George Gilder's Life After Google (Book Review)

Technology oracle George Gilder's writing output is nothing short of  prolific with twenty books published during his long career. I read his broadband manifesto Telecosm at the height of the dotcom boom where he declared the age of computer over, and the beginning of infinite bandwidth with ubiquitous networks. His main premise was correct, but didn't come to fruition for about fifteen years with the cloud computing phenomena. Now that we're fully entrenched in the "big data" era, Gilder is rocking the boat again with prognostications about the next telecommunications phase. Published in 2018, Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy, is Gilder's latest pronouncement of what may be coming in the not-too-distant future. 

I didn't like this book one iota. I liked a lot of what Gilder had to say, just not the way he said it. The former gold bug, now cryptocurrency crusader, was erudite with long winded sentences. There was too much fluff in Life After Google, and it read like a mashup of a philosophy book and a technology manual. Lots of minutia about the structure of semi-conductors, data centers and networks. Although Gilder is very smart and has a great sense of humor, much of the work was self-serving. He positions himself as part of the resistance against the Silicon Valley technology giants. It came off like the John Connor character in The Terminator fighting against Skynet and the cyborgs that protect the network. In reality, if blockchain circumvents "big data" and ushers in a new era, Gilder and his bitcoin (BTC) buddies such as Peter Thiel, Chamath Palihapitiya and Marc Andreessen, are going to hit the mother lode. Palihapitiya already cashed in some bitcoin and bought the NBA franchise Golden State Warriors. We're talking about a lot of money here.

The title of the book is Life After Google. Not Amazon (AMZN). Not Apple (AAPL). Not Facebook (FB). It's Google (GOOG)(GOOGL) Gilder sets his sights on. This is because, "Under Google's guidance, the Internet is not only full of unwanted ads but fraught with bots and malware. Instead of putting power in the hands of individuals, it has become a porous cloud where all the power and money rise to the top.". Gilder believes that security in the first iteration of the Web was fine because there were no such things as financial transactions.  When credit cards and cash exchanges were introduced, new security regimes become indispensable. He goes on the say, "The crisis of the current order in security, privacy, intellectual property, business strategy and technology is fundamental and cannot be solved within the current computer and network architecture.".  This is where the distributed network of blockchain comes into play and the cryptocurrencies that accompany it. The most notable cryptocurrency is bitcoin. 

"Warren Buffett dismisses bitcoin as a 'mirage'. Jamie Dimon, the CEO of JP Morgan Chase, calls it delusional. The Nobel laureate economist and Times columnist Paul Krugman declares it 'evil'."

It should be noted that JP Morgan Chase (JPM) now has the Quorum platform that utilizes blockchain. It's gaining traction, but as an evolution, not a revolution, at least on Main Street. 

Gilder explains Markov chains, where the outcome of a given experiment can affect the outcome of the next experiment. Google's entire architecture is dependent upon Markov chain technology. "By every measure, the most widespread, immense and influential of Markov chains today is Google's foundational algorithm, PageRank. Treating the Web as a Markov chain enables Google's search engine to gauge the probability that a particular Web page satisfies your search.".  The author takes swipes at the "titans of the cloud" from Amazon to Facebook for using Markov models to predict what customers will do next. Gilder also discusses hedge fund Renaissance Technologies, and its stellar performance with a dependence on Markov chain technology. He calls Renaissance the Google-era titan of finance and investing. Yet, he is betting against all of them in that a non-Markov model will win, aka, blockchain. I found some of the technological writing difficult to read and understand, especially when discussing Markov chains. I had to go over it a few times, which I prefer not to do. Some of it can be chalked up to my own lack of knowledge. Some of it can be attributed to the stream-of-conscious style of writing that felt like a nod and a wink to Gilder's associates and techie followers.

Gilder devotes a lot of pages refuting Google's head engineer Ray Kurzweil, an "inventor-prophet". I took this to be a backhanded compliment. "Google enlisted in a chiliastic campaign to blend human and machine cognition. Kurzweil calls it a 'singularity', marked by computation over human intelligence.". A Markov enthusiast, Kurzweil maintains that in recognizing patterns, "hierarchical hidden Markov models are a guide to the mind.". Gilder believes that the intellectuals of this era are simply blind to the reality of consciousness. He rejects Kurzweil's doctrine that consciousness can be put to the side as was inferred in Kurzweil's How to Create a Mind. Gilder is a staunch believer in AI, but nevertheless, spends a lot of time invalidating the teachings that machines will overcome human beings. You don't have to worry that a Cyberdyne Systems T-800 Terminator is coming to get you.

A big clue about the contents of Life After Google is the publisher Regenery Gateway.  On their Website the company states that, "Regenery Gateway, dedicated to serious works of cultural, social, and political analysis, is a reaffirmation of Regnery’s tradition of publishing original and penetrating conservative thinkers.". You don't get much more conservative than George Gilder. I get the impression after reading the book that he's in the libertarian camp, and influenced by the Austrian School of Economics. He wants to blow up the whole system. "The premise of the cryptocurrency movement is the recognition that the old bureaucracies of socialism and crony-capitalism have failed. That is the problem, not the solution.". He goes on to say, "Blockchains, smart contracts and cryptocurrencies are new ways to address the evils of the Google Age: porous internet security, unmoored money, regulatory overreach, network concentration and diminishing returns of big data.".  Gilder believes that the move to blockchain and cryptocurrency will happen in his lifetime, and he's 80 years old now. 

I couldn't read the book in long sessions because there was so much fluff. It just bogged me down. That said, I highlighted relevant paragraphs and sentences, and on my second pass through, it made much more sense to me going over the condensed version. Gilder goes into great detail about the resumes and histories of obscure computer scientists that are well known in the bitcoin universe from their blogs and whitepapers. Hackers. programmers, electrical engineers and bitcoin miners could probably benefit from reading Life After Google. I read for information and pleasure. Although there's a lot of information in the text, it wasn't a pleasurable experience. About the only investment in the book that bridges both eras is Nvidia (NVDA). It will be successful with parallel processing if blockchain becomes mainstream. Like they say in the business world, the squeeze was not worth the juice. A better book on cryptocurrency and blockchain is Bitcoin Billionaires by Ben Mezrich.  

Tech Titans of China (Book Review)

Forbes columnist Rebecca A. Fannin recently published the definitive guide to emerging technology investing in the PRC, Tech Titans of China: How China's Tech Sector is Challenging the World by Innovating Faster, Working Harder and Going Global. What Yelp is to restaurants, or, Lonely Planet is to travel books, Tech Titans of China is to technology companies in the Middle Kingdom. From startups to venture capitalists to publicly traded companies, some household names, some not, most are covered in the publication. It's a blueprint for allocating assets to China. With plenty of bullet lists and descriptive tables chock full of information, readers get their money's worth. If there's such a thing as a user-friendly technology investment book, this is it. A fine piece of journalism. 

Although there's nothing like American ingenuity, from Silicon Valley to Silicon Alley and all the flyover states in between, China is nipping at our heels for global technological dominance. It has a ways to go before catching up, but it's encroaching. Equity investors may be familiar with the BAT companies, Baidu (BIDU), Alibaba (BABA), Tencent (TCTZF) (TCEHY), but not as knowledgeable with some of the up-and-comers. Ms. Fannin refers to the next tier as the XTMD firms: Xiaomi (XIACF) (XIACY), Toutaio, TikTok (subsidiary of ByteDance), Meituan Dianping, and DiDi. Some of these stocks are controversial and in the news. For instance, this week a Microsoft (MSFT)/Walmart (WMT) consortium is attempting to buy TikTok because of a mandate from President Trump. Oracle (ORCL) is also in the running. Tech Titans of China is a book, so you're not going to get up-to-the-minute updates on current events, but you will gain a deep understanding of what these companies do. Detailed resumes of the founders and brief business histories, too. 

With roughly four and a half times the population of the United States, there's a huge untapped potential in China. Internet penetration is 58 percent in the PRC while in America, it's 89 percent. Twenty years ago, China was decades behind the United States in regards to technological advancement, but that's all changed now. The BAT firms rose from the ashes of the dotcom bust and were primarily copycat companies of the American high-tech conglomerates. China went from a technology backwater to a wireless powerhouse in a matter of years by leapfrogging the personal computer era and going straight into smartphones. Mobile payments, e-commerce and electric vehicles are niches where Chinese corporations best the United States. In the large urban areas, it's all mobile thanks to the backing of the Chinese government. "Even beggars in China's major cities carry smartphones with QR codes to receive donations. Cash and email are things of the past.".

The BAT companies have worldwide ambitions, but expansion into the United States has been thwarted from political pressure from both countries. "A takeover of San Diego-based chip maker Qualcomm (QCOM) by Singapore rival Broadcom (AVGO) was shot down over potential security risks in 2018, as an example of the tightening of foreign ownership.". This is from the Trump Administration. The powers that be in Beijing have also cracked down on Chinese firms acquiring American organizations. One way to get around this conundrum is for Chinese conglomerates to take a percentage of the American firms. In the past few years, Tencent has taken a 12% stake in Snap (SNAP) and a 5% stake in Tesla (TSLA). As the saber rattling continues between the two superpowers, China has partnered with Israel marrying capital and market potential in the R&D arena. They've also expanded into Southeast Asia: Vietnam, Indonesia, Malaysia and India, where the cultures are more similar with China. These Southeast Asian countries lag five years behind China's technology advances, so there's plenty of room for adoption and profits. 

On the surface, it would appear that there are just two forces at loggerheads, the governments in Washington DC and Beijing, but don't forget the third force, big money.  Venture capitalists have saturated China going back twenty years and expect to hit the mother lode. David Lam, general partner at cross-border investment firm Atlantic Bridge is quoted in the book: "Global supply chains are international, and the movement is unstoppable. It's already happened. So it's hard to turn back the clock.". I agree. It's beneficial for both China and the United States to work out their differences to help buoy their respective GDP's. In the current state of funding, "A two-way highway runs from Beijing's Zhongguancun Software Park to Menlo Park's Sand Hill Road (the miracle mile for VC firms), raising capital and funding startups hinged from both coasts of the Pacific Ocean.". These investments have been increasing even though tensions from the Trump Administration have been rising.

A good portion of the publication is dedicated to the venture capitalist firms. One such company  highlighted is Sequoia Capital China, a subsidiary of Sequoia Capital know for funding Apple (AAPL), Alphabet (GOOG)(GOOGL), and Oracle in their salad days. "Today, with nearly $20 billion to invest in China, Sequoia Capital China is the largest Valley-anchored firm prospecting in the Middle Kingdom and has an unbeatable track record.". Sequoia Capital China has invested in China Unicorns such as Meituan Dianping, Pinuoduo, Kuaishou, and NIO (NIO). China's mobile and savvy Gen Z and millennials make up more than half of China's population, roughly 700 million, compared to 100 million of the same demographic in the United States. These are the generations that are moving technology forward at an accelerated pace. With the Chinese government funding the race to be the global leader in 5G, those 700 million teens and young adults have the potential to incubate and deploy disruptive technologies in the next five years. 

The latter section of Tech Titans of China features chapters dedicated to specific sub-sectors in technology: AI, ride sharing, e-commerce, drones, robots, and electric vehicles. Like the previous sections of the book, all the chapters are well documented and researched. A Who's Who of up and coming companies are highlighted. I will briefly discuss the Electric Vehicle chapter because Tesla (TSLA) has been one of the hottest stocks of 2020. They have a lot of competition with the BAT companies funding startups such as NIO and Xpeng (XPEV), an IPO that went public the past few days. "Xpeng intends to have 1,000 super-charging stations nationwide in China by 2022 and partner with third parties to bring on 100,000 charging spots.". China is also producing fifty percent of the world's electric car batteries, but have a long way to go to catch up with Tesla's 300 mile range. The Chinese EV's are subsidized by the government. According to the author, when that practice stops and tariffs are lifted, look for Tesla to make more inroads in China as the playing field is leveled. 

About 100 years ago, Edwin Lefèvre wrote in Reminiscences of a Stock Operator, "There's nothing new on Wall Street. Speculation is as old as the hills.". There's plenty of speculating going on with Chinese securities. Many of these young firms operate at a loss. However, you can say the same thing about many of the cloud companies stateside, or Amazon for the first 15 years of its operating history. Although earnings count, young companies plow revenues back into the organization to to expand and make acquisitions. Out of all the companies that are featured in the book, my favorite is AI firm SenseTime, a $4.5 billion unicorn. Would I try to invest in it if it comes public on one of the American exchanges? No question about it, but only if I get my price.    

The Man Who Solved The Market: How Jim Simons Launched The Quant Revolution (Book Review)

Veteran Wall Street Journal reporter Gregory Zuckerman has come up with another gem of a book in The Man Who Solved The Market: How Jim Simons Launched The Quant Revolution. I read one of Zuckerman's previous works, The Greatest Trade Ever, about John Paulson and the fortune he amassed during the financial crisis of 2008-2009. The Greatest Trade Ever is equally as good, if not better than Michael Lewis' book The Big Short, which primarily covers the same topic. Zuckerman's an outstanding storyteller. A non-fiction piece that reads like a novel, The Man Who Solved The Market is a page turner from cover to cover unearthing the tale of Jim Simons and the hedge fund he founded, Renaissance Technologies [RenTech].

A trailblazing quant firm, RenTech is renown on Wall Street for its flagship investment product the Renaissance Medallion fund. Although closed to outside investors, the Medallion fund is revered in financial circles. "By the summer of 2019, Renaissance's Medallion fund had racked up average annual gains, before investor fees, of about 66 percent since 1988, and a return after fees of approximately 39 percent.". That betters George Soros' Quantum Fund, Steven Cohen's SAC, Peter Lynch and the Magellan Fund, Warren Buffett's Berkshire Hathaway, and Ray Dalio's Pure Alpha; all in their heydays. As The Economist put it in 2010, "There's Renaissance Technologies, and then there's everyone else.". They discovered the secret sauce. 

Jim Simons didn't get into the investment business until he was in his 40's. Before launching his hedge fund, he was an award winning mathematician, a code-breaker during the Cold War, and built a world-class mathematics department at Stony Brook University. He could have stopped there, but wanted to conquer the world of investing, too. "Simons didn't have a clue how to estimate cash flows, identify new products, or forecast interest rates. He dug through reams of price information.". Not just opening and closing prices, but the upticks and downticks of currencies, commodities and bonds. Securities would come later, but were more vexing. He and his team utilized the stockpiles of information competitors weren't interested in. RenTech was mining "big data" before there was such a thing which is why they were probably given the moniker of 'rocket scientists' by the established Wall Street firms. Like Vanguard founder John Bogle, they were ostracized but got the last laugh.

Working for the Institute of Defense Analyses in the early 1960's, Simons learned how to "develop mathematical models to discern and interpret patterns in seemingly meaningless data. He began using statistical analysis and probability theory, mathematical tools that would influence his work.". Simons concluded that "markets don't always react in explainable or rational ways to news or other events, making it difficult to rely on traditional research, savvy and insight.". As a result, he didn't hire economists or experienced traders for his fledgling firm. Instead he employed not only PhD's in mathematics, but award winning mathematicians. Some having had influential algorithms named after their discoveries. The cream of the crop. They also hired top-of-the-line astronomers to glean their research techniques.

"Just as astronomers set up powerful machines to continuously scan the galaxy for unusual phenomena, Renaissance's scientists programmed their computers to monitor financial markets, grinding away until they discovered overlooked patterns and anomalies."

With the aid of ever increasing computing power, Simons and crew bucked the old financial convictions that the markets are efficient and investing is a "random walk". RenTech continues to have a leg up on the field gathering as much data as they can. Everything from earnings reports, press releases and the aforementioned tick data. "IBM has estimated that 90 percent of the world's data sets have been created in 2018-2019 alone, and that forty zettabytes - or forty-four trillion gigabytes - of data will be created by 2020, a three-hundred-fold increase from 2005.".  

RenTech's approach is to carve up the trading day into five minute segments or bars, and compare small slices of historic data. For instance, "Perhaps bar 50 in the gold market saw strong buying on days investors worried about inflation but bar 63 showed weakness.". Then they would bet accordingly. It's a dynamic system that adapted to the real-time analysis, "then adjust the fund's mix of holdings given the probabilities of future market moves - an early form of machine learning.". And this was decades ago. Simons and his colleagues were way ahead of the curve. They bought and sold on the most desirable days of the week and at the ideal moments of the day. One employee is quoted, "The name of the game is not to be always right, but to be right often enough.". Former CEO Robert Mercer succinctly stated: "We're right 50.75 percent of the time...but we're 100 percent right 50.75 percent of the time. You can make billions that way.". Which they did and still do. They programmed the software like a gambling casino where the house always wins. 

RenTech invented and developed many strategies that are copied by competitors to this day. As an example, "profitable trade ideas are only half the game; the act of buying and selling investments can itself affect prices to such a degree that gains can be whittled away.". To combat this, they made more frequent trades, with larger amounts of money, dispersed throughout many trading platforms. A no brainer in today's world, but RenTech pioneered it twentysomething years ago. Almost like high-frequency trading in some respects. Throughout his life, "Simons has been driven by two ever-present motivations: proving he could solve big problems, and making lots and lots of money.". Staying a mile ahead of rivals, he accomplished both - exponentially. 

So how much money is a lot of money? In the 2016 presidential campaign, Jim Simons was one of the biggest supporters of Hillary Clinton. Conversely, then RenTech CEO Bob Mercer was one of Donald Trump's largest financiers. Mercer accumulated so much money at RenTech, he purchased nearly 50 percent of Breitbart News in 2010. If you aren't familiar with Breitbart News, it's the voice of the alt-right. That must have made for interesting water-cooler conversation at the office. Mercer eventually sold his share in the news company to his daughters. As the author asserts: "Money is seductive, even to scientists and mathematicians.".   

Although the book keeps your interest from page one, it begins to really start cooking around page one hundred because it's established in a more modern setting, and discusses computerized trading in practice. There's also a section about market history. Those that have tried and failed going back to Babylonian times to the present. This is especially true for technical analysis which, according to the author, is best utilized for short term trading. If you are an investor looking to place your assets with a quant fund, Zuckerman sums it up best near the end of the story: "For all the advantages quant firms have, the investment returns of most of these trading firms haven't been that much better than those of traditional firms doing old-fashioned research, with Renaissance and a few others the obvious exceptions.". 

The Future Is Faster Than You Think (Book Review)

In the dot-com boom of the 1990's, technology evangelists foretold of a not-so-distant future where Star Trek Communicators and Dick Tracy wrist watches would become commonplace. That time has come and gone with the advent of smartphones, and more recently, the Apple (AAPL) watch. Forward thinking investors that got in near the ground floor benefited tremendously. Apple is closing in on a two trillion dollar market cap at $440/share. In 1997, split adjusted, it traded for under a dollar. Market participants looking for some foresight as to where technology may be heading in the next few years, should look no further than The Future Is Faster Than You Think by Peter Diamandis and Steven Kotler. Clear, concise, full of statistics - you'll be hanging on every word. This is the duo's third collaboration. Their two previous works are Abundance and BOLD. Neither is required reading to take advantage of the new offering.

I believe what makes this book unique is that not only does it report the futuristic projects of the usual suspects, corporations such as Apple, Alphabet (GOOG)(GOOGL), Amazon (AMZN), Facebook (FB) and Microsoft (MSFT), but it also includes the not quite ready for prime-time players. Smaller companies, some public, some not, that can be monitored for portfolio inclusion at the appropriate time. Better known examples are the peer-to-peer insurer Lemonade (LMND), or, the cloud based realtor eXp Realty (EXPI) which ditched brick and mortar for cyberspace. One "affective computing" startup discussed is Ubimo which was recently acquired by Quotient Technology (QUOT). However, most of the trailblazers are very small organizations funded by venture capitalists. Cluep, Lyrebird, Betterment, and v7Labs are just a few of these businesses. The authors give a theoretical blueprint as to what type of firms could become mainstream in the next five years. 

Steve Jobs liked to quote Wayne Gretzky's famous chestnut: "Skate to where the puck is going, not where it's been.". Diamandis and Kotler believe that exponentially accelerating technologies are converging with other independent waves of exponentially accelerating technologies to create disruptive innovation on a scale never seen before. Some of these applied sciences include augmented reality, sensors, artificial intelligence, blockchain and nanotechnology. One example of this inevitable amalgamation is: "When we combine autonomous vehicle technology with smart traffic systems and sensor-embedded roads - two developments that have already begun rolling out - transit risks don't just plummet, they mutate.". That's a more pedestrian case in point. If we include the aforementioned "affective computing", "Or the science of teaching machines to understand and simulate human emotion. It's the intersection of cognitive psychology, computer science, and neurophysiology, combined with accelerating technologies like AI, robotics and sensors.". It sounds creepy at times, but that's where we're going. 

It's all about large corporations adding to their war chests by increasing productivity and cutting costs. For instance: "In 2001, sequencing the entire human genome took nine months to complete and cost $100 million. Today, Illumina's latest generation sequencer can do that in an hour and for $100 - or 6,480 times faster and a million times cheaper. And what is true for gene sequencing is true for dozens of fields. Tools only accessible to only the wealthiest companies and the largest government labs are now available at near-zero prices to just about anybody.".  With cloud based services such as Amazon Web Service and Microsoft's Azure at hand for the masses, the future is now.

The authors appear to be influenced by Alphabet director of engineering Ray Kurzweil who came up with the concept of "computer singularity" where humans and machine intelligence merge. Although this phenomenon won't happen for another decade or longer, it's coming. This will be ushered in by the era of quantum computing and Rose's Law which has been described as "Moore's Law on Steroids". In Moore's Law, computing power doubles every two years. In Rose's Law, the number of qubits (a quantum bit) doubles every year. They mention Rigetti Computing that manufactures quantum integrated circuits. Already rumored to be coming soon to the public market. "Established organizations will have a hard time keeping pace. Our biggest companies and government agencies were designed for another century, for purposes of safety and stability. That is why 40 percent of today's Fortune 500 companies will be gone in ten years, replaced, for the most part, by upstarts we've not heard of.".

This is not to say you can just scoop up these young upstarts when they come public and make your fortune. A technological advancement Diamandis and Kotler discuss, and one that I am particularly interested in, are holograms, a form of augmented reality. They give a cautionary tale of Magic Leap, an organization that wants to eliminate video screens by manufacturing AR glasses. They were leapfrogged by another young company, Mojo Vision, that is developing AR contact lenses. Theoretically, you no longer have to wear a headset, the screen is mounted on your cornea and projects onto the back of your retina. It's not science fiction anymore. However, public AR company Microvision (MVIS) has been trading since the 1990's, and has given investors nothing but heartaches. It shows a lot of promise, but never seem to come through in the clutch. Perhaps these companies are ready for their close-ups now that 5G networks and other converging technologies are being rolled out nationally. 

The authors claim theirs is not a techno-utopian thesis. They're just telling it like it is. To use the old cliché, "The genie is out of the bottle". For instance, the largest increase in productivity historically is augmenting machines with humans. They state, "Workers have been on the fast track to obsolescence since the Luddites took sledgehammers to industrial looms in the 1800's. Automation produces job substitution far more than job obliteration.". To reinforce the fact, they give the example of the bank ATM. "Because ATMs made it cheaper to operate banks, the number of banks grew by 40 percent. More banks meant more jobs for human bank tellers.". That may have been a convincing argument in a previous era. I have my doubts with these large corporations. Plus, Diamandis and  Kotler rarely discuss the privacy aspect of all our personal information flowing to the digital oligopoly. Early in the book, they did touch on the subject: "While knowing everything about one's customers presents an alarming privacy concern, it does provide organizations with an incredible level of dexterity - which may be the only way to stay in business in these accelerated times.".

I have no doubt that this is a book worth reading. I have no doubt that I may profit from becoming aware of some of these startups. I also have no doubt that these converging technologies are on my doorstep. What I do doubt are the motives these powerful West Coast technology companies have with too much of my personal information. Maybe it's a generational thing. I was always taught to question authority. Although I benefit from lower prices, split second communications, and information at my fingertips, I am not so sure that's such a good thing if left unchecked.