The Sunday Drive - 04/23/2023 Edition
Musings and Meanderings of a Financial Provocateur
👋🏻 Hello friends,
Let's take it easy and enjoy a leisurely Sunday Drive around the internet.
Vibin'
As many of you know, after a 30+ year career in investment management, I recently launched my own hedge fund. I’m beyond excited about its potential to bring to investors a low-cost tax-efficient alternative solution for retirement income.
However…. Let me just say that courting early investors for the Fund doesn’t exactly come naturally to me, but I know that is the only way to make it a long term success.
So with that in mind, this week I’m vibin’ to the title track from ABBA’s 1978 album, Take a Chance on Me. Enjoy...
💭 Quote of the Week
“Life can be much broader once you discover one simple fact—and that is: everything around you that you call life was made up by people that were no smarter than you.“ - Steve Jobs
📈 Chart of the Week
In the Chart of the Week, it’s interesting to see the rise and then fall of Core Goods inflation (purple bars) as a result of pandemic related supply chain disruptions.
However, what I think is even more interesting is the rise and sustained levels of Core Services inflation (yellow bars). I’m a firm believer that this is partly, if not largely, a function of demographic changes in the workforce. I also believe that it’s not going to make the Federal Reserve’s goal of getting the inflation rate down to 2% particularly obtainable.
🚙 Interesting Drive-By's
🤔 A Few Things I Believe About AI - There are two important components to intelligence: reasoning and knowledge. GPT-4 is quite good at reasoning, but its knowledge of the world is limited. As such, its performance is bottlenecked by our ability to give it the right knowledge at the right time for it to reason with.
This problem, which the author calls knowledge orchestration, is the biggest unsolved problem for builders in AI outside of progress on foundational models. It touches how you store, index, and retrieve the knowledge you need to perform useful large language model tasks.
💡 Artificial Monopolies - When the world is flooded with fake content, you can't be yourself unless you pay someone. Centralized platforms will become bigger and stronger, but they'll also face whole new threats.
🤓 ChatGPT Can Decode Fed Speak, Predict Stock Moves From Headlines - Two new papers have been published this month that deployed the artificial intelligence chatbot in market-relevant tasks — one in deciphering whether Federal Reserve statements were hawkish or dovish, and one in determining whether headlines were good or bad for a stock.
ChatGPT aced both tests, suggesting a potentially major step forward in the use of technology to turn reams of text from news articles to tweets and speeches into trading signals.
That process is nothing new on Wall Street, of course, where quants have long used the kind of language models underpinning the chatbot to inform many strategies. But the findings point to the technology developed by OpenAI reaching a new level in terms of parsing nuance and context.
📈 The Upside to Delayed Success - Success and failure are interesting because they can’t be fully explained by some third party. They have to be experienced to be understood.
This is especially true with money.
You can’t teach someone what it feels like to lose money. I mean, sure, you can show someone that markets have declined by 30, 40, or 50% in the past. You can share stories of home flippers who made and lost millions in the Great Financial Crisis and day traders whose paper fortunes evaporated when the Dot Com Bubble popped.
But no one understands risk and loss until they live through it.
🧐 A New Kind of Startup is Coming - There’s a famous theory in engineering called Conway’s Law, which explains a lot about why different eras of technology produce different kinds of organizations. The original formulation is:
“Any organization that designs a system (defined broadly) will produce a design whose structure is a copy of the organization's communication structure.”
For example, if your organization consists of three tight-knit teams that are spread across three geographical locations, your software will probably consist of three main modules with lots of internal complexity and simple, well-defined interfaces between them.
📞 Weekly Call 2 Action
I learned about a new type of job this week - Prompt Engineer.
As ChatGPT and other Large Language Models (LLMs) continue to rapidly proliferate throughout our society and economy, knowing how to ask the right questions in order to get the optimal results from the prompts one submits to the AI is growing in importance. Hence, a new job called Prompt Engineer. 🤯
For this week’s C2A, if you haven’t already, I suggest you spend some time learning how to use, or just mess around with, ChatGPT. There’s a free tier and an affordable (and worth it, IMHO) $20/month paid tier. You can learn more and sign up to start using ChatGPT HERE.
👋🏼 Parting Thought
In honor of Earth Day 2023, which was yesterday, April 22nd:
If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em at me.
I hope you have a relaxing weekend and a great week ahead. See you next Sunday...
Your faithful financial provocateur,
-Mike
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