The Sunday Drive - 11/12/2023 Edition [#84]
Musings and Meanderings of a Financial Provocateur
👋🏼 Hello friends,
Greetings from Ellicottville, NY! Let’s take it easy and enjoy a leisurely Sunday Drive around the internet.
The Sunday Drive is also published at NewLanternCapital.com.
🎶 Vibin'
These days, with so many loud voices shouting down those who would try to reason and find common ground, I thought the signature song from the 1985 film, Vision Quest, (aka Rocky for Gen X) might fit the bill. So this week, I’m vibin’ to Lunatic Fringe by Red Rider.
💭 Quote of the Week
“Competence is how good you are when there is something to gain. Character is how good you are when there is nothing to gain. People will reward you for competence. But people will only love you for your character.” – Mark Manson
BONUS QUOTE
”Not losing money is more important than making money.” – Jared Dillian
📈 Chart of the Week
This week’s Chart shows the importance of staying invested in equities over the long term if one is to truly build wealth over time. While anything can happen in the short term, and if history is any guide at all, an investor’s chance of losing money over a 10 year holding period approaches zero. For even longer investment horizons, investors have not experienced negative returns at any time during the existence of the modern capital markets.
This is worth keeping in mind these days as markets attempt to account for recession fears, interest rate uncertainty, government debt levels, and the long term effects of demographic change.
🚙 Interesting Drive-By's
This week we have articles on Optimism, Wisdom, and (of course) AI:
📈 Why I’m Optimistic About the Future - from Peter Diamondis
I’m often asked what concerns me about the decade ahead.
Do I worry about the downside of AI, climate change, terrorism, political polarization, social unrest, and other problems?
The answer is “Yes.”
These are all very real challenges that make me nervous about some aspects of the future.
But do I believe, on the whole, that "the future is better than you think"? Am I more optimistic than pessimistic about the next 30 years?
Again, the answer is an emphatic yes, even though I acknowledge that humanity will concurrently face various dangers and hardships.
Over the next few blogs in this Scaling Abundance series, I hope to convey—or at least sow the seeds of—hope and possibility. Despite the immediate dangers we face, humanity has a history of finding ways to overcome obstacles, even during prolonged periods of difficulty.
To reinforce your belief in this somewhat bold statement, we need only reflect on the past century. [link]
💡 The Quieter You Become, the More You Can Hear - from Chip Conley of MEA
I’m reminded of the owl, the wisest animal or bird in the forest. Owls are masters at camouflaging themselves and intensely listening. They are quiet, still, and patient. They can swoop down with almost soundless flight and snatch a small rodent that is inaudible to anyone else. That tiny mouse scurrying on the ground never heard its predator coming.
What’s to be learned from the owl? Jimi Hendrix said, “Knowledge speaks, and wisdom listens.” Owls invite us to become “first-class noticers” who blend into the background so they can observe with presence. They role model what it means to be still and invisible in a world that manically loves to call attention to itself. [link]
🤔 The OpenAI Keynote - from Ben Thompson of Stratechery
This was, first and foremost, a really good keynote, in the keynote-as-artifact sense. CEO Sam Altman, in a humorous exchange with Microsoft CEO Satya Nadella, promised, “I won’t take too much of your time”; never mind that Nadella was presumably in San Francisco just for this event: in this case he stood in for the audience who witnessed a presentation that was tight, with content that was interesting, leaving them with a desire to learn more.
Altman himself had a good stage presence, with the sort of nervous energy that is only present in a live keynote; the fact he never seemed to know which side of the stage a fellow presenter was coming from was humanizing. Meanwhile, the live demos not only went off without a hitch, but leveraged the fact that they were live: in one instance a presenter instructed a GPT she created to text Altman; he held up his phone to show he got the message. In another a GPT randomly selected five members of the audience to receive $500 in OpenAI API credits, only to then extend it to everyone.
New products and features, meanwhile, were available “today”, not weeks or months in the future, as is increasingly the case for events like I/O or WWDC; everything combined to give a palpable sense of progress and excitement, which, when it comes to AI, is mostly true. [link]
😳 AI Will be at the Center of the Next Financial Crisis - from Felix Salmon at Axios
AI will be at the center of future financial crises — and regulators are not going to be able to stay ahead of it. That's the message being sent by SEC chair Gary Gensler, arguably the most important and powerful regulator in the U.S. at the moment.
Why it matters: A paper Gensler wrote in 2020, while a professor at MIT, is an invaluable resource for understanding those risks — and how little regulators can do to try to address them.
The big picture: The most obvious risk from AI in financial markets is that AI-powered "black box" trading algorithms run amok, and all end up selling the same thing at the same time, causing a market crash.
"There simply are not that many people trained to build and manage these models, and they tend to have fairly similar backgrounds," wrote Gensler. "In addition, there are strong affinities among people who trained together: the so-called apprentice effect."
Model homogeneity risk could also be created by regulations themselves. If regulators exert control over what AIs can and can't do, that increases the risk that they'll all end up doing the same thing at the same time, and also increases the likelihood that firms will all choose to use AI-as-a-Service offerings from a small number of beyond-reproach large providers.
Be smart: Because the rules governing when the models buy and sell are opaque to humans and not knowable in advance (or even retrospectively), it's very difficult for regulators to prevent such a crash. [link]
👋🏼 Parting Thought
On this Veterans Day weekend I say to all who also served or are currently serving, “Thank you for your service.”
To all the veterans of the war in Vietnam, whose numbers are quickly dwindling as the years pass, I would also like to say, “Welcome home.”
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.
Please note that the content in The Sunday Drive is intended for informational purposes only, and is in no way intended to be financial, legal, tax, marital, or even cooking advice. Consult your own professionals as needed.
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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