6 ms·

Innovation Is Inherently Controversial

81 points by salakotolu 5y ago

xwdv 5y ago
The way Cathie Wood manages ARK strikes me as institutional size day trading, and having a “five year vision” is no excuse to catch falling knives or accumulate recklessly.
- sombremesa 5y ago
  I don’t know enough about this fund to agree or disagree, but I will say that this “selling to take profits” idea mentioned in the article really rubs me the wrong way: in my experience that’s not something people interested in long term plays do.
  - ikeboy 5y ago
    Kelly betting straightforwardly has you reduce your position size as your edge goes down, which happens when the price moves in your favor more than the fundamentals have changed. It's exactly correct.
    - sombremesa 5y ago
      Sure, but in the article/convo a distinction is made between selling to take profits and selling when there is a shift in expectations. That implies that taking profits here is a purely speculative move.
      - RhodoGSA 5y ago
        taking profits is always a purely speculative move, but a good one. Taking profits doesn't mean you liquidate entirely, it just reduces risk. E.G. I believe in crypto, but when btc went from 20k - > 50k i took all my profit except my initial investment. It was purely speculative sure, but it drastically reduced my risk without reducing too much profit potential if i still believe in the long term.
        ikeboy 5y ago
        Talk about initial investment is not meaningful. Money is fungible. The only relevant question is what the current optimal percentage of bankroll to allocate is given the price and the expectation of future prices.
      - ikeboy 5y ago
        If there is no shift in expectations, then you should reduce your position as the price goes up, per Kelly, i.e. "take profits". It's a great heuristic. If you wouldn't buy something at the current price, why hold it?
- deleted 5y ago
  [deleted]
- yellow_lead 5y ago
  It's speculation, marketing, and size (as you suggest). Ambiguous words like "innovation" help them build a lot of FOMO for their holdings.
- salakotolu 5y ago
  You're not alone. I've also spent some time trying to understand the game ARK is playing. I wrote about it last week: https://tolusnotes.com/understanding-what-ark-invest-is-up-to/ https://tolusnotes.com/understanding-what-ark-invest-is-up-t...
inthewoods 5y ago
Generally speaking, once a fund reaches the level outperformance of ARK, they underperform the market. Only time will tell if she was just lucky or actually had any kind of edge. It's usually the former.
- fairity 5y ago
  > Generally speaking, once a fund reaches the level outperformance of ARK, they underperform the market. Source for this? It would make sense to me if your claim was that future performance for this cohort is average. But, you seem to making a stronger claim -- that is, this cohort of outperforming funds performs worse than average going forward.
  - cosmojg 5y ago
    I think this makes more sense if you think of it in terms of mean reversion [1], particularly as distinct from regression to the mean, that mean being the market return. Here are a couple articles that try to analyze the phenomenon [2][3]. [1] https://www.bogleheads.org/wiki/Mean_reversion https://www.bogleheads.org/wiki/Mean_reversion [2] https://peeranalytics.com/2018/05/21/hedge-fund-mean-reversion/ https://peeranalytics.com/2018/05/21/hedge-fund-mean-reversi... [3] https://www.valuewalk.com/2015/05/hedge-fund-mean-reversion-2/ https://www.valuewalk.com/2015/05/hedge-fund-mean-reversion-...
    - fairity 5y ago
      Thanks for the sources. A quote from your second source: The average subsequent performance of the historically best- and worst-performing long U.S. equity hedge fund portfolios is practically identical and similar to the market return. A quote from your third source: Due to hedge fund mean reversion, yesterday’s nominal winners tend to become tomorrow’s nominal losers. So, it seems like there are differing conclusions based on how you slice the data. I'm familiar with mean reversion, but I don't understand why this would predict underperformance for outperforming funds. If you flip a coin 10 times in a row and get heads 10 times in a row, you don't expect to get heads less than 50% going forward (but do expect the average rate of heads to trend back towards 50% over time). Furthermore, if OP's strong claim ever held true, surely there would be funds that outperform by simply indexing the broad market minus the holdings of top performing hedge funds. As more and more money gets invested in these new inverse fund, the pattern the strong claim is based on would slowly cease to exist. Unless you're saying the underperformance is due to fraud or exorbitant fees.
danboarder 5y ago
From the article: "3D printing is really a subset of autonomous technology and robotics." Interesting to pick up on how she maps investments across "innovation themes" like robotics, AI, etc admittedly without deep domain knowledge herself, depending on the input of analysts.
- smoldesu 5y ago
  By that logic, all cars are really just a subset of human-operable motorized transport devices. It's much less impressive if you look at it that way, right?
  - wearywanderer 5y ago
    > human-operable motorized transport devices Also known as 'automobile' or 'motor vehicle.' Cars are really just a subset of automobiles. It's less weird when you phrase it like that, using established terminology, right?
    - smoldesu 5y ago
      And now we've come full circle. That was my original point: we can abstract technologies like this into their original components, but it doesn't do any good to do so.
      - wearywanderer 5y ago
        What you call "abstract technology to their original components", I call understanding the historic context of technology. I think there is a lot of value in understanding that context. Without looking at that historic context, people are more likely to let their imaginations run wild and inadvertently come to believe things that aren't true (a significant portion of the general public believe Henry Ford invented cars...) or come to view technologies with an unwarranted level of awe and tunnel vision (the way 3d printing seems to be viewed by some, as mystical Star Trek replicator technology that came out of nowhere.) More generally, if people don't understand the true historic context of technology they become more likely to believe things that aren't true about technology. There is inherent value in dispelling myths and providing historic context for technology does exactly that. And why is it important to break a technology down into it's constituent fundamental traits or properties? Because almost always the historical context of a technology includes technologies that did not share the same name. If you're talking about the history of cars but limit the scope of your consideration to things called cars, you won't get back much further than the 1890s. But if you break the concept of a car down, it becomes clear that you need to consider the history of wheeled vehicles and the history of motorized vehicles. Self-propelled traction engine are one of the conceptual predecessors to the machines we now call cars. They share 'abstract concepts' with cars (a wheeled vehicle, not on rails, which can move around under its own power), but not a name. Traction engines aren't cars, but are important historic context for cars. If you aren't willing to consider the abstract attributes that constitute a car, you cannot consider the true historic context of cars.
sys_64738 5y ago
https://www.fool.com/investing/2021/05/28/5-reasons-i-regret-buying-cathie-woods-ark-innovat/ https://www.fool.com/investing/2021/05/28/5-reasons-i-regret...
smoldesu 5y ago
Innovation may be inherently controversial, but that doesn't mean that you shouldn't pay attention to the controversy. People who are vocal enough to voice a concern about your product probably care on one level or another, and ignoring them is tantamount to ignoring a support query. If you want your innovation to mean something, you still need to listen and work with your community to build something better. All of the biggest innovators have done this: Discord pivoted to more inclusive branding after their original "gaming" market expanded, and Microsoft headed into the server provisioning/cloud market when developers suggested that they preferred Microsoft as an SAAS. Being flexible enough to meet your users demands is how you take innovation to the next level, so make sure that your controversy counts.
- tasogare 5y ago
  > biggest innovators > Discord We’re speaking of a chat application...
  - smoldesu 5y ago
    Love it or hate it, Discord changed the chatting landscape. They're approaching 100 million active users and have inspired countless other chat clients and software like Matrix's Element, or Slack. They may not have built Rome here, but I'd argue that the best innovation just repositions pieces that are already on the table.
    - bumblebritches5 5y ago
      Inspiration != Innovation
    - mbrodersen 5y ago
      Discord is a small improvement on already existing ideas. The number of users has nothing to do with “innovation”. Unless of course you think toilet paper is “innovative” because it has more users than Discord.
    - Arathorn 5y ago
      both slack and element significantly predate discord...
stemlord 5y ago
Industrial society and its consequences have been a disaster for the human race
- RhodoGSA 5y ago
  pretty terrible sentiment but i've been seeing it a bit lately. We have cars, microwaves, refrigerators, insulation and food stamps. If you brought someone from a pre-industrial society i'm pretty sure they'd call modern america a utopia.
bumblebritches5 5y ago
Very true, which is why I've never shyed away from being controversial or stating my true opinion on things

81 points by salakotolu 5y ago

xwdv 5y ago

The way Cathie Wood manages ARK strikes me as institutional size day trading, and having a “five year vision” is no excuse to catch falling knives or accumulate recklessly.

sombremesa 5y ago
I don’t know enough about this fund to agree or disagree, but I will say that this “selling to take profits” idea mentioned in the article really rubs me the wrong way: in my experience that’s not something people interested in long term plays do.
- ikeboy 5y ago
  Kelly betting straightforwardly has you reduce your position size as your edge goes down, which happens when the price moves in your favor more than the fundamentals have changed. It's exactly correct.
  - sombremesa 5y ago
    Sure, but in the article/convo a distinction is made between selling to take profits and selling when there is a shift in expectations. That implies that taking profits here is a purely speculative move.
    - RhodoGSA 5y ago
      taking profits is always a purely speculative move, but a good one. Taking profits doesn't mean you liquidate entirely, it just reduces risk. E.G. I believe in crypto, but when btc went from 20k - > 50k i took all my profit except my initial investment. It was purely speculative sure, but it drastically reduced my risk without reducing too much profit potential if i still believe in the long term.
      - ikeboy 5y ago
        Talk about initial investment is not meaningful. Money is fungible. The only relevant question is what the current optimal percentage of bankroll to allocate is given the price and the expectation of future prices.
    - ikeboy 5y ago
      If there is no shift in expectations, then you should reduce your position as the price goes up, per Kelly, i.e. "take profits". It's a great heuristic. If you wouldn't buy something at the current price, why hold it?
deleted 5y ago
[deleted]
yellow_lead 5y ago
It's speculation, marketing, and size (as you suggest). Ambiguous words like "innovation" help them build a lot of FOMO for their holdings.
salakotolu 5y ago
You're not alone. I've also spent some time trying to understand the game ARK is playing. I wrote about it last week: https://tolusnotes.com/understanding-what-ark-invest-is-up-to/ https://tolusnotes.com/understanding-what-ark-invest-is-up-t...

inthewoods 5y ago

Generally speaking, once a fund reaches the level outperformance of ARK, they underperform the market. Only time will tell if she was just lucky or actually had any kind of edge. It's usually the former.

fairity 5y ago
> Generally speaking, once a fund reaches the level outperformance of ARK, they underperform the market. Source for this? It would make sense to me if your claim was that future performance for this cohort is average. But, you seem to making a stronger claim -- that is, this cohort of outperforming funds performs worse than average going forward.
- cosmojg 5y ago
  I think this makes more sense if you think of it in terms of mean reversion [1], particularly as distinct from regression to the mean, that mean being the market return. Here are a couple articles that try to analyze the phenomenon [2][3]. [1] https://www.bogleheads.org/wiki/Mean_reversion https://www.bogleheads.org/wiki/Mean_reversion [2] https://peeranalytics.com/2018/05/21/hedge-fund-mean-reversion/ https://peeranalytics.com/2018/05/21/hedge-fund-mean-reversi... [3] https://www.valuewalk.com/2015/05/hedge-fund-mean-reversion-2/ https://www.valuewalk.com/2015/05/hedge-fund-mean-reversion-...
  - fairity 5y ago
    Thanks for the sources. A quote from your second source: The average subsequent performance of the historically best- and worst-performing long U.S. equity hedge fund portfolios is practically identical and similar to the market return. A quote from your third source: Due to hedge fund mean reversion, yesterday’s nominal winners tend to become tomorrow’s nominal losers. So, it seems like there are differing conclusions based on how you slice the data. I'm familiar with mean reversion, but I don't understand why this would predict underperformance for outperforming funds. If you flip a coin 10 times in a row and get heads 10 times in a row, you don't expect to get heads less than 50% going forward (but do expect the average rate of heads to trend back towards 50% over time). Furthermore, if OP's strong claim ever held true, surely there would be funds that outperform by simply indexing the broad market minus the holdings of top performing hedge funds. As more and more money gets invested in these new inverse fund, the pattern the strong claim is based on would slowly cease to exist. Unless you're saying the underperformance is due to fraud or exorbitant fees.

danboarder 5y ago

From the article: "3D printing is really a subset of autonomous technology and robotics." Interesting to pick up on how she maps investments across "innovation themes" like robotics, AI, etc admittedly without deep domain knowledge herself, depending on the input of analysts.

smoldesu 5y ago
By that logic, all cars are really just a subset of human-operable motorized transport devices. It's much less impressive if you look at it that way, right?
- wearywanderer 5y ago
  > human-operable motorized transport devices Also known as 'automobile' or 'motor vehicle.' Cars are really just a subset of automobiles. It's less weird when you phrase it like that, using established terminology, right?
  - smoldesu 5y ago
    And now we've come full circle. That was my original point: we can abstract technologies like this into their original components, but it doesn't do any good to do so.
    - wearywanderer 5y ago
      What you call "abstract technology to their original components", I call understanding the historic context of technology. I think there is a lot of value in understanding that context. Without looking at that historic context, people are more likely to let their imaginations run wild and inadvertently come to believe things that aren't true (a significant portion of the general public believe Henry Ford invented cars...) or come to view technologies with an unwarranted level of awe and tunnel vision (the way 3d printing seems to be viewed by some, as mystical Star Trek replicator technology that came out of nowhere.) More generally, if people don't understand the true historic context of technology they become more likely to believe things that aren't true about technology. There is inherent value in dispelling myths and providing historic context for technology does exactly that. And why is it important to break a technology down into it's constituent fundamental traits or properties? Because almost always the historical context of a technology includes technologies that did not share the same name. If you're talking about the history of cars but limit the scope of your consideration to things called cars, you won't get back much further than the 1890s. But if you break the concept of a car down, it becomes clear that you need to consider the history of wheeled vehicles and the history of motorized vehicles. Self-propelled traction engine are one of the conceptual predecessors to the machines we now call cars. They share 'abstract concepts' with cars (a wheeled vehicle, not on rails, which can move around under its own power), but not a name. Traction engines aren't cars, but are important historic context for cars. If you aren't willing to consider the abstract attributes that constitute a car, you cannot consider the true historic context of cars.

sys_64738 5y ago

https://www.fool.com/investing/2021/05/28/5-reasons-i-regret-buying-cathie-woods-ark-innovat/ https://www.fool.com/investing/2021/05/28/5-reasons-i-regret...

smoldesu 5y ago

Innovation may be inherently controversial, but that doesn't mean that you shouldn't pay attention to the controversy. People who are vocal enough to voice a concern about your product probably care on one level or another, and ignoring them is tantamount to ignoring a support query. If you want your innovation to mean something, you still need to listen and work with your community to build something better. All of the biggest innovators have done this: Discord pivoted to more inclusive branding after their original "gaming" market expanded, and Microsoft headed into the server provisioning/cloud market when developers suggested that they preferred Microsoft as an SAAS. Being flexible enough to meet your users demands is how you take innovation to the next level, so make sure that your controversy counts.

tasogare 5y ago
> biggest innovators > Discord We’re speaking of a chat application...
- smoldesu 5y ago
  Love it or hate it, Discord changed the chatting landscape. They're approaching 100 million active users and have inspired countless other chat clients and software like Matrix's Element, or Slack. They may not have built Rome here, but I'd argue that the best innovation just repositions pieces that are already on the table.
  - bumblebritches5 5y ago
    Inspiration != Innovation
  - mbrodersen 5y ago
    Discord is a small improvement on already existing ideas. The number of users has nothing to do with “innovation”. Unless of course you think toilet paper is “innovative” because it has more users than Discord.
  - Arathorn 5y ago
    both slack and element significantly predate discord...

stemlord 5y ago

Industrial society and its consequences have been a disaster for the human race

RhodoGSA 5y ago
pretty terrible sentiment but i've been seeing it a bit lately. We have cars, microwaves, refrigerators, insulation and food stamps. If you brought someone from a pre-industrial society i'm pretty sure they'd call modern america a utopia.

bumblebritches5 5y ago

Very true, which is why I've never shyed away from being controversial or stating my true opinion on things