, it's a good starting point but is not definitive. There are plenty of exceptions to the rule. It is still a good starting point for intellectual conjecture.
I recently found out there are more philosophical razors, and they're all interesting. Here are some of the more interesting ones:
Hanlon's Razor - Never attribute to malice that which is adequately explained by stupidity;
Hitchens' Razor - What can be asserted without evidence can be dismissed without evidence; and
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.
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.
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.
The NFL draft happened this week, despite the Quarantine.
I was happy to distract myself from the economy and news cycles.
Football is something I used to love to play. And it is still something that informs my thoughts and actions.
Some lessons relate to being part of a team, while others relate to the coaching or management side of things.
Some of these lessons stem back to youth football ... but I still learn things watching games – and even more from watching Dallas Cowboys practices at The Star.
Think about it, even in middle school, the coaches have a game plan. There are team practices and individual drills. They have a depth chart, which lists the first, second, and third choice to fill certain roles. In short, they focus on the fundamentals in a way that most businesses don't.
The picture, below, is of my brother's high school team way back in 1989.
To re-state, most businesses are less prepared for their problems than an 8th-grade football team. Now, that sounds offensive to some of you, but if you think about it ... it's pretty true.
Losing to An 8th Grade Team
I shot this video right before the COVID-19 shutdown. I encourage you to watch it. I think it's 3 minutes well spent.
Teams think about how to improve each player, how to beat this week's problem, and then how to string together wins to achieve a higher goal.
Contrast that with many businesses. Entrepreneurs often get myopic ... they get focused on today, focused on survival, and they lose sight of the bigger picture and how all the pieces fit together.
The amount of thought that goes into football - which is ultimately a game - is a valuable lesson for business.
What about when you get to the highest level? If an 8th-grade football team is equivalent to a normal business, what about businesses that are killing it? That would be similar to an NFL team.
Let's look at the Cowboys.
Practice Makes Perfect
How you do one thing is how you do everything. So, they try to do everything right.
Each time I've watched a practice session I've come away impressed by the amount of preparation, effort, and skill displayed.
During practice, there's a scheduled agenda. The practice is broken into chunks, and each chunk has a designed purpose and a desired intensity. There's a rhythm, even to the breaks.
Every minute is scripted. There's a long-term plan to handle the season ... but, there was also a focus on the short-term details and their current opponent.
They alternate between individual and group drills. Moreover, the drills run fast ... but for shorter time periods than you'd guess. It is bang-bang-bang – never longer than a millennial's attention span. And they move from drill to drill – working not just on plays, but the skillsets as well (where are you looking, which foot do you plant, how do you best use your hands, etc.).
They use advanced technology (including advanced player monitoring, biometric tracking, and medical recovery devices ... but also things like robotic tackling dummies and virtual reality headsets).
They don't just film games, they film the practices ... and each individual drill. Coaches and players get a cut of the film on their tablets as soon as they leave. It is a process of constant feedback, constant improvement, or constant renewal. Everything has the potential to be a lesson.
Beyond The Snap
The focus is not just internal, on the team. They focus on the competition as well. Before a game, the coaches prepare a game plan and have the team watch tape of their opponent in order to understand the tendencies and mentally prepare for what's going to happen.
During the game, changes in personnel groups and schemes keep competitors on their toes and allow the team to identify coverages and predict plays. If the offense realizes a play has been predicted, they call an audible based on what they see in front of them. Coaches from different hierarchies work in tandem to respond faster to new problems.
After the game, the film is reviewed in detail. Each person gets a grade on each play, and the coaches make notes for each person about what they did well and what they could do better.
Think about it ... everyone knows what game they are playing ... and for the most part, everybody understands the rules, and how to keep score (and even where they are in the standings). Even the coaches get feedback based on performance, and they look to others for guidance.
Imagine how easy that would be to do in business. Imagine how much better things could be if you did those things.
Talking AI, Analytics, and Trading With IBM
I'll be speaking at an IBM Webinar on June 18th. The focus is on using AI, analytics, and advanced computing to improve trading research. Click here to sign-up.
Posted at 06:04 PM in Business, Current Affairs, Market Commentary, Science, Trading, Trading Tools | Permalink | Comments (0)
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