Fwd: Thoughts

I’ll be honest: I wasn’t really that impressed by chatGPT in the beginning. When the first open beta came out, I played with it for a few queries and found it a bit underwhelming. So while my colleagues and friends seemed to run around with their hair on fire in pure doomerism, I kind of… just enjoyed the show. That’s changed a bit. Not because of how the model is beating out law students taking the LSATs, but because there’s finally been some interesting use-cases coming out of it: stories of people using it to properly diagnose their pet’s sickness when their vet couldn’t, people using it for standard copy & paste legal contracts, and even authors using it to spellcheck and tone-check their articles. I’ll add my use-case: I asked it for a song and artists recommendation by giving it 5 artists I like, and it gave better results than Spotify. Low bar I’m sure. But I pay for Spotify, and it does better than it.

The thing that really popped out at me was the fact of how this usefulness came to be. And its that, it came out via the availability of the AI to the mass public. We’ve always thought about how AI could be used to scale XYZ, but we never really thought about how people could be used to scale AI. And that’s an interesting thought because if there is an answer to that: and if AI really is the economic future that may displace most of our current economic labors, then anyway that humans can scale AI is the remaining way that humans will be able to deliver unique economic value. In other words, its the only way for those of us paranoid about being replaced or made redundant in tomorrow’s economy to still have a job or a reason for our silicon overlords to not reduce us to inefficient Matrix batteries.

So then. What are those things, how can we scale AI?

Continue reading “Inhuman AI lets us scale what is Human” →

In a twist of fate, it looks like blue collar and white collar are going to switch places. For the past decade or so, many people have cheekily told the blue collar to #LearnToCode. Manufacturing is gone, they said. Manual labor is over, they said. If you want to be well paid, go where the jobs are, they said.

But what if the jobs are… everywhere? Ben Thompson’s central tenet on Aggregation Theory is that as distribution costs go to zero, the product that owns the customer relationship matters more than anything else. Pre-existing business models that relied on geographical or distribution as a barrier to entry without any other differentiation outside of “I’m your only choice” will die and go away. We see this via online news sources and local newspapers. Online retailers versus physical retail (whose decrease the pandemic has only accelerated). And of course there’s Netflix versus the cable bundle.

We can take this same model and apply it to the job market.

Employees/Labor are the cable bundles. Though there’s a lot of us, ultimately supply was constrained by geographical and legal constraints. Many would love to work for Google for example, but not everyone is willing to move to Mountain View. And even if they were, the legal system might still not issue them a visa to do so. Those were the barriers.

Continue reading “Blue Collar, White Collar: Freaky Friday and FAANG Domination” →

And no, it’s not just because it’s mostly only people who work with the internet that can work at home.

At the risk of shouting the same things that everyone else is, there’s been some very obvious trends that this extended remote work has promoted. A quick list just to make sure we’re on somewhat similar pages:

1. Tech companies getting a very real measure of remote employee efficiency (and assuming its the same, better, or even slightly worse)
   • Decrease demand in commercial real estate and office space
   • Increased investment in their non-local workforce
     • Increased diversity due to wider area recruitment
     • Increased competition and talent due to larger labor pool
     • Decreased costs by leaving urban centers
2. People realizing the feeling of freedom and comfort of being in their own private space for the majority of the day while still being able to work and earn a living… AND be close to the ones they love
   • Re-shifting the priority between work and personal life
   • Paradoxically, a blurring of work hours. Increased length of on-call times but decreased intensity. Instead of 8 hours of high octane focus, it may be 24 hours of varying attention
3. A further hit to the ecosystem that revolved around corporate complexes (restaurants, shops, and other stores built near corporate offices to serve the workers)

Those feel like pretty standard guesses that we can make at this point. Outside of slight derivatives of those assumptions, the other forays made are often about habit and consumer spending behavior. Which are valid, but another discussion.

Instead what I think is more interesting and less covered is supply part:

The First: Corporate Internal Innovation

If we take the step of #2 further and realize what it means, it paints a potentially grim picture for companies. Not about productivity no, I’m an optimist and believe that people will continue to pull their weight and contribute. Instead, a lot of value that companies capture from their workforce is in the creative drive and interactions between their employees– value that is neither expected nor properly compensated for (and therefore I argue, not their responsibility), but gleefully consumed by the company whenever possible.

With no coffee-meets, water-cooler talks, or just the continuous subconscious humdrum that accompanies physically seeing or hearing someone outside of your world, I am positive that company innovation will be down. Discussions will be down. Spontaneity will be down. Zoom calls are a very explicit and almost aggressive act, proper ones require an agenda, act as a sharp and uncomfortable introduction of formality and work into one’s home, while also shouting for cold efficiency. After all, dead air with a friend is awkward enough– dead air with a co-worker or worse, a manager, is bone-chilling.

For companies who realize this and value it, there might need to be forced physical gatherings. Perhaps employee-only conferences or some form of extended retreats. Unfortunately, until immersive VR, this will only be possible via large company purse strings.

The Second: Company Direction and Investment Culture

If the above ends up being correct about a drastic decrease in company innovation due to people simply being more distant from each other and the company, then it’s very likely that we’ll see a huge drop-off in the crazy and wonderful integrative solutions that arise from bottom-up creation.

Instead, because the responsibility of the brunt of employees is not that– and because the remoteness of work has put in that distinct border between their responsibilities and zone with regards to work and private life, it’s very possible that companies will become more top-down than ever. Only those whose responsibility is in creativity and creation will continue to do so, but their works are often insular and one-directional due to the weights of professional training and unconscious bias.

Thing is, many companies rely on those sort of creations to remain relevant and discover new evolutions. Even before, successful creativity and outside thinking was hard to find. That’s why instead of fostering and spinning off more and more blockbuster products, we see that the trend more often than not for industry titans is M&A.

So outside of slowing down intra-company innovation, what impacts does that have? I argue a lot:

• Reduced company innovation means reduced competitiveness, I expect a slowing of feature in the truly new and adventurous
• Lack of new alternative ideas by definition means companies are less likely to expand outside of their current market. Not just slowing their growth but also putting a cap on their potential

And that ties into investing. Our current culture is smitten with VC-funded entrepreneurship. The dream is one original idea, funded with millions, earning billions. Part of that though relies on that one idea continuing to grow and then give birth to more (Amazon into AWS, anyone?). But if growth is stunted (raising the ROI time horizon) and idea mitosis is decreased (returns are lowered), then that era might be coming to an end. Whether this means less money goes into VCs, they become stingier in choosing what to invest in, or the dynamic just shifts as a whole– it’ll be something interesting to keep an eye on.

Companies paying for growth via acquisitions are the same. After all, what are M&As but companies acting as a VC but in a more complete and intimate investment?

The Third: Entrepreneurship

Far be it from me to end it on a negative note, I generally still think this change can be positive. And that’s solely because of what these impacts mean for entrepreneurship. Assuming that consumer spending and the economy doesn’t drive everyone into austerity, a larger talent pool, cheaper business operations run-rate (cheaper talent + no rent), and less VC money might mean that we begin to replicate real world traditional entrepreneurship into the internet world: smaller market sizes, slimmer margins, and more private ownership.

And as technology continues to open up and make things like development much easier, this means a much more varied and competitive landscape. Perhaps we’ll see the internet version of mom & pop stores begin to sprout and flourish. We already see a lot of this in terms of where the physical world bleeds into the digital (dark kitchens, private digital retailers, or even just the online site of a family-owned service), but now a full transition can be made.

A worry however is that these digital “mom & pop” stores will not be created nor owned by the same traditional mom & pop ones we talk about in the news. It’s more likely that those will be the ones who’ll continue to be driven out of business due to digitalization, but are unable to switch and learn to adapt to the new age.

There’s not much we can do in terms of the technological aspect, as we can’t simply expect them to learn coding. Even before that would have to be the understanding and urgency in realizing that the melding between physical and digital economies come in phases, and we’re maybe only just now entering the next one.

After more than a decade of the idolization of negative-run rate companies with billions in investment IPO’ing or permanent VC-funded companies however, this return to traditional business models is a breath of fresh air. It’ll require new businesses to quickly get in the black, be self-sustainable, and generally more resilient to even situations like the pandemic-stricken one we find ourselves in now.

With the pandemic still on-going, I’m not sure if this is the most fitting time. But I want to talk about misinformation and ecosystem responsibility.

We’ve been seeing some crazy things since the internet. Home remedy articles that are more poison than medicine: like drinking bleach or nonsensical herb mixes that at best do nothing and at worse are harmful. But tamer and almost-reasonable sounding misinformation exists too for those who think they’re more educated or prepared: information and “tips” like infection via pets or sanitizing masks via alcohol spray.

And unless you work in chemistry, biology, or come across masks often in your daily life— this sounds perfectly reasonable. After all, We’re all told alcohol cuts 99% of germs and viruses. If it works on my tabletop, why wouldn’t it work on masks? But it doesn’t, and because we’re not experts in it we forfeit the responsibility to verify to those we think know better.

Such misinformation is on every single side of the spectrum and exists in every demographic. Even moreso, it spreads not because of the malicious intent of every propagator, but rather the benevolent and hope of its believers. Facebook and Google have been doing everything they can to filter and delete this information. And I really do believe they’ve been putting in their honest effort.

Yeah places like NYT might still be able to find something, but that’s just because that’s how the internet is. Unless they’re asking for the internet to become a gated walled garden, that’s how it’ll always be too. Nevermind the fact that they have every incentive to hope and wish for a return to that reality.

But we don’t want that, because information goes both ways. Case in point, Twitter became one of the places where Dr. Chu was able to blow the whistle on cases already existing in Washington and WeChat was where Dr. Li had raised the first ever alarms.

So we have both misinformation and valuable information, that until vetted has the very real possibility of being mistaken for the other. Yet for some reason the loudest voices screaming for more technological intervention seems hell-bent on just the one: “fix it, block it, stop it.” They don’t know the “how” but are abosolutely sure on the “who,” “when,” “why,” and “what.”

The internet is about the democraticization of information. Whether thats right OR wrong information. And just like for a political democracy, FDR’s quote rings true: “Democracy cannot succeed unless those who express their choice are prepared to choose wisely. The real safeguard of democracy, therefore, is education.”

The internet is the same exact thing. On one side, thats a scary scary thought. Because there ARE things that are atrocious. Livestreaming terrorist behavior for example or things that just present an immediate and obvious physical harm like bleach remedies.

But we have to be able to balance that with the possible and practical. Of course we don’t want false information on the internet. Of course we don’t want bad actors to be able to rally others to their cause. Of course, of course, of course. But just like there’s an infinite array of good things, theres an infinite number of bad and its just not possible to automatically or remove and identify all of that in a prompt manner. Even more, it’s ridiculous to have that expectation: because we’ve never done that successfully in any point in history.

TV still has scams and directly misleading shows. Newspapers and magazines get sued successfully for defamation and slander. Radio has always had “pirate stations” that broadcast some not so saavy things. What are rumors but misinformation via the spoken word?

Yes the frequency is much lower because the investment costs used to be higher. Yes spread and reach is now higher and easier than ever. Anyone can make a blog or share a post. But while that means that there’s a lot more junk, it also means theres a lot more people who are and can be whistleblowers. Who can lead charges and make change. 

Maybe the reason why we’re extra hard on it nowadays is because its the most recent, the most viral, and at the same time— we see it as the most addressable. Because we see how scaleable and amazing technology has become. But I would say its the opposite, just look at what happened to Facebook when their algorithms blocked an iconic anti-war photo due to nudity. In this case scale doesn’t mean a solution or perfection, it means magnification of flaws and deficiencies. Because theres two ways to look at this: the algorithm blocked the image on purpose and correctly because it WAS nudity, or the engineer accidentally blocked it because the algorithm they designed could not take into consideration political, historical, and emotional context. When even humans struggle to read and make that context, how can we possibly think that dry code can?

So I don’t think that we can push this as a purely supply-side driven solution. As consumers we have to take up our responsibility in recognizing and identifying this sort of information ourselves.

And this is how it ties back to the pandemic. Because I’ve been very heartened recently to have seen this adjustment made by my own parents. My mother who previously fell for almost every medicinal gossip on what diets will lend to a 120 year old life now eyes every health article shared with caution. She looks to get her information confirmed with other sources. She looks to her own experience to make a logical check.

She actually said to me on the phone: “Hey, you can’t trust news on [XYZ App].” She’s not adept with technology. She never graduated college. Nor is she particularly scientifically or politically informed. But yet she’s developed the new skill of passive information filtering required for our new day and age.

We need to recognize that a real working solution is going to require fundamental changes on the consumer-side, and we need to accept that as soon as possible so that we can push and incentivize such change immediately.

Companies can and should ban, be wary of, and design their product to disincentivize bad behavior. But they shouldn’t be the ones to dictate what information is or isn’t correct. Nor should we want the consequences that come with such a solution. By giving up responsibility, we are at the same time giving up our own power and the promises of the internet. Maybe this is just my upbringing as an American, but that’s just such an unnerving idea.

We have to be able to accept this weight of responsibility. And thats uncomfortable. Its going to be a rough transition. Especially in times like this when its during a pandemic. Because people are scared, and bad information can mean life or death. But I don’t think there is a technical solution. At the end of the day, humans need to adapt and learn and evolve. We’ve stopped evolving biologically since we’ve exited nature to a certain extent. But now we have the adapt and evolve mentally, cognitively, and as a society.

This is a big shift from what I usually write about, and for those reading I hope that its okay. As the last post mentioned, I really want to get away from the idea of only writing things that scale or try to position myself as some sort of seasoned professional. Instead I want to simply only write as me. And that means pretty scattered thoughts. It’ll still revolve around product, around strategy, and around technology. But it might have some things about finance, education, or even random experiments I’m partaking in my own life or mind. Things that align with my own specific background and experiences, but not necessarily “professional” or business/technology related.

As always, thank you all for reading.

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As the title gives away, the topic I want to talk about today is money. It’s about stocks. Evaluations. What money really means as a symbol and to an individual.

Specifically I want to talk about the stock market in recent years and its meteoric rise. We really can’t go even hours nowadays without seeing some article or reporter talk about the market breaking all time highs. This is almost always followed by gloomy predictions that we can’t maintain these groundbreaking evaluations forever. That they’re not sustainable and break our common sense in terms of evaluation metrics. That the collapse is near, things are out of control, and it’s just a matter of time.

And for the most part, this has been taken as gospel. Even though the market gets higher and higher almost every single day, there’s a lot of people— myself included— who agreed with these articles. “It has to come down. It just doesn’t make sense.” And that might be one of the reasons why more than ever, there’s a whole lot of money and people still sitting on the sidelines.

Even with the current CoronaVirus, it’s still around all time highs. It’s been almost a month since what some have built up to be the next pandemic, and yet outside of the tumble of a few days, we’re dancing but a couple percents from the top. Isn’t that ridiculous? If stocks are just shares of companies, unless the companies have become more valuable— which they especially wouldn’t in a pandemic because of suffering sales— they shouldn’t go up in value. Isn’t that just common sense?

But what if that wasn’t the case?

What if it was this fundamental understanding that was the mistake itself? What if we misunderstood the very basics of even what money is? And that the very way that we’re measuring stocks (their worth/exchange in currency) is much more complex than that statement portrays?

We know money as the simple store and representation of value used for exchange. We pay for a bag of chips with money. Chips have value. Our paper (or digital bits) have value. We trade them.

But money is not a singular entity. Instead, money is then abstracted further into multiple forms of currency. It’s an overarching group, where currencies in this case represent forms of money. It’s “money for money”— if that makes sense. And that means that though all of our currencies are stores of value, they themselves flucuate in relation with each other because they differ in supply and trust.

We already know this in terms of exchange rates. But when we combine that with inflation, especially different rates of inflation, things get a lot more squirrelly.

And the way that this ties back to stocks, or rather any asset at all, is to actually get away with the learned focus on currency— and back on the equation of money (or value, if that makes it less confusing). Because of how we use it in our everyday lives, we see currency as a very unique store of value because it is what we use to exchange most often and most directly. To the layman, their domestic currency is an anchor— a stable point in which we base our fundamental unit of value on. But ask any financial or wealth advisor and they’ll simply mark it just as another number in the “asset” column probably with stocks and real estate. Or ask Zimbabwe during hyperinflation. Currency is not money. Currency is just a store of value that fulfills the function of money.

Which means that stocks are currency. Paintings (which the rich use to store value) are currency. Buildings are currency. Even the things we trade currency for, like milk and eggs, they are also currency. Currency that rapidly depreciates as time goes by, but currency nonetheless. In other words: a dollar is a dollar, until it isn’t. And when it isn’t enough, we need something else to represent a dollar.

And when we get to this point, that’s when it starts making sense. Stocks, paintings, and buildings are fixed to a certain extent. But monetary currency is not. That’s why we have inflation, and in a decade of global quantitative easing— it’s something that exploded in supply.

But does that really answer it? Inflation has always existed, and this relationship has always existed as well. We know that a home could have sold for $100 back in the 1800s but may be $1,000,000 now. Is it really sufficient to pin it as the reason for the spike in the last few years?

I think so. Because the reason is the deadly combination of ZIRP (Zero Interest Rate Policy) and massive QE (Quantative Easing). This one-two punch has basically gutted the traditional trust in a government and its currencies. By giving nothing for saving currency in its currency form, and instead even punishing it by actively engaging in an activity that devalues it— governments worldwide are essentially forcing people to reject currency.

Like milk approaching its expiration date, currency by itself has no escape (a healthy interest rate) from losing its own value.

So the people who know avoid it like the plague. Instead they are looking for ways to keep their value/wealth constant. They might even massively leverage themselves because what used to be a danger that grew larger (a debt payment with increasing costs) is now its very opposite… a debt payment that gets cheaper with time…

If i can borrow $100 to spend $100 worth today, and pay $110 a year from now when $110 is worth last year’s $80, I’d be a fool not to do it. It’s literally free money.

The second wrinkle in this is actually the fact that our world is intrinsically and almost irrevocably connected more than ever. The fact that almost every country is using a ZIRP and QE, means that everyone everywhere is chasing assets because they’re looking to maintain their wealth. It’s essentially a loser’s game of chicken because noone can afford not to.

If everyone is pursuing QE and ZIRP, then the one person who isn’t— the one person who has a stable currency and a positive interest rate no matter how small— will see their assets swallowed by international demand. Because their assets, land, stock, or currency, are the most stable stores of value. Sound familar Toronto real estate and US equities?

And so everything is gold. Because everyone is afraid and has no trust in currencies.

We all lose with this. And unfortunately, its the middle and lower socioeconomic class who lose the most (as always). They are the ones least able to diversify their wealth, as they are the ones who— unable to scrounge up the funds to purchase assets or lacking the knowledge to— have the majority of their wealth in currency.

Combined with policymakers’ hesitance towards wage growth (claiming that it raises inflation even though they actively engage in QE and low interest rates which does it much more directly…), I have a strong supicion that this is the real reason that real wealth and savings amongst median households is lower than ever. How even in an era of record low unemployment we get statistics where 63% of households can’t even muster up $500 for a rainy day.

This system seems messed up. And as someone who loves the free market— I’d call it a failure caused by broken and flawed tools rather than an inherent flaw in capitalism. This is artificial, but if the only way to fix it is a gut-wrenching crash, then I’m not sure we can live to stomach it.

Perhaps this is the natural end point of consumerism. Governments push ZIRP and QE to force spending— because it’s better to spend your $100 to get $100 worth of stuff now than save it and only be able to use it as $75 later. It makes for great GDP numbers, creates demand, and ensures jobs. But it actively creates a widening wealth gap and punishes people who possess the virtues we all spout and pretend to extol: frugality, self-sufficiency, and preparedness.

We’ve gone too far. Governments wanted us to spend, so they made currency poisonous to hold. And yet most of us can’t hold enough poison to get into the things that aren’t.