Chairman and CEO Nicholas Mitsakos has published four books: “Investment Principles: Strategies for an Irrational World,” “Transformation and Investing: Disruption, Opportunity, and Absurdity,” “The Ten Year Horizon: Volatile, Intense, and Harmless,” and “Cryptocurrency and Digital Assets: Terror and Opportunity.”
These books present a broader, more methodical, and more disciplined way to think about investing. Investment success requires understanding many dimensions ranging from global economics, industry, competitive and microlevel analysis, technological innovation, game theory, and human behavior and emotions. This integrated approach develops a more informed and distinctive way to think about the current investment environment, the future, and what choices to make.
Investment success combines predicting the future, the confidence to make bold choices, and the fortitude to stay with those choices. Nicholas asserts that wisdom, defined as combining a broad range of observations into a new set of knowledge to predict the future more effectively, is the essential component of successful investing. The foundation of knowledge, assembling relevant facts from many sources, produces better decisions and superior returns.
There is no simple formula. Thoughtful observation of complex factors, understanding their interrelation, and predicting the outcome of their interaction is challenging. In Daniel Kahneman’s words, it requires “slow thinking” and demanding work. Breathless and urgent recommendations from social media quips are usually misguided. Superficial ideas and quick thinking are even worse.
These books do not contain a series of numerical models and algorithms. Those kinds of tools are a simplified sideshow intended to turn numerous dynamic factors into a simple, typically misleading analysis. One obvious example is the current investment principle that revenue growth is the only factor that matters in determining a company’s future value. Along with other simplistic approaches, this is often nonsense.
The books discuss topics ranging from disruptive innovation and technologies, globalization, leadership, fiscal and monetary policy, and other topics usually relegated to economics or behavioral textbooks. But inferior performance comes from not understanding all the elements, both macro, and micro, that influence investment choice, the policies impacting those decisions, the competitive environment, and the leadership qualities essential to succeed within this context.
General statements are a waste of time, profoundly inefficient and misleading, and designed simply to make the reader feel good without giving him or her any useful way to think more deeply about analysis and more accurate and impactful conclusions.
These are not “how to pick stocks” books. Along with platitudes, there are no simple formulae, heuristics, or any other effortless way to outperform the market. Deep thinking about the factors that matter is complex, challenging, unique to each situation, and escapes simplicity.
The books are not organized as straightforward narratives, but each contains sections addressing different, sometimes unrelated but important topics. The foundation comes from Nicholas’s articles and lectures (posted elsewhere on this website under “Writing and Podcasts” and Arcadia’s “YouTube” channel) and may seem disjointed, but each topic and subtopic is meant to stand on its own. The books can be just as effectively read in discrete sections and not necessarily in any narrative series. These can be reference books, as well as a descriptive analysis.
The third book, “The Ten Year Horizon” explores the next decade’s more frequent and intense economic, geopolitical, fiscal, and market volatility, technological innovation, disruption, and hype.
Long-term opportunity exists, and this book uses a 10-year horizon as a surrogate for a long-term perspective. Some of the world’s most important industries are being disrupted, especially finance via digital assets and Blockchain-based businesses, life sciences via gene editing, DNA sequencing, and CRISPR, and communications via advanced wireless data networks, software technologies including artificial intelligence, and new interactive platforms such as the Metaverse.
Success requires not only understanding how to assess these industries, the potential disruptions, the sustainability of new business models, and other economic forces, but also understanding that human emotions swing market cycles, impact values, and skew competitive dynamics.
This is not a hyperbolic “this time it’s different” sermon, but we are entering an era that will be characterized by persistent uncertainty and rejection of the halcyon days of “growth equals value regardless of profitability.” Vulnerability to economic and social shocks will also be higher and there may be many dark days along the way to the horizon.
The world is becoming a zero-sum chess game. The players, China and the US, hope to either control or influence other pieces – queens to pawns – ranging from Russia and Ukraine to India and Turkey.
This book explores the chills of discontent that ignited these fractures and looks at potential avenues for re-engagement and mutual benefit. The foreseeable future is disjointed and fractured, but, there may be an ultimate realization that long-term benefit from reigniting mutual engagement will be in everyone’s best interest.
Traditional industries that drive the world economy – metals, minerals, plastics, and energy – are essential to any “green revolution.” Technology, innovation, and disruption need minerals, metals, plastics, and energy to build and deploy their products. Technology, and potentially life-saving innovation, are useless without these basic industries – now impacted more than ever by geopolitics and global trade.
Technology and innovation can solve potentially existential threats from climate change to food scarcity to global pandemics But, as I discuss, technology is also an uncontrollable monster that can lead the world into a downward spiral of distraction and meaninglessness – and solve nothing.
I explore whether the future needs the Metaverse, cryptocurrencies, or NFTs (it doesn’t), Blockchain technology and other digital assets (it can), or artificial intelligence and machine learning (it does). The Metaverse and cryptocurrency are mostly a sideshow. Blockchain and digital assets are platforms enabling the digitization and potential disruption of finance. While all these technologies are often lumped together, I discuss the significant distinction between them.
I also explore what can be predicted, what should be ignored, and why basic science and fundamental discovery are our most potent weapons and greatest opportunity to create value and benefit society. I emphasize the need to ignore policy recommendations that attempt to manage outcomes for a shortsighted, politically popular goal.
I close this book with some very personal thoughts from my experiences.
The fourth book, “Cryptocurrency and Digital Assets: Terror and Opportunity,” addresses the over-hyped world of cryptocurrency, but also explores an underlying disruption to global finance.
Cryptocurrencies soar in value, plunge, hit new highs, are written off, rebound, and hit new highs again, and the cycle repeats. We should be terrified.
Over the last five years, cryptocurrencies such as Bitcoin and Ether have outperformed the overall market. However, can the general trend of outperformance last, or will these digital assets drop over 90% like some of its other crypto brethren? Is there a sustainable performance that creates the foundation for either a new currency or a valuable asset class?
Probably not. Forces that drive these eye-watering returns seem to be the same as those that drove the social media-driven insanity behind meme stocks such as GameStop. We are seeing social media mobs controlling demand to a limited supply, creating price spikes that look attractive to any speculative investor. Unfortunately, demand can dry up quickly and the price subsequently falls through the floor.
The volatility is hard to gauge. It fizzled once and recovered and fizzled again and then somewhat recovered. Is any of this sustainable?
It may not matter. There is something more fundamentally valuable happening with digital assets. Distributed ledger technology, otherwise known as blockchain, radically simplifies financial markets and more importantly, fundamentally changes market infrastructure. While this will take time, regulatory requirements, and undoubtedly government cooperation for these changes to truly materialize, digital asset technology enables the decentralization of critical data to entirely new financial systems and capital flows without the need for traditional intermediaries. In other words, the entire global financial infrastructure as we know it today. This is a real disruption and has the potential to create enormous value.
In this book, I will explore the role of digital assets, cryptocurrency, distributed ledgers, and the future of capital markets. While crypto may not be a currency, it is an emerging asset class that needs to be understood, its speculative nature unpacked, and its prospects analyzed. It may not be the revolution its creators hope for, and it hardly seems a financial revolution, but it is pervasive enough to warrant analysis and understanding.
Decentralized finance can disrupt global finance but only if private financial systems and central governments cooperate. This seems unlikely – sworn enemies understanding the greater good is rare (mostly in novels). But a cooperative relationship between decentralized and efficient financial structure and government systems, regulations, and central banks with stable currencies is absolutely necessary. I will explore this idea in detail, including the concept of a digital central bank. While we understand that bureaucratic governments lack initiative, creativity, and foresight, central banks and governments armed with simplicity, clarity, and algorithms may add efficiency, access, and global interconnection enabling an improvement to the quality of life of most people whether they have bank accounts or not.
Financial markets ruthlessly sort nonsense from substance. Volatility and existential threats have been brutal and extreme for digital assets and the reckoning for crypto has been predicted for some time. However, digital assets are not on their way to history’s dustbin.
Reality is more nuanced, and I try to provide a more detailed analysis since a broad brush hardly seems appropriate. The weakest and craziest portions of the crypto world have been exposed as nothing more than silliness. But some valuable components remain resilient and offer tremendous opportunity. I will explore these in detail.
There is more cause for optimism than pessimism among the best and the brightest. We will explore these opportunities while harshly dismissing the hype and silliness – avoid the terror of worthless market frenzies.