Signal generators

Back to my blog

In an effort to ensure I write more, I am changing the format of my blog. I will still occasionally deep-dive into topics, but otherwise will share some of my interesting readings from the week with thoughts.

Signal generators

I enjoy betting on US and UK political events, and my track record thus far has been quite good. In the aftermath of the election, you saw a lot of so called ‘experts’ shocked at a Trump victory. Not from dislike of the man, but rather, the beliefs they held so firmly regarding how Trump couldn’t win being proved wrong. So what was the issue here?

I believe it to be a limited set of what I’ll call signal generators. And defining a signal as meaningful information that stands out against noise.

Another ‘expert’ analysing how he could be so wrong…

We are emotional creatures, and generally we like to surround ourselves with similar people/ideas/beliefs. Do this to too great an extent and you exist in an echo-chamber, with only a very limited set of signals feeding your beliefs.

The problem with many experts (on all sides) is that they are plugged into only a limited set of signal generators, and therefore have their own strong filters fitted that they consider rational, and which ultimately leads to many of them looking relatively naïve. Of course this doesn’t only apply to politics but every field.

My goal with a lot of my reading is to try to pick up interesting ‘signals’ that sit across a broad spectrum of belief systems. I will aim to share these, with a focus mostly in tech, the economy, science and politics.

The property disparity

The ratio between salaries and house prices in the UK is now at ~9x. For young people this is especially bad as we see the average age of first time buyers continuing to rise. The UK also has very low participation in the stock market. Over 60 per cent of Americans invest in the stock market, but only 23% of Brits do. Before, young adults would get on the property ladder earlier and see wealth appreciation through the value of their property. We now have generations of people trying to build deposits to pay for ever-appreciating house prices, whilst simultaneously seeing erosion in the real value of their savings. At the same time, we have a stagnant domestic stock market (up only 17% since Jan 2000 vs. 300%+ for the S&P500), which may explain the lack of equity market participation to some extent.

Interestingly, from a historic perspective, we have seen a higher multiple, although it was 150 years ago. Prices then were driven down predominantly due to a doubling of the housing stock. Unfortunately, the British NIMBY of recent does seem to be somewhat of an immoveable object. We also saw plot sizes for property more than halve, as well as wages doubling from 1845 through 1911. Replicating this seems challenging.

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Sound and silence

I read an interview with a social media manager from Sonos, who had a rather pithy quote. I really liked this phrasing of a concept that can be applied to a lot of areas of life.

“In terms of strategy, it’s all about not touching every opportunity. Music is made of sound and silence.”

Doctor GPT will see you now

ChatGPT outperformed doctors when it came to diagnosing conditions. Even now, chatGPT has the opportunity to save lives through better diagnosis. What we need is training for healthcare providers in how to effectively use these tools, and work with them to understand the value that these tools can bring, instead of just using them like a glorified search engine.

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Rail mania

This week I learnt of the British rail mania. Between 1840 to 1850, private investors cumulatively invested 40% of British GDP into the country’s first rail network. This would be the equivalent of US VCs ploughing ~$10trillion into an industry.

This also seems to have relatively little written on it. I therefore managed to track down a 1968 copy of a book on the topic, where I am hoping to gain access to some esoteric knowledge about the largest speculative bubble I’d never heard of.

Esoteric knowledge within…

This did seem slightly emblematic of Sam Altman’s comments earlier this year calling for a $7trillion investment into the global chip industry. A lot of the mania’s that are more widely known of (tulip, south sea bubble, dot com etc…) seem to focus on inflated valuations of assets that were more facades of value that providing any tangible value.

I am interested in spending some time digging into the outcomes of a bubble that had so much investment into a relatively substantial asset such as railways. A topic I will aim to cover in more detail in a future post.

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Nuclear for all

In Baku, the U.S. sets targets to triple it’s nuclear energy capacity by 2050. I’m very happy to see the most efficient source of energy finally start to get some love. Long may this continue.

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Please let me know your thoughts on this new format, and I’ll aim to get back into a more regular cadence.