Tuesday, March 03, 2015

The Haiku of Finance for 03/03/15

Nasdaq regains crown
Highest price since dot-com days
Silly silicon

Monday, March 02, 2015

The Haiku of Finance for 03/02/15

Taking on more debt
College kids and Greece do it
Both of them are dumb

Student Loans Still Out Of Control In March 2015

Over-indebted American Baby Boomers have raised their Millennial children in their own image.  They have passed on their proclivity for living beyond one's means to a new generation.  Gen-Y continues to take on new debt in the form of unpayable student loans.

The Project on Student Debt noted last November that average college debt for the class of 2013 was two percent higher per graduate than the prior year.  Debt.org notes that total US student debt still tops $1T.  Carrying so much debt would not be so bad in a normal economic expansion.  The problem today is that personal income growth has slowed to a trickle.  Median incomes for most middle class demographics, however you slice them, have not increased since the early 1970s after adjusting for inflation.

Baby Boomers have an average net worth of maybe a buck fifty because hardly any of them saved anything for retirement.  They all counted on Social Security, which is in financial peril according to the Bowles-Simpson commission as long as its recipients aren't means-tested.  Millennials have done their parents' generation one better.  They are going for negative net worth rather than merely going for broke.

Alfidi Capital At DeveloperWeek 2015 San Francisco

I attended this year's DeveloperWeek in San Francisco.  The brand new Pier 27 terminal made for excellent views.  The most recent America's Cup made use of some temporary buildings here and it's nice to see The City repurpose the lot into something useful.

The conference started off in a disorganized manner.  The initial Main Stage talk got relocated to Stage 2, or so I was told.  The other stages weren't open on time in the morning.  The opening talk I attended started 20 minutes late.  Sheesh.  I did not have time to stay all day so I had to make the most of the morning.  I guess the trend in tech enterprises towards minimizing meetings means some presenters aren't accustomed to showing up on time in person.

The morning talk on GitHub pull requests convinced me that engineers are susceptible to simple ego strokes like fancy job titles.  Designating someone as "Senior Associate Engineer" makes them feel superior to a mere "Associate Engineer."  I saw this same head game when I worked at an asset management firm whose initials were the same as Baloney Goofball Imbeciles.  The "Senior Associates" at my former employer worked for the same entry-level wage as the new hires even if they had years of experience.  Giving someone a longer title is much cheaper than giving them a raise.

The gist of GitHub is that its suite offers advantages over wikis as a documentation method for engineering processes.  Updating a wiki takes constant curation effort.  I once inherited a US Army unit's wiki that did a poor job of documenting the unit's knowledge management architecture.  I ended up shutting it down and migrating users to a more hierarchical archiving system.  The US Army's new taxonomy for updating its doctrinal publications is actually a very useful governance technique for engineering handbooks.  Base document changes should be much less frequent than minor document changes.  Splitting out the documents into a base series providing broad guidance makes sense if they are not updated as frequently as product-specific technical guides.

I like that GitHub's online process changes contribute to a meeting-averse culture, a good evolution in engineer-based enterprises that value productivity.  Knowledge management systems in larger enterprises should use automated workflows.  Non-engineers seem to have trouble grasping workflows' utility.  GitHub pull requests apparently create an audit trail of changes documenting a process during updates, especially the "why" of an author's update.  That's analogous to clarifying a commander's intent in a military mission planning process.  I need to examine GitHub myself to find more analogies.

The Main Stage talks eventually began where they belonged.  The bottom line in several talks is that many verticals are upgrading their tech stacks and this drives demand for developers in the labor market.  I did not mind the thinly disguised pitches for services like HackerRank because they provide a disruptive benefit to productive enterprises.  I have noticed other such disruptive talent matching services migrate to the finance sector.  Whale Path does for finance professionals what HackerRank does for developers, elevating skill demonstration over a stale resume and obsolete academic credentials.  You're only as good as your last performance.  Having a verifiable track record of accomplishment on HackerRank or Whale Path means job performance has a market value.

Some other talks covered deep learning, a new approach to machine learning.  We're all going to hear more about it as VC money starts pouring into IoT devices that need to operate autonomously.  It was fun to see someone walk through the ease of manipulating images displayed on a Lightbox-enabled website.  No coding knowledge is needed to alter Lightbox parameters.  The clear lesson for non-techies is that object manipulation is an easily mastered skill.  Coding as basic literacy still makes sense but not everyone who touches tech will need to code.

I didn't win any raffles or door prizes at DeveloperWeek, nor did I score dates with the hot tech babes who flirted with me.  I still came away with the perspective I needed on how enterprise tech is changing.  DeveloperWeek matters to people driving tech's migration into ease of use modes that business domain experts can interpret.  Anyone in business who is at least minimally tech literate will be economically viable for years to come.

Sunday, March 01, 2015

The Haiku of Finance for 03/01/15

List business online
Rich snippets across platforms
Ubiquitous brand

Online Local Business Listings Have Complex Interactions With Google

Google's Zero Moment of Truth (ZMOT) concept drives home the importance of a ubiquitous presence for business brands.  The ZMOT is a compressed decision time frame between a stimulus and a purchase decision.  Consumers who switch between several computing platforms during the day, say from personal smartphone to business desktop to personal laptop, engage in "sequential screening."  Marketers now face a challenge of keeping up a brand's presence all day long through inbound marketing.  Business listing sites have figured out Google.

Marketing used to spread brand identities across several media in the age before the Internet.  People read newspapers in the morning, kept their radios on in the car or in the office, and watched TV at night.  Ad spending became more difficult to target as people became more mobile.  The explosion of smartphones into several different sizes and operating systems initially compounded the targeting problem.  The curse of Big Data for marketers is also a blessing, as those same mobile devices generate a stream of updates about a consumer's daily minutiae.

Enter the magic of Google's search algorithm and page ranking system.  Google has figured out that some business listing services are simply more reliable in delivering high-quality solutions to consumer Web searches.  The best business listings maintain a brand's ubiquitous presence in front of a target demographic, across multiple platforms.  Brand ubiquity increases the chance that a consumer will select a well-positioned brand once they reach their ZMOT and make a purchase.  It is no accident that the most successful business listing sites configure brands in rich snippet formats that resemble Google Places listings.

Small and medium-sized businesses (SMBs) cannot rule out business listings in their branding strategy.  Google is powerful enough to reward advertisers who select favored keywords in ad spending and punish business listings that do not deliver attractive search results.  Many skills in SEO and content marketing are interchangeable enough that SMBs can learn the basics.  I do not believe the financial cost of an outsourced SEO effort is all that high, but the time needed to devote to the SEO learning curve may be a sufficient pain point for business listing services to solve.  Business listing services may fill a gap for SMBs lacking the time or budget to optimize for mobile.  Some of them may cost nothing at all.

Alfidi Capital At The Big Talk Summit Silicon Valley 2015

I looked through my pile of notes from recent events and dug out my notes from attending the BIG Talk Summit in Silicon Valley this past January.  It was okay for a one-day conference and a few of the speakers had provocative things to say.  I am not clear about what Baidu is trying to accomplish by hosting such BIG events.  It may be someone's BIG chance to pick the brain of American thought leaders and piggyback their ideas all the way to the backdoor of a Chinese tech lab.  You won't see my name badge in the photo I took below because it wasn't worth capturing.

One Baidu guy and an MIT guy had stuff to say about deep learning.  I would like the next big leap in mobile UI to be a direct digital thought interface rather than a speech interface (listen up, Siri and Droid developers).  Thought transfer UIs would be perfect for wearables as remote control devices once the IoT launches itself into our wired home appliances, personal robots, and private drones.  Baidu's preference for high-performance computing (HPC) in AI over cloud computing is anecdotal.  I need to see independent confirmation of HPC's supposed superiority.

One of the Web's favorite MOOCs got up and talked about disrupting education.  I did that once in a Notre Dame undergraduate philosophy course by insulting several of my stupid classmates.  Content-based models like MOOCs will eventually have problems expanding into markets of authoritarian regimes (China, Iran, etc.) that control mass media, Internet access, and human thought.  Non-ideological course offerings may be universally allowed but menu offerings of the humanities will face political limits in conservative societies.

There's a local "singular" executive education system that charges a lot of money to talk to VIPs appearing on rolling flatscreens.  These people advocate innovative medicine because the cost per genome performance curve now beats Moore's Law in computing.  If you can handle bioprospecting, biosecurity, bioweather, biohacking, mHealth, eFormulations, and other such buzzwords then you have a future in health care.  It also means you'll be overqualified to run the ACA health insurance exchanges.  I could probably sell these people some solutions for biobonanza once I figure out how to grow cell cultures on a dollar bill.  Can biology be securitized?  Maybe genes can be sold like music royalties or IP portfolios.  You heard it here first at Alfidi Capital.

Speaking of finance, another MIT genius wants to disrupt it with Big Data.  Count me in, I'm all over it.  MIT's Media Lab is pushing the needle on social physics.  They should not mistake correlation for causation.  Idea diversity and social tie engagement density emerge in MIT's research as healthy indicators.  In other words, it's easy to achieve high GDP per square kilometer in Silicon Valley.  They also measure the effects of Pigouvian taxes and subsidies on the relationship between idea flow and ROI.  There's a ton of innovation waiting to spring out of all that research.

RAEL Berkeley can't plan smart communities all by themselves.  It takes ECPA and Cool California to move the sustainability bandwagon down the road to riches.  I expect that magical vehicle to get up to full speed once Apple and Google come out with their competing models of automated cars.  Watch one zoom through your ZCTA at highway cruising speed and try to guess which USDOT automation level it uses to avoid hitting your car.  Seriously, I'm being obscure because the obviously proprietary work of the automakers and their Silicon Valley partners is just as obscure.

The combo of robotics and machine learning was the topic that set some of the gurus on fire at this conference.  The breakthrough in neural nets that can execute pattern recognition 30 levels deep due to increases in computing power is begging for commercialization.  We really need to hardwire Asimov's Laws of Robotics into these things before we design them to breed and teach them to adapt to their environments.  Future generations will thank us for not giving them a real-life Terminator nightmare.

Steve Wozniak, aka the Woz, was last marquee guest at the BIG Talk.  He noted that hardware startups grew so well in Silicon Valley specifically because of its ecosystem, while software startups can grow anywhere due to the proliferation of IT.  His observation about software poses a minor challenge to MIT's social physics discoveries about social density and idea diversity being strongly geolocated.  I may have heard him say elsewhere that finding flaws and gaps in dominant tech systems opens paths to entrepreneurial disruption, but repetition is good when the Woz does it.  The dude has an enormous ability to synthesize diverse intellectual concepts.  He should volunteer his thought process to whomever is mapping pattern recognition 30 levels deep.

What's Woz's impression of Silicon Valley?  It is a frenetic work pace and massive environmental stimulation bringing fast progress, bringing a human price of up/down, happy/sad cycles.  Woz's mind must be a model for how rapid testing and experimentation with multiple technical iterations leads to innovative product functions.  His description of Fusion IO's disk drive development condensed a huge sequence of related analytical problems into something simply amazing.  Such creativity!  People asked him about corporate creativity.  IMHO the most creative companies give employees the most diverse stimuli and the most chances to randomly interact.  Look at the communal bulletin boards at the headquarters of Facebook and Google, where people post classes, clubs, movie nights on "campus," and other things that appeal to perpetual students.

I counted the number of times someone said "game changer" at this conference - exactly twice, and Woz was one of them.  Way to go, Woz.  One of Silicon Valley's living icons is sharing buzzwords.  I missed whatever chance I had to tell him so when we left the parking lot of the Computer History Museum at the same time.  I'm sure he'll have another chance to benefit from my wisdom.  The attractive women at this conference definitely benefited from my genius, especially the two who just had to pose with me at the end of the day.  Keep it coming ladies.  I'm getting big exposure at events like the BIG Talk.

Saturday, February 28, 2015

The Haiku of Finance for 02/28/15

World bodies working
Prosperous policy path
Inclusive approach

Listicle of Financial Inclusion Institutions

Financial inclusion is an emerging topic in both the traditional finance sector and the social capital arena.  Here's a rundown of the major institutions facilitating and tracking this phenomenon.

The Center for Financial Inclusion (CFI) has a target date of 2020 for full inclusion.  That's ambitious, so five years from now we can expect to see inclusive programs all over the developed world.  If the subject is ever going to catch fire, it must cover both the developed world and emerging markets.

The G20's Global Partnership for Financial Inclusion (GPFI) is a serious effort to integrate several multilateral initiatives.  It matters if it keeps the developed world's sub-ministerial task forces on track.  The risk is that the G20's recent endorsement of coordinated monetary stimulus will disrupt the capital account flows the developed world needs to meet inclusion targets.

The World Bank's Consultative Group to Assist the Poor (CGAP) develops a policy architecture for implementing inclusive plans.  That's a fancy way of saying the group has sample rules that any country can implement.  Check out their discussions of microcredit.  The World Bank also maintains GPFI's G20 Financial Inclusion Indicators, along with its own Financial Inclusion data and Global Findex.

The Alliance for Financial Inclusion (AFI) is probably the most inclusive policymaking body.  The difference with AFI is the participation of experts from the developing world to ensure the other coordinating bodies aren't making policy in a vacuum.

Billions of formerly marginalized people are crossing the chasm between the non-integrated gap and the functioning core.  Keeping up with the times means knowing how they will all grow wealthy.  Financial inclusiveness is the developed world's welcome mat laid out for the world economy's brand new members.

The Business Case For New Mentoring Tools

I recently visited with the enterprising minds behind MicroMentor, a derivative of Mercy Corps.  I don't participate in their program but they offer a good value proposition to anyone seeking mentoring via social media.  Entrepreneurs pressed for time now have another option besides SCORE.  They can also share knowledge with peers at Startgrid.  The good news for proteges seeking financial inclusiveness just keeps on coming.

The advent of microfinance and microenterprise means mentoring must adapt to changing times.  The Aspen Institute's FIELD program documents the latest data on how microbusiness sectors adapt.  Aspen has tons of other programs too numerous to name here that can help.  Mentors who need ROI trackers for their board service and volunteerism need look no further than True Impact.

A web search of topics covering mentoring reveals a ton of open-source research on personal mentoring for disadvantaged youth.  The research on mentoring within a business context is often behind the paywalls of academic journals or held in the private databases of consultancies.  The best open-source business cases for mentoring are in the Society for Human Resource Management's research and tools.  Searching SHRM's site for variations on the word "mentor" reveals everything a good manager needs to know.

The existing literature on mentoring has some gaps.  Mentoring disadvantaged youth makes sense from a humanitarian standpoint.  Finding a mentor at work has potential payoffs in the time-honored tradition of riding a superstar's coattails.  The HR coursework I recall from my business studies showed that formal mentoring programs often lead to mismatches.  There is room for disruption in mentoring.  Social media enablers like MicroMentor and Startgrid are natural evolutions in business relationships.

Friday, February 27, 2015

The Haiku of Finance for 02/27/15

Broker rule struggle
Wall Street greed for account fees
Need more strict control

Greek Crisis Drops Off Reality Radar Into Pretend Land

Hey children!  Let's all pretend that Greece can pay its bills, Germany loves giving away money, and Europe is one big happy family.  That would make a hilarious fairy tale suitable only for the dumbest of credulous kids.  Europe's leaders are living this fairy tale right now even though they know the grown-up math will never make it work.

Tuesday's approval of Greece's proposed austerity compliance plan was a farce beyond all belief.  European finance ministers somehow gave it their seal of approval with a straight face.  Whether they were complicit in drafting it before Greece pretended to own it is a moot point.  Every responsible adult at the European financial table is now engaging in mass self-deception, national deception, and continental deception.

Here's a trumpet blast of reality for any Europeans still asleep.  Greece has no intention of ever paying its debts or fulfilling its austerity promises.  Athens' capitulation to the troika's new bailout terms was a feint to stop Greek bank runs.  The Tsipras regime knows it will run out of money but needs another few weeks or months to turn disorderly starvation into something that does not lead to civil unrest.  Europe knows it will never see its banks made whole after a Greek default.  The ECB needs the next few weeks to figure out how to front-load as much quantitative easing as possible into Greek bonds.

Childish fairy tales are now okay for grown-ups.  European parliaments will sleep for the next four months telling themselves a bedtime story of prompt Greek payments, generous German taxpayers, and kindly central bankers.  The hard wake-up will be a surprise thunderstorm breaking in the middle of the night.

Thursday, February 26, 2015

The Haiku of Finance for 02/26/15

Python in finance
Calculate all risk metrics
No room for humans

The Choices Between Statistical Programming Languages

I recently attended a talk where an audience member posed a question to an experienced economist about which programming language is best for statistics.  The expert selected Python over MATLAB and Mathematica, and I think I heard the R language as one other choice (it wasn't clear).  Young professionals just entering the workforce with high-end skills take the choices between those languages very seriously.

MATLAB iterates the manual matrix programming most top MBA programs include in their decision science classes.  It interfaces with both modern languages like C++ and legacy languages like Fortran.  Some programmers, like our expert above, believe Python can replace MATLAB in transforming data into graphical displays.  Maybe it depends on the profession.  I have recently spoken with a hedge fund manager who swears by Python for its ease of use, comparable to MS Excel functions.  That's two anecdotal votes for Python in a week.

Mathematica's Wolfram language is almost as old as MATLAB, and just as heavily used in the sciences and engineering.  They both have open source competition.  R is a more recent innovation with open source origins.  I have heard R mentioned at tech conferences where hackathon alums discuss the techniques they used during competition.  Looking at snippets of R syntax I found on the web reminds me of the very basic DOS programming I did in an undergraduate business class in the early 1990s.  Comparing all of these to Python's supposed symbolic ease of use entices me to learn more about Python first.

Hedge fund quants know financial engineering, where high-level programming languages like Python are necessary.  I have long been skeptical of the value added by hedge funds.  Knowing their preferred lingo should make critiques of their approaches more credible.  I still expect a market cataclysm to shake out almost all hedge funds as redundant.  Any investment firms that survive will attract the best quant talent and programming will still be a valuable skill.  The key for those few quants who keep their jobs will be knowing the limits of financial engineering in marking risk/reward tradeoffs.  Economics are human-caused events, not natural phenomena governed by hard math.  Black Swans can still fly right through any Python script.

I am not yet at a decision point where I am ready to learn a computer programming language, but the changing demands of the finance sector may require such an adaptation.  Those of us in the middle of our careers need to seriously consider learning the basics of some of these languages.  None of the four languages I mentioned were in the curricula of my MBA courses but they are now recognized as de rigeur for enterprise data professionals.  The concept of coding as basic literacy is on many thought leaders' lips.  Young people who can do it are far ahead of middle-aged people in adapting to a high-value workplace.  Coding as literacy leads to a Big Data career.

Wednesday, February 25, 2015

The Haiku of Finance for 02/25/15

Global policy
"Thousand needle" stimulus
Everyone pushing