Dec 102017

This year, I have posted several articles observing how the vocal few, amplified by online social networks, have an outsized voice in the political discord that swirls all around us. A few thousand like-minded activists are being heard while 350,000,000 others shake our heads in disbelief and sigh, while sipping our beverage of choice, remote control and smartphone in hand.

Simultaneously, I believe the remainder of this decade will be the true dawn of machine learning algorithms. While the concepts are not new, the practical application of machine learning is really hitting its stride, especially at the companies that are cornering many of the brightest minds in computer science, namely Facebook, Google, Microsoft, Amazon, Netflix, and the private unicorns awaiting their IPOs.

Machine learning needs big data sets to “learn” and no companies do a better job at marrying big data with algorithms and computer power than these. Traditional businesses rarely recognize that their most valuable asset to leverage is their data, still mired in thoughts about facilities, machines, and stores. Most of the Fortune 2000 do not run their data as a business, making investments and measuring results of analytical programs.

Here’s the bottom line:

If he decides, Mark Zuckerberg now, in 2017, has the power to decide who will be the next U.S. President.
— Bob Sakalas

I’m not saying that Mark will use his super power, but he has that power. Right now, Facebook’s and Google’s power is clearly driving greater and greater polarization of the public. This power extends to many countries, not just the United States.

Don’t believe me?

Watch this TED presentation by Zeynep Tufekci. It is eye-opening, and common sense tells me she is spot-on. It might just make you rethink your own level of participation on social networks, but that unfortunately will not change destiny for the country.

So what is the bright note for the optimist? Well, I’ve argued that optimists must take prudent risks within the backdrop of capitalism. As an investor, I’m increasing my long exposure to Facebook, Google, and perhaps add a small stake in Tencent. And, on a less serious note, the artificial intelligent Skynet won’t build terminators to exterminate humans, it might only try to control our thinking and ideology in an insidious Matrix-like mirage.

I.M. OptimismMan

PS. Are you interested in other side-effects of powerful social networks?  Here’s another angle worth understanding.


Dec 042017

Saving just a few dollars every day can make a big difference, if you invest it.  This lesson is lost on many teens, but it is worth talking about. I don’t care how you save it — I’m not trying to pick on Starbucks per se — you can do the same thing by drinking water in restaurants or simply comparing prices of everything you buy on your shopping app — but saving and investing early in your career is crucial, if you want a better financial future.

I created a little spreadsheet to prove my point, downloading the actual returns of the S&P 500 index for the last 40 years, without the added benefits of annual dividends.  This is important because actual returns would be quite a bit better than my model, but I thought it would not hurt to be conservative and realistic.

I then decided to save the cost of one Venti Caramel Cocoa Cluster Frappucino per day — roughly $5.  Almost anyone, if they pay attention, can find ways to save $5 per day, once out of school and working for a living.

The difference between just saving your money vs. saving and investing it, is stunning.

The ‘saver‘ would save $73,000 over 40 years.

The ‘save and invest‘ person, assuming they religiously purchased the S&P 500 ETF over the 40 years, would have $510,000. The majority of this savings kicks between year 30 ($250,000 at that point) and year 40 (over $510,000), due to powerful nature of compounding. In truth this number would be larger due to dividends, but I think my point is simple enough.

  • Graduate school.
  • Get a job (in a career you like, at a company that is growing).
  • Don’t get into debt, other than possibly debt that has opportunity for appreciation (real estate).
  • Be careful to save money and invest it. The more you can invest, the better off you are, especially early on. Investing is a matter of engaging, taking a prudent risk, and building a habit for success.
  • 40 years for now, you are quite likely to have 700% more money than savings alone, and much more compared to someone who doesn’t save, or doesn’t save early on. Compounding takes time to work.
  • Financial success is not brain surgery but it does require a bit of discipline and foresight.

Some might say that saving and investing $5 per day “won’t make me a millionaire.”  Well, saving $7 per day would, on the same little spreadsheet that I know is too conservative. Take a quick look at the average net worth of America in this article. Even worse, CNN Money reports that over half of adult Americans don’t have savings to cover a surprise $1,000 expense and would have to rely on credit cards or family members to bail them out, although I find that statistic a bit hard to believe and question how it was determined. But the bottom line is simple — save and invest $150 or more every month, unfailingly,  starting the day you start full time work, and you will greatly exceed average.

Speaking of averages, this entire model assumes you will only do “average” as in the S&P 500 average by buying the SPY ETF shares. I don’t believe that average is in your destiny, if you question everything.

I.M. OptimismMan

PS. The Caramel Cocoa Cluster Frappucino is over 500 calories — it won’t hurt you to miss that too 🙂