Reading across disciplines is one of the best ways to improve our investment acumen. Here is a summary of some of the best articles I read this week. If you like this collection, consider forwarding it to someone who you think will appreciate it.
How to save the world?
Currently, the concentration of carbon dioxide in Earth’s atmosphere is around 414.68 parts per million (ppm) – there is consensus that, once the level reaches 450ppm it will raise the global temperature above 2 degrees Celsius, triggering extreme weather events and irreversible, catastrophic change. While some advocates of change suggest that the target should be 2030, Mr. Gates believes that’s unrealistic – carbon is too deeply woven into the fabric of everything we do – and could provide a distraction to the more significant goal of zero emissions by 2050.
When asked on betting on a single breakthrough happening in the next decade that really was a game changer, he says, “Well, part of the point of the book is that [we can’t rely on a] single breakthrough, we need artificial meat, we need lithium... But I would say, if you can get super-cheap green hydrogen, it sits in terms of the industrial economy at the peak. So, if you pencil in ridiculously low-cost hydrogen, then I can tell you how to make clean fertiliser and clean steel, and even clean aviation fuel.” Lastly, he says that he is optimistic about the world being net zero in terms of carbon emission by 2050.
https://www.wired.co.uk/article/bill-gates-interview-climate-crisis
AI in financial research
Technologists at Morgan Stanley have developed a virtual assistant that helps people throughout the organization plumb useful information from the 50,000 research reports the investment bank generates every year. “Our research reports can be many, many pages long,” said Eden Kidner, global head of research technology at Morgan Stanley. “And now we’re getting to the ability to actually find specific charts and paragraphs within the reports that answer questions.” The AskResearch bot is an example of banks ramping up the use of AI in different parts of their business.
“What we are seeing on the AI side, especially in natural language processing, is really amazing,” said Brad Bailey, research director for capital markets at Celent. “One aspect is the ability to get content from all types of structured and unstructured data and leverage that in numerous ways is a competitive edge and a huge benefit to client service.” The bot uses machine learning and natural language processing to become better at answering questions over time, Kidner said. The bot can retrieve earnings-per-share estimates for any company, or any of 50 other fundamental metrics the bank tracks or forecasts. It understands abbreviations like GDP (gross domestic product), so they don’t have to be spelled out, and synonyms. It understands multiple ways of asking questions.
“Trying to enable the bot to be able to find a specific paragraph, a chart or something that sits deep within that research and distill it up — that's where the high value of this bot is," Kidner said. "It’s also the biggest challenge to solve for." In the past, it typically took 10 minutes to go to the research portal and find a piece of research, he said. With the bot, the task takes less than a minute.
https://www.americanbanker.com/news/morgan-stanley-creates-bot-that-does-junior-analysts-work-faster
Can Shopify beat Amazon at its game?
Shopify isn’t doing what Amazon does - it isn’t competing directly and it wouldn’t fit inside a competition lawyer’s market definition. But it challenges Amazon at a very basic point of leverage by doing something different, but relevant. This is very often what competitive threats look like in technology. In markets with strong network effects or winner-takes-most effects, it’s very hard to displace a new incumbent directly, but pretty common to address an underlying customer need in another way. So, Google doesn’t think about Bing nearly as much as it thinks about Amazon and Facebook, and Amazon thinks about Shopify, because they change what the businesses might be, and offer your customers a different way to solve their problem.
https://www.ben-evans.com/benedictevans/2021/2/17/shopify
You are as good as your team
The legend of Steve Jobs is that he transformed our lives with the strength of his convictions. The key to his greatness, the story goes, was his ability to bend the world to his vision. The reality is that much of Apple’s success came from his team’s pushing him to rethink his positions. If Jobs hadn’t surrounded himself with people who knew how to change his mind, he might not have changed the world.
For years Jobs insisted he would never make a phone. After his team finally persuaded him to reconsider, he banned outside apps; it took another year to get him to reverse that stance. Within nine months the App Store had a billion downloads, and a decade later the iPhone had generated more than $1 trillion in revenue.
https://hbr.org/2021/03/persuading-the-unpersuadable
Jeff Bezos - the greatest tech CEO ever?
What is clear, though, is that any attempt to understand the relentlessness of the company redirects to their founder, Jeff Bezos, who announced plans to step down as CEO after leading the company for twenty-seven years. He is arguably the greatest CEO in tech history, in large part because he created three massive businesses, all of which generate enormous consumer surplus and enjoy impregnable moats: Amazon.com, AWS, and the Amazon platform (this is a grab-all term for the Amazon Marketplace and Fulfillment offerings; it is lumped in with Amazon.com in the company’s reporting). These three businesses are the result of Bezos’ rare combination of strategic thinking, boldness, and drive, and the real world manifestations of Amazon’s three most important tactics: leverage the Internet, win with scale, and being your first best — but not only — customer.
https://stratechery.com/2021/the-relentless-jeff-bezos/
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