Category: Business

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AI Predicts Timeline for EVs to Capture 50% of US Car Sales

Introduction:

As electric vehicles (EVs) become more popular, experts and enthusiasts alike are trying to determine when they will capture a significant portion of the US automotive market. To shed light on this question, researchers at ApplyingAI.com have employed artificial intelligence (AI) to analyze historical data and predict when EVs will make up 50% of US car sales.

Methodology:

The AI model used for this prediction was trained on a dataset that includes historical EV sales data, government policies, technological advancements, and market trends. By analyzing these factors, the AI was able to identify patterns and correlations that influence EV adoption rates and market penetration.

Results:

Based on the AI’s analysis, EVs are predicted to account for 50% of US car sales by 2035. This projection takes into account the current growth rate of EV sales, as well as anticipated improvements in battery technology, charging infrastructure, and vehicle affordability. Additionally, the AI considered the impact of government policies, such as the recent ambitious EU and US programs – Europe’s Fit for 55 package and the US’s Inflation Reduction Act, which include new proposed EPA emissions rules. These policies are expected to drive significant growth in EV sales over the next decade.

Regional differences:

The AI model also identified regional differences in EV adoption rates across the United States. States with more progressive environmental policies and higher incentives for EV adoption are likely to reach the 50% milestone sooner than states with less supportive policies. Furthermore, urban areas with better charging infrastructure and higher population density are predicted to adopt EVs more quickly than rural areas.

Market implications:

The AI’s prediction of EVs capturing 50% of US car sales by 2035 has significant implications for the automotive industry, the oil industry, and the environment. Automakers will need to adapt their production lines and supply chains to meet the increasing demand for EVs. The oil industry will face a decline in demand, as EVs displace internal combustion engine vehicles, potentially reducing the need for at least 5 million barrels of oil per day by 2030, according to the International Energy Agency (IEA). Lastly, the widespread adoption of EVs will contribute to a reduction in greenhouse gas emissions, helping the US meet its climate change goals.

Conclusion:

The AI-powered prediction provides valuable insights into the future of EV adoption in the United States. While the timeline for reaching 50% of car sales is only an estimate, it underscores the importance of continued investment in EV technology, infrastructure, and policy to accelerate the transition to cleaner and more sustainable transportation.

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Unveiling the Untold Story of Tesla’s Q1 2023 Earnings Report: A Deeper Dive into Share Price Implications

Tesla’s Q1 2023 earnings report has captured the attention of investors and market enthusiasts alike, showcasing impressive revenue growth and a solid financial position. However, a closer inspection reveals some underlying concerns that might not be as clear on the surface. In this analysis, I will explore the hidden truths that may impact the company’s future success and share price, while offering a unique perspective on the unfolding situation.

Part 1: Financials and Profitability

The Balancing Act of Tesla’s Profitability: At first glance, Tesla’s Q1 2023 report reveals an 11.4% operating margin and $2.7B in GAAP operating income. However, this figure is down YoY, primarily due to reduced average selling prices (ASPs), higher raw material costs, and increased logistics and warranty expenses. As the company continues to expand production and launch new products, these costs may continue to escalate, potentially putting a strain on profitability.

Share Price Implications: A decline in profitability could dampen investor sentiment and lead to downward pressure on Tesla’s share price. As the electric vehicle (EV) market becomes increasingly competitive, Tesla may need to continue cutting prices to maintain its market share. This price war, along with the rising costs of production, could significantly impact the company’s profit margins and, consequently, its stock valuation.

Part 2: Product Development and Challenges

Navigating the Cybertruck Waters: Tesla’s Cybertruck has generated a significant buzz, and its production is set to begin later this year at Gigafactory Texas. However, the unconventional design and features of the Cybertruck may not resonate with traditional truck buyers. The pickup truck market is fiercely competitive, and Tesla’s entrance into this space comes with a considerable risk that may not be fully reflected in their earnings report.

The Odyssey of 4680 Cell Production: Tesla’s 4680 battery cells are crucial for their future success, as they promise increased energy density, reduced cost, and better performance. However, ramping up production for these cells has proved challenging, contributing to the decrease in operating income. If Tesla encounters additional setbacks, it could significantly delay product launches and hinder their ability to meet the 50% compound annual growth rate (CAGR) target.

Share Price Implications: Tesla’s share price is heavily influenced by investor sentiment and expectations of future growth. If the Cybertruck fails to capture a significant portion of the pickup truck market, or if the 4680 cell production encounters further delays, it could lead to a negative impact on the stock price. Furthermore, as Tesla’s valuation is based on future growth potential, any delays in product development could result in a revaluation of the company’s worth by the market.

Part 3: Energy Storage Expansion and Market Position

Tesla’s Energy Storage Ambitions: Tesla’s energy storage business showed promising growth in Q1, with the company planning to increase production capacity at their Megafactories in Lathrop and Shanghai. Despite the positive outlook, the energy storage market is becoming increasingly crowded, and Tesla may face stiff competition from both new and established players. This competition may put pressure on margins and make it more difficult for Tesla to maintain its position as a market leader.

Share Price Implications: As a significant portion of Tesla’s valuation is tied to its position as a market leader in the EV and energy storage sectors, increased competition could negatively affect investor sentiment and the company’s stock price. The energy storage market is evolving rapidly, and new technologies could emerge that challenge Tesla’s dominance. If Tesla fails to maintain its competitive edge, the market may reevaluate the company’s growth prospects, leading to potential share price

Part 4: Tesla’s Long-Term Growth Strategy and Share Price Implications

The Roadmap to Tesla’s Growth: In the earnings report, Tesla outlines plans to grow production in alignment with their 50% CAGR target, aiming to produce around 1.8 million cars in 2023. However, the automotive industry is known for its unpredictability, and Tesla’s ambitious growth plans may not be feasible in the long run. The company’s aggressive expansion may leave them vulnerable to unforeseen challenges, such as supply chain disruptions, regulatory hurdles, or shifts in consumer preferences.

Share Price Implications: Investors have high expectations for Tesla’s growth, which is reflected in the company’s stock price. Any signs of faltering growth or the inability to meet their ambitious targets may cause a loss of investor confidence and result in a decline in Tesla’s share price. The market is sensitive to changes in growth projections, and if Tesla’s growth falters, even temporarily, it could cause significant volatility in the stock price.

Part 5: Tesla’s Long-Term Plans and Share Price Dynamics

Tesla’s Vision for the Future: Tesla has ambitious long-term plans that focus on rapid growth, expansion of its product lineup, and continuous investment in autonomy and vehicle software. The company’s strategy includes an emphasis on Full Self-Driving (FSD) technology, which could potentially revolutionize the automotive industry and create new revenue streams through ride-sharing and other applications. Tesla’s commitment to innovation and growth is part of what has propelled its share price to around $170 per share.

Cybertruck Manufacturing Optimism: Cybertruck has the potential to disrupt the pickup truck market with its unique design and advanced technology. Tesla’s Gigafactory Texas, where the Cybertruck will be produced, is expected to feature cutting-edge manufacturing techniques and innovations that could help streamline the production process. If Tesla can successfully ramp up Cybertruck production and gain a foothold in the competitive pickup truck market, it could further solidify its position as a leader in the EV industry and create a positive impact on its share price.

Full Self-Driving (FSD) Prospects: Tesla’s FSD technology is one of the key pillars of the company’s long-term strategy. The company has made significant progress in recent years, with multiple iterations of their Autopilot and FSD software being released to customers. However, the path to true autonomous driving is complex, with regulatory and technical challenges still to be overcome. If Tesla can successfully navigate these hurdles and deliver a fully functional FSD system, it could potentially unlock substantial value for the company and its shareholders.

Share Price Implications: The share price of Tesla is closely tied to the company’s long-term plans and its ability to execute them successfully. The introduction of the Cybertruck and advancements in FSD technology could potentially lead to significant upside in Tesla’s share price. However, the market will closely monitor the company’s progress in these areas. Any setbacks or delays in production, FSD development, or regulatory approval could negatively impact investor sentiment and the stock price.

Conclusion: Tesla’s long-term plans, including the Cybertruck production and Full Self-Driving technology, play a crucial role in the company’s current share price of around $170 per share. While there are risks associated with these ambitious plans, a successful execution could propel Tesla to new heights in the automotive industry and lead to potential gains in its stock valuation. As the electric vehicle market continues to evolve, Tesla’s ability to navigate these challenges and capitalize on emerging opportunities will be key to maintaining its dominance and protecting its share price.

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Unleashing the Revolutionary Power of AI in Data Entry and Processing: Anticipating Unprecedented Advances Before 2025

Data entry and processing is one of the key areas where Artificial Intelligence (AI) is expected to have a major impact in the coming years. With the increasing amount of data being generated every day, the demand for faster and more efficient data processing has never been higher. Fortunately, AI technology is here to help meet this demand and take data entry and processing to the next level.

One of the main advantages of AI in data processing is its ability to automate manual data entry. This means that instead of relying on human data entry clerks, AI algorithms can process and categorize vast amounts of data much more efficiently and accurately. AI algorithms can also identify patterns and relationships within the data, allowing for more comprehensive data analysis.

Another key area where AI is expected to enhance data entry and processing is in natural language processing (NLP). NLP is a subfield of AI that focuses on the interactions between computers and humans in natural language. With advancements in NLP, AI will soon be able to understand and interpret written and spoken human language, making data entry and processing even more seamless.

Before 2025, we can expect to see significant advancements in AI’s ability to process and analyze unstructured data, such as images, videos, and audio. AI algorithms will be able to automatically identify and categorize information within these types of data, making data entry and processing much easier and more efficient. Additionally, AI will be able to process multiple languages, further expanding its reach and impact on data entry and processing.

Another exciting development in the field of AI and data entry and processing is the use of machine learning. Machine learning is a type of AI that allows algorithms to learn and improve over time through experience. With machine learning, AI algorithms can become more accurate and efficient at processing and analyzing data, reducing the risk of human error and improving the overall accuracy of the data.

In conclusion, the next few years will bring significant advancements in the field of AI and data entry and processing. From automating manual data entry to processing unstructured data and utilizing machine learning, AI has the potential to greatly enhance the accuracy and efficiency of data processing. By embracing these changes, we can look forward to a future where data entry and processing is seamless and accurate, providing valuable insights and helping organizations make better data-driven decisions.

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AI Job Automation: What to Expect in the Next 5 Years and How to Stay Ahead of the Game

As the world of technology evolves, Artificial Intelligence (AI) is becoming an increasingly influential force in our lives and careers. With the advent of new and innovative AI technologies, we can expect to see a major transformation of the job market over the next few years.

One of the most significant changes we can expect to see is the automation of a wide range of tasks that were once performed by humans. This shift may seem daunting at first, but it’s important to keep in mind that it will also lead to the creation of new job opportunities.

Here are just a few of the areas where AI is expected to have a major impact:

Data entry and processing: With the help of advanced AI algorithms, vast amounts of data can now be processed and categorized with incredible efficiency and accuracy. This will result in a significant reduction of manual data entry tasks.

Customer service: AI-powered chatbots and virtual assistants are already helping many companies handle customer inquiries and support. In the years to come, these systems are only going to become even more advanced and capable of handling even more complex tasks.

Manufacturing and logistics: AI is revolutionizing production processes and reducing the need for manual labor in manufacturing and logistics. This technology can be used to optimize production runs, streamline supply chains, and minimize waste, ultimately improving efficiency and cost-effectiveness.

Sales and marketing: By analyzing customer data, AI can predict which customers are most likely to make a purchase, allowing companies to tailor their sales and marketing efforts with greater precision. AI can also automate tasks such as lead generation and email campaigns, freeing up valuable time and resources for sales and marketing teams.

Healthcare: AI is having a major impact on healthcare by automating many tasks and improving patient outcomes. For example, AI algorithms can be used to process medical images, diagnose illnesses, and develop personalized treatment plans.

As AI continues to shape the job market, it’s important for individuals to embrace new opportunities and develop new skills. Fields such as AI development, data analysis, and cybersecurity will likely be in high demand, and those who invest in these areas will be well positioned for success in the years to come.

In conclusion, AI is not something to be feared, but rather an exciting opportunity to be embraced and utilized to its full potential. The next five years are going to be an incredible time for AI, and we can’t wait to see the impact it will have on the job market and beyond!

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Maximizing Your Earnings with ChatGPT: A Guide for Aspiring AI Experts

Are you interested in making money with AI but not sure where to start? OpenAI’s ChatGPT is a powerful tool that has the potential to provide new opportunities for monetization and help you turn your AI expertise into a profitable venture. In this blog post, we will explore how you can use ChatGPT to earn money online, even if you are new to the field of AI.

  1. Offer ChatGPT-powered Customer Service: One of the easiest ways to get started with earning money using AI is by offering ChatGPT-powered customer service. Customer service is a critical component of any business, and many companies struggle to keep up with the volume of inquiries they receive. That’s where ChatGPT comes in – it can provide quick and personalized responses to customers 24/7, freeing up human customer service representatives to focus on more complex inquiries. By offering ChatGPT-powered customer service to businesses, you can earn a recurring income stream by charging a monthly fee for your services.
  2. Develop AI-powered Chatbots for E-commerce: Another way to earn money with ChatGPT is by developing AI-powered chatbots for e-commerce websites. Chatbots are becoming increasingly popular for online retailers as they provide instant support and recommendations to customers. With ChatGPT, you can create custom chatbots that can help e-commerce websites improve the customer experience. By developing chatbots for e-commerce websites, you can earn a one-time fee for your services and potentially earn recurring revenue through ongoing maintenance and updates.
  3. Create ChatGPT-powered Virtual Assistants: Virtual assistants are becoming more and more common in both personal and professional settings. With ChatGPT, you can create virtual assistants that can perform a range of tasks, such as scheduling appointments, answering frequently asked questions, and even making recommendations. As demand for virtual assistants continues to grow, there is a huge opportunity for aspiring AI experts to develop and sell these systems to businesses and individuals. You can earn money by charging a fee for your virtual assistant services or by selling the software outright.
  4. Offer ChatGPT Training and Consultation Services: Finally, you can monetize your AI expertise by offering ChatGPT training and consultation services to businesses and individuals. As ChatGPT continues to grow in popularity, there will be an increasing demand for experts who can help organizations and individuals understand and effectively utilize this technology. By offering training and consultation services, you can earn a fee for your expertise and help others take advantage of the potential of ChatGPT.

In conclusion, there are many ways for aspiring AI experts to use ChatGPT to earn money online. Whether you are interested in offering customer service, developing chatbots, creating virtual assistants, or offering training and consultation services, the potential for monetization is significant. Keep in mind that the key to success is staying up-to-date with the latest advancements in AI technology and marketing your services effectively. Don’t be intimidated by the fact that you are new to AI – with the right tools and resources, you can quickly become an expert and start earning money with ChatGPT.

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When Stocks Stop Being Sexy – Why I’m Buying Tesla

These are scary times. The market is the most volatile that it’s been since the crash in march 2020 during the first lockdown. Tesla is down over 25% from its high share price to below $660 as of this video. Friends keep asking me: Is it time to sell? Is this the end of the run?

Well, something big is happening and I want to share it with you. 

Tesla is one of the most talked-about companies in the market and one of the most popular to trade. There are hundreds of YouTube channels dedicated to their cars and many dedicated to their stock.

So why should you listen to me?

Please don’t take it lightly when I say that I’m VERY familiar with Tesla. I’ve been following the company since they released the first roadster in 2008. I actually founded a company, InOrbis Intercity, that uses exclusively Tesla vehicles for city-to-city travel, in 2015. During that time I have owned several models of Tesla and have driven and ridden in virtually every model and trim that has been released to-date. We’ve had cars with upwards of 400,000km of use and we’ve driven nearly 3 million km in total with travelers in the past 5 years. We gather feedback from our drivers and our customers on the safety, comfort, maintenance, energy costs, and reliability of Teslas every single day.

I know a lot about these cars and about the company. Let me tell you, until about 5 days ago, I thought Tesla’s share price has been overvalued. And I’ve thought that since 2018.

This is not easy for me. But I’m here to tell you that I was wrong and that I’ve changed my mind about Tesla and also what I’m going to do about it.

Here’s how I changed my mind. And trust me, it wasn’t easy. 

Full disclosure, I’ve been bullish on Tesla’s products for a long time. In my opinion, Tesla makes the best cars on the market. Full Stop. And they only get better every day. We’ve had nothing but positive feedback and experiences in our fleet with the vehicles. There certainly are downsides to owning a Tesla but the software and driving experience make up for any of the negative experiences with the company that we’ve had to this point.

Unfortunately for me (and my wallet), I’ve been bearish on their stock price until now, thinking that it was just the ‘popular kid on the block’ and eventually, the price would come back down to earth. I was sure that Tesla would eventually get bought up by Apple or another large auto-manufacturer and their cars would live on as a sub-brand. I even created an extremely detailed valuation model and wrote a 30-page report on why Tesla was overvalued back in January of 2018 when their stock price was $200 (pre-stock split).

I was absolutely positive that Tesla was not going to make it. They’d soon run out of money and that the only way for them to keep going was if they got bought out.

In my defence, I was almost right! Tesla almost went bankrupt. Apple ALMOST bought them. Elon almost had to give up leading his dream of electrification (twice).

But then they delivered; first on the Model 3, and then the Model Y. They’ve hit target after target and even delivered very nearly half a million cars in 2020, during one of the most difficult years in recent memory for many of us. Tesla has been on an absolute tear for so long that I finally bought in around the time that their stock split. I didn’t buy much though. I still thought they were overvalued and that the run would end.

To summarize, I’ve thought Tesla stock was overvalued for a LONG time.

Lots of people are saying that Tesla would have to have a 50% market share of the entire automotive industry to hit its current valuation. I believed them. Until now.

It turns out that’s just not true!

I won’t go into detail here but in future posts and videos on my YouTube channel, I’m going to show you how, even with an extremely conservative (high) discount rate, Tesla is actually undervalued. And it’s probably undervalued at $800 per share, too. You can check out my valuation by clicking this link.

I’ve changed my mind on Tesla. I’m now bullish on the product AND on the stock.

I am going to buy shares of Tesla, and keep buying until they hit my price target, and maybe even more after that depending on a few factors. I bought shares in after-hours today at a price of $651. If they keep dropping, I’ll keep buying.

As meet Kevin says, I’m throwing my money into the fireplace! As the price of Tesla falls I’ll be Buyin’… The… Dip…!!!

Numbers don’t lie, and I am confident in my numbers.

There’s also a move that Tesla could make that would double my price target. Sign up to my Patreon to find out what that is.

My targets are not based on any dreams of a full-autonomous revolution and of Tesla taking the MaaS (Mobility-as- a-Service) market over with their Tesla Network app (although that certainly wouldn’t hurt my valuation).

My targets are based solely on EV sales and on Tesla’s planned expansion of production. Not on a guess, but on their actual, stated manufacturing targets.

Before I tell you why I’m doing this. Please don’t JUST listen to what I’m saying and start buying because I said so!!! Do your homework! Make your own decisions! I am not a financial advisor so please don’t sue me if I’m wrong!

If you decide you want to buy too. Click this link to get Wealthsimple and get $10 to start trading on top of being able to make trades absolutely free!

OK, here’s what you CAN do and what I did: Make a valuation spreadsheet and understand what the intrinsic value of Tesla is. If you want to learn how to do this, I have a course that I’m building on how to value a company, get more info on that in my Patreon group. 

To get a good head start today, though, just Google discounted cash flow statements and fundamental valuation.

Learn about the business you want to value. Learn what they do and how they do it. Learn about its competitors and the technology that they use. Learn everything you can because you need to know what you’re investing in if you want to be successful. Then, build your model. Predict how much they’re going to make over the next several years and decide if the company is worth investing in. Invest until the business hits your target valuation or until you get new information that changes your mind.

So why is Tesla undervalued?

For me, this all comes down to something that many people glossed over at the time it was announced back in September. The media barely talked about it, because, I think it was too abstract for most people. What is was is Tesla’s internal battery production goal. That’s right. The key factor is how many batteries Tesla is going to manufacture in-house. That number is 3-Terawatt-hours by 2030. That’s huge! It’s 3000x more than what they produced in 2020. And that’s purely for cars and energy storage.

Because that’s their internal production target, and they’ve stated that they’re going to buy every battery their existing partners can make for the foreseeable future. I think it’s fairly conservative to use that 3TWh/year production target as a benchmark for calculating Tesla’s share price. All I had to do from there is work backward to find the size of each car battery and divide to find the number of cars they plan to produce. If Tesla can keep selling as many cars as they can produce (and I think they can because the demand for autonomous EVs is enormous), then this tells me exactly what Tesla’s sales curve is going to look like over the next years. Peek over a few Elon tweets and stats on their expenses and margin targets and we’ve got our future cash flow statement.

Fundamentally, Tesla is leading the way in EVs and in autonomous tech. Those two technologies ARE the future of transportation. They have the technology, they have the manufacturing capacity and they have the talent and the plan to make it happen.

I now think that this will happen and that it’s a great bet. Whether you do is up to you.

Remember: Do your research. If you’re confident in what you’ve found. Take a deep breath and make your call. You can do this.

For now, that’s all.

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Book Review – Hello World: Being Human in the Age of Algorithms – Part 1

Introduction
I often think of AI as something separate from traditional computer programming, something transcendent. However, most of the advances in modern AI are not the result of revolutionary new concepts or fields of study but rather the application of previously developed algorithms to significantly more powerful hardware and massive datasets.

Hannah Fry’s take on the world of AI covers topics ranging from justice to autonomous vehicles, crime, art and even to medicine. While the author is an expert in the field, she does a great job distilling the topics down to a level understandable by a layperson, but also keeps it interesting for someone with more background in programming and AI.

My favourite quote from the first part of the book comes on page 8, where Hannah succinctly describes the essence of what an algorithm is in only one sentence:

An algorithm is simply a series of logical instructions that show, from start to finish, how to accomplish a task.

Fry, Hannah. Hello World: Being Human in the Age of Algorithms (p. 8). W. W. Norton & Company. Kindle Edition

Once you read it, it seems obvious, but trying to describe to a first-year computer science student what an algorithm is can be a challenging task. The author manages this well. Despite the complexity and depth of the subject matter, Fry is able to bring context and relevance to a broad array of topics. The remainder of my review will speak to some of the book’s many sections and how someone with a business-facing view into the topics sees them.

Data
This section covers some of the unknown giants in data-science including Peter Thiel’s Palantir. The section also touches on some very public examples where analytics has played a negative role – Cambridge Analytica’s use of private user data during the 2016 Presidential Elections.

The story here is about data brokers. Data brokers are companies who buy and collect user data and personal information and then resell it or share it for profit. A surprising fact is that some of these databases contain records of everything that you’ve ever done from religious affiliations to credit-card usage. These companies seem to know everything about just about everyone. It turns out that it is relatively simple to make inferences about a person based on their online habits.

The chapter converges to one of the major stories of 2018, the Cambridge Analytica scandal. But it begins by discussing the five personality traits that psychologists have used to quantify individuals’ personalities since the 1980s: openness to experience, conscientiousness, extraversion, agreeableness and neuroticism. By pulling data from users’ Facebook feeds, Cambridge Analytica was able to create detailed personality profiles to deliver emotionally charged and effective political messages.

Perhaps the most interesting fact though, is how small of an impact this type of manipulation actually has. The largest change reported was from 11 clicks in 1000 to 16 clicks in 1000 (less than 1 percent). But even this small effect, spread over a population of millions can cause dramatic changes to the outcome of, say, an election.

That’s the end of part 1 of this review. In Part 2, I’ll touch on some of the other sections of the book including Criminal Justice and Medicine.

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AI Everything

These days it seems like businesses are trying to use AI to do everything. At least for startups, that isn’t far off. Anywhere there is a dataset remotely large enough and an answer that is vaguely definable, companies are putting together a business model to use machine learning to solve the problem. With some incredible successes in areas like image classification and defeating humans at video games, its hard not to be impressed.

One of the best channels for following recent breakthroughs in AI is the 2 Minute Papers YouTube Channel, started by Károly Zsolnai-Fehér, a professor at the Vienna University of Technology in Austria. Károly’s videos combine interesting clips of the programs in action with well-delivered summaries of recent papers illustrating advances in artificial intelligence.

In one of his latest videos, he covers an AI that not only can copy the most successful actions that humans take in video games but can actually improve on those actions to be better than the best human players. So does that mean that AI will be displacing office workers once it learns how to do their jobs better than them? Probably, yes. But maybe not quite how you think it might.

As much of a ‘black-box‘ as AI has been in the past, modern systems are becoming better and better at explaining how they arrived at an answer. This gives human operators predictive capabilities that we didn’t have with systems of the past that could spit out an answer but gave us no indication of how that answer was formulated.

This Forbes article on Human-Centric AI provides some examples of how modern AI systems can be implemented to train employees to do their jobs better and even enjoy their jobs more while doing it! If that doesn’t sound incredible to you, you may be a machine who is only reading this page to improve your search algorithm.

So what does this all mean? A lot of research is showing that AI is actually creating many more jobs than it destroys. So, as long as you’re willing to try and understand the systems that will one day be our overlords, you should be able to upgrade your career and stay employed.

Whether you still want the job that remains is another question entirely.

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On AI and Investment Management

Index funds are the most highly traded equity investment vehicles, with some funds like ones created by Vanguard Group cumulatively being valued at over $4 Trillion USD. Index funds have democratized investing by allowing access to passive investments for millions of people. But what are they?

An index fund is a market-capitalization weighted basket of securities. Index funds allow retail investors to invest in a portfolio made up of companies representative of the entire market without having to create that portfolio themselves. Compared to actively managed funds like mutual funds and hedge funds, index funds tend to have much lower fees because the only balancing that happens occurs based on an algorithm to keep the securities in the fund proportional to their market cap (market capitalization, or market cap, is the number of shares that a company has on the market multiplied by the share price).

Starting in the 1970s, the first ‘index funds’ were created by companies that tried to create equally weighted portfolios of stocks. This early form of the index fund was abandoned after a few months. It quickly became apparent that it would be an operational nightmare to be constantly rebalancing these portfolios to keep them equally weighted. Soon companies settled on the market capitalization weighting because a portfolio weighted by market cap will remain that way without constant rebalancing.

With the incredible advancement of AI and extraordinarily powerful computers, shouldn’t it be possible to create new types of ‘passively managed’ funds that rely on an algorithm to trade? What that could mean is that index funds might not have to be market cap weighted any longer. This push is actually happening right now and the first non-market cap weighted index funds to appear in over 40 years could be available to retail investors soon.

But this means that we need to redefine the index fund. The new definition has three criteria that must be met for a fund to meet:

  1. It must be transparent – Anyone should be able to know exactly how it is constructed and be able to replicate it themselves by buying on the open market.
  2. It must be investable – If you put a certain amount of money in the fund, you will get EXACTLY the return that the investment shows in the newspapers (or more likely your iPhone’s Stocks app).
  3. It must be systematic – The vehicle must be entirely algorithmic, meaning it doesn’t require any human intervention to rebalance or create.

So, what can we do with this new type of index fund?

“Sound Mixer” board for investments with a high-risk, actively traded fund (hedge fund) on the top and lower risk, passively traded fund (index fund) on the bottom.

We can think of investing like a spectrum, with actively managed funds like hedge funds on one side and passively managed index funds on the other and all the different parameters like alpha, risk control and liquidity as sliders on a ‘mixing board’ like the one in the image above. Currently, if we wanted to control this board, we would have to invest in expensive actively managed funds and we wouldn’t be able to get much granular control over each factor. With an AI-powered index fund, the possibilities of how the board could be arranged are endless. Retail investors could engage in all sorts of investment opportunities in the middle, instead of being forced into one category or another.

An AI-powered index fund could allow an investor to dial in the exact parameters that they desire for their investment. Risk, alpha, turnover, Sharpe ratio, or a myriad of other factors could easily be tuned for by applying these powerful algorithms. 

The implications of a full-spectrum investment fund are incredible. Personalized medicine is a concept that is taking the industry by surprise and could change the way that doctors interact with patients. Companies like Apple are taking advantage of this trend by incorporating new medical devices into consumer products, like with the EKG embedded into the new Apple Watch Series 4.

Personalized investing could be just as powerful. Automated portfolios could take into account factors like age, income level, expenses, and even lifestyle to create a portfolio that is specifically tailored to the individual investor’s circumstances.

So why can’t you go out and purchase one of these new AI managed, customizable index funds?

Well, unfortunately, the algorithms do not exist, yet. The hardware and software exists today to do this but we’re still missing the ability to accurately model actual human behaviour. Economists still rely on some pretty terrible assumptions about people that they then use to build the foundations of entire economic theories. One of these weak assumptions is that humans act rationally. Now, there is a lot of evidence to suggest that many people act in the way that we are programmed to by evolution. The problem is, a lot of what allowed us to evolve over the last 4 billion years of life on earth, is pretty useless for success in 2018-era financial planning and investment.

All hope is not lost, however. New research into the concept of bounded rationality, the idea that rational decision making is limited by the extent of human knowledge and capabilities, could help move this idea forward. One of the founding fathers of artificial intelligence, Herbert Simon,  postulated that AI could be used to help us understand human cognition and better predict the kinds of human behaviours that helped keep us alive 8,000 years ago, but are detrimental for wealth accumulation today. 

By creating heuristic algorithms that can capture these behaviours and learning from big data to understand what actions are occurring, we may soon be able to create software that is able to accentuate the best human behaviours and help us deal with the worst ones. Perhaps the algorithm that describes humanity has already been discovered.

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How Much Is Your Idea Worth?

Nothing.

Zero, nada, zilch, bupkiss. That’s how much your idea is worth.

But…but, my idea is brilliant! It will change the world! My new plan for how to solve snow-covered streets is worth billions!

Really? Who is willing to pay you a billion dollars for your idea? Anyone?…Anyone? Bueller?

I’m sorry to burst your bubble, but the likelihood is that any idea that you’ve had, someone smarter than you has already had. Your idea is worthless. So what? It doesn’t matter that it’s not worth anything now. What matters is what you do with your idea.

Take your idea for a product or service, and sell it to someone. See if there are people willing to put down actual money for what you’ve thought of. And don’t be afraid to tell people what your idea is. If it’s so easy to replicate that just by telling someone, they could take it and turn it into a business, then your idea wasn’t really worth anything, to begin with. How do you sell your idea? Take it to market! Start by defining the problem that you’re trying to solve. Research the hell out of it, what the pain points are that your idea addresses, who has those pain points, and how you can reach those customers. See if you can interview people with the pain. Ask them to tell you a story about the pain and see if it really bothers them enough to change what they’re already doing. This type of research costs nothing but your time and will provide valuable insight into the minds of your target audience.

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Has the Lean Startup flopped?

Steve Blank, the entrepreneur responsible for customer development methodology says The Lean Startup is dead. What does that mean? Basically, there’s so much money available through angels and VCs that a young company’s success depends almost exclusively on their ability to raise huge sums of money and not on their ability to bootstrap a startup.

I am not confident that Steve is correct, especially if you live outside of the Silicon Valley bubble, or are creating a startup that doesn’t immediately scream ‘FUND ME’ to Angels and VCs. It’s still possible to build a company without raising a hundred million dollars, it’s just difficult. I’ve been building my company, InOrbis Intercity for over three and a half years now. It started off as a worthless idea, just like yours. But it has grown to be more than that. We’ve just had our first profitable quarter, and we’re still only in Alberta. The vision I have for the company is beyond large. It will be a billion dollar company. But it takes time for great things to happen.

In order to change the way that people travel, we have to reinvent the model of a transportation company. We can’t rely on what companies like Uber did for intra-city ridesharing, and we definitely can’t copy what the airline and bus industries have done (RIP Greyhound). Our vision involves fleets of autonomous vehicles bringing business travellers, vacationers and more between the hundreds of cities that are within a few hundred kilometres of each other. So far, we have connected 6 cities with a combined population of nearly 3 million people. If we provide to access 100 times that number in 5 years, then we’ll be well on our way.

If you have an idea, and you want to talk to someone who also had one, and has tried to turn their idea into a reality, I am always open. Send me a message, I’ll happily sit down with you for a coffee to tell you my story and ask you about yours. I want you to succeed just as much as I want to succeed.

Think your idea is worth it? Let’s make it happen.