Some of the most fascinating topics covered this week are: Technology (Machines have taken over stock market; Would you survive a merger with AI?), Sports (The boxer mother; First person to run a sub-two-hour marathon!), and Investing (Sanjoy Bhattacharya on good behavior)
At Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, ranging from zeitgeist to futuristic, and encapsulate them in our weekly ‘Ten Interesting Things’ product. Some of the most fascinating topics covered this week are: Technology (Machines have taken over stock market; Would you survive a merger with AI?), Sports (The boxer mother; First person to run a sub-two-hour marathon!), and Investing (Sanjoy Bhattacharya on good behavior).
Here are the ten most interesting pieces that we read this week, ended October 18, 2019.
1) The stock market is now run by computers, algorithms and passive managers [Source: The Economist] Technology has taken over each and every sector, including finance. Today, most, in fact all, of the stock brokers have their own website and app from where a trader/investor can buy/sell stocks. The role humans play in trading has diminished rapidly. In their place have come computers, algorithms and passive managers—institutions which offer an index fund that holds a basket of shares to match the return of the stock market, or sectors of it, rather than trying to beat it. The rise of financial robotisation is not only changing the speed and make-up of the stock market. It also raises questions about the function of markets, the impact of markets on the wider economy, how companies are governed and financial stability.
Companies are pushing automation; the strategies of “rules-based” machine-run investors—those using algorithms to execute portfolio decisions—are changing. Some quant funds, like Bridgewater, use algorithms to perform data analysis, but call on humans to select trades. The execution of orders on the stock market is now dominated by algorithmic traders. According to Deutsche Bank, 90% of equity-futures trades and 80% of cash-equity trades are executed by algorithms without any human input. Many critics argue that this is misleading, as the liquidity provided by high-frequency traders is unreliable compared with that provided by banks.
The machines’ market dominance is sure to extend further. The prospect of gaining an edge from machine-derived factors will entice other money managers to pile in. It is natural to be fearful of the consequences, for it is a leap into the unknown. But the more accurate and efficient markets are, the better both investors and companies are served. If history is a guide, any new trading advantage will first benefit just a few.
2) Jeff Bezos’s master plan [Source: The Atlantic] Today, Jeff Bezos controls nearly 40% of all e-commerce in the United States. More product searches are conducted on Amazon than on Google, which has allowed Bezos to build an advertising business as valuable as the entirety of IBM. But, that’s not what he dreams of. His dreams are big and massive. And to understand that you need to take a look at his ambitious venture, Blue Origin. He funds that venture—which builds rockets, rovers, and the infrastructure that permits voyage beyond the Earth’s atmosphere—by selling about $1 billion of Amazon stock each year.
What worries Mr. Bezos is that in the coming generations the planet’s growing energy demands will outstrip its limited supply. The danger, he says, “is not necessarily extinction,” but stasis: “We will have to stop growing, which I think is a very bad future.” While others might fret that climate change will soon make the planet uninhabitable, the billionaire wrings his hands over the prospects of diminished growth.
As Amazon has matured, it has assumed the trappings of something more than a private enterprise. It increasingly poses as a social institution tending to the common good. Ben Thompson, the founder of Stratechery, a website that vivisects Silicon Valley companies, has incisively described Amazon’s master plan. He argues that the company wants to provide logistics “for basically everyone and everything,” because if everything flows through Amazon, the company will be positioned to collect a “tax” on a stunning array of transactions.
3) Would you survive a merger with AI? [Source: Nautilus] What would you give to become immortal? Would you give yourself? The idea that humans should merge with AI is very much in the air these days. It is offered both as a way for humans to avoid being outmoded by AI in the workplace, and as a path to superintelligence and immortality. One of Neuralink’s (Elon Musk’s company) first aims is to develop “neural lace,” an injectable mesh that connects the brain directly to computers. Neural lace and other AI-based enhancements are supposed to allow data from your brain to travel wirelessly to one’s digital devices or to the cloud, where massive computing power is available.
Perhaps these sorts of enhancements will turn out to be beneficial, but to see if this is the case, we will need to move beyond all the hype. Policymakers, the public, and even AI researchers themselves need a better idea of what is at stake. For instance, if AI cannot be conscious, then if you substituted a microchip for the parts of the brain responsible for consciousness, you would end your life as a conscious being. You’d become what philosophers call a “zombie”—a nonconscious simulacrum of your earlier self.
The author of this piece also gives an example of the science-fiction novel, Mindscan by Robert Sawyer. The protagonist Jake Sullivan has an inoperable brain tumor. Death could strike him at any moment. Luckily, Immortex has a new cure for aging and illness—a “mindscan.” But, that’s not what he had expected. Having a particular type of pattern cannot be sufficient for personal identity. Indeed, the problem is illustrated to epic proportions later in Sawyer’s book when numerous copies of Sullivan are made, all believing they are the original!
4) We’ve evolved and science played a vital role in our identity [Source: nature.com] In the iconic frontispiece to Thomas Henry Huxley’s Evidence as to Man’s Place in Nature (1863), primate skeletons march across the page and, presumably, into the future: “Gibbon, Orang, Chimpanzee, Gorilla, Man.” Fresh evidence from anatomy and palaeontology had made humans’ place on the scala naturae scientifically irrefutable. We were unequivocally with the animals — albeit at the head of the line. Nicolaus Copernicus had displaced us from the centre of the Universe; now Charles Darwin had displaced us from the centre of the living world. Regardless of how one took this demotion, there was no doubting Huxley’s larger message: science alone can answer what he called the ‘question of questions’: “Man’s place in nature and his relations to the Universe of things.”
Huxley’s sunny view — of infinite human progress and triumph, brought about by the inexorable march of science — epitomizes a problem with so-called Enlightenment values. The precept that society should be based on reason, facts and universal truths has been a guiding theme of modern times. Across the arc of the past 150 years, we can see both science and scientism shaping human identity in many ways. In the late 1960s and 1970s, critics (including a number of scientists) grew concerned that the new biology could alter what it means to be human. In 1978, Patrick Steptoe and Robert Edwards succeeded with human in vitro fertilization, leading to the birth of Louise Brown, the first ‘test-tube baby’. By 1996, human cloning seemed to be around the corner, with the cloning of a sheep that Ian Wilmut and his team named Dolly.
Since the Enlightenment, we have tended to define human identity and worth in terms of the values of science itself, as if it alone could tell us who we are. That is an odd and blinkered notion. In the face of colonialism, slavery, opioid epidemics, environmental degradation and climate change, the idea that Western science and technology are the only reliable sources of self-knowledge is no longer tenable. This isn’t to lay all human misery at science’s feet — far from it. The problem is scientism. Defining the self only in biological terms tends to obscure other forms of identity, such as one’s labour or social role. Maybe the answer to Huxley’s ‘question of questions’ isn’t a number, after all.
5) Edison and the shadow side of artificial light [Source: nature.com] The author of this piece, David E. Nye, examines two books, American Lucifers by Jeremy Zallen and Edison by Edmund Morris, to understand the history of lighting technologies. American Lucifers begins a century before Edison’s birth, in 1750. Zallen, a historian, explores the human costs of artificial lighting from then until 1890, concentrating on people producing and using fuel in the United States, and their links to South America, Britain and the Caribbean. Viewing energy in terms of class, he examines the fate of whalers, enslaved people distilling pine resin to make turpentine, children in match factories, petroleum refiners and miners of coal and copper.
Morris’s view of Edison is more nuanced. Known for his trilogy on US president Theodore Roosevelt, Morris follows an unusual chronology, proceeding in reverse from Edison’s death in 1931. Thus, Edison’s final three decades, when important inventions tapered off, precede his spectacular triumphs. Morris, an engaging writer with an eye for details, explains the inventions clearly, including lesser-known technologies such as the 1877 translating embosser, which sped up telegraphic transmission.
Morris’s treatment is detailed but flawed. Edison’s relationship with the US car magnate Henry Ford was more important than Morris credits: both grew up in the hinterlands of Detroit, Michigan, and they held similar convictions. Electrification has proved a boon — but spurred resource extraction, light pollution and global warming. As we face another great transition, from fossil fuels to alternative energies, Zallen’s narrative is timely — echoing in the high human and environmental costs of dramas playing out in Nigerian oilfields and the smog of Indian cities. Meanwhile, Morris’s portrait of an energy revolution that was eagerly embraced, yet took more than half a century, leaves us hoping that rendering Edison’s system sustainable will not take as long.
6) Her never-say-die attitude strikes a chord with sportspersons and mothers alike [Source: parentcircle.com] Mary Kom has become an inspiration for everyone in India. Be it school children in the Northeast or youngsters who dream of pursuing their career as a boxer, she has made a place in every Indian’s mind and heart. While she has performed like a champion in the ring, she has done the same as a mother. An encouraging mom to her kids, the boxer says she can balance work and home by being quick in her decisions, just as she is in the boxing ring. In this interview, she gives a sneak peek into her life, as a mother.
When asked what’s her mantra to balance work and family, she says that it is like the boxing ring. “I am swift and quick in my decision and action in my daily life too. This enables me to accomplish several tasks. Being on time (and waking up early), help me tackle my various responsibilities.” Talking about her children, she says that they are crazy about football. “It is always football for them in their free time. They have achieved quite a lot in sports in their school, even beyond football. I support them in every possible way. I bring them sports kits whenever I travel abroad.”
When it comes to values, Mary Kom wants her children to be good human beings and be compassionate. Also, she says that hers and her husband’s parenting approach is a bit different. “My husband is soft by nature, so is his approach to everyone including our kids. He corrects them with ease and softly. In my case, I do not compromise easily, even with my kids. I let them know for sure that they should not repeat the mistake they have made. Meanwhile, I appreciate them for all their accomplishments.”
7) Challenges that you face as a working parent [Source: HBR] Parenthood is a wonderful experience, but with its own challenges. Today, we’re having more open and honest conversations about topics like maternity leave, return to work, and pregnancy and breastfeeding in the office. Yet much of our public discussion around working parents focuses on the needs of new mothers, as if the challenges of integrating work and parenthood evaporate once a child enters school (not to mention that working fathers are often ignored completely).
After pregnancy and return to work, the next major upheaval for most working parents happens when their child enters school and the childcare arrangements they have come to rely on are suddenly upended. Children continue to need care even as they transition to middle and high school and become more independent. But, it’s not all bad news as children get older. While the demands of work and family don’t diminish, they become better equipped at integrating the two and more forgiving of their missteps. They become skilled multitaskers and time managers, laser-focused on what has to get done both at work and at home.
Some organizations have become more creative in supporting parents with older children. Biotechnology company Genentech has partnered with an organization that helps employees find high-quality programs for their children when school is not in session. Johnson & Johnson provides financial assistance for the speech, occupational, mental health, and physical therapy needs of employees’ children. Being a parent doesn’t end, it just changes form. By acknowledging this and providing appropriate supports to parents throughout their children’s lives, we can create better workplaces, stronger families, and healthier communities.
8) Arrested in PMC fraud, Rakesh and Sarang Wadhawan were once the darlings of Mumbai’s social circles [Source: Mumbai Mirror] For one to earn name and respect it takes ages, but to see it destroyed, just few minutes. And one such example is of the Wadhawan’s. Known for the flamboyance, the father-son duo (Rakesh and Sarang Wadhawan) and promoters of a realty company have recently got in news with connection to the PMC fraud. PMC Bank had extended loans to the beleaguered HDIL and related entities, to the tune of Rs 6,226 crore, roughly amounting to 73% of the bank’s total assets, but the borrowers defaulted, leading to a spiralling crisis that has now hit the bank’s 17 lakh depositors. The RBI has asked the bank to stop doing business for 6 months.
The depositors’ hard-earned money has long supported the lavish lifestyles of the Wadhawans. From private jets to luxury yachts and mansions in Alibaug, Lonavla, Dubai and all over the world, the Wadhawans have all the riches that one can imagine. It was through political connection that the Wadhawans managed to build such a big conglomerate. Rakesh Wadhawan founded HDIL in 1996, and by 2009, at age 57, he had cracked into the billionaire’s club with an estimated net worth of $16 billion.
Looking back, it seems plausible that financial troubles prompted Rakesh Wadhawan to suddenly exit the world of horseracing in 2013, a world he had entered with characteristic pomp just five years earlier. According to senior racing journalist Usman Rangila, Wadhawan once owned about 100 horses, collectively valued at over Rs200 million. But, the big investment in horses didn’t yield returns. As the HDIL ship begins its descent into the murky waters of economic fraud, it’s no longer clear if the Wadhawans’ fortunes will, in fact, sink or swim.
9) Eliud Kipchoge: First person to run a sub-two-hour marathon! [Source: The Economist] For the first time in the human history has anyone ran a marathon under 2 hours! Researchers had said that for a human to run a sub-2-hour marathon it will take years, but Eliud Kipchoge has proved them wrong. The 34-year-old Kenyan who holds the world record ran the marathon with a time of 1:59:40. Kipchoge had earlier tried to break the 2-hour barrier, but fell short by 26 seconds. The two-hour marathon ranks with the four-minute mile, bested by Sir Roger Bannister in 1954, and the ten-second 100-metre dash, which was not achieved at low altitude until 1983.
But the record wasn’t set in a normal race. The official rules were bent to make it happen. The location and route were optimized to increase the likelihood of a sub-two-hour time. The exhibition also aimed to eliminate much of the wind resistance that slows any runner. Mr. Kipchoge trailed an electric car, which established a consistent speed for the duration of the attempt, as well as a rotating army of 42 pace-setters in a specially-designed ‘V’ formation.
Also, one of the biggest factors in Mr. Kipchoge’s successful sub-two-hour marathon is his shoes. He wore the Vaporfly Next by Nike. Vaporflys have been on the feet of elite marathoners since 2016, a short span of time in which the event’s record books have been completely rewritten. Only four men have ever run a regulation marathon in less than 2:02:57, and all of them did so with the assistance of Vaporflys. All this aside, Kipchoge’s fans will admire him for his running dominance. Only now we got to see whether he can break under 2 hours again in a marathon.
10) Sanjoy Bhattacharya on rewards of good behavior [Source: YouTube; CFA India] In this interactive session, Sanjoy Bhattacharya, one of the leading value investors in India, throws light on why behavior plays an important role in investing. Mr. Bhattacharya explains why one must put behavioral finance into practice. He also busted several myths, some of which even the stalwarts follow till date.
In this speech, he pauses several times and interacts with the audience to give them live examples of how behavioral finance works. Not only did he mention the myths, but also taught ways to overcome the same. He beautifully explains, with examples of course, how our mind and emotion work in the market in downturn and upturn.
He also gives a disclosure in the beginning that this presentation is not his original work. He has taken ideas from Daniel Crosby, Jason Zweig, James Monteir and Michael Mauboussin. This longish presentation is a must watch for anyone and everyone in the investing world.