A Blog by Jonathan Low

 

Jan 26, 2015

Hedge Fund Robots Are Crushing Their Human Rivals

It is tempting, when reading a headline like that, to leap ahead and assume that yet another profession has fallen to the undisputed attractions of robotic action.

In this case, who needs yellow ties, suspenders, slicked back hair and excessive fees? Say hello to my little friend...

And it may, in fact, be the case that the capital markets will be increasingly driven by algorithms and the servers who love them. They will be cheaper and their returns will be similar if not always better.

But it is worth noting that those who embraced high speed trading have already discovered that returns are declining as more and more competitors adapt the same technologies, just as their predecessors discovered the hard way, during the Long Term Capital Management unpleasantness back in 1994 when econo-technological theory came face to face with reality.

So, one should pay careful attention to the fact that yes, computer algorithm investing kicked butt in 2014, but only after losing the previous three years. The data, as they say, are noisy. The result could be because the 'robots' are superior. Or it could be because a lot of conditions have changed so that the strategies employed by the techies are now better situated to outperform than their competitors are. For now.

Rather than draw any long term conclusions, it might be more prudent to simply acknowledge that new forces now need to be incorporated into one's strategy. Until the next change. JL

Lawrence Delevigne reports in CNBC:

Computer algorithm-led investing produced stellar returns, beating most gut-driven human managers and dramatically recovering most of their losses from 2011, 2012 and 2013.

The Quantified Self: Implications of a Data Driven Life

If you quantify it, they will come. That is the presumption we are building into our increasingly data driven economy. 

But we have seen this cycle before, the obsessive embrace at the intersection of knowledge and technology, so we know it doesnt always turn out like the heavy breathers would have us believe.

We are already in the obsessive phase: people comparing FitBit scores, how many steps they've taken, their REM sleep count and how many calories they shed over the weekend. On Monday mornings, this threatens to surpass discussion about how the markets opened in Hong Kong; at least when the boss is out of earshot, though she, too, is probably as competitive as anyone when it comes to sharing that body mass index info.

There is so much information available that we - the organizations and people who both generate and use it - that we can't stifle our wonder and excitement. It's like that first iPhone: wow!, you mean it can do this?! Let's try it.

But it would probably be premature to insist that this is the future. A part of the future, almost certainly, but perhaps not the dominant aspect that it now appears to be. We will tire of all the data, especially when it becomes evident that much of it is irrelevant, or even diversionary.

Like New Years resolutions, new exercise machines and that shirt you just had to have at that one particular moment, some, arguably much data will lose its allure. We will drift towards those who summarize it for us. We will ask that the volume be turned down so we can process effectively. And our attention will turn to newer, more glittery interests.

Which is not to say that data and the meaning it conveys will lose its importance, but that it will take its rightful place; be categorized and slotted and managed just like every other new innovation we've ever encountered. And what that suggests is that even now, while its gleeful aspect still thrills us, those who wish to efficiently benefit from turning knowledge into wisdom will prepare for the hard, anonymous work that requires. JL

Anne Helen Petersen reports in BuzzFeed:

The future will be quantified, then, because these devices promise the latest iteration of what we’ve always sought: happiness. That presumes, however, that happiness is rooted in transparency.

Jan 25, 2015

Are Anti-Vaxers Killing Disneyland?

Whoa! Visitors to Disneyland getting sick from something other than too much candy and fried food!

So many cases of measles have been tracked to the California theme park that health officials are saying it is safe for the unvaccinated to visit.

There is some irony in this as the anti-vaccination movement derives much of its popularity from Hollywood celebrities whose medical knowledge comes from playing medical workers on television sitcoms like Marcus Welby or Doogie Howser.

The internet has extended their reach, if not their credibility, suggesting that technology has rendered expertise no longer limited to the expert. JL

Lindsay Abrams comments in Salon:

With at least 51 measles cases linked to initial exposure at Disneyland, the deputy director of California’s Center for Infectious Diseases announced that the theme park is no longer safe for the unvaccinated

The Not Very Complicated Reason Why No Men Were Using Pinterest

It can true: men often have a hard time getting in touch with their sensitive side. They can be a bit clueless when it comes to creativity and design, even though some of the great designers in the world are men. And, it could be argued that a lot of men are lazy: spending time thinking about crafts when there's a game on can be, well, a mismatch of interests and actions.

But none of those stereotypes had anything to do with the lack of interest displayed in Pinterest, the social 'visual discovery tool,' as it describes itself.

No, actually, the reason that men have not flocked to Pinterest as they have so many other creative, socially interactive sites is that the algorithm driving the technology that runs it discourages them from doing so. Now, even that is not entirely accurate. It's not so much that men are discouraged as that the software reinforces the demographic tendencies of the site and the way it builds usage.

The implication of all this has less to do with Pinterest than with the role of inadvertent biases in everything we do and the way they can be exacerbated by technology, again, inadvertently.

Which may have something to do with why there are so few women in tech relative to their numbers in the population and why other inclinations by which we think we mean nothing bad end up driving behavior that we did not intend but affects us socially, economically and personally. JL

Carmel DeAmicis reports in GigaOm:

Since it’s a user-generated content site it’s demographics tend to build on themselves. The more women — or motorcycle fans, or cooks, or interior designers — are on the site, the more pin will be created that appeal to them.

The Cash for Citizenship Industry

Most countries that encourage immigration want skills. And, let's be honest, making money is a skill. So why is everyone getting so upset about the process of trading citizenship for cash?

Nations, in their wisdom, have, in the past, traded citizenship for laborers, farmers, software coders, athletes and soldiers. People who know how to make money seem like a natural extension, an efficient distillation, even. After all, the others were brought in to help established industries address man-and-woman power shortages. This addresses an investable capital shortage.  And there's no BS about the forces of nature or higher causes.

Ok, the optics are terrible: you're selling the birthright for which thousands have laid down their lives. It reeks of corruption and cronyism. And who knows what ancillary reputational damage is being acquired along with the cash: crime, disease, violence...nasty, but it does sound like the pilot for a successful new TV mini-series.

The reality is, this is happening with official approval - and has been for a generation. The amounts required to buy your way in are 'material,' which is to say, you will not be able to go to the nearest ATM to make this happen. The question is, given who's probably benefiting more, should the price be even higher? JL

Virginia Harrison reports in CNN/Money:

The cash-for-passports industry has been running for about 30 years. Schemes first cropped up in North America, Australia and the U.K. -- safe places for wealthy citizens looking to relocate or invest their funds. These regions accept the highest numbers of investor migrants.

Amazon Learns How to Fail Faster

It's one of those tried and true business cliches: let's throw the spaghetti against the wall and see what sticks. Meaning, let's try a bunch of different things and see if anyone willing to pay cash money might actually want to buy it.

Which is all great: let's experiment, innovate, take risks, explore, tolerate failure, celebrate the creative process, etc.

There's just one problem if your livelihood somehow involved the intervention of technology: you can no longer afford to wait around to see what is sticking.

This is where Amazon finds itself. It may have vast breadth and surprising depth. It may even define scale as we now know it. But it does not have fat margins. And that means it cannot afford to invest too heavily for too long in something that might not prove out.

So Amazon is forcing itself to fail faster, by which it means that it has to make quicker decisions about what's working and what isn't. Even if the data are less than comprehensive and the time frame does not permit what is commonly considered longitudinal consideration.

So, yeah, even the biggest of the big guys, the one who scares and bullies everyone else is constantly looking over its shoulder at the clock while it calculates the potential for profit. It's their world, but they recognize that if they want to stay in it, they are going to have to pick up the pace. JL

Evan Schuman reports in Venture Beat:

“Unlike Google or Apple, they don’t have a high-margin business. They have to be somewhat selective. I applaud their willingness to try so many different things. I’m a believer that Amazon can make adjustments.”

Did Google's Eric Schmidt Really Predict the End of the Internet: Or Something Even Weirder?

We need a timeout here. It's  Davos, the World Economic Forum, and strange pronouncements are wont to emerge from the mouths of people suffering from  brutal jet lag (despite transport via personal jet and helicopter), consumption of adult beverages of uncertain provenance and, no doubt about this, way too much expresso.

So Eric Schmidt, the officially designated adult supervision at Google, is holding forth at some panel on the future of the digital economy and is reported to announce the end of the internet.

Chaos ensues.

But what about my unused Starbucks' coupons, millions wail? This amid the attempts to parse, redefine, walk back, interpret and make sense of what he actually said.

First of all, he's on stage with Marissa Mayer, along with some Eurocrat shouldering vague technological responsibilities and several other tech savants, probably all nursing hangovers. It's Davos. Participants are supposed to say something meaningful and portentous. Plus, they've gotta be thinking, 'let's get this over with so we can get to the next meal and maybe shoehorn in a little time on the slopes.'

What he really said was right out of that recent Luc Besson-directed dystopian vision flick "Lucy" starring Scarlett Johansson in which a wonder drug turns her into a computer and as she disappears says, "I'm everywhere."

Or, in other words, the internet wont even be noticeable because it will be an essential, indefinable part of our being. We're not sure ATT or Verizon or Orange will go for that unless they get a piece of the action, but, anyway, where's that Swiss waiter cum security guard with the expresso refills? JL

Chris Taylor comments in Mashable:

“There will be so many IP addresses, so many devices, sensors, things that you are wearing, things that you are interacting with that you won’t even sense it,” Schmidt said on a panel titled 'The Future of the Digital Economy.' "It will be part of your presence all the time."