Introducing The Attention Span- a new e-mail from The Knall/Cohen/Pence Group.
Why I hope The Attention Span will be worth your time:
- “Save people time or make them money.” I have come to believe that these are the only 2 things that really matter when communicating with successful, busy people. I aspire to do both.
- A filter of filters. The amount of information on the Internet is infinite, your time is extremely finite. Hence- The Attention Span. Every e-mail I send will state what it’s about, how long it will take, and why you might want to read it. Traditional information sources have already been rapidly disrupted. We need to be updating our inputs as fast as the world is evolving. I aim to highlight only what I see as the best sources of information and most insightful thinkers. Some of them will be weird. That’s the point.
- Building awareness not relaying information. Your intelligence stays roughly fixed over the course of your lifetime, your awareness does not. I aim to produce less ephemeral content than the news of the day. The plan is to identify hidden forces, key points of focus, or sweeping trends in order to better inform your decisions. I hope to direct your attention to things that are truly important.
- Going beyond business and finance. The best content is truly cross-disciplinary. I plan to highlight insights from what I find to be among the best thinkers in a wide variety of stimulating fields. It seems to be that useful information is increasingly found at either end of a barbell: the best domain experts or the best whole-system thinkers. The ‘opinion’ space in the middle has too much noise. I also plan to tackle health and holistic topics with informed experts.
- Creating the strongest network. Over the last decade, I have been fortunate to have established reciprocal relationships with some extraordinary minds. As a recipient of this e-mail I hope that you will contribute to a genuine dialogue. This makes the entire network more robust and exciting.
Who am I? I have spent the last 16 years on Wall Street in research and data sales. I obsessively consume content and try to extract the actionable insights for busy people.
Each edition will feature a short piece combining insights from some of what I believe are the best books and articles I’ve ever read. I will also highlight who I believe are the most valuable writers and thinkers I can find to help you broaden your network. Finally, I will highlight some important links and explain why I think they’re worth reading. But I will also extract what I believe to be the key insights. Otherwise, I’m just outsourcing the reading back to you.
For the first edition, here are some things we’ve been thinking about while surveying the “unusual” market conditions of 2021 so far.
[4 min read]
‘Life moves pretty fast. If you don't stop and look around once in a while, you could miss it.’- Ferris Bueller.
So, let’s stop and have a look around. You can’t invest in the new world if you can’t first conceptualize the new world. It’s obvious that the information landscape of our new digitally networked world is big, it’s just worth pondering how big. Consider a pack of cards. Every time you shuffle a pack of cards you create a miracle. The number of potential card combinations is 52 factorial. A bonkers metaphor from Scott Czepiel describes what happens if we imagine 52 factorial as a number of seconds. The timer starts ticking down from 8.0658e67 seconds:
- Walk around the world along the equator at the rate of one step every billion years. After one trip around the world, remove a drop of water from the Pacific Ocean. Repeat the circumnavigation, removing a drop at a time, until the entire ocean is empty. When it is, take one sheet of paper and place it flat on the ground. Now, fill the ocean back up and start the entire process all over again, adding a sheet of paper to the stack each time you’ve emptied the ocean.
- When the stack of paper reaches from the Earth to the Sun, you will see that the three left-most digits on the time haven’t even changed. So, take the stack of papers down and do it all over again. A thousand times. Look at the timer. You’re only a third of the way done.
That’s with just 52 variables. There are now roughly 4.66 billion users on the Internet, up from just 250 million in 1999. That’s a conservative 10 to the 750,000,000 possible groups of interacting users on the Internet. The interconnectivity in our brains themselves is combinatorial. We have perhaps 100 billion neurons, and each neuron may be connected to up to 10,000 other neurons. Our brains effectively contain the infinite. Then we connected them to all of the other brains!
This means the landscape of good ideas and bad opinions is effectively limitless. This is new.
Combinations are important. The hugely positive implication is that human progress largely results from combining idea ‘recipes’ to create new ones. We have just created an idea-combining machine that is effectively larger than the known universe. This didn’t exist even 20 years ago.
Moreover, it’s easy to forget how many of these Internet users are now on mobile (immediate access), and not in the developed world (see below).
All these interconnected people, brains, and machines are generating data. As of 2020, there were 44 zettabytes of data on the Internet. Up tenfold in a year from 4.4 in 2019! A zettabyte is 1,000 bytes to the seventh power. In other words, one zettabyte has 21 zeros. Human consciousness can process about 61 bits a second. Blimey. With the wrong tools, it’s like handing you a snorkel and asking you to find a diamond in the Pacific.
What’s the takeaway from this illustration?
The first, and by far most important, is that the value of information in your life will increasingly depend on the quality and effectiveness of your filters. They need to be ruthlessly updated to reflect the dizzying landscape.
We now have a perfect real-time example of why this is so important. If you were a hedge fund, or other shorter-term investor, whose information inputs didn’t include Reddit, Discord, or other online forums over the last month, you may have had a…. difficult time.
The other major takeaway is attention. Determining what gets put in front of our extremely limited human bandwidth is of essential importance in future. But so is paying attention to what the rest of the world is seeing. Social media algorithms serve users more of what they want and more of what’s getting overall engagement. This is new. And imagine it applied to stocks! The GameStop story is now international headline news. It’s been exhausting to be online over this period as the episode is spawning more takes than a Stanley Kubrick movie. But the story dominating the Internet (as you can see on Google trends), is itself introducing a new dynamic. A new consumer is being introduced to the stock market.
Pokemon Go was the harbinger of this trend. In 2016, an augmented reality game went globally viral and doubled Nintendo's market cap in 7 trading sessions.
Now the game is the market itself! How many new people know about short squeezes, market structure, and retail investing in general? It’s an opinion, but I think this trend is going to be an enduring dynamic. Price trends can be thought of as the spread of a narrative through the market. In bubbles, price moves from a source of information to a source of influence. Now you have narratives that can go instantly viral, across platforms and across the world. This is totally new! What’s the Total Addressable Market for a new narrative in 2021? The example above shows it’s now billions of people. And they may have only really started paying attention in the last week, and had app-based market access only over the last year.
An opinion about GameStop is a lot less interesting than considering what the saga represents. If you’ve introduced a new consumer to the stock market, what does this mean?
In his excellent Substack, Software is Eating the Markets, Packy McCormick makes a simple but interesting point. These new stock market participants have different preferences to traditional investors. Retail investors, like retail consumers, might also be more sensitive to a low actual price rather than a low valuation (The Wall Street Journal has argued that the best explanation for how stocks have moved so far this year is the raw price of the stock). They obviously want to make money, but they might also want entertainment, stories, protest, or virtue. You gave U.S. consumers stimulus, and they used it to buy their new consumption good.
The other major takeaway for long-term investors is to consider the increasing importance of stories. Stories travel exponentially faster than facts and numbers do. According to Bloomberg, the ARK Family of thematic ETFs have seen about roughly the same inflows as BlackRock and State Street combined in 2021. Last week’s ARK 2021 Big Ideas report illustrates the kind of themes and trends that are likely to appeal to this new investor base. Moreover, the kind of excitement and narratives investors want may not be sufficiently provided by a relatively stodgy S&P 500. Disruptive tech IPOs are doubling on day one. Special-purpose acquisition companies (SPACs) have proliferated beyond comprehension, many of whom look to go into the private markets and source new and appealing tech narratives. You’ve also seen an explosion in demand for socially responsible investing, reflecting a shift in generational priorities. Perhaps most strangely of all, you’re seeing rapid capital infusions into struggling old-world stocks and industries: unintended emergent consequences from a cash stimulus.
When you network everything together, you make it much more vulnerable to volatility and butterfly effects. COVID-19 and 2020 is probably just an appetizer. It’s possible that a major correction in GameStop, retail stocks, and the market in general washes out these new market participants. But the idea that they all leave, and these market dynamics revert to exactly what they were before strikes me as unlikely. We need to adapt our understanding of these new participants.
This speaks to the hardest and most exciting part of our new mission at The Knall/Cohen/Pence Group: finding the best emerging ideas and sources in this new world.
Have a great weekend!
Director of Communications and Content
The Knall/Cohen/Pence Group
Cell (917) 656-2742
Past performance is not indicative of future results.
The Standard & Poor’s 500 Index is a capitalization-weighted index that is generally considered representative of the U.S. large capitalization market.
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