Q&A 026

Published on:
March 17, 2021

Hi All,

Technology as a solution to problems, often comes with trade-offs and drawbacks. This week we explore technology to help struggling artists, get over the energy transition 'hump', enable algorithmic trade and externalise motivation. Enjoy!

💸 Patron

In general, artists have never been amongst the best paid people on this planet. You get a skewed image if you focus on the top 0.01% of painters, actors, writers and musicians, but these exceptions cannot hide the fact that the majority of people in the arts struggle to make a living with their craft.

It fascinates me how this contrasts with the way we consider all of our art forms to be uniquely human and invaluable to our well-being. We have gotten solace and comfort from art in our darkest moments and much of what we consider our historic achievements is art.

With modern incarnations of Patrons (like patreon.com) as an example of technology solving this problem, I was therefore quite enthusiastic about the dawn of the NFT. An NFT (Non Fungible Token) is a way to buy digital art based on Blockchain technology, albeit without the formal legal and economic ownership of the piece.

“I feel like I got a steal,” the buyer said in an interview about buying the NFT, or nonfungible token, of a digital collage.

The NFT space has exploded recently, with many investors buying NFT's of everything from digital artwork and writing to videos of NBA action shots. Last week, a collage of work by Beeple was sold at Christies for US$ 69 Mio (not a typo).

My enthusiasm of NFT's took a turn for the worse after being confronted with Seth Godin's view and then reading this more in-depth article. While quite extreme in its conclusion, I have yet to find the fundamental flaw in the reasoning behind it. If NFT's are a modern incarnation of a pyramid scheme, it's not about to end because of a lack of buyers, but because of a clash with our moral and environmental values.

☢️ Nuclear option

Last week marked 10 years since the Fukushima Nuclear Disaster. The combination of an earthquake and a tsunami caused a cascade of events, ultimately leading to 3 nuclear meltdowns.

These events were an illustration of one of the biggest drawbacks to nuclear power. While the risks are small, failure can immediately have catastrophic results. Combined with the long-lived toxic waste that nuclear power generation produces, the events led to a halt in nuclear programmes in most of the Western world.

The Economist evaluated the current state of nuclear affairs, and came to the conclusion that our response to the most recent disaster might not be the best in the long term. While solar and wind energy are on the rise and have become cheaper than ever before, looking at our energy consumption only in the Watt-hours dimension paints a flawed picture. The sun and the wind only provide us with intermittent power. As battery technology is still not mainstream, we will need other sources for a reliable grid.

"Despite this, safe and productive nuclear plants are being closed across the rich world. Those closures and the retirement of older sites mean that advanced economies could lose two-thirds of their nuclear capacity by 2040, according to the International Energy Agency"

If the gap resulting from this is filled by fossil-fuel infrastructure, this will then be in place for decades. For good reason, Bill Gates invested heavily in next-generation (safer) nuclear technology. He decided to stop his efforts after Fukushima because political will was gone. The Netflix show 'Inside Bill's Brain' gives you a great peek inside the process and the pitfalls of dealing with the matter. Our intuitive response to nuclear energy might not be in our best interest for the long term.

🐧💨 Momentum

The financial markets and in particular the stock markets may be complex and puzzling. It leads many people to conclude that it is an area they do not understand and is to be left to the quantitative whizzkids. However, even experienced and studied financials are puzzled by certain phenomena taking place in the financial world.

“We don’t know why it exists, and it shouldn’t exist.”

This was the response of emeritus Professor Paul Marsh to a question about so-called 'momentum' in the equity markets. More specifically, he was asked why momentum was more profound in developed financial markets or sectors, which are considered to be more efficient.

Momentum in equity markets is the tendency of winning stocks to keep winning, and losing stocks to keep losing. Smart investors have created dynamic strategies to make use of this effect, even adding to this positive feedback loop. It turns out this momentum strategy generally outperforms the market over the long term. It does so more reliably than 'value strategies', which consistently invests in companies that are undervalued.

Paul Marsh, together with his former London Business School colleagues Elroy Dimson and Mike Staunton have published the 'Global Investment Returns Yearbook' annually since 2000. They have observed and explained many effects over the years, but this one remains a mystery. They may have to turn to their social and psychology colleagues (or one could argue: the real world). Dynamics like crowd herding, groupthink and peer pressure could be in play here. In developed markets, there are more large institutions driven by their own incentives rather than what the market determines.

A fascinating example how 'developed' is not always synonymous with 'better' or 'more advanced'. I'm sure professors Marsh, Dimson and Staunton have places available for social whizzkids to solve this puzzle.

🔋Motivation

In the realm of productivity tools, improving motivation is probably near the top of the list. Motivation essentially comes in two different tastes: intrinsic or driven from within yourself and extrinsic, such as money or other forms of rewards. On medium, a popular platform to publish your thinking, one of the most read articles on this topic suggests you can forget about motivation and you can purely rely on systems and procedures to get things done:

"To recap: establish your systems and habits. Stay focused on what matters. Delegate and tune out the noise. Your motivation will grow."

It is a (very) different perspective. I have been thinking about it and re-reading the article several times. I tend to like and nourish contra-thinking if only to sharpen my own thoughts. Still, after each pass, I became more certain the author was in my opinion missing a key point. Intrinsic motivation provides the energy to do whatever you want to do, be it useful for the goal you're after or something very mundane as doing the dishes.

I have experienced it myself in the past weeks and months, having embarked on several, highly challenging journeys at the same time. Each of the projects could be a fulltime job, but I manage to fit it all into the schedule. A great example is creating this weekly newsletter and the investigative and philosophical discussions we have whilst preparing it.

Intrinsic motivation generates a basket of energy and could be the closest thing to a Perpetuum Mobile.

That's it for this week! If you got forwarded this newsletter and like what you read, click here to sign up.  You can browse earlier editions in our archive.

As always, we would love to hear your thoughts and tips. Just reply to this e-mail to get in touch with us.

Have a great week!

Quinten & Alphons