Capitalogix

Fueling Alpha: Data is Powering the New World

Data is becoming a precious commodity.

A staggering 90% of all the world’s data (2.5 quintillion bytes per day) has been created in the past two years alone ... and its value is rapidly rising.

With IoT growing from 2 billion devices in 2006 to a projected 200 billion by 2020 you can expect to see that growth continue to explode.

Data is today’s “wild west” and the battlefield of today’s tech titans. Alphabet, Amazon, Apple, Facebook, and Microsoft all have an unprecedented amount 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 their own data from prying eyes.

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

Having basic data and basic analytics used to be enough, but the game is changing.  Traders used to focus on price data, but now you’re seeing an influx of firms using alternative data sets 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 they’re playing, and their rules are important, but that’s 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 it lets you play your own game.

I shot a video where I talk high-level about Data as fuel for your business. Check it out.

 

 

It is interesting to think about what’s driving the new world (of trading, of technology, of AI, etc.) and that often involves identifying what drove the old world. History has a way of repeating itself.

Before e-mails, fax machines were amazing. Before cars, you were really happy with a horse and buggy.

It’s in these comparisons that I think we can help explain the importance of data in today’s new world economics.

via 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 products. 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.

The process of pumping crude oil out of the ground and transforming it into a finished product is far from simple, but anyone can 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

Data can be seen as the fuel to the information economy and oil to the industrial economy. The amount of power someone has can be correlated to their control of and access to these resources ... and, leaking 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 – ultimately – 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, share it, transform it, infinitely knowing that it won’t diminish. Data is more useful 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. An important 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 end up slaves to the data, losing focus on the bigger picture. Second, even the most insightful data can’t predict black swans.  It’s important to exercise caution.

The future of data is bright, but it’s also littered with potential challenges. Privacy concerns and misuse of data have been hot button topics, as have 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.

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

Food for thought!

Taking Stealing To The Next Level: Baseball and Machine Learning

Baseball signals are purposely confusing to keep them a secret.  Attempting to decode your opponents' signals is part of the game. As it turns out, machine learning is pretty good at figuring them out. 

Mark Rober, a former NASA engineer on the Curiosity Rover, put together a good video showing its efficiency. It's an interesting application and a pretty good introduction to machine learning. It did the rounds in my office, and we liked it. 

 

via Mark Rober

So, what do you think, should we make this legal in the MLB?

Here Are Some Links For Your Weekly Reading - July 14th, 2019

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

 

Lighter Links:

• How Did NASA Put Men on the Moon? One Harrowing Step at a Time. (Washington Post)
• 55 Dr. Seuss Quotes for the Places You'll Go. (DevelopGoodHabits)
• Nick Saban on the 5 Choices We Have in Life. (LeadershipNow)
• How to Turn on Fall Detection on Your Apple Watch Series 4. (Mactrast)
• When Charlie Chaplin Entered a Chaplin Look-Alike Contest & Came in 20th Place. (OpenCulture)

Trading Links:

• Electric Vehicles are Outperforming the Traditional S-Curve Dynamics. (SeekingAlpha)
• Are Drones Really the Future of Delivery? [Infographic]. (B2C)
• The World's Biggest Potential IPO May Be on Again. (Economist)
• Moody's Economist: We'll See the Markets 'Tank' If the Fed Doesn't Cut Rates. (Finance)
• Trump Picks Another Fed Member Who Believes in the Gold Standard. this One Really Means It. (CNN)

 

 

Biohacking Gone Wild

Dave Asprey is perhaps the most well-known biohacker (he's even referenced in Merriam-Webster's definition of biohacker) and the founder of Bulletproof. For those that don't know, a biohacker is someone who uses drugs and technology to make their body/mind function better. 

Dave and I shot a video where he discusses life and provides an interesting take on algorithms. 

 

 

It's not surprising that biohacking has become as popular as it has. In a society that encourages (maybe even necessitates) an impossible balance between work, responsibilities, and self-care - it makes sense to want to increase efficiency. 

Biohacking helps you do more with less. Biohacking is popular because you're trying to get peak performance via the path of less resistance.

Having trouble with sleep, but don't want to stop using your phone before bed? Wear blue-light blocking glasses. 

Not getting enough results at the gym? Work out "smarter" not harder, by using cryotechnology and intelligent lifting machines. 

While biohacking started as tricks like that - nootropics to help your mind, light and sound machines to decrease stress - it's becoming increasingly tech-centric and augmentation based. 

Several months ago, I shared Gartner's hype cycle for 2018. Do-It-Yourself Biohacking was one of 5 encompassing trends for the year. 

The future is bringing implants to extend humans past their perceived limits and increase our understanding of our bodies; biochips with the potential to detect diseases, synthetic muscles, and neural implants. - Howard Getson

It's estimated that over 100,000 people already have various types of implants. In Sweden, thousands of Swedes are inserting chips under their skin to speed up their daily routines. They use chips to open locked doors, to store contact information, and to get on to the train. Currently, chips are limited to simple tasks like unlocking doors, holding personal data, and tracking simple to record data.

Longterm, it's likely you'll see it moving toward exoskeletons, AR/XR experiences, and unsurprisingly to sex toys. It's also being used to create artificial organs and counteract memory loss.  The two companies that are leading this movement are Neuralink,  Biohax International and Digiwell. While it's currently being adopted primarily by fast-movers and technocrats, it's pragmatic to think there will be more widely-adopted versions of this as technology gets standardized and protections are put in place. 

For all the excitement, it's necessary to remain skeptical and patient. DIY biohacking raises various ethical issues, especially around data protection and cybersecurity. As a reminder, when it comes to cybersecurity, you "the user" are the biggest weakness.

There's no stopping this train, but there is time to make sure it stays on tracks!

Onwards!

by the way, I highly recommend the Bulletproof product line!

Replicas: Deep Fakes and Voice Replication

Fake news was scary enough ... but now it is going to a new level.  Technology is going to make it harder to find the “signal” in the “noise”.

Here is a preview of tech solutions (which already exist) that are likely to create a new set of problems and challenges for us in the future.

Replica is a company whose goal is to replicate celebrity voices. They see this as enabling creative applications of their voices without the commitment of the celebrity - of course the owner of the voice that's being replicated would control when/where it could be used.

Here's a video introducing Replica. 

 

 

Combine that ability to simulate voices with deepfake technology (which can alter video in many ways, including to look like the mouth in the video is is saying the words that were simulated) and the potential for confusion or deception skyrockets. 

Here is an example.

 

 

My guess is that you will hear a lot more about this soon because of upcoming elections.  It will also become increasingly relevant in everyday life, business, trading, and legal situations.

A picture used to be worth a thousand words, but this may change that equation forever.

Here Are Some Links For Your Weekly Reading - July 7th, 2019

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

 

Lighter Links:

• These are the Top 10 Emerging Technologies of 2019.(WEForum)
• Inside an Amazon Warehouse, Robots' Ways Rub off on Humans. (New York Times)
• Beetles and Flies are Becoming Part of the Agricultural Food Chain. (Economist)
• China and the World: inside the Dynamics of a Changing Relationship. (McKinsey)
• How Many of the "Top 100 Books of All Time" Have You Actually Read? (BuzzFeed)

 

 

Trading Links:

• So How's the Economy Really Doing?: Theme of the Week. (Bloomberg)
• Jony Ive's Shock Departure from Apple: What Does It Really Mean? (Forbes)
• The End of FinTech. (TheFinanser)
• Is a Netflix Subscription Model the Future of Financial Services? (TheFinancialBrand)
• A Looming Disconnect between the Economy and Financial Markets. (SeekingAlpha)

 

 

 

If The Internet Goes Down Does The World Crumble?

On Tuesday, for less than an hour, early in the workday, it felt like the internet was down for many.  The cause? Cloudflare went down. Cloudflare offers web services to over 16 million websites. That includes sites like HubSpot, Medium, UpWork, 9gag, Discord, Sirius XM, Shopify, Coinbase, Canva, Soundcloud, Buzzfeed, and Capitalogix.

Even down detector was down. 

 

That means when Cloudflare went down, so did a non-trivial portion of the internet. W3techs reports approximately 10% of the internet was affected by Cloudflare being down. 

What happened?

via DigitalAttackMap

There was a massive spike in CPU utilization. At the time, it looked like a DDOS attack. People were speculating that it was a Chinese attack trying to mess with the Hong Kong protests. 

Turns out, it was bad code - specifically, a single misconfigured rule within their firewall services. They did a global rollout of the code, and so it affected everyone. 

This shows the importance of staged rollouts - testing your releases live with test groups before being released globally. 

Here's a great write-up from Andy Ellis on preventative measures in the future.  

The reality is, using a CDN is still helpful, Cloudflare's downtime doesn't mean you shouldn't use them.

It does mean we should be thinking about what failsafes are needed to keep the internet infrastructure working in the event of attacks or failures. 

Attacks are becoming more common, and as we now expect constant improvements/releases to software, we can expect more company errors as well. Facebook had similar issues on Wednesday.

Think of how much relies on the internet as a backbone. It's crazy to think about the impact sustained downtime would have; billions of dollars in business not happening, banking systems down, etc.  Realistically, if the entire internet goes down we likely have bigger issues to worry about, but this event shows that large swaths of the internet could be affected at once. 

Would a decentralized network help? Are smart contracts necessary for that? Is there a CDN for CDNs?

It feels like we often end up with more questions than answers.

It is why many companies opt for a hybrid cloud with plenty of on-premise compute.

What do you think?

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)

Here Are Some Links For Your Weekly Reading - June 23rd, 2019

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

 

Lighter Links:

• DeepMind's AI Has Used Teamwork to Beat Humans at a First-person Shooter. (TechReview)
• Physicists Discover Surprisingly Complex States Emerging out of Simple Synchronized Networks. (Phys)
• Amazon Prime Air Delivery Drone to Start Dropping Packages 'Within Months,' Officials Say. (USAToday)
• 136 Maps Reveal Where Tourists & Locals Take Photos in Major Cities across the Globe. (OpenCulture)
• A Subway Map of Human Anatomy: All the Systems of Our Body Visualized in the Style of the London Underground. (OpenCulture)

 

Trading Links:

• Microsoft is Now Worth over $1 Trillion, a Stunning Run since Satya Nadella's Ascent. (Quartz)
• These are the 10 Best-performing Stocks of this Century. (BusinessInsider)
• What is Currency? (Visual)
• Michael Jordan's Net Worth is Now Officially $1.9 Billion. (CNW)
• NASA Opens Space Station to Tourists and Businesses to Promote Commercial Activities. (Wall Street Journal)

Camp Kotok: Economists In Nature

I was just in Maine at Camp Kotok, a private gathering of economists, fund managers, and other financial industry professionals. 

 

 

There was no cell phone service ... so people had to talk with each other.  Everyone went outside.  And, people continued to fish, even when it rained.  Craziness.

At last year's Camp Kotok, I did this interview with Bob Eisenbeis,  Cumberland Advisors' Vice Chairman & Chief Monetary Economist.  Check it out. 

 

Cumberland Advisors via YouTube

AI is removing the fear, greed, and discretionary mistakes from financial decision making. We’re at the beginning of a cycle of progress that is hard to imagine ... and easy to underestimate.

Ultimately, I think AI will transform the planet much like electricity did.  What about you?

Lots of cool discussions up there. Call me if you want to talk about it.