The Deload #100: Curiosities and Experiments
Embracing the Freedom of Unfocus, and a New GPT
This is the 100th issue of The Deload. Whenever you joined the journey, thanks for reading. 🎉🎉
The Deload explores my curiosities and experiments across AI, finance, and philosophy. If you haven’t subscribed, join over 1,500 readers:
Disclaimer. The Deload is a collection of my personal thoughts and ideas. My views here do not constitute investment advice. Content on the site is for educational purposes. The site does not represent the views of Deepwater Asset Management. I may reference companies in which Deepwater has an investment. See Deepwater’s full disclosures here.
Additionally, any Intelligent Alpha strategies referred to in writings on The Deload represent strategies tracked as indexes or private test portfolios that are not investable in either case. References to these strategies is for educational purposes as I explore how AI acts as an investor.
The Freedom of Curiosity
Sometimes you stumble onto the perfect advice for a thing with which you’ve long struggled. That just happened to me.
I was listening to the Media Empires podcast with LibertyRPF, writer ofLiberty’s Highlights. Living up to his namesake, Liberty said something incredibly freeing:
I think as long as you have the intrinsic motivation, as long as you love it, as long as that's still there, I think it's a good sign to keep going because you're probably not that unique.
If you love it that much, there are probably your tribe out there somewhere, maybe you just haven't found them yet or maybe you just haven't got good enough at it that they noticed you or whatever. But as long as you have that thing from the inside, I think that it's a good sign. If -- even if you get some external success, but you've lost the fire on the inside, that's the first sign to, okay, you go take a break, see if it comes back, but if it doesn't, move on to something else.
Life is too short to do things you hate even if it pays the bill.
100 issues ago, I started writing The Deload to explore non-consensus ideas because Howard Marks convinced me those ideas are the only path to extraordinary investment results. With that kernel of inspiration, I’ve written about everything from equity valuation, to investment philosophy, to crypto (ouch), to performance enhancing drugs.
In my wandering, I’d have some strong posts and get some good feedback. Then I’d get visions of dedicating The Deload to one thing, writing on a reliable schedule, following the conventional path of newsletter writing.
The conventional approach never stuck. That’s not who I am. I’m widely curious. Inevitably my interest in whatever topic was working would wane, and I’d sit stuck between a loss of interest in what was working and a growing curiosity about some new shiny thing. Worse, I’d feel bad about my loss of focus and my writing would stop.
No more.
Liberty’s wisdom encourages me to embrace my curiosity.
His newsletter is great because it’s authentic. You feel his genuine interest in what he writes about. He’s not writing for an audience. He’s writing for himself, and that makes it even more interesting for his audience than if he wrote for them. At its best, The Deload follows the same playbook.
Looking ahead to the next 100 issues, The Deload will embrace my wandering curiosities and experiments without the nag of focus. My focus is what makes me curious. When those ideas come together in a form worth sharing, I’ll share them with you as I always have.
Thanks for the freedom, Liberty.
Curiosity: The 10x10er
If 2021 was defined by the excessive belief in potential 10-baggers, maybe the next few years can be defined by the 10x10er.
A 10x10er is a company that can grow revenue 10%+ over 10 years. That’s a true unicorn. Few companies at scale deliver such growth. Historic 10x10ers include many names you’d expect like Amazon, Google, Apple, and Microsoft. The club also includes names you may not think of like Chipotle, Monster, and Costco.
Credit for the 10x10er idea comes from @TheBigLong2019 in the comments section of a tweet from Brett Caughran. Caughran was explaining how investors should pay more for sustainable revenue growth via a valuable lesson from Lone Pine founder Steve Mandel:
Sustained structural growth is (almost always) chronically underpriced in the market, and sustained secular decline is (almost always) chronically overpriced in the market.
Looking for companies that might be able to grow 10%+ per year for a decade isn’t an easy task, but it immediately reduces the complexity of investment exploration. At a minimum, you know you need a massive market opportunity and a company with a product loved by consumers that they can’t get anywhere else so the company can capture the opportunity ahead of it. Then you need trustworthy management with the vision to win.
That’s a pretty limited universe if you’re honest about market size, product uniqueness, and management capability. Few companies can be great and durable investments, therefore almost every idea when looking for such companies will be bad. Investing can be a simple game if we allow it, and that usually comes from the discipline to live by a specific investment philosophy and avoiding the many almosts along the way.
On the thread of simplicity and investing in the rare, truly great business, h/t to the recent Reece Duca interview with Tegus and his clear message: Complexity is the greatest barrier to high performance in the investment industry. Noted.
Curiosity: TikTok Shops
Speaking of potential 10% growth for 10 year opportunities, Greg Isenberg thinks someone will make $100 million with a TikTok shop next year.
His logic is hard to argue with:
The average TikTok user spends more time on platform than any other social/content network other than Netflix.
TikTok is now giving Shop prime real estate. They want it to work. They’re going to push it hard.
They’re subsidizing 30% off first purchases to drive activity.
TikTok Stores feel like the future of eCommerce. This week, Amazon and Facebook announced that they’re testing a feature for IG and FB users to buy directly from Amazon ads without leaving the app.
What does this mean for companies like Shopify? Do the rebels go closer to where the distribution is?
Time for an experiment.
I signed up for a TikTok Shop this week to learn how it really works. It took about 15 minutes. Now I’m waiting on approval for my new business: StrongBox Snacks.
StrongBox Snacks was invented with ChatGPT over breakfast given a few requirements:
A holiday-focused business to capture the season
A product that would be easy to make and ship
A product that I’d actually buy
ChatGPT suggested a holiday basket business, but every time I get a holiday basket, it’s such a waste of money. Weird unrefrigerated cheeses, stale crackers, some small apples.
Conventional gift boxes suck, just like conventional ideas.
But I’d love a holiday basket of high-end protein goodies like chips and crackers from Quest, candy bars from Anabar, pastries from Legendary Foods, and brownies from Prime Bites. That’s what StrongBox Snacks makes — holiday gift baskets for fitness freaks and meatheads.
To start my TikTok store, I grabbed a bunch of protein treats from my pantry, put them in a nice looking box, taped a printout of the StrongBox logo from Midjourney on the box, and started taking pictures. I paid someone on Fiverr to make me a couple of basic product ads to post after my shop gets approved and another person to make daily workout program videos of my current program. Easy content. Next I’ll look at getting some creators to work as affiliates. All-in, I spent less than $150 to launch the experiment.
I think it would be fun if I sell 10 baskets. More to come on this experiment soon.
Experiment: Intelligent Alpha GPT
Intelligent Alpha — using generative AI to challenge markets — is my longest running experiment. More importantly per LibertyRPF, I find it fun and interesting, and I don’t see that slowing any time soon. Any endeavor to beat markets is necessarily a permanent thing. Markets keep opening, so the game is infinite.
In the infinite market game, Intelligent Alpha remains largely ahead:
If AI can’t consistently beat humans and markets, it would be a failure to reach the potential of the technology. Logically, a computer that can combine a form of creativity with twin superpowers of data processing and lack of emotion should win the market game. The reason we haven’t seen it yet is because most AI approaches to investing rely on too much data.
The greatest learning from the IA experiment remains that the unconventional approach to using AI vs markets is the path to superior long-term performance. Conventional approaches to using massive amounts of data can only lead to trading strategies because most data does not contain meaningful fundamental investment signal. All you can do with billions of noisy data points is trade, not invest.
In our theme for this issue of The Deload, simplicity wins again.
Intelligent Alpha uses a data-light approach with a heavier emphasis on teaching generative models a sound fundamental investment philosophy, and now you can try it for yourself with Intelligent Alpha GPT (IA GPT).
I made IA GPT with OpenAI’s new GPT product. The process was easy — upload some relevant data, give the GPT the right philosophy, fine tune the messaging. It probably took a few hours all in to get it to a usable version.
There are a couple of differences between IA GPT and the full Intelligent Alpha process. IA GPT is tuned only for US large cap equities, so it’s pared down from how I use AI across a broader range of strategies. IA GPT is also only one foundational model where Intelligent Alpha also uses input from Bard (PaLM 2) and Claude.
Try Intelligent Alpha GPT for yourself. It’s open for private access now. Warning: It can be a bit temperamental. True of all generative AI. I’d love your feedback on IA GPT.
Free and Easy
When ideas flow freely and writing is easy, I know I’m on the right path with The Deload. This was one of the easiest Deloads I’ve written so far. Embracing the freedom to wander and explore is a powerful unlock. 100 issues in, maybe I’m starting to figure it out.
Enjoy your great attitude! Have always felt it has been a large part of my success in all pursuits. No doubt luck plays to my success, but willingness to go further than others, experimenting and taking risk is a recipe for discovery. Not necessarily success, but you live and you learn, hopefully by paying attention and you using your common sense. My biggest fault, GREED! Keep up the great learning entertainment.