"Not Even Wrong" Podcast
Investing in fundamentally new concepts and engineering practices with large impact.
Spotify says it’s competing with Tesla. Important. Tesla is in the business of building transportation service. In the long run transportation will become infrastructure, I.e you don’t care about car, battery, horse power etc. In that world transport morphs into an entertainment problem. Tesla will morph into an entertainment company. Good thing but only if Tesla keeps technology first culture.
Strong businesses attract capital. Tesla, Amazon, Apple, Google are strong. Facebook, Netflix, Spotify and PayPal are weak. Strong businesses put technology fits to lower cost and/or increase value. Strong businesses iterate with focus.
Good and bad in the markets often just means different shades of light. Discussing earnings events around FB, PYPL and NFLX. Success is about competitive response. Only long term rapid innovation keeps competition at bay, which is key in wealth creation. Technology first. NFLX slipped into media and dropped ball on tech. FB is not. TSLA has always been driven by technology first attitude.
The really great things in life often depend on others to give you the opportunity to cross the chasm. Or does it? Maybe not. Eventually The Score takes care of itself as Bill Walsh wrote. Cover all bases, get so good that you can take risk and become unpredictable.
When competition is weak, change the goalposts and redefine your market. Tesla is doing exactly that. Tesla is in the business of providing transportation. From A to B. Reducing cost per mile will increase miles driven. Using this metric, Tesla we estimate revenue north of 2 Tril. $ in 2030. Upside in stock. This is a framework to understand what Elon Musk is thinking when talking about massive value creation.
Thoughts on Tesla earnings. Positive because company raising natural Sharpe ratio. More iteration (Tesla Bot, more flexible manufacturing, larger scaling from prototype to scale, lower cost of error correction due to increased flexibility and agility). No new products in 2022 negative. Tesla continuously improving existing line up. Wide gap between market sentiment and true value of Tesla, because Natural Sharpe ratio up and stock down. Ultimately will catch up.
The fact that a sprout like Ai Weiwei is allowed to exist is a good sign for China. Book conversation Ai Weiwei, “1000 years of joys and sorrows”. Purpose of art is to start a process and art is the process. China has a way of reforming itself from within. That’s the hope and Weiwei is a signal.
What are we trying to achieve? What is our purpose? In times of market turbulence it’s worth asking what we’re here for. Create wealth by investing in entrepreneurs that deploy fundamentally new concepts and engineering practices. We choose them to hire our capital.
Assessing downside and leverage. Fear of recession is fine. What matters is how you deal with it. Expect worst case of 35% downside from here. Fundamentals of businesses we’re invested in are good and will get better with recession. Recession is logical conclusion of pandemic measures. Slow down due to inflation. Correction will free up capacity for supply chain and strengthen businesses with strong fundamentals such as Tesla or Crisper companies. Expecting recovery and annual performance of 25%.
Reaction to Ai Weiwei’s memoir “1000 years of Joy and Sorrows. ”When rebelling against totalitarianism you run the risk of becoming totalitarian yourself. Entitlement, lack of empathy and urge to scream are reciprocal. Both the rulers and the rebels have those types of tendencies.
Wealth Creation is an optimization problem best expressed in the Natural Sharpe Ratio. Iterate as much as you can on new concepts and engineering practices, reduce the screw ups and lower the cost of error correction.
Introducing concept of Natural Volatility and Natural Sharpe Ratio. Efficient frontier of optimizing shots on goal and misses. Also important to have low cost of error correction. Valuation of company is function of shots on goal (expected internal rate of return), misses and errors (natural volatility) and cost of error correction. Natural sharpe ratio = eNIRR/(NV-RE) with eNIRR= expected Natural Internal Rate of Return , NV= Natural volatility. RE= rate of cost decline in error correction.
More discussion on PACB vs ILMN competition. ILMN bought long read player. Patch short reads together to one long read. Also, what’s up with quantum computing? QC is like EV without Tesla. Lots of science and VC but lack of entrepreneurial urgency.
Competition for PACB from ILMN in long read segment. Can incumbent threaten disruptor? Typically no. Both grow by expanding market. Tesla delaying Cybertruk, news by Reuters. Good for legacy Detroit.
Book discussion “The Anomaly” by Herve Le Tellier. When strange things happen governments assume way too much power and coerce people. Question of reality. What is a person? What happens when a person gets duplicated? Science and moral knowledge evolve when strange things happen. Governments are judged by how good they deal with unusual situations without coercing people too much. (my comments).
M&A in Biotech expected. Lackluster share performance by targets and lots of cash available to potential buyers such as large pharmaceutical companies makes for explosive combination. Focus on Crispr and gene sequencing.
Rough start of year driven by two factors. 1/2 fear of higher long term rates. 2/2 rotation from growth to value. We believe rates not going much higher and actually lower this year. Value stocks in most sectors value traps. First IPhone moment then Polaroid moment. iPhone monument = market changed. Polaroid moment = you’re not in market anymore.
Discussing Pieter Abbeel interview with Sergey Levine talking about self supervised reinforcement learning as tool to develop intelligent robots. Kevin talks about offline reinforcement learning, a concept that could potentially help l Tesla in developing FSD. Combine real world data with reinforcement learning reward function to build a behavior making machine. Not just pattern seeking but behavior making.
What is going on with bond market? Fed controls rates. Not free market anymore. Signal from treasuries not valid. Long term lower rates will propel stocks of disruptive companies.
Book discussion “Barbarian Days” by William Finnegan. Biography through the lens of surfing. Great command of language. Write like you surf, precise, daring, flow, beautiful. Work out with purpose. Live with purpose. Learn to love.
Reaction to William Finnegan telling the story about surfing Ocean Beach in SF in this book "Barbarian Days". Power. Fear. Courage. Ocean Beach is an A+ player.
Road log SLC-Reno. Loneliness, freedom, excitement. Conditioning of mind. Tesla = road tripping and freedom
Five books that influenced us most in 2021 . 1/5 Barbarian Days, 2/5 Science of Can and Can’t, 3/5 Magic Mountain, 4/5 Lenin 5/5 The Black Cloud.
Recap of 2021. Returns. Money makers. Losers. Tesla delivers. NTLA delivers exciting results. Synbio disappoints. BTC looses ground. Mentioning TSLA, NTLA, TWST, PACB, BTC.
Reaction podcast to David Beckworth “Macro Musings”. Great window into macro world and thinking of Fed. Problems, 1/2 assuming no bankruptcies is a good thing. 2/2 confirmation bias as in “look it’s working, why change authoritative monetary system?” Central planning never works , even at the Fed level because error correction too slow.
Road log 4. Moab. My purpose is to leave earth a better place than when I came. Kindness and hard work. Generate wealth by investing in projects that lower cost of iteration. Faster exploration of counterfactuals and rapid error correction. Increase rate of disruption.
Short term gyrations in financial markers are driven by a specific type of intelligence. But this intelligence in not the type of intelligence that generates wealth. Wealth generation is an emergent property to short-term workings of financial markets. Like nervous system and consciousness in humans. You don’t care about every synaptic transaction in a person, you care about the human.
Road log 3d episode at SLC. Economics of NBA work well. Focus on culture and entertainment. US soccer can learn from NBA. Build a more US native culture.
Road log 2nd episode at SLC. Hospitalizing desert required strong purpose. Every amazing endeavor is driven by purpose. Tesla has strong purpose, competitors don’t. Three positive drivers in market. 1/3 Fed stopping printing. 2/3 Biden trillion dollar spending bill not passing. 3/3 Job market un-tightening.
Road log. SF-SLC. Reno was pivotal in our understanding of Tesla. Always feels hopeful to be there.
Literature audience responding to narratives. It's not about authors but the audience. The purpose of stories is to condition the mind to skills like courage and empathy. Angus Fletcher. Stories provoke action. Stories help build companies like Tesla, win wars or save lives (Crispr). When we say there is no Elon Musk in an industry, we mean there is no author telling compelling stories to evoke reactions on people.
Open message to Cathy Wood; “Don’t let emotions influence trading decisions”. Pain trade is hurting. Underlying current in the market is long disruptees and short disruptors, which is inverse of Wood’s thesis. Keep your head down and focus on relevant questions such as when will pain trade end. It will end when fundamentals catch up with market distortions. Disruptees such as F and GM will loose share, revenue and whatever margins they have left. Same counts for GS or JPM vs. Square or retail vs. SHOP.
Today’s Fed statement cheered markets. The problem here is that one central institution has this much power. Establishment of Fed was Faustian bargain. Mission creep exacerbates cronyism and corruption. Solution is rules based money. Bitcoin.
What we learn from W. Heisenberg. Theory decided what we see. Observer influences observables. What you look at in financial markets is determined.by how you think about it. Theory determines what you see. You look with brain not just eyes. Successful hedge fund managers are all successful in their own way. Less successful managers are all bad in the same way. It’s their wrong theories which make them look at the wrong things. For example value investors don’t get Tesla because they look at moat instead of speed of error correction.
What’s the role of time in investing? Time is the unit of transformation. Cost of iteration is inversely correlated with time. Humans measure time based on the perceived transformation of earths’ position relative to the sun. We look at time as transformation of company relative to competition. Competitive advantage is when cost of iteration is lower and therefore speed of error correction faster.
Book discussion “The Magic Mountain” by Thomas Mann. Reason, anti reason or mysticism and what’s beyond reason. Love, death and creation. There are limits to reason but we must not fall back to arbitrary mystique. Love and arts guide us, but also can lead us astray. Humans know a lot more than words can convey. Creation comes after death. Petulance and stupor are dangerous human traps.
When raising money for a hedge fund the tables should be turned. Instead of investors vetting the manager, the manager vets the investors. Investors are like employees. Investors need to fit the funds' objectives.
Musk talks about A Plus solutions to solve starship problem. A Plus players are necessary to generate wealth through disruption. We are employed by A Plus wealth generators.
Three reasons for recent drawdown. 1/3 Chinese stocks delisting on Nasdaq. 2/3 Ginkgo issues 3/3 Nvidia/Arm deal break and SoftBank leverage. Discussing “Magic Mountain” by Thomas Mann. Section on Music as solution for question what comes after God and reason? Music opens feelings towards nature, feelings that we can’t express with reason and words.
Space X lets go of high ranking personnel. When tasks outgrow people they need to leave. Companies operate this way adapt and progress. Elon Musk shows once again why he is able to create so much value. Mindset is the weapon.
Efficient market hypothesis ( EMH). New Information is valuable when not reflected in asset values. Information can be found by developing new theories. Theory of disruption is evolution of EMH. What would a modern AI do as trader?
Theories give purpose. How do theories emerge? New problems. Example Value investing focus on assets and return on asset. In those days assets were important. Today new problem. Wealth generation in area of exponential growth. Cost of iteration and speed of error correction. Theories don’t need to be true, just good enough. A fish is good enough in water, doesn’t work on land.
Book discussion “Against method” Paul Feyerabend Chapter 4. Science is method and all the results stemming from that method. Political criticism is necessary to counteract scientific chauvinism. Children education is attempting to squeeze subjective dreamy creativity into status quo of the law of science. This is bad.
Tell me something interesting about what’s happening in markets. 1/2 Shelling effect drives more concentration towards winners such as APPL, NVDA or TSLA. New winners will emerge and past winners will drop out. 2/2 Less inflation and higher rates due to improvement in government institutions.
Discussing how to add NVDA. More leverage or sell other positions? We don’t want to sell assets to free capital. We also decided not to add leverage. Froth in certain stock (such as NVDA) comes from hedge funds concentrating more and adding winners.
Do we have a theory of wealth generation? No. We have a principle stack, which is a bunch of guidelines that help us navigate markets. First steps towards a theory of wealth generation start with understanding concept of cost of iteration and thus cost of error correction. Cost of error correction is inversely related to rate of disruption. Disruption is key to wealth generation.
Initiating position in NVDA. Animation for machine learning. Machine Learning 2.0. Build virtual video worlds with transformers rooted in real physical world. This allows for Self Supervised Reinforcement Learning, which is Alpha Go Zero approach to machine learning. We believe that this type of self play learning will be key in solving the self driving car problem. NVDA takes pivotal role in that.
Reaction to Lex Fridman conversation with Boris Sofman. Don’t tell me what art is. Don’t tell me what a good product is. Just do it and let market decide. Failing in market place is not bad luck. It’s failing. Humility is key mindset for disruptive company founders. Humility lowers cost of iteration and thus increases rate of error correction. Anki and Waymo had/have high cost of iteration due to lack of humility.
Criticism is important in the hedge fund business. But there are two types of criticisms, good and bad. The bad one is vulgar criticism often used by short sellers. Best way to criticize a position is to look at the company from the perspective of theory of competitive response. Vulgar criticism is rooted in righteous argumentation is is detrimental for returns.
Discussion “The magic Mountain” by Thomas Mann. Passage where Hans Castrop leaves town and exposes himself to nature. Primal, eerie and exciting. Civilization, sophistication and human elegance clash with nature. Nature is the enemy of reason. We strive to straddle the void between reason and nature (volatility) with our principal stack.
Economics is the theory of competitive response. It’s an extension of Christensen’s theory of disruption. In other words economics is particularly interesting and useful when there is disruption. Could be technological, social, political etc. Theory of competitive response is useful for wealth generation.
Covid giveth, inflation taketh. Deterioration of government institutions is key risk to markets, since this is the main driver of inflation. Reason for inflation is people are not showing up to work. Government stance in many places around US is exacerbating problem. We therefore formulate an increased risk of inflation and stagflation due to opportunistically parochial and ineffective government interventions.
Situations of uncertainty can be fixed. Parse the problem. State the goal. Make sure you’re in sink with stake holders and you have adequate resources. Then execute. Examples youth sports career. Running a hedge fund.
Taxing unrealized capital gains creates terrible incentives. It also fosters a police state. Before we even argue about the pros and cons, let's establish what our goals are. If we stick with founding principle of US then purpose of US government is to facilitate better outcomes for future generations by maximizing opportunity and minimizing coercion. Within that framework wealth tax is wrong. Musk should sell 10% of his Tesla stake to increase opportunity and reduce potential for coercion by state. Best is to keep the stake, since Tesla is doing exactly that.
How to run a hedge fund in a post reason world? Reason and analysis are tools but not sufficient. Key to progress through disruption is lowering cost of iteration. AI is a great tool for lowering cost of iteration. Iteration means exploring counter factuals, which is another word for computation. Moore’s Law drives down cost of iteration and thus increases rate of disruption. This is particularly effective in physical business such as cars and energy and main driver of Tesla valuation.
Knowledge exists without a knowing entity. Tesla has knowledge as a company, no single person or entity has that same knowledge. Even Musk doesn’t have the knowledge that makes Tesla do what it does. What would you have to change to undo Tesla? The answer to that question is also answer to where is the knowledge of Tesla. Investing is buying into knowledge. Valuation is particularly difficult, when bulk of knowledge is not with a person or set of people such as CEO or management. When knowledge is embedded in the company as an abstract catalyst for instantiating products and services, traditional valuation metrics fail. Knowledge is most valuable when it drives down cost of iteration. When cost of iteration goes down, the rate of knowledge creation goes up.
Hard money + soft rules = wealth creation. We need freedom in the way we think about disruptive companies. Analysis and reason are typically rooted in the old and can’t explain the new. Hard money is the arbiter of new ideas, deciding what’s good and what’s bad.
In Physical space good problems are easy to find but hard to solve. In Software space good problems are hard to find but easier to solve because cost of iteration is low. Biotech is a hybrid. Crispr makes cost of iteration lower so problems are easier to solve. AI and Crispr also make it easier to find good problems. AI lowers the cost of iteration in physical space.
Is FB interesting now since they change name and direction? No. Iteration in software is cheap. Hard thing is finding right problem to solve. Inverse of physical business, where problem is obvious but iteration hard. FB is forcing the issue. FB culture, mission and execution is not congenial to us. Congenial means we feel the right way but can't all explain rationally.
Discussing Paul Feyerabend “Against Method”. There is no general process in science to predict a priory success. Same applies to wealth creation and hedge fund business. Rationality and reason are tools but should not be allowed to become doctrines. Societies have to be protected from science as doctrine. Same applies to business.
Discussing TV show “Maid”. Young women struggles through life with integrity and work. Eventually that gets her to a beautiful place.
Tesla is about to embark on another market cap expansion. Formed CEO of Ford says Tesla is way ahead. This is s milestone. Some like GM mislead investors by claiming they will catch up by 2025. That’s not even officially in GMs plan as of today.
Instrumentalism is not enough in wealth creation. You need more, a theory based on principles. Instruments (like models, math or AI) help but are not sufficient. Principles help navigate through volatile nature by expanding knowledge.
Hertz buys 100k Teslas to enter EV rental biz. Great way for Tesla to iterate around B2B business. FSD 10 10.3 rollback is example of how Tesla iterates. NASB and NHTSA hypocritical concern about safety. Instead of attacking Musk why not fix problem of 35k deaths per annum in US. Highest per capita in developed world. Biden administration biggest risk for Tesla and proliferation of EVs.
Observations are theory laden. Example Bitcoin. We went from avoiding the asset to investing a substantial part of our fund into Bitcoin. Economic freedom is big part of freedom. Free money proliferates freedom. Bitcoin at center of free money.
New allocation in Bitcoin. Freedom is being clipped everywhere. Money is proliferating freedom. Free money is moral. Tesla earnings call discussion.
What would Lenin have done with Bitcoin? Conversation between Alex Gladstein and Lex Fridman on merits of Bitcoin for human rights and anti-despotism. Money is part of the basic freedom set. Bitcoin proliferates freedom because it doesn't allow for control of money supply. It's the distinguishing factor between Bitcoin, and Ethereum. The latter has value for smart contracts.
Comments on “The Magic Mountain” by Thomas Mann. Notes on belonging and how unwritten rules can sneak up on you and coerce you into something. Hans Castrop was a guest, now he’s morphing into a patent with the accolades of a true patient in the sanatorium. Allegory on Bolshevism and the then emergent right (book was published in 1924).
We don’t invest in uranium, natural gas or container capacity, despite the shortages in those sectors. Those are commodity businesses with territorial and predatory business models. While they can generate returns, they are limited. We focus on innovation stack businesses.
Notes on “The Magic Mountain” by Thomas Mann. Time? It’s not linear. The more active you are, the slower time goes, the more longevity you have. Markets look at time in linear fashion and price stocks with Bayesian method. We don’t look at it that way. We focus on cost of iteration as inverse of longevity. Longevity is a proxy for valuation.
Discussing Crispr Tx phase 1 results on CTX110. Good efficacy, similar to autologous peers. Question is, if efficacy not much better, how much will they be able to charge? Safety results good. Crispr companies need to show higher efficacy, better safety and lower cost. Key is multiplex editing.
The measure of wealth is Freedom. Freedom generates wealth. Wealth and Freedom are two sides of the same coin. Freedom makes error correction without coercion and/or violence. It’s a fragile flywheel. We must fight to keep it running.
Efficient market hypothesis is a good working tool for hedge funds. Market Efficiency is when fundamental, non idiosyncratic information, is reflected in asset prices. We focus on bespoke and idiosyncratic factors that drive valuations of assets, such as technology risk. Observations are available to everybody but they are theory laden. Hence their interpretation is unique to us. We don’t spend resources to out-Beta the market.
Note on why we invest in Biotech. Note on risk and reward. Note on life sciences on the cusp of becoming a predictable engineering practice. Note on timing.
Setback for allogenic Car-T Immunotherapy. Allogene Tx gets a halt on trials from FDA because one patient in one of their trials shows irregular chromosomal results with injected Car-T cells. Allogene Tx works with TALENs and is based on Cellectis technology for Gene editing. That is older tech, predates Crispr. Key is that Crispr allows for faster, lower cost and more precise edits. Same applies to Base Editing and Prime Editing. Immunotherapy has been around for 100 years. Fears of T-cells going rouge and turning against patient have always been center stage. This is another example. Crispr is more robust and allows for faster iteration. Fundamentally Crispr will enable digitization of life sciences.
Book discussion “Lenin” by Victor Sebestyen. Personal portrait of Lenin gives insight into revolution from Lenin’s perspective. Great angle. Note on revolution. Note on the man Lenin. Note on the difference between Popperian West and authoritarian East, why the inaction of incumbent powers lead to the seizure of power by an ill prepared, badly organized group of thugs called Bolsheviks. Note on why Lenin created fertile ground for future dictators like Stalin, Mao and other self proclaimed ideological leaders in the 20th century. Finally a note on why Lenin is still relevant in today’s “Post truth Politics ” and why that’s dangerous.
Observations are theory laden. Conversation between Brett Hall and David Deutsch. Important for wealth generation business or any knowledge business. Knowledge is a solution to a problem. It’s conjectural and can be devolved with observations. But those are based on theory. Risk on falling into Goedelian inconsistency loop where theory defines observations and vice versa. Happens often in hedge fund business.
Chiara Marletto on Sean Carroll podcast. Build theory on Counterfactuals to take account of innovation stack. Innovation stacks are not time reversible. Wealth creation is building products and services by exploring Counterfactuals. Science and free markets work through building innovation stacks and thus replacing incumbents with better solutions.
Demand for electrons will go up. Price has to come down. New energy mix. Solar, Natgas, nuclear. Tesla, Cameco, Range Resources.
Third quarter performance. Tesla good, Biotech not so good. Key for Tesla going forward are 1/2 4680 batteries and 2/2 Self learning stack.
Visiting Podcast from 7/11/21 where I talk about Fei Fei Li and her research about meta learning. How did my thinking evolve? Meta learning is computation which again is exploration of counter factuals. Less energy for future learning is optimization problem. Multiverse where energy for future learning to solve specific problem is more likely.
Book discussion "Lenin Biography" by Victor Sebestyen. Today I focus on the period right after the October 1917 revolution in Petrograd. Cult of personality. Lenin switches from socially concerned revolutionary to power hungry monster. Power reveals, power doesn't necessarily corrupt. Within days Lenin overruns several ideas he was allegedly cherishing for years, such as social justice, human rights and economic freedom.
US Dollar supremacy stronger than ever. Risk of disruption by crypto high. Can happen fast. Problem with dollar system, it’s too expensive and bloats US political establishment. Euro and Yen already incapable to spur economic growth and innovation. China fears crypto shows power of crypto.
Trip to Bergell to birthplace of Giacometti. Discussing first 30 years of Giacometti. Two big influences. Les Demoiselles d’Avignon and Surrealism. Both aim to deliver art from the deepest inner self, circumvent the rider of the elephant and show what’s inside the elephant. Violent sexuality paired with tender love. This tension makes Giacometti so attractive. Giacometti is a “score takes care of itself kind of guy”. Problem is, how not to fall into nihilism trap?
Trip to Bergell to birthplace of Giacometti. Discussing first 30 years of Giacometti. Two big influences. Les Demoiselles d’Avignon and Surrealism. Both aim to deliver art from the deepest inner self, circumvent the rider of the elephant and show what’s inside the elephant. Violent sexuality paired with tender love. This tension makes Giacometti so attractive. Giacometti is a “score takes care of itself kind of guy”. Problem is, how not to fall into nihilism trap?
Deciding when to stick to a manifesto and when to change. Tesla is facing fundamental problem in changing AI effort to self learning. Crispr companies are facing challenge through base and prime editing. Solution is flexible adaptation to master plan. Netflix offers solution, keeper test. It’s the question am I still up to the job and is the job up to me? Flexible adaptation to environment from both parties.
Markets take the subjectivity out of judgment. Fallabilism rests on ideas with access to liquid markets to compete. The great thing about Popper is that he opens the door for the competitive process. Criticism and error correction are best way to win in competitive markets.
Free will or not? Wrong question. It’s more like, how do you react to problems presented by environment? In that sense, you have free will to come up with creative solutions. But you don't control the environment, so you're not free in what problems to solve. The problems are defined by the environment. In that sense, both the Free will and the non Free will camps have a point. Discussing Free will in the context of disruption and competitive response.
We don’t use computation as basis for the investment process because we don’t have the necessary knowledge. Instead we use a principal stack. We are like early Renaissance navigators relying on philosophical methods instead of scientific. This will change. Self supervised reinforcement learning could pave the way to more computational methods in wealth generation.
Why is it that we don’t trade around market events and try to exploit volatility? We don’t have the tools and conviction necessary to succeed in this type of activity. Our mission is to invest in new concepts with innovation stacks built around. The key is finding entrepreneurs with “Zero to One” culture who can turn technological inventions into innovation stacks.
China Evergrande large real estate company in China is in financial trouble. Market turmoil due to fear of default. Good thing is now we know why Tesla has seen sluggish sales in China. This has been going on for months. Now the debt market fears default. Too much leverage. Market corrections are part of a functioning mechanism. Like error correction in science.
Episode September 18, 2021 III
Book Discussion “The Black Cloud” by Fred Hoyle. 1/3 Our communication is confined by physical substrate like brain, body, gravity and energy consumption. Gaseous existence would be more efficient. 2/3 Communication and computation are the main concepts of 21st century. Communication is conveying counter-factuals and computation is the exploration of counter-factuals. 3/3 Deep problems are not suited for scientific method. Scientists don’t have tools to tackle deep problems. Literature is better at it.
Why do we need energy for computation. Computation is the exploration of counter factuals. Energy is required to explore . The more the faster. Math is an abstract form of representing relationships between stuff. It’s a shortcut for exploring counter-factuals. Computation allows for faster error correction which again allows for faster error making? Relationship between error making and error correction defines progress.
Book discussion “The Black Cloud” by Fred Hoyle. Part 1. Inspired by one specific scene in the book, when earth communicates with alien intelligence. 1/2 We are bound by physical body and in particular gravity. 2/2 This limits our use of energy for computation which is the driving force of intelligence. Is it? Why do we need energy for computation?
Failure of Central Banking and political system. Blockchain technology is alternative. Human centric decision making replaced by algorithmic. Central planning and governance doesn’t work because error correction lags speed of mistake making. Like in the Renaissance when celestial decision making was replaced by human centric decision making, we are witnessing a shift from human to algorithmic decision making.
The problem of legacy education. Technical debt from 19th century inhibits eduction system to foster faster disruptive evolution. People need to train critical and creative thinking plus risk taking through iteration. This is crucial for companies looking to hire for solving hard problems. Solution lies in self learning and risk mitigation for individuals.
Book discussion “Malibu Rising” by Taylor Jenkins Reid. A novel wrapped as candy but actually delivering real nutrition. Very good book. Three fundamental threads. 1/3 Commitment and lack there off, 2/3 Love and lack there off and 3/3 Fire as destroyer and laying the ground for new things. Iteration is key.
Today’s education system is a large technical debt and therefore exactly the opposite of an innovation stack. Instead of solving a problem and creating new, better problems we solve for a small benefit with large long-term costs attached.
Phase transitions in physics is problem solving in science. Same applies to business. Problem solving is the core of innovation stacks. Only businesses with phase transitions offer wealth generation potential. Predicting phase transitions is impossible. But assessing the potential for phase transitions is feasible.
How good of an investor would Karl Popper have been? A really good one. What Popper applies to science can be generalized for any process that requires the creation of knowledge. Wealth generation is driven by innovation stacks crated by entrepreneurs. Popper calls this problem solving. Key is lowering the cost of iteration through compute. It pays to think about how to think.
"The best way to destroy the capitalist system is to debauch the currency." Lenin. We are on this path. Negative yields in Europe and Japan are canaries in the cola mine. Bitcoin and other Blockchains are solution. There has to be a cost of money for capitalism to function.
Book discussion “Great Circle” Maggie Shipstead. If you take a character from 2015 to 1915, would it change? Drive, conviction and uniqueness eventually are the most relevant features of the human condition. Build your own innovation stack and create the You. Is drive inhuman? Marianne Graves sometimes comes across as inhuman because she’s so ambitious. In the end we all end up in a circle. You push too much you end up in the wrong place. Success requires stepping over PNR (point of no return). Kaleb is my favorite person in the book. Freedom, accountability and character.
Discussing Rodney Brooks on Lex Friedman. His arguments are vacuous. Reasoning by induction is not useful when talking about disruptive technologies. AI and robotics will be driven by self learning and brake new ground.
Book discussion “What happened to the USMNT?” Steven Mandis. US soccer culture needs legitimacy. Currently trying to copy Europe is energy wasted. Better approach is to develop unique US soccer culture by borrowing from other US sports such as Football. Focus on specialized skills such as defense, offense, turnovers etc. with dedicated coaching staff and specific strategies works. Kids in the US would identify much faster and legitimacy would increase delivering a much broader talent pool. Build an innovation stack in US soccer around specific US centric sports culture.
Manifesto: Path towards FSD. Self supervised reinforcement learning . Based on video animation developed by AI system in the spirit of DALL.E. The circle.m: Video animation trained by real world images performs realistic video animation that allows for self leaning of robots that then can be deployed in the physical world and do a much better job than humans.
Discussing Wojciech Zaremba Robotics lead at open AI. Robotics will happen with self driving cars. Self supervised reinforcement learning. To do that you need advancements in video animation like DALL.E. Tesla needs to build innovation stack around video animation and self supervised reinforcement learning.
“To obtain knowledge, add something every day. To obtain wisdom, subtract something every day.” Lao Tzu. Subtraction works towards reducing complexity and clarifying goals. Innovation stack adds better problems with corresponding better solutions and thus reduces complexity. Innovation stack is a form of subtraction.
The aim of wealth generation? Leaning on the essay by Karl Popper “The aim of Science”. Solve problem of wealth generation. Find explanations that are independent of the goal. In other words. don’t explain investments with arguments that depend on outcome. “Tesla is good investment because they are winning”. Explain with independent arguments. Principle stack, cost of iteration and compound effect of knowledge.
Fun is a good criterion for what to do next. Evolutionary efficient because it uses less energy. Bayesian approach to investing is wrong because probabilities don’t work with creative processes. Creative projects are driven by counterfactuals and potential. Probabilities don’t work. Projects where probabilities work are not interesting.
Ideas for a new manifesto for Orange Capital Partners. What problem are you solving and how are you applying computation to solve it? Are you applying learning methods and if so, are there any explicit levels or are you doing Alpha Go Zero type self supervised reinforcement learning?
Alpha GoZero and Tesla Autopilot software. Tesla will transition from search and hardcode solution for planning and control to self supervised reinforcement learning as base for AI. This will deliver true FSD. New architecture needed. New talent and rethink also most likely required.
Humanoid Robot by Tesla is a great way forward. Tesla is optimizing for iteration and iterating on the innovation stack of vision, planning and robotics. Humanoid Robots require more fine grained motor skills. This can be useful for many application at Tesla, Space X, Boring company and Neuralink. Criticizing Musk for pushing the envelope is a void argument.
In sports and business the higher you reach the more flaws you see. This leads to insecurity and fear of being inadequate. Fear is good as long as you do something useful with it. Build on your strengths.
Why did I take on Boxing? Start something new in light of Kye staring High School. New experiences sharpen brain and body. Boxing is a one muscle sport. Combine limbs and core to one muscle movements.
Tesla AI Day. 1/4 Vision to build model of reality 2/4 Planning based on predictions 3/4 Training software for labeling 4/4 hardware for training and inference with DOJO and FSD chip. Tesla is compute company.
When it comes to short sellers who predict bubbles in technology there are two questions. 1/2 Do you have a theory of disruption and is your short based on this and 2/2 Are you just trading or do you have a longterm view? In both cases shorting is legitimate. Everything else is charlatans in suits. Buying puts and bragging about being short is like dipping your toes in the ocean at Mavericks and talking about surfing.
Creativity is key to wealth creation. Requires freedom. People need to be as free as possible but still function within processes. Mindset is the weapon. Applies to business as much as sports. Example youth soccer.
Tesla facing power backlash from China and US. Disruptors are never welcome. Now is the phase where the incumbents are fighting back. Book discussion “Interior Chinatown” Charles Yu. What is identity? Who deserves one? It’s hard earned and achievable through your own endeavor. Nobody will give it to you. Same applies to entrepreneurs.
Book discussion “Who is Maud Dixon?” By Alexandra Andrews. Genius requires a no half measures approach to life. It feels inhuman. That’s what we think when we say “be unique” like in Peter Thiel’s Zero to One.
Information embedded in counterfactuals. The more, the more potential. But it needs to happen in the context of the "Innovation Stack". Fundamentally an innovation stack is built around information, digitized and therefore optimizable through algorithms.
Visit at AKA in San Jose. Place where the likes of Khabib train. Excellence and energy radiate. Why this is important to us.