MicMacMan

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On November 20, 2016, MicMacMan commented on Defeating Terrorism With Big Data :

MM, great post!

The recent increase in isolated, lone-wolf terrorist actions like the Orlando night club attack and the Bastille Day attack in France underscore the importance of developing new intelligence tools to identify and prevent terrorists. Palantir’s big data solution seems well suited to detect suspects that more traditional intelligence gathering methods might miss.

I do see some area for concern though. As noted, Palantir is attempting to “promote interagency communication” and “interconnect the databases.” While linking together information may be necessary, it must be done very carefully. I worry as our intelligence data becomes more pooled it also becomes more vulnerable to theft or cyber-warfare/crime. The Edward Snowden case illustrates the vulnerability of having single individuals have such broad access to data. This isn’t to say that Palantir and others shouldn’t proceed along this path. I just think it’s important to be incredibly thoughtful on how we secure and protect these databases and tools as we develop them.

On November 20, 2016, MicMacMan commented on Goldman Going for Gold… through Digital. :

kz2018, great post!

I remember being shocked as a summer intern at Goldman Sachs when one of the firm’s leaders got up at orientation and declared, “this isn’t a financial services company; it’s technology company with expertise in financial services.” My sense was that this was only sort of true. Goldman invested meaningful amounts of money in technology and developed great tools to enable its employees to work effectively and better serve client needs. However, at its core, I agree with your assessment that the real economic engine of the firm is its talented work force that have great domain expertise as well as deep client relationships across its investment banking, investment management, sales and trading and lending businesses. I would consider it more a “tech-enabled” (or perhaps “tech-reliant”) company rather than a true technology company.

I also wonder if the emphasis on developing technologies “in-house” makes sense. It’s hard to be great a financial services firm and also be best-in-class at developing cutting edge technologies. These require quite different critical tasks. I wonder if Goldman would be better served focusing on financial services and then working closely with select partners to develop the technological solutions it needs.

On November 20, 2016, MicMacMan commented on IoT: The Internet of Trenchcoats :

Maria, really interesting post!

I thought this was a great example of a company using digital technology very effectively in an unexpected way. One might think that high-tech customer interfaces would be antithetical to the Burberry brand image of a traditional 19th century clothing company; however, the video you shared drove home that retailers can creatively employ cutting-edge technology while still maintaining the look and feel of their brand identity.

This post made me realize that the “brick and mortar” retail experience—a model that has been relatively static over the past few decades—is likely to evolve meaningfully as companies find ways to use technology to improve the customer experience. I really liked your ideas on improving the fitting room experience with additional sizes on demand and “customers also bought” information. As I read this, another idea I contemplated was using digital technology to improve the fitting process. 3D scanners could figure out a person’s dimensions and then recommend a specific size / style for a clothing item. Farther in the future, perhaps retailers could use this 3D rendering to direct machines to instantaneously alter garments for the perfect fit. It seems like a number of startups are already working on technology of this sort (one interesting example: http://www.refinery29.com/2015/11/98373/body-labs-3d-modeling-fashion-technology-company).

On November 20, 2016, MicMacMan commented on Stripe Emerges from Global E-Commerce and Mobile Boom :

PThatai, thanks for this post! I really enjoyed it and found the business analysis to be spot-on!

It does seem like a very low barrier to entry industry / product. You point out correctly that—to the chagrin of some of its customers—PayPal owns the customer experience. While this in part creates the market opportunity for Stripe, it is also a challenge for the business. The fact that PayPal owns the customer experience makes it a more valuable business. Speaking personally, I trust the PayPal brand, and it gives me confidence when I’m making a payment on some website I’ve never been visited before that I’m getting taken to PayPal’s secure portal. I worry that competing purely on the basis of being a private label technology provider is a less differentiated / sustainable business with significantly lower switching costs. That said, you make a great point that Visa and American Express (who obviously know much more about this than I do!) gave Stripe a huge vote of confidence by investing in it at a $5bn valuation.

One thing I can say for certain is that these FinTech innovations are driving great value for customers as well as businesses. Paying online and on mobile devices is so much easier now than it was 5 years ago!

On November 20, 2016, MicMacMan commented on Crowdsourcing Alpha: Can Quantopian Re-invent the Hedge Fund? :

DSN, thanks for this post—it was right up my alley! This is like the Threadless of quant trading!

I find myself with mixed feelings about the strength / viability of this model. On one hand, I do believe in the power of the masses. I’m sure there are really smart and motivated people out there that could come up with creative, market-beating algorithms. However, given the incredibly limited number of algorithmic trading jobs reserved for only the most pedigreed applicants, most of these folks will never get a chance to develop their ideas. Providing the masses with a platform to create and test their ideas seems likely to produce some great algorithms.

Beyond the fact that it sounds like the platform itself still needs a lot of improvement, I struggle with how Quantopian “analyses all of the algorithms created by its community” to select the best ones. For this platform to succeed, it will ultimately need to show that it can sustainably generate alpha. Even if you accept the premise that some good algorithms will get created, Quantopian is still dependent on its ability to find these among inevitability an even larger number of bad ideas. While this may seem like an easy task, I’m guessing it’s not. Data mining can result in the creation of algorithms that fit the historical data incredibly well but are not actually predictive of market movements in the future (i.e. they pick up on spurious historical correlations). My intuition is that it wouldn’t be that easy to figure out what patterns (which algorithms can then trade on) are likely to persist into the future. Interested to see how this turns out!

On November 7, 2016, MicMacMan commented on A Carbon Tax on Airfare: Will It Kill Management Consulting? :

Great post on a topic that I hadn’t thought much about! It’s an interesting statistic that in a sustainable world each person would only be allowed to emit up to four tons of carbon annually. One thing to note, however, is that this constraint need only to apply on an aggregate level (i.e. you could have some individuals producing substantially more carbon while others produce less). Economically, you could make an argument that individuals with the highest marginal benefit to GHG emissions should continue to do so and then society should find some wealth redistribution system to compensate those that emit less. It’s not obvious to me that in this scenario the optimal outcome is for management consultants to travel significantly less given face-to-face interaction is pivotal to their businesses. I wonder how material of a cost increase it would be for consultancy businesses if the price of their carbon usage during travel was appropriately captured. I don’t have a great sense for the relative size of the cost that would be imposed.

On November 7, 2016, MicMacMan commented on Climate Change is Heating Up Foundries :

Great topic and post! I find these traditional “dirty” industries to be some of the most interesting test cases. While often pejoratively labeled as “polluters”, the reality is that these businesses make important contributions to the economy and manufacture products that are highly valued by consumers. In terms of the greenhouse gas (“GHG”) pollution, this example also underscores the benefits of a cap and trade type scheme versus a flat carbon tax. As Maria expertly points out, this process is by its nature energy intensive, and it doesn’t seem that this is easily changeable without costly investments in new technologies / equipment. In this context it makes sense for businesses that have a lower marginal cost of reducing GHG emissions to do so in order to minimize the overall cost to society and avoid putting businesses like this into bankruptcy!

J2G18, thanks for this post—it raises a number of key issues. One thing that stands out to me is how broadly climate change is now impacting the value of businesses. With a wide range of side effects including rising sea levels, changing and extreme weather patterns, decreasing food production, destabilizing political environments and increasing human health risks, climate change is altering the intrinsic value of businesses around the globe (both positively and negatively). It is thus more critical than ever to have a well-informed view of (i) the scope and trajectory of these impacts under the status-quo environment and (ii) the likelihood and efficacy of a coordinated global effort to counter the effects of global warming by curbing greenhouse gas emissions. I wonder, for instance, if Donald Trump had fully considered these issues (in particular rising sea levels) when he purchased the assets in 2014 or if the substantial costs of the proposed mitigation strategies are coming as an unpleasant surprise.

NJ234, thanks for this interesting post. At least ostensibly, it appears that Cummins’ business model may be significantly challenged in the near term as it attempts to adapt to an evolving regulatory and technological environment that may render its current diesel engine technology obsolete. Outside of this specific example, I think there may be a broader lesson. As a manager of a business crafting it strategy, it’s important to not only consider today’s regulatory / technological environment but also the broader context of how the industry is likely to evolve over the medium to long-term. This type of thinking helps ensure your company doesn’t just focus on “band-aid” products or technologies that quickly become irrelevant. It seems like Cummins focused on making some incremental improvements to engine technology when a more thoughtful examination of the broader threat posed by climate change and greenhouse gases (not just the localized pollutants that EGR appears to address) would have made it clear that a real step-change was needed.

On November 7, 2016, MicMacMan commented on Cargill’s Dilemma: Farmers versus Climate Science :

Tom Joad, I think this post will go down as your seminal contribution to American literature! Cargill is a fascinating example of a company experiencing tension between the existing attitudes and opinions of its customers and its strategic vision for the future of the business / industry which must adapt in the face of the threat posed by climate change.

While there is likely some wisdom in being tactful with farmers (as the author correctly notes), Cargill’s current equivocation surrounding the root cause of climate change seems untenable to me. The U.N.’s Intergovernmental Panel on Climate Change at one point suggested that efforts to stabilize levels of greenhouse-gas emissions would require investments of about $13 trillion through 2030 (https://www.technologyreview.com/s/527196/how-much-will-it-cost-to-solve-climate-change/). In order to justify the eye-popping level of investment that would be required by farmers—and more broadly society—to curb greenhouse-gas emissions, Cargill needs to take a stronger stand. This level of spending only makes sense in the context of a strong causal link between greenhouse gas and global warming. Until Cargill and Executive Chairman Greg Page acknowledge this premise as a key part of the rationale for its sustainability strategy, it’s unlikely its efforts will be fertile (pun intended!).