‘Le défi américain!’ in The Age of Capitalism’s Crisis.

Excessive wealth inequality, spiraling CO2 levels, the rise of the precariat, and public opprobrium across Europe and America defined the foreboding tone of Davos. The health of the world economy is plagued by slowing growth, global societal tensions, rising debt levels, quantitative easing, and a cooling Chinese economy (which is far more fragile and broken than most realize). The transformative impact of Globalization 4.0 on production was presented. But the cry for “inclusive and sustainable growth” was far louder: “this is about saving capitalism.”

Today’s events are symptomatic of Karl Polanyi’s “double movement,” which characterizes the antagonism between the expansionary logic of neoliberalism and the ascriptive values embedded in a ‘gemeinschaftlich’ community. Since 2008, there has been renewed interest in ‘décroissance,’ (degrowth) by French Intellectual André Gorz. He argues the world should insulate social capital and ecological capital at the expense of GDP growth.

The utopian dream of living in a ‘gemeinschaft’ is far more dystopian. Yet, the macroeconomic policy discussed at Davos is also not the remedy to the world’s problems. Globalization is extremely unsustainable in a world with a finite amount of resources. 1 If every one of India’s households consumed as much energy as American households, it would result in an environmental catastrophe. Instead, we need to re-accelerate the rate of technological progress and overcome stagnation to save our future.

Continue reading

The Galápagos Islands of α.

Broadly defined, alpha represents the excess return of an investment relative to the return of a benchmark index. Over time, competition commoditizes alpha to a point where alpha disappears or becomes beta.

Screen Shot 2019-02-04 at 6.53.23 PM.png
Courtesy of Andrew W. Lo’s presentation from MIT Sloan Fireside Chat .

Traditional economic theory is a fragile, cloistered, and prosaic way of thinking about financial markets. Rational expectations of market efficiency treat alpha and beta separately: the expected return of an investment is linearly related to its risk. Conventional investment paradigms around risk/reward, capital asset pricing models and portfolio optimization are only useful when markets are at an equilibrium. However, equity risk premiums, arbitrage opportunities, and alpha-factors are non-stable and exist in the context of their market ecology.

Continue reading

Timing is everything. Demographics is destiny.

Why is it the perfect time for this business to exist at scale? The most successful companies all had a compelling “why now.” These companies leveraged technological advancements and changes in consumer behavior.

Today, there are many new “why now” enabling opportunities. Software and hardware innovation are converging. Robotics, AR, VR, IoT, wearables, and quantum computing are on the horizon. New hardware will incorporate advances in ML and decentralized protocols.

There are dynamic social and cultural behaviors enabled by new demographics. Society is being shaped by technological tools and the economy it’s developing.  As Marshall McLuhan puts it, “first we build the tools, then they build us.” Today’s consumers are more than digital natives. They are natives to on-demand services, personalized items, virtual goods, influencers, e-sports, and voice assistants.

Continue reading

Learning to Say No.

“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things. – Steve Jobs

Start with your point; don’t end with it. Focus is about saying no. Saying yes is a quick road to mediocrity.

Continue reading