Mad Hedge Technology Letter
October 28, 2019
Fiat Lux
Featured Trade:
(NEWSPAPERS REALLY KNOW WHO YOU ARE),
(TPCO), (AMZN), (FB), (GOOGL), (USPS), (SFTBY)
Publishing magnate and self-described populist William Randolph Hearst was a deep admirer of Adolph Hitler and did not shy away from using his newspapers as a de-facto mouthpiece spouting off der Fuhrer's propaganda.
Hearst created content sympathizing with the Nazi ethos and even mobilized an embedded secret agent from the German government to act as a correspondent that followed hot, daily scoops inside Germany.
Hearst also used his publishing clout to pull the strings in the 1932 presidential election backing candidate John Nance Garner or "Cactus Jack" who later agreed to be Franklin D. Roosevelt's running mate.
The fusion of politics and media has been chiseled into human DNA since antiquity. However, the purpose of newspapers has evolved significantly since it became impossible to break even about 10 years ago.
Print newspapers are a lot like the United States Postal Service (USPS) - it specializes in losing money.
However, the (USPS) was never politicized as was the publishing industry until the administration managed to commingle the loss-making mail outfit and Amazon as a joint problem roiling society.
The politicization comes at a cost to society.
All the well-intentioned journalists involved in earnest and quality journalism lose out because the new normal for newspapers has evolved into a William Hearst-like blatant tool promoting targeted interests.
Do you ever wonder why the Washington Post hardly ever publishes content harmful to the image and interests of Amazon?
Because it is owned by the same man, Jeff Bezos, who founded Amazon (AMZN) in 1994, as he cruised in his car cross-country from New York to Seattle where he would establish his tech empire.
Effectively, Jeff Bezos has the ear of each corner of the political power grid in Washington and even more so as he establishes another Amazon headquarter in the state capitol.
And while the administration attacked Bezos as a job destroyer repeatedly, Amazon has in fact been the largest private job CREATOR in the U.S. It added a staggering 130,000 new jobs in 2017, and an eye-popping 560,000 jobs over the past 10 years.
Laurene Powell Jobs, widow to Steve Jobs, acquire the Boston-based American magazine The Atlantic.
The Atlantic earns more than $10 million per year in revenue and lures in over 33 million readers per month.
Billionaire biotech investor Patrick Soon-Shiong reached a deal with Tribune Publishing Co. (TPCO), a portfolio of a vast array of various legacy media assets, to take over the Los Angeles Times and San Diego Union-Tribune for $500 million.
Tribune Publishing Co is a potential investment for SoftBanks' (SFTBY) Masayoshi Son, looking to scoop up parts of the extensive portfolio.
Private equity group Apollo and media firm Gannett Company are also in the mix to acquire Tribune Publishing Co
Some of Tribune Publishing Co.'s crown assets are the Chicago Tribune, the New York Daily News, and the Baltimore Sun among other regional newspapers with a large audience base.
The courting of these news media assets comes at a time when Google (GOOGL) is funding a project to automate more than 30,000 stories per month for the local media as a cost-effective way to advance the business model.
Quality journalism written by a human is the last thing in which these mega-tech companies are interested.
Tech is about automating and then scaling the automation. This bodes ill for personalized authors, and newspaper journalists are the lowest rung on the totem pole. They will be the first to be replaced by automation.
The first thought that came into my head when I heard about SoftBank's vision fund swooping in for another company was data grab.
We have seen this story time and time again.
Newspapers and how an online subscriber behaves on a digital newspaper platform offer valuable data points unfound elsewhere.
The data will reveal the political ideas, topics of interest, and other sensitive information deduced into a comprehensive data profile.
Effectively, a company such as SoftBank will be able to create a functional shadow profile for almost anyone.
The concept of shadow profiling emerged from the acrimony of Mark Zuckerberg's testimony in Washington and could be the next point of heated contention.
What are shadow profiles?
Shadow profiles are digital profiles crafted from data not directly handed over to Facebook (FB) by the user.
This data is extracted through fringe third parties, other friends on Facebook if they post content unique to you, and specifically through the "find your friends" function that recommends the uploading of an entire digital address book giving Facebook access to everyone you know.
Scarily, there is no opt-out for shadow profiling, and there probably won't be another congressional testimony about this topic anytime soon.
If Facebook wanted to turn into the FBI, it would be easy.
The treasure trove of data would give insight on the subtle nuances of authentic human behavior and how to best manipulate it.
This artificial profile would seem real.
If you are an Android user like most of the world, Google could fill out the most comprehensive profile with a high degree of accuracy on most people.
The scandalous bit about shadow profiling is that these profiles are whipped up even if a user has never signed up for Facebook.
Shadow profiling, along with other data, becomes more precise as the volume of data piles up. To understand the behavior, trends, and tastes of most of the world's population is incredibly valuable.
Facebook could use this shadow profiling data to understand the wide range of non-Facebook user behavior.
This way of monetizing data would be highly illegal if leaked to an actionable third party and would be significantly worse than the Cambridge Analytica scandal.
This data should be deleted immediately, but Facebook has a backdoor way to keep the data in the system.
If Facebook got slammed for data leakage then others are in danger, too. That's because Facebook is not the only player mining data for money.
It wouldn't be surprising if other large-cap tech companies started to create these shadow profiles to get dirt on their competitors as well as other use cases.
Tech is evolving at such a fast pace. It subconsciously encourages the never-give-up mentality that coerces firms to stay one step ahead which Amazon has been able to do since its inception.
Newspaper companies are next in line to be absorbed by large-cap techs continuously expanding web assets that hyper-focus on exponential data generation.
These newspapers will defend tech's interests in the economy similar to how newspapers were used as William Hearst's rallying cry for politics.
Jeff Bezos has chosen silence to react to the administration's vendetta against him but he could easily mobilize his assets to protect Amazon's interests.
Bezos just shrugs his shoulders and goes about his day because he knows Washington cannot do anything to prevent Amazon's dominance at the top of the tech food chain.
Better take the high road.
Not only do these big tech companies know who you talk to, what you buy, and where you are, but now they are given deeper access into the identity of users.
Be on the lookout for these assets to get cherry-picked and look forward to reading your future newspaper owned by Google, Facebook, and the usual cast of characters.
Stay away from legacy newspaper stocks. Only weigh up the media stocks that have already pivoted to the online streaming business model of scaling original premium content.
"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)
