"The real danger is not that computers will begin to think like men, but that men will begin to think like computers," - said journalist Sydney Harris.
Mad Hedge Technology Letter
October 25, 2019
Fiat Lux
Featured Trade:
(THE DIGITAL NOMAD ISSUE)
People want a better life.
And the Internet has connected the outermost populations living in slum-like conditions giving them a feed into the biggest transformation ever to grace mankind.
The applications of the Internet are countless and promise to deliver huge productivity gains while lifting entire populations out of poverty.
The next leap of digital migration will see the remaining 3 billion of unconnected users connected offering new markets, fresh revenue streams and a super-charged level of competition that our tech behemoths have never seen before.
Each passing day not only sees the value of technology companies rise as data assets become more sought after but the level of expertise increases at a hyper-accelerated pace.
The human capital fueling the outperforming tech sector is like the blood that is pumped through the arteries.
Now, governments are getting in on the act, crafting policies that attempt to lure in top tech talent in an attempt to enhance their economies.
Digital nomads are frequently typecast as tech-savvy Millennials remotely working via an Internet connection while living as an expatriate.
However, they come in all shapes and sizes and that is the main point.
The Baltic nation of Estonia has been one of the leading lights in tech innovation, rolling out Skype before Facebook and Twitter existed.
Skype was entirely comprised of local Estonian developers who achieved this in the early 2000s.
Quite a feat for such a small nation.
This charming Baltic country has stepped up its game with a visa targeted at digital nomads and other countries will likely copy this progressive type of visa.
Estonia rolled out a revolutionary visa allowing digital nomads to work in Estonia all year round. This visa also includes 90 days of travel in the Schengen Area of mainland Europe.
This visa isn't targeted at EU citizens who already reap the benefits of working all over the European Union, but untapped tech talent that otherwise might not consider Estonia.
Estonia is on a mission to amass as many tech-savvy workers from far-flung places around the world, incorporating them into Estonian life, and boosting the level of innovation in a country that prides itself as a start-up hub.
More importantly, jacking up the volume of tech workers is becoming an existential issue for many sovereign countries as developed countries reap the monetary rewards from such new cutting-edge technology.
These digital nomads create communities that harness an enormous flow of tech know-how. Usually, their friends are fellow like-minded digital nomads that roll in packs with each other.
Tallinn, Estonia has rapidly turned into a top 10 digital stronghold attracting hordes of digital nomads.
If technical issues arise, help is usually just a shout across a coffee shop and presto!
Everything is fixed.
The message is that simple.
Estonia does not care where you are from, how many sugars you drink with your tea, or how you style your hair in the morning.
The concern there is if you know how to use a computer well or not. Plain and simple.
The global tech talent shortage is a pressing issue, and this is just the beginning.
Try hiring an experienced artificial intelligence engineer on the cheap, and headhunters will just hang up and delete your contact information. Better not to low-ball the offer.
In fact, something must give because visa policies are entirely based on legacy systems of yore.
The world has moved on and visa policies should reflect it.
Expect more exotic visa policies pinpointed exactly toward the type of immigrants that nations want as part of their national policy.
With the advent of low-cost carriers such as airBaltic, Spirit Airlines, and Norwegian Air, taking a flight halfway across the world is only a $200 proposition, thanks to wonders of deflation and ruthless competition.
And the further creation of private short-term rental app Airbnb has allowed digital nomads a pipeline of private housing to tap into whenever they jet-set across the globe.
The common denominator that denotes a perfect location for a digital nomad is cost.
Locations such as Copenhagen and Monaco are places of cultural beauty but pricey for a digital nomad to operate from as the wallet turns lighter consumed by the additional marginal cost of housing and hooking up a decent Internet connection.
Estonia and the rest of the Baltic countries are affordable and boast great digital infrastructure.
Sadly, Estonia is also grappling with aging demographics as with many of the Western powers and must lure 440,000 people just to maintain the current population of 1.3 million people.
Many of these Baltic countries lose huge swaths of youth that migrate to higher-wage countries in Western Europe.
Expectedly, they never come back unless just visiting relatives, in effect crushing the local birth rate.
The Estonian government has been bold and is, in some ways, acting with a start-up mentality itself.
This young, audacious government looks to scale up as fast as possible. The visionary policy is seen as the solution to maneuvering around long-lasting problems.
These pro-growth tech policies could invigorate local youth causing them to stay at home rather than flee to greener pastures.
This lifeline might slow down the 60% of local Estonians who dream of moving to a place where they can experience a higher quality of living standards.
Rebranding itself as the digital nomad epicenter is a risky move that most governments wouldn't dare to do.
It's easy to ignore the brain drain in the Baltics while I am living in the Bay Area.
Silicon Valley has been drawing in the cream of the crop for years.
Developers want to stay in California because of the high standard of living, which is even nicer on a developer's salary.
No doubt the Bay Area has poached its share of Baltic working professionals especially when Microsoft acquired Skype.
However, this Estonian policy starts with the low-hanging fruit as the biggest names in the industry’s power players will gravitate toward the oodles of venture capital and large pool of talent. Unfortunately, that place is not the Baltics.
You must learn how to crawl before you can walk. If this visa experiment takes off, it could be a game-changer while nudging the Baltics closer into the West's orbit of influence and raising income levels.
A win-win situation.
As for me, I won't be taking a $200 flight to Estonia to work in a coffee shop.
I prefer Incline Village, Nevada, and Zermatt, Switzerland, as my favorite digital nomad hideouts.
If it's not broke, don't fix it.
On My Way to Switzerland
Chiang Mai, Thailand - Another Digital Nomad Stronghold
“A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.” – Said CEO and Founder of Amazon Jeff Bezos
Mad Hedge Technology Letter
October 23, 2019
Fiat Lux
Featured Trade:
(WILL A.I. SAVE US?),
(TSLA), (AMZN), (FB)
Anti-A.I. physicist Professor Stephen Hawking was a staunch supporter of preserving human interests against the future existential threat from machines and artificial intelligence (A.I.).
He was diagnosed with motor neuron disease, more commonly known as Lou Gehrig's disease in 1963 at the age of 21 and sadly passed away March 14, 2018 at the age of 76.
Famed for his work on black holes, Professor Hawking represented the human quest to maintain its superiority against quickly advancing artificial acculturation.
His passing was a huge loss for mankind as his voice was a deterrent to A.I.'s relentless march to supremacy. He was one of the few who had the authority to opine on these issues.
Gone is a voice of reason.
Critics have argued that living with A.I. poses a red alert threat to privacy, security, and society as a whole. Unfortunately, those most credible and knowledgeable about A.I. are tech firms.
They have shown that policing themselves on this front is remarkably unproductive.
Mark Zuckerberg, CEO of Facebook (FB), has labeled naysayers as "irresponsible" and dismissed the threat. After failing to prevent Russian interference in the last election, he is exhibiting the same defensive posture translating into a de facto admission of guilt. His track record of shirking accountability is becoming a trend leading him to allow politicians to post untrue marketing material for the 2020 U.S. election.
Share prices will materially nosedive if A.I. is stonewalled and development stunted. Many CEOs who stake careers on doubling or tripling down on A.I. cannot see it die out. There is too much money to lose – even for Mark.
The world will see major improvements in the quality of life in the next 10 years. But there is another side to the coin which Zuckerberg and company refuse to delve into...the dark side of technology.
Tesla's (TSLA) CEO Elon Musk has shared his anxiety about robots flipping the script on humans. Elon acknowledges that A.I. and autonomous vehicles are important factors in the battle for new technology. The winner is yet to be determined as China has bet the ranch with unlimited resources from the help of Chairman Xi and state sponsored institutions.
The quagmire with China has been squarely centered around the great race for technological supremacy.
A.I. is the ultimate X factor in this race and whoever can harness and develop the fastest will win.
Musk has hinted that robots and humans could merge into one species in the future. Is this the next point of competition among tech companies? The future is murky at best.
Hawking's premise that evolution has inbuilt greed can be found in the underpinnings of America's economic miracle.
Wall Street has bred a culture that is entirely self-serving regardless of the bigger system in which it finds itself.
Most of us are participating in this perpetual money game chase because our system treats it as a natural part of life. A.I. will help a select few do well in this paper chase to the detriment of the majority.
Quarterly earnings performance is paramount for CEOs. Return value back to shareholders or face the sack in the morning. It's impossible to convince anyone that America's capitalist model is deteriorating in the greatest bull market of all time.
Wall Street has an insatiable hunger for cutting-edge technology from companies that sequentially beat earnings and raise guidance. Flourishing technology companies enrich the participants creating a Teflon-like resistance to downside market risk.
The issue with Professor Hawking's work is that his timeframe is too far in the future. Professor Hawking was probably correct, but it will take 25 years to prove it.
The world is quickly changing as science fiction becomes reality.
People on Wall Street are a product of the system in place and earn a tremendous amount of money because they proficiently execute a specialized job. Traders are busy focusing on how to move ahead of the next guy.
Firms building autonomous cars are free to operate as is. Hyper-accelerating technology spurs on the development of A.I., machine learning, and enhanced algorithms. Record profits will topple and investors will funnel investments back into an even narrower grouping of technology stocks after the weak hands are flushed out.
Professor Hawking said we need to explore our technological capabilities to the fullest in order to avoid extinction. In 2018, exploring these new capabilities still equals monetizing through the medium of products and services.
This is all bullish for equities as the leading companies associated with A.I. to reap the benefits.
And let me remind you that technology is still the least regulated industry on the planet even with all the recent hoopla.
It is having its cake and is eating it too. Hence, technology is starting to cross over into other industries demonstrating the powerful footprint tech has extracted in economics and the stock market.
The only solution is keeping companies accountable by a function of law or creating a third-party task force to regulate A.I.
In 2019, the thought of overseeing robots sounds crazy.
The future will be here sooner than you think.
"The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge," said the late Professor Stephen Hawking.
Mad Hedge Technology Letter
October 21, 2019
Fiat Lux
Featured Trade:
(THE CLOUD BASICS)
(AMZN), (MSFT), (GOOGL), (AAPL), (CRM), (ZS)
If you've been living under a rock the past few years, the cloud phenomenon hasn't passed you by and you still have time to cash in.
You want to hitch your wagon to cloud-based investments in any way, shape or form.
Microsoft's (MSFT) pivot to its Azure enterprise business has sent its stock skyward, and it is poised to rake in more than $100 billion in cloud revenue over the next 10 years.
Microsoft's share of the cloud market rose and is catching up to Amazon Web Services (AWS).
Amazon leads the cloud industry and still maintains more than 30% of the cloud market. Microsoft would need to gain a lot of ground to even come close to this jewel of a business.
Amazon (AMZN) relies on AWS to underpin the rest of its businesses and that is why AWS contributes 73% to Amazon's total operating income.
Total revenue for just the AWS division is an annual $5.5 billion business and would operate as a healthy stand-alone tech company if need be.
Cloud revenue is even starting to account for a noticeable share of Apple's (AAPL) earnings, which has previously bet the ranch on hardware products.
The future is about the cloud.
These days, the average investor probably hears about the cloud a dozen times a day. If you work in Silicon Valley, you can triple that figure.
So, before we get deep into the weeds with this letter on cloud services, cloud fundamentals, cloud plays, and cloud Trade Alerts, let's get into the basics of what the cloud actually is.
Think of this as a cloud primer.
It's important to understand the cloud, both its strengths and limitations. Giant companies that have it figured out, such as Salesforce (CRM) and Zscaler (ZS), are some of the fastest growing companies in the world.
Understand the cloud and you will readily identify its bottlenecks and bulges that can lead to extreme investment opportunities. And that's where I come in.
Cloud storage refers to the online space where you can store data. It resides across multiple remote servers housed inside massive data centers all over the country, some as large as football fields, often in rural areas where land, labor, and electricity are cheap.
They are built using virtualization technology, which means that storage space spans across many different servers and multiple locations. If this sounds crazy, remember that the original Department of Defense packet-switching design was intended to make the system atomic bomb-proof.
As a user, you can access any single server at any one time anywhere in the world. These servers are owned, maintained and operated by giant third-party companies such as Amazon, Microsoft, and Alphabet (GOOGL), which may or may not charge a fee for using them.
The most important features of cloud storage are:
1) It is a service provided by an external provider.
2) All data is stored outside your computer residing inside an in-house network.
3) A simple Internet connection will allow you to access your data at anytime from anywhere.
4) Because of all these features, sharing data with others is vastly easier, and you can even work with multiple people online at the same time, making it the perfect, collaborative vehicle for our globalized world.
Once you start using the cloud to store a company's data, the benefits are many.
- No Maintenance
Many companies regardless of their size prefer to store data inside in-house servers and data centers.
However, these require constant 24-hour-a-day maintenance, so the company has to employ a large in-house IT staff to manage them - a costly proposition.
Thanks to cloud storage, businesses can save costs on maintenance since their servers are now the headache of third-party providers.
Instead, they can focus resources on the core aspects of their business where they can add the most value without worrying about managing IT staff of prima donnas.
- Greater Flexibility
Today's employees want to have a better work/life balance and this goal can be best achieved by letting them telecommute. Increasingly, workers are bending their jobs to fit their lifestyles, and that is certainly the case here at Mad Hedge Fund Trader.
How else can I send off a Trade Alert while hanging from the face of a Swiss Alp?
Cloud storage services, such as Google Drive, offer exactly this kind of flexibility for employees. According to a recent survey, 79% of respondents already work outside of their office some of the time, while another 60% would switch jobs if offered this flexibility.
With data stored online, it's easy for employees to log into a cloud portal, work on the data they need to, and then log off when they're done. This way a single project can be worked on by a global team, the work handed off from time zone to time zone until it's done.
It also makes them work more efficiently, saving money for penny-pinching entrepreneurs.
- Better Collaboration and Communication
In today's business environment, it's common practice for employees to collaborate and communicate with co-workers located around the world.
For example, they may have to work on the same client proposal together or provide feedback on training documents. Cloud-based tools from DocuSign, Dropbox, and Google Drive make collaboration and document management a piece of cake.
These products, which all offer free entry-level versions, allow users to access the latest versions of any document so they can stay on top of real-time changes which can help businesses to better manage workflow, regardless of geographical location.
- Data Protection
Another important reason to move to the cloud is for better protection of your data, especially in the event of a natural disaster. Hurricane Sandy wreaked havoc on local data centers in New York City, forcing many websites to shut down their operations for days.
The cloud simply routes traffic around problem areas as if, yes, they have just been destroyed by a nuclear attack.
It's best to move data to the cloud to avoid such disruptions because there your data will be stored in multiple locations.
This redundancy makes it so that even if one area is affected, your operations don't have to capitulate, and data remains accessible no matter what happens. It's a system called deduplication.
- Lower Overhead
The cloud can save businesses a lot of money.
By outsourcing data storage to cloud providers, businesses save on capital and maintenance costs, money that in turn can be used to expand the business. Setting up an in-house data center requires tens of thousands of dollars in investment, and that's not to mention the maintenance costs it carries.
Plus, considering the security, reduced lag, up-time and controlled environments that providers such as Amazon's AWS have, creating an in-house data center seems about as contemporary as a buggy whip, a corset, or a Model T.
"Life is not fair; get used to it," said the founder of Microsoft Bill Gates.
