Derek Thomson had a nice article in the Atlantic on whether AI will replace creatives like writers and artists. I don’t know about if it will come to pass. But I am sure that we’ll see more BS “AI-powers stock tips”, “our mutual funds are picked by AI and will outperform Nifty 50 by 7.3%” tools and platforms
We may be in a “golden age” of AI, as many have claimed. But we are also in a golden age of grifters and Potemkin inventions and aphoristic nincompoops posing as techno-oracles. The dawn of generative AI that I envision will not necessarily come to pass. So far, this technology hasn’t replaced any journalists, or created any best-selling books or video games, or designed some sparkling-water advertisement, much less invented a horrible new form of cancer. But you don’t need a wild imagination to see that the future cracked open by these technologies is full of awful and awesome possibilities.
A good read on how Starbucks came back from the dead. One interesting titbit about Starbucks is that customers have deposited over $1.6 billion in the in-app wallet. Starbucks is getting all this money at 0% interest, which also makes it one of the largest banks by assets.
One interesting thing in that article was the higher survival rates of startups founded during bear markets and recession. PS: Zerodha was started at the depths of the 2008 crisis
But wait. Couldn’t you make the argument that innovation is a perk for businesses that are already the strongest, or the least affected by a crisis, and that their success is not a result of innovation per se?
It turns out that the biggest predictor of whether a company will innovate during a downturn is the already established presence of an R&D department—suggesting that it’s the ability and commitment to innovate that gives these businesses an edge above and beyond other factors, including size and industry.
In fact, companies with the fewest resources of all—startups—have the most staying power. As per a 2009 study, businesses founded in a recession or bear market disproportionately made up more than half of the Fortune 500, including Microsoft, Google, Salesforce, FedEx, and Trader Joe’s.
Saying yes to everything can have dramatic consequences over the long run. This doesn’t just apply to your personal or professional life but also to investing. One reason why retail investors lose money in the markets is that they keep adding more things (saying yes) to their portfolios—more funds, stocks, tools etc.
Saying yes carries a cost that is often paid in the days, weeks or even years ahead.
What starts as a single meeting becomes a weekly one. A small project becomes a large one. A one-time event with colleagues turns into a weekly session.
The difference between average results and exceptional ones is what you avoid.
This is a brilliant article on the power of rituals that applies to everything including investing. I’ve highlighted the last line in bold that applies perfectly to trading and investing. The stock part is inherently uncertain—predicting things is hard if not impossible. In such a setting, the best you can do is to develop logical and robust processes.
A simple example would be an SIP vs timing the market or arbitrary investing. Another example would a systematic trading strategy like buying above a moving average and selling below. Such simple rule based strategies have been shown to outperform a vast majority of discretionary strategies.
Studies show that, when people experience uncertainty and lack of control, they are more likely to see patterns or regularities where there are none. These patterns can range from visual illusions (such as seeing faces in the clouds) to seeing causality in random events and forming conspiracy theories. Under these circumstances people are also more likely to turn to ritualized behaviors. This is known as the compensatory control model: We compensate for lack of control in one domain by seeking it in another. Whether this sense of control is illusory is of little importance. What matters is that ritual can be an efficient coping mechanism, and this is why those domains of life that involve high stakes and uncertain outcomes are rife with rituals.
This entire story is nuts.
This is bad news for the poorest countries around the world who are already reeling under high inflation, high energy prices and food shortages.
The Need to Read
A golden rule of finance is that your starting valuation will predict future returns. A higher starting valuation almost always means lower future returns, and vice versa. But the issue is that timing markets based on valuations is notoriously hard.