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A Few Things: 5% Inflation For a Decade, A US Bubble?, Good Inside, SBF, ChatGPT, Generative AI.....
December 5, 2022
I am sharing this weekly email with you because I count you in the group of people I learn from and enjoy being around.
If you are new to this email, you might be wondering what it’s about….answer: this is simply a catalogue of my weekly learning journey out in the open with you. It covers the rabbit holes I went down last week.
If you missed last week’s edition, you can check it out here: Malmgren on Geopolitics, Space Race & CBDCs, Papic on Analysing Markets, Huberman on Happiness, Chanos on Frauds, Engines That Move Markets, Berger on Ways Of Seeing, Latest in AI…
If you like this email please hit the like button, so others know which posts to read.
“Man is least himself when he talks in his own person. Give him a mask, and he will tell you the truth.”
- Oscar Wilde
“I have never seen a wild thing feel sorry for itself. A little bird will fall dead, frozen from a bough, without ever having felt sorry for itself.”
- D. H. Lawrence
“Every generation imagines itself to be more intelligent than the one that went before it, and wiser than the one that comes after it.”
- George Orwell
“You don’t have to burn books to destroy a culture. Just get people to stop reading them.”
- Ray Bradbury
“Things that matter most must never be at the mercy of things that matter least.”
- Johann Wolfgang von Goethe
“A process cannot be understood by stopping it. Understanding must move with the flow of the process, must join it and flow with it.”
- First Law of Mentat, Dune
A. A Few Things Worth Checking Out
1. The always entertaining Vincent Deluard was on the Bloomberg: What Goes Up podcast arguing that expectations that inflation will normalise to near 2% in the near term will “end in tears”. He contends growth in consumer prices will remain closer to 5% for about a decade, which will enable the financial repression that Napier has also discussed.
One reason for higher inflation is the reversal of three huge forces: cheap labour, cheap capital and cheap energy.
He believes that the FED will at some point signal “Mission Accomplished” and then through various means including hedonic adjustments keep inflation elevated while “pretending” its’ lower.
He also spent some time discussing the origins of the 2% inflation goal and why a higher number could be good for growth.
He calls his market recommendation, the holy trinity portfolio: 1/3 Financials, 1/3 Energy, 1/3 Healthcare.
Thank you Bjorn T for flagging.
2. Gavekal had an interesting piece titled: Themes For 2023: Consequences Of The US Bubble Implosion. The gist of the piece is that the US has been perceived as the cleanest dirty shirt. Thank you Jim for sharing.
This narrative is now at risk because: a) the US economy is headed into a recession b) the US real estate market has rapidly deteriorated c) the cost of funding of US govt debt is rising
They argue that the US equity market outperformance over the last decade has been driven by a re-rating of technology stocks. But what if the outperformance was merely the product of easy money that is no longer available.
3. The US Airforce launched it’s B-21 Raider, 6th generation bomber on Thursday. It’s a beauty.
4. With the year coming to an end, here are 3 of your favourite posts from Q1 that are a good read today.
5. Great Netflix movie to check out:
B. Good Inside
Being a good parent is probably my most important job. I can’t think of anything else more impactful and rewarding.
But what is our goal as parents? What are we trying to accomplish? Do we want to raise independent children? Do we want them to be resilient and caring? Do we want to parent them the way we were parented?
These are the questions I have been thinking about over the last eleven years as a parent. Not only what the right goals are of a parent, but what is the best way to achieve those goals.
Dr. Kennedy’s book is a top 5 book on the subject of being a better parent.
She is a clinical psychologist and a mother of 3, so much of the discussion is very practical.
Here are a couple of things I got from it that I have been trying to apply:
The key idea to start from is that both you and your child are good inside. This is an obvious but important idea. So often we start from the place of either not believing our own goodness or we look past the goodness of our child. Remember you are both good inside.
When dealing with your child’s emotions, feelings or thoughts, always validate and permit what they are feeling rather than immediately pushing away. No matter how much you might disagree with what they are feeling or saying, the first step is to accept them where they are and how they feel. If we don’t validate or permit what they feel, they will grow up doubting their emotions and beliefs. They need to know that they are allowed to feel what they feel and that they can share it with you. For example: “I understand what you are feeling and it’s ok to feel this way. I respect you”.
We all want our children to be happy but how do we cultivate happiness? Dr Kennedy’s approach is that we cultivate it by regulating distress, and you regulate distress by being resilient. By being able to handle the bad stuff, we become stronger and more trusting of ourselves. Which means rather than removing your children’s troubles, work with them to handle the troubles and show them that they can survive them.
When your children are behaving badly, it’s a good time to ask yourself, what feeling could be leading to this behaviour? What are your child’s real needs here? Don’t use shame to change behaviour. Real change happens when they are feeling good inside.
Some tactical stuff:
When they are hesitating on soccer or music practice, rather than pushing onwards, first validate their feelings, then say something like: “seems like you need a minute. Take your time. You will know when you are ready”, some questions for them could be: a) when shall we do it? b) what cool thing can we do once this hard thing is over?
When they are lying, rather than shaming and confronting them, reframe their lie as a wish preserving their goodness and then asking later when things have cooled down, something like: “if it did happen…?” or “what would it take for you to be honest on this….?”
She had a great discussion of the ideas inside the book on the “We Can Do Hard Things” podcast with Glennon Doyle on a podcast titled: Breaking Cycles and Reparenting Yourself. Highly recommend this.
You can see her talking about the issues: How To Find The Goodness Inside Yourself
Thank you Leila Z for sharing this.
C. The Tech and Crypto Section:
1. We are at the point in the crypto cycle, when we need to discuss Distressed Crypto Investing. In this episode of Empire, Thomas Braziel joins the hosts to discuss the highly lucrative yet misunderstood world of distressed crypto investing.
2. A snippet from a Twitter Spaces where SBF admits creating fake bitcoin entries in the accounts of people on the platform. Not your keys, not your coins….
and here is the full recording with notes from the Twitter Spaces with SBF:
3. ChatGPT was released by OpenAI for public access and the internet has gone crazy over what is being churned out. ChatGPT is a simple user interface that allows a user to drop in a prompt about almost anything, and the AI responds with some pretty impressive answers.
It’s free to sign up, and it makes for some very entertaining reading, and existentially bad news for mediocre journalists, copywriters or content producers. We have discussed OpenAI a few times in the last few months.
Please take 10 mins and play with it, ideally with your children.
OpenAI is also the company behind DALL-E2.
This was OpenAI’s post on ChatGPT. ChatGPT is a dialogue-based AI chat interface for its GPT-3 family of large language models. It can write poetry, correct coding mistakes with detailed examples, generate AI art prompts, write new code, expound on the philosophical questions…
4. At this point, ChatGPT is probably best used less an authoritative oracle and more as an autocomplete or idea machine.
Key bits (emphasis mine):
One thing everyone wants to know when thinking about technology and the future of work is what they’ll actually be doing for a living in the future. It’s not enough for economists to just wave their hands and say “Oh, we’ll find something for people to do.” But although we can’t know for sure what the jobs of the future will look like, we can imagine how many of today’s creative jobs might change in the age of “autocomplete for everything”.
Take op-ed writers, for instance – an example that’s obviously important to Noah. Much of the task of nonfiction writing involves coming up with new ways to phrase sentences, rather than figuring out what the content of a sentence should be. AI-based word processors will automate this boring part of writing – you’ll just type what you want to say, and the AI will phrase it in a way that makes it sound comprehensible, fresh, and non-repetitive. Of course, the AI may make mistakes, or use phrasing that doesn’t quite fit a human writer’s preferred style, but this just means the human writer will go back and edit what the AI writes.
In fact, Noah imagines that at some point, his workflow will look like this: First, he’ll think about what he wants to say, and type out a list of bullet points. His AI word processor will then turn each of these bullet points into a sentence or paragraph, written in a facsimile of Noah’s traditional writing style. Noah will then go back and edit what the AI wrote – altering phrasing, adding sentences or phrases or links where appropriate, and so on. An iterative, collaborative writing loop where an AI coauthor masters different parts of the cognitive stack than Noah himself, not dissimilar to the co-writing of this article.
Many artists will likely have a similar workflow. Suppose you want to draw a painting of a space adventurer riding a giant rabbit on Mars. You’ll write (or speak) a prompt, and the AI will create a bunch of alternative pictures – perhaps adapted to your own art style, or that of a famous artist like Frank Frazetta. You’ll then select one of the alternatives and go to work on it. Maybe you’ll continue to prompt the AI to alter that image or riff on it. When you finally have something close to what you want, you’ll go in and change the details by hand – including cleaning up the hands, hair, or other little “edge cases” that the AI messes up.
Industrial design will work in a similar way. Take a look at any mundane, boring object in the room around you – a lamp, or a TV stand, or a coffee maker. Some human being had to come up with the design for that. With generative AI, the designer won’t have to look through pages and pages of examples to riff off of. They’ll just deliver a prompt – “55-inch TV stand with two cabinets” – and see a menu of alternative designs. They’ll pick one of the designs, refine it, and add any other touches they want.
We can imagine a lot of jobs whose workflows will follow a similar pattern – architecture, graphic design, or interior design. Lawyers will probably write legal briefs this way, and administrative assistants will use this technique to draft memos and emails. Marketers will have an idea for a campaign, generate copy en masse and provide finishing touches. Consultants will generate whole powerpoint decks with coherent narratives based on a short vision and then provide the details. Financial analysts will ask for a type of financial model and have an Excel template with data sources autofilled.
What’s common to all of these visions is something we call the “sandwich” workflow. This is a three-step process. First, a human has a creative impulse, and gives the AI a prompt. The AI then generates a menu of options. The human then chooses an option, edits it, and adds any touches they like.
The sandwich workflow is very different from how people are used to working. There’s a natural worry that prompting and editing are inherently less creative and fun than generating ideas yourself, and that this will make jobs more rote and mechanical. Perhaps some of this is unavoidable, as when artisanal manufacturing gave way to mass production. The increased wealth that AI delivers to society should allow us to afford more leisure time for our creative hobbies.
So that’s our prediction for the near-term future of generative AI – not something that replaces humans, but something that gives them superpowers. A proverbial bicycle for the mind. Adjusting to those new superpowers will be a long, difficult trial-and-error process for both workers and companies, but as with the advent of machine tools and robots and word processors, we suspect that the final outcome will be better for most human workers than what currently exists.
5. Great post on How to…use AI to generate ideas. Tried this with kids. I can see children keeping a ChatGPT screen open on their screens at all times.
The key idea: In the long run LLM (large language models) such as ChatGPT will get commoditised, then magic will be in the proprietary data sets. On the job front, a lot of language / communication based jobs will get automated or augmented. We should see a Cambrian explosion of new companies building using these models just like companies that built on top of AWS.