Don’t Panic

Snip20160327_1OK, so the other week everyone who was anyone was banging on about the AlphaGo programme from The Google’s DeepMind that can, so far, beat humans at Go. Baruch’s understanding is that this was a different type of AI than we’ve seen with Deep Blue and Watson kicking human butt at chess and Jeopardy. Both of those deployed the main trump card that computers have against human minds — the ability to scan, prioritise, sort and rank huge databases extremely rapidly to come up with statistically likely solutions to well defined questions. All they needed to defeat the humans were mega amounts of computer processing, clever coders, a ludic fallacy and a large, cold room to keep the servers in.

DeepMind, so far as I am told, uses something more akin to analogy in its core processing, with a feedback loop that keeps the focus on a narrowly defined and therefore manageable number of moves. Words Baruch pretends to understand but probably doesn’t, like “neural networks” and “deep learning”have been bandied about. To play Go well, you clearly have to be able to program smart. That said, AlphaGo doesn’t seem terribly parsimonious in its use of processing grunt: a “mere” 2000 CPUs, as well as 280 high end GPUs using what we experts* call parallel processing, so perhaps it’s still just the typical thing of throwing Moore’s Law at something until you have enough computing power to make it work eventually. But it probably isn’t, in which case chapeau, DeepMind.

So overall, it’s mildly interesting, and at a more mercenary level, grist to Baruch’s mill. If the advances made by DeepMind bring us one step closer to the massive disruption digital automation is going to wreak on business and society, then I’m going to be quids in. My current project is about providing investors with an opportunity to take advantage of those transformations, so this can only encourage more people to want to invest when my idea finally goes live. Yay!

We all need to hedge against the coming AI whirlwind, and this is Baruch’s plan. However, his biggest worry is resistance is futile — that even his job as a fund manager is going be replaceable by machines, like all of yours will be. So imagine his horror when he saw this (HT Alphaville) in Wired from back in January.

LAST WEEK, BEN Goertzel and his company, Aidyia, turned on a hedge fund that makes all stock trades using artificial intelligence—no human intervention required.

Oh bollocks, he thought.

But at times like this I think of Douglas Adams, and have learned not to panic.

Continue reading “Don’t Panic”

Chinese plans for world technology domination foiled again. For now.


It all seems to be going wrong for Chinese-American relations when it comes to technology. Late last month Tsinghua University’s purchase of a minority stake in Western Digital was referred to CFUIS, the panel determining if global M&A involves a US national interest. This, contra lots of commentary at the time, wasn’t business as usual, rather the US government drawing a very thick red line around China and saying no nationally significant technology, in this case semiconductor memory, crosses this. And this week the US kicked the feelings of the Chinese People in the goolies by sticking it to ZTE, one of their national tech champions, for selling stuff to supposedly Bad Countries like Iran.

The net effect of this in the near term is bad news for much of the listed semiconductor equity in the US, as a potential purchaser of last resort is removed. Longer term, no-one knows, not even Baruch.

Continue reading “Chinese plans for world technology domination foiled again. For now.”

Where are you on the Techno-opto-pessimism spectrum? Will robots take our jobs (and then kill us)?

Baruch’s been reading Rise of the Robots by Martin Ford, the 2015 Financial Times and McKinsey (yuk) Business Book of the Year, no less. He’s a bit embarrassed to tell you, avid reader though he be, that this book eventually defeated him*. He stopped reading it and picked up something a bit more light hearted; specifically General Heinz Guderian’s memoirs of leading Germany’s Panzer Divisions in WW2. So far it’s going badly. The Russians keep breaking through, and Hitler’s being a super awful boss.

Anyway, back to the robots. This topic, about whether increased automation and use of robots and algorithms is going to be a Good Thing or a Bad Thing, seems to have become a little cottage industry of late, with not just Martin Ford’s book, but also works by Robert Gordon, Calum Chance, Nick Bostrum and probably a few others, all in the past 18 months. The current spasm of published thought on this matter was probably started off by MIT’s Brynjolfsson and McAffee’s really quite good Second Machine Age a couple of years ago, and hasn’t stopped since. Of course, the great Ray Kurzweil, he of The Singularity is Near, is the true father of the genre, and before that there was pulp science fiction, in Baruch’s case concentrated in the epic comic 2000AD, edited by Tharg from Betelgeuse. Great thinkers such as Elon Musk and Stephen Hawking have also recently weighed in, these latter on the more techno-pessimist side.

As you can see, all or most of these guys can be put on different bits on what Baruch calls his Techno-opto-pessimism spectrum. Most of the arguments, I think, have been set out by Kurzweil, McAfee and Brynjolfsson, and Robert Gordon. A lot of the later books decide to come out on the spectrum where they feel like, and simply selectively reproduce these arguments to justify themselves. Baruch is going to do you a favour so you can seem knowledgeable at dinner parties, without having to do actual, you know, reading of any this stuff. Here it is, his patented Techno-Opto-Pessimism spectrum! Ta Daaa! Look upon his powerpoint, oh ye mighty, and despair.


Baruch’s somewhere in the middle: most people, I think, would put themselves a bit on the left, on the optimistic side. Funny that most of the serious books on the subject are on the left hand side. Anyway, how about you?

*I guess the reason why I stopped reading was that it got a bit repetitive. There’s only so many ways you can explain the idea that not only poorly paid jobs will be automated but tons of middle class ones too. 

At times like this I’m happy I’m poor


Baruch, dear readers, has no money.

Don’t feel sorry for him. He’s rich in many other ways and is just trying to milk your sympathy. All he really means is at this very moment he doesn’t run any money. His brilliant strategic idea for reinventing himself is in progress, and boy, let him tell you, he has to beat the billionaires off with a stick. But as of yet no deal has been signed, so there’s no capital to deploy or protect. This means he can view the current market carnage with a certain amount of distance, mixed with a blob of sympathy for those less fortunate than he, i.e. the ones in the market right now.

As of now, US futures are predicting a bloody morning in the US (often the harbinger of a sunnier afternoon, however). What does Baruch think? At times like this, thoughts turn darker. Here are a few observations, in no particular order:

  • WTF is up with the VIX? Of all the indicators it’s the one I like best to time whooshy markets, and it’s not just not spiking, it’s narcoleptic. That’s a bit scary, telling me the selling is a bit more orderly than it should be. Probably not a good sign.
  • The fact that the growthiest of the growth stocks are being attacked isn’t great either. Growth is supposed to outperform in a rising rate environment. What we saw on Friday in Cloudy/Big Data-y growth looked terminal multiple related; if earning estimates in your out years didn’t get crushed, the multiple they’re willing to put on the out years just died. Tableau (DATA), Splunk (SPLK) and Salesforce (CRM) have been among the “new tech” darlings, and the reaction to DATA’s guide has been cruel, -50% or so, with widespread collateral damage. That one may take a few years to get back to its previous highs if it ever does*. 3 things going on in this space I think. Macro is biting, the Amazon, Azure and other cloud channels gaining more leverage and offering their own-label competing products, and in the case of Tableau and maybe a few others, IT managers have made the products available to desks, but are the people at the desks really using them? Migration might be slower than people think. Meanwhile, DATA’s management point to low visibility and onboarding too many lower productivity sales dudes. Could be true too.
  • Another way of saying “low visibility”, by the way, is “we haven’t got any sales at the moment”. Like “extending sales cycles” (or “they’re not buying anything anymore”) it’s one of those wonderful euphemisms we see so often in the business world to make something unpleasant sound nice. My favourite is still “upgrading staff” (or “firing people”).

Continue reading “At times like this I’m happy I’m poor”

Which FANG is which Beatle?


So I’ve thought about this a lot, because the job of matching Facebook, Amazon, Netflix and Google to a Beatle is one that every investor needs to think about.

Why? Well there’s four of them, for one thing. And just like the Beatles, they’re all “fab”, too, and you had better have appreciated their fabness last year or your performance would have sucked. More seriously, they’ve all got that no-limits platform thing going for them. FANG is like a vortex, sucking in value from everywhere in tech and non-tech industrial sectors. Do you make ethernet switches? Well, you’d better sell to FANG or you’re toast. Do you sell stuff online? Watch your Google page ranking drive your sales. Are you a TV network? Well, you should . . . do something or other with Netflix. What, you advertised the new campaign buying search terms on Bing?! And we can’t launch the service this week because the server guy delivering the new servers got lost? You’re fired. Fred, ring Facebook and Amazon. Etc.

But let’s face it, everyone’s got their favourite FANG, just like everyone has their favourite Beatle. And just as the great thing with the Beatles was that they all had their very distinct personalities, so do the FANGs. This makes both foursomes even cuter and easier to love and have impassioned debates over.

So if each FANG was a Beatle, which one would they be? This is Baruch’s list:

Well, Netflix is easiest. It’s Ringo. Netflix is the most fun of the FANGs, and the least threatening. When asked if he thought Ringo was the best drummer in the world, John replied he wasn’t even sure if he was the best drummer in the band. We have Netflix at home. The kids watch Pokemon and Pretty Little Liars, we watch Breaking Bad (yes I know we’re a bit behind), all harmless except for the meth. Netflix isn’t going to conquer the world, just our high production value video watching habits. So in the end the addressable market is limited. And it’s mostly just content delivery, though we must appreciate the recent attempts at creation. Overall though, if it wasn’t for Netflix, we would likely still be watching over the top video, just from somewhere else. Similarly, the Beatles would likely still have been the Beatles if Ringo hadn’t been the drummer and they’d kept Pete Best, or god forbid hired Keith Moon*.

George, Paul and John are more difficult. Continue reading “Which FANG is which Beatle?”

Don’t call it a comeback. . . well, actually

Drum roll. . .

Baruch is back!! Yes, he has been out of commission these past few years. You may have been annoyed by his lack of any farewell, or any information as to what he was doing or why he had quit blogging. More likely you probably in fact don’t care, but I’m going to pretend that you do, OK?

So why DID he quit blogging? Was his true identity finally discovered by his Swiss gnome employer? Did he accept a secret mission from the Mossad that led him to disappear under deep cover for years? Was he in prison? Did he drop dead? Will he stop asking these pitiful rhetorical questions?

No, no, no, no, and yes: to be honest I got a bit messed up, and took a short break from the world of the markets. When I came back, despite the fact the markets hadn’t actually stopped, the urge to blog had dried up, the energy devoted to other desires, like watching Game of Thrones and most recently, playing World of Tanks. I also thought at the time, hang on, why am I telling all these barbarians* my amazing ideas and thoughts? I’m just showing off. Isn’t it better to keep them to myself? That’s what Spinoza would do. I’m mostly wrong anyway! It was strange, but oddly the most natural thing to do was just to stop this . . . hobby, I guess, which I had previously got lots of pleasure out of.

So then, why start again? Well that’s easy: I’m on the dole and haven’t got anything better to do. Baruch parted ways with his employer about a month and a bit ago in a difference of opinion about the appropriate period to measure performance. Admittedly that performance hadn’t been very good for a while, but there are good reasons for that, too, which I can go into later if you like. It’s OK, Baruch doesn’t consider himself the victim of a conspiracy.

The other thing is, I sort of feel I have something to say again. Over the past few years I’ve been thinking more and more about the long term role of technology in business, society and the economy, and what it means for investing. I’ve got some ideas about that. Yet another thing is, I can actually write substantially about these things, name names if you like, without fear of letting something slip I shouldn’t. I no longer have investors to inadvertently betray. I can’t get fired again, can I? And thirdly, it’s not beyond the bounds of possibility that someone will see these pearls of wisdom, Baruch’s Great Thoughts, and think, aye aye, there’s a clever chap, and give him a huge wodge of cash for him to do something or other with. Spend it on more cars, hopefully: in his absence from your screens, Baruch developed an unhealthy interest in unnecessarily powerful yet beautiful German sports cars. White ones. And they don’t pay for themselves.

So what’s been going on since I was “away”? Well things got better! And now seem to be getting worse. We’ve had arguably a bubble in bonds and may still be in it, Apple got boring, Amazon is now Skynet, China lost its mojo, crude is so cheap we could wash in it, and maybe above all the world has been swimming in free money for ages without any apparent increase in inflation, or growth, tiny dragons, or any of the things people actually predicted.

The Old Times Gang is still there though: Tadas plugging away at Abnormal Returns, Josh Brown still downtown but moving uptown, Felix ecoblogging after a fashion and no doubt recovering after another strenuous Davos. The Epicurean Dealmaker, Michael Jordan-like, keeps on retiring. And Tyler Durden, whoever he may be now, is as brilliantly batshit as ever. If anything HAS actually changed in the eco-blog firmament, Baruch will probably find out as his re-entry into blogging continues but feel free to point out what he’s missed in the comments. Hmmm. I wonder if there will BE any comments?

*That’s you, by the way. “Ultimi barbarorum” was uttered by Spinoza in the vocative tense.

I’m not ever touching Swedish money again

Dear Baruch,

My New Year’s resolution for 2013 is to not ever touch Swedish money again. I’ve found these past few months that I no longer need cash in Sweden, as practically every single transaction can be done electronically, no matter how small the amount. The advantages to me speeding along the arrival of a wholly cashless future are many:

  • Coins are heavy yet worth little. I already give far more to charity per day than the value of the coinage I would willingly keep to avoid being shortchanged in my transactions.
  • Bills weigh less, but are worth more, so if I lose them or have them stolen their value to me is forever destroyed. And when I travel abroad, they need to be exchanged before I can access their value. My debit card is better on both counts.
  • Transfers between Swedish bank accounts can be done online, and are instantaneous and free. Ask a Swede about cheques and they will draw a blank, figuratively.
  • All Swedish merchants I’ve used in the past year take bank cards, because all Swedish points of sale must report back to the tax authorities, so taking cash just to avoid paying taxes is a nonstarter (and frowned upon in any case — Swedes ask for the receipt). This is why Sweden is Sweden and Greece is Greece.
  • Security and identity fears have been effectively resolved with the recent nationwide introduction of the BankID and Mobile BankID system. I can now authorize and sign a whole range of interactions via a desktop app or a mobile app. BankID connects me securely to banks, pensions funds, insurance corporations, tax authorities and anyone else willing to join. These services are often available via mobile apps that connect seamlessly to the BankID app. (Here’s the state pension fund’s app; here’s the tax authority’s app.)
  • Innovative cardless payment solutions are evolving. Just in the past month, I’ve started using two:
    • Swish is an initiative by Swedish banks that lets you connect your bank account to your mobile phone number and then send to or receive money just by using phone numbers. There’s no more need to deal with bank account numbers. 
    • SEQR has just started being used by my local supermarket to allow payments via mobile phone. When the checkout chick presents me with my grocery bill, I tell him I want to pay with SEQR, and then scan that register’s unique QR code. While the register sends SEQR the payment amount, I send SEQR the QR code, which authorizes payment. It’s about twice as fast as paying with my debit card, because the service does not have to check with my bank to see if my account has money on it. Instead, it gives me a SEK 5,000 (USD 770) advance with which I can make purchases, and I get the bill at the end of the month. 

Both apps are getting glowing reviews, but we’re still short of the Holy Grail. SEQR and competitors will get even better when some form of near-field communication technology gets widely adopted in the next few years.

My New Year’s resolution is not for everyone. Right now, getting a BankID to work requires a few too many tech-savvy steps for old people to really get a hang of it. Either it will get easier, or cash will be around until they die off. One bank at least continues to see facilitating cash transactions as a service for this demographic.

As for other people in other countries, how soon they can follow Sweden’s example depends on a couple of national traits. Banks in Sweden are not averse to cooperation, in part because they are so well-regulated that they don’t have to operate in some kind of Hobbesian zero-sum scramble for customers. They tend to compete on services, but collaborate on platforms. Also, Swedes have a national genius for public trust in their government, and it is by and large justified. I’m not sure I’d be willing to give up the anonymous payment option that cash offers anywhere outside Scandinavia right now. In any case, anonymous cashless payment technologies are riding to the rescue.

[BONUS REASON I FORGOT TO MENTION: Banks like SkandiaBank have apps that let you datamine your own expenditures by type, establishment and even by individual component purchases. This certainly appeals to our inner geek but it can also more easily motivate behavior modification — for example, the micro-savings app lets you set savings goals by encouraging you to forgo small daily expenses.]