Fundamental drivers for pricing valuations in public markets have changed. Now, there is a new interaction among factors unseen just recently. Advanced technologies such as artificial intelligence have had a profound impact on the tools available and analysis presented to even the most amateurish investor. Social media, such as Reddit, Twitter, and other platforms, have allowed access to information and influence from media “stars” driving demand in an almost herd-like mentality driving up prices, and causing extreme volatility. Finally, technology has enabled a trading floor to be in everyone’s pocket. That same trading floor allows access to any information on anything from anywhere, and communication with anyone or, via social media, receive communication and information (regardless of how dubious) from anyone about any security or investment strategy.
These factors will cause unprecedented market volatility, along with extreme price movements for well-known (or perhaps more accurately, well-publicized) companies and their securities. While the supply of securities remains somewhat constant, demand for those securities is increasing (sometimes exponentially) because many more investors are now chasing those same securities.
The price of anything cannot escape supply and demand dynamics. Recent IPO activity is an attempt to meet growing demand (and raise capital at attractive prices). The new supply from IPO’s, secondary stock issuances, and most recently and monumentally, SPAC offerings, still do not provide enough supply to quench a growing and overwhelming demand. The valuations, especially those given to the SPAC’s, are entering stratospheric levels that could hardly be justified under normal market conditions. While there is plenty of capital, most assets seem fully priced with an under-estimation of risk. There are alternative investments where higher returns without the same commensurate increase in risk are available. Some return is simply mispricing of securities through lack of attention (those starved from social media can create meaningful opportunities for those savvy enough to look for them) or liquidity.
Successful investors are the ones who understand adding return without corresponding risk is the most critical component of successful investing, especially given the new equation for valuation:
The history of AI shows that attempts to build human understanding into computers rarely work. Instead, most of the field’s progress has come from the combination of ever-increasing computer power and exponential growth in available data. Essentially, the ability to bring ever more brute computational force to bear on a problem-focused on larger data sets have given increasing usefulness. But, it’s limitations are also magnified in sharp relief more than ever. The bitter lesson is that the actual contents of human minds are tremendously, irredeemably complex…They are not what should be built into machines. Machine learning doesn’t live up to the hype. These systems are fundamentally brittle, and always break down at the edges where performance is essential and consequences much direr. There are many potential applications that can be effective and useful tools. They are simply much less ambitious than the current hype would indicate, but they are also far more realistic.
Medical Intelligence is a new discipline, converging human and artificial intelligence. Artificial intelligence will not replace human intelligence, especially in medicine. Diagnosis and treatment will remain a human endeavor. But AI will be an indispensable tool helping human intelligence effectively deliver better quality healthcare. The overwhelming benefit is that it raises the bar for all practitioners. A minimum level of quality medical care can available globally. The higher standard for diagnostic accuracy, therapeutic recommendations, and overall care from this mass of data gathering will improve overall health and wellness everywhere. Applied effectively, these tools also drive down overall healthcare costs, diagnostic errors, and unnecessary procedures. Greater accuracy eliminates needless testing and procedures significantly and delivers effective care more quickly. Diagnosis is more immediate, recovery times faster, care more available, and overall expenses reduced.
Instead of “internet time” we now have “pandemic time.” The need for advanced systems to keep society functioning, manufacturing moving, and give consumers some sense of safety is immediate. Driving innovations – whether those innovations are in health care, technology or other areas of production and manufacturing – is essential to not only offset the impact of the global pandemic but stay competitive and sustainable long after the current health crisis has subsided. Technological advancements, especially machine learning and other powerful software tools, combined with developments in nanotechnology, monitoring, and global communication networks will accelerate a profound change that will permeate all aspects of business and manufacturing. Advanced technologies were set to indelibly affect all aspects of industry in about five years. The curve to successfully implement the best tools and make processes more efficient, informative, and effective has been accelerated by the pandemic. The need for automation and systematic tools to keep society functioning, keep manufacturing moving, and give consumers some sense of safety and confidence is immediate. More than anything, driving innovations – whether those innovations are in health care and life science, technology or other areas of production and manufacturing – is now seen as essential to not only offset the impact of the global pandemic but stay competitive and sustainable long after the current health crisis has subsided. Technological advancements, especially machine learning and other powerful software tools, combined with developments in nanotechnology, monitoring, and global communication networks will accelerate a profound change that will permeate all aspects of business and manufacturing.
Technological innovation ignites economic growth feeding further innovation. But, has our relentless progress irrevocably tipped the balance from a virtuous circle of innovation and growth to a downward spiral of disaster and decline? We’re going to continue to drive, fly, throw away plastic, and tear down the rainforest. If we aren’t going to solve the problems we’ve created by regulating ourselves, we’re probably going to have to use technology — whether that’s to save species, or human lives, or to make sure that certain plants or coral reefs survive climate change. We don’t know the consequences of these future actions.
While it may seem tempting to target attractive market sectors and provide government-backed capital and direction, this typically does not end well. The efficient allocation of capital, demanding an appropriate return for given risks, is something private markets do extremely well. A handful of bureaucrats cannot match the collective wisdom of the capital markets, no matter how attractive the target.
WeChat has become the ubiquitous, full-service platform for communication and commerce in China. Essentially, the company has taken the mobile Internet and made it their own. The WeChat internet has a lot to admire — and emulate. While the United States sees big tech as a colossus that needs to be knocked down, the Chinese government saw tech companies as economic engines to be harnessed. They were right.