Intuition – what it is and how to use it (the curious case of the Tesla buyout)

Topic: Intuition is real, not just a guess or an irrelevant feeling. A hunch is always just the starting point of a formal investigation

Length: Short

Shorting Tesla: My intuition told me to investigate a short position in Tesla, but I’ve of course made sure to go over my best practices check list for investments before actually going through with the trade


Logic or Feels

How do you make your best decisions? Gut feeling, hunch, intuition, guess, expert pattern recognition, or logical conclusion after carefully weighing pros and cons?

Are you in the Pure Logic or the Gut Feeling camp? Don’t worry, you don’t have to choose. In the real world, they both complement each other and is some ways are the same thing.

An intuition is the result of the sum total of your experiences as pitched against the current situation. If you’re extremely experienced, that intuition might very well be the best possible basis for a decision. If you’re not, it might very well be the worst (psychological biases can be a bitch).


Golfers, physicists and investors

Just as a golf player deliberately practices parts of his swing and other aspects of his game, but relinquishes control to his subconscious when actually playing, a decision maker, an investor, e.g., needs extensive practice and experience in the nitty gritty details before developing a reliable expert recognition ability.

It doesn’t end there of course. The hunch, the gut feeling, the “blink” is emphatically not always right on the money. Just as often it can be completely off the mark. If your intuition tells you to buy this stock over that one, or go short rather than long, that can only be the beginning. Scientists, e.g., conjecture an idea about how the real world works. That conjecture, thoughtful guess based on extensive experience, then gets falsified or verified through experiment.


a super educated “guess”,

based on thousands or millions of data points,

his subconscious had combined

in ways his conscious mind never could


An investor does something similar; his experience and prior knowledge about the economy, interest rates, currency movements, about historical performance for various stocks, news flow, hypes and fads and so on, point him to a few promising ideas. No matter how convincing that first intuition is however, a serious investor then proceeds to try to falsify his investment case.

More often than not, a good and experienced investor will find that his hunch was right, that there is an overwhelming amount of facts in favor of his original idea. It was his expert recognition ability, his intuition that pointed him in the right direction, a super educated “guess” based on thousands or millions of data points his subconscious had combined in ways his conscious mind never could. Please note, that this is not a case of confirmation bias; remember that our thoughtful investor was actively trying to find counterarguments, not the other way round.


Not a guess

Just because you don’t have access to the computer making the decision doesn’t mean it’s not a logical conclusion. Just because your limited conscious mind can only handle variables in the tens or possibly hundreds, doesn’t diminish the ability of the brain/mind to effectively deal with inputs numbering in the millions or billions. Long before formal logic, the mind took account of touch data, smell data, visual and auditory data to record the totality of a situation and its consequences.

You might not have known there was a prey or predator around the corner, but you “felt” it. You couldn’t actively smell it, hear it, immediately realize the birds or monkeys behaved differently, that you stepped over a suspicious looking mark in the trail a bit back and so on. Your subconscious, however, did; and concluded you are being ambushed by a lioness. Our skilled hunter actually could stop to think about the alarms going off in his head and check certain variables against a check list: trail tracks, bird sounds, monkey business, maybe a faint smell of big cat, landscape form, ambush-friendly large stone or tree etc. and conclude it really is time to turn around.

That wouldn’t be a guess anymore, nowhere close to just a guess of whether there is a God or not.

I might guess that Elon Musk doesn’t have funding for a buyout of Tesla. I might guess that the stock provides a good shorting opportunity. My several decades long experience with similar situations on the stock market (although this one is as unique as they come) might scream this is as good a sell as there ever is. I would still, however, need to corroborate that guess with tangible information. And I have.

One thing is that Tesla is burning cash, has loads of debt, produces lemons at a higher rate than any other car manufacturer, that Tesla’s are four times as likely to kill their drivers as similar cars, that Tesla bought SolarCity at it’s very peak before sales collapsed (fake sales it turned out)…; simply that Tesla’s business is nowhere near of being sustainable or profitable.

Another is the constant lies, exaggerations and other funny business round Tesla and Elon Musk. Musk keeps saying Tesla will soon turn a profit, will soon produce X amount of cars, will not need to raise capital ever again and so on. In reality, the losses and cash burn only rise, and Tesla has raised capital through issuing debt and equity numerous times after his claims. There is no reason to believe anything he says now either — in particular given his obsession with “short sellers and their spreading negativity”, not to mention Tesla is all but completely out of cash (by December 31, Tesla is officially in breach of some of its loan covenants), and Musk himself desperately needs a higher stock price lest he will be forced to sell shares to cover his private loans.


Who’s guessing, longs or shorts?

On the long side, the only arguments you ever hear are “Don’t bet against Musk. Look at the stock price. Environment. Will soon make enormous profits”; never any explanations as to how those profits will be attained. My “guess” is that the Tesla longs in this case only play by ear, and their first uneducated guess, supported by an enormous amount of confirmation bias and desire for Musk to make magical progress and save the world.

The bears, including me, know we’re as usual up against very strong opponents: money printing, wishful thinking, unthinking bulls, cheap leverage, comatose regulators, short squeezes etc. That’s why we keep investigating, keep finding information supporting our case, while actively looking for bullish information that could derail the short case.

Yes, no matter how unlikely a sudden buyout, we bears actually give it some thought. Who could do it? Who would do it? How would it be done? What consortium, which banks, which law firms, how would it be communicated, what about the board of directors, how could Musk both make threats of a short burn, buy stocks privately and have information about an imminent buyout without committing securities fraud? We have to entertain the possibility. There is nothing in the short case but money to be made, so there’s no use fighting all the forces of the market if the odds are not ever in our favor.

Is a buyout at all possible? Of course. Is it likely? My experience, intuition and check lists all point to a resounding NO, there isn’t a 50% probability God exists just because somebody says he might:


Magical funding or mental breakdown

Tesla is a basket case, with inferior products sold at a loss, facing an acute liquidity crisis. You’d have to be incredibly ill-informed to take it over at prices anywhere near today’s market price, let alone at a premium. Besides, all the weird things Elon has tweeted the last 6 months, including how he wants to make a buyout of Tesla but hope all investors stay investors (what?!) and go private with him, speak volumes of Musk’s mental breakdown (much more likely than a 70bn funding materializing out of nowhere).

No matter how this ends, it seems the end is pretty close. And that end is one for the history books. My bet is that it will be very similar to the end of the Enron saga. What does your intuition tell you, and how does your best practices check list corroborate that view?

In any case, this blog post is not a recommendation to buy or sell financial instruments. Do your research elsewhere and trade carefully.

The first quadrillion dollar company won’t be Amazon, Apple or Alphabet

It’s not hip to be square

-popular commercial ca. 5000 BC


Do you remember when that round, friction-minimizing thingamajig was all the rage in the tech space? That was fun, albeit a bit slow moving in the beginning.

Of course, many were skeptical at first as always. But once Salpeter Steel invested in Squares With Supermany Corners, more and more Stoneage VCs showed interest. However, it wasn’t until the name change to We Have Efficient Enormous Load Relievers the business really took off.

After Peter Steel’s success in the WHEELR industry he turned his focus to the struggling start-up Hot As Hell But Still Good For Cooking And Scaring Wolves Away Inc.

“It doesn’t quite roll off the tongue all that easily”, he thought… not to mention the hassle carving it in stone entailed. He let his mind wander: “Four letter words are always popular. Maybe you should try something on F?”, he suggested to the founders Fred, Isla, Rose and Ember.

And on and on it went, until the famous: “Plastics” comment in the 1967 movie “The Graduate”. Little did they know plastics would soon be demonized by hippies and greens, while the real action would turn to semiconductors, computers, software, mobile phones and other information technology companies.


Topic: Hot technologies in the past, present and future; companies with names beginning on “A”

Discussion: The Singularity Is Near, but how should you invest on the way there?

Conclusion: One word: “Agents”. We could move away from P&P companies that own our data, our portals and more or less force products down our throats; to owning digital autonomous copies of ourselves (the company making those could become the largest in the history of corporations by several orders of magnitude) that finally relieve us of the paradox of choice without relinquishing control to Big Data corporations.


Railways and radios

There was a time when steam engine powered water pumps for coal mining were the only game in tech town. Railways and cars then stole the limelight, not to mention radios (now, that was crazy at a whole new level) and airplanes.

That was, however, just “technology”, not information technology. Once Turing set things in motion after deciphering nazi codes with his version of computers, and possibly indirectly contributed to solving equations underlying the first atom bomb, a whole new industry was born with IBM in pole position.

IBM’s president Thomas Watson had a vision of the future:


“I think there is a world market for maybe five computers.”

Thomas Watson, president of IBM, 1943


A companies

The IT industry has progressed through mainframes and minis to Personal Computers, separating and celebrating hardware vs. software, and a whole stack of layers of operating systems, databases, applications etc. The workload has shifted from central (mainframe) to local (PC) to central (minis) to local (PC, laptops) and central (mobiles vs. cloud) again. The stock market has shifted its focus (a.k.a. ‘hype’) from semiconductors to computers to operating systems to applications to databases to business intelligence to browsers to search engines to network equipment (from data to voice and back to data again), to phones and minimalistic small applications known as applets or apps, not least social media apps.

Where is it all headed? Let’s just take a look at a few randomly selected companies in alphabetical order: Alibaba, Alphabet, Amazon and Apple. The first and most obvious conclusion is that names on ‘A’ are more successful than other companies. But we’ve known about that since Salpeter Steel’s first service business back in 5000 B.C.: AAA Wheeler Tow and Sons.

Jokes aside, the secret sauce is knowing your customer and having access to his attention and wallet, as well as products to sell. The best companies have tons of intelligence on its customers for crafting the perfect pitch, and an addictive portal to control the flow of products and services:


It’s all about the platform and the pitch

During the Mad Men era in the 1960s, a pitch consisted of convincing customers your bland and commoditized product was better than the competition’s. Today deep learning algos instead tease your core preferences from your largely unintended data radiation and satisfy your every want and need perfectly.

Alphabet’s search engine Google controls your attention and sells it to the highest bidder. Amazon knows about everything you buy, when and in what combinations — it controls both the platform and the pitch. Apple does the same, albeit in the form of a handy little gadget that enables recording and sharing as well, and that is placed one step before Amazon and Google. In China, WeChat is even more dominant with a billion Chinese users spending 5 hours a day on the platform.


What’s next? AR contacts, 3D printers, robotic companions?

The highest valued businesses harvest your data, sell it or reverse engineer your utility function to pitch increasingly addictive products. The actual manufacturers of most products and services have taken a back seat to the “portal” companies.

At the risk of predicting the equivalent of the Internet collapsing under its own weight within a year, or nuclear powered vacuum cleaners, here goes some of my thoughts about the remainder of the 21st century in tech.

Contact lenses and bionic limbs

Analyzing and hooking clients will only grow in importance, but the portals will morph into something quite different. Mobile phones will become increasingly mobile/wearable and gradually fuse with the body, perhaps in the form of contact lenses enabling seamless Augmented Reality and Virtual Reality experiences; perhaps through neuronal interfaces pioneered by the prosthetics industry. Nota Bene that there’s already touch feedback bionic limbs available, not to mention rudimentary AR contacts. There are even eye implants that restore some sight to the blind.

Will Apple be able to hold its own when the “phone” hardware becomes so different from today’s fragile glass bars? A robotics or biotech company could very well be better equipped to take the lead in that scenario — or Apple could try to take them over.

The HMI era, the portal of the future

In any case, Human Machine Interface technology will be crucial whatever form it takes. Today’s crude Finger And Voice input methods won’t last long, except for particular situations that don’t require precision.

Intention Readers, Emotion Detection Systems, Autocorrect Deduction Devices (that combine gestures, voice (words + tone), facial expressions, blood flow, heart beat, breathing etc. to guess and anticipate your desires) and so on will replace keyboards and touch screens. All these technologies already exist by the way.

What about existing search and retail platforms? Hard to say, it depends on what the H-M Interface companies decide. They could choose to connect directly to the end products, or they could uphold the status quo and go through Google and Amazon.

There is a whole different set of solutions to the HMI problem: digital and real world agents, wholly owned by you, that gradually mimic your every trait (don’t worry, you’ll be able to edit out unwanted evolutionary mismatched psychological biases). Rather than letting Facebook, Cambridge Analytica, Alphabet, Netflix, Amazon, WeChat, Alibaba and others know everything about you and abuse that information, you can elect complete anonymity but let your own proprietary agent know exactly everything and in effect turn into an exact copy of you. Your agent could over time assume more and more responsibility, from booking tables at restaurants to shopping for groceries and clothes.

In the beginning your agent might merely suggest a few alternatives, and as its precision improves you allow it to only show the single best one, then make preliminary bookings and finally just hand you the goods, reservations and tickets: “Your Uber will arrive at 7:48 tomorrow morning. The alarm is set for 7:19. Your face and iris scan are valid as your flight ticket. You’ll be staying at your usual hotel”

William Gibson wrote about such agents (eventually becoming self aware) in his epic book Neuromancer from 1984. I see the development of such artificial “helpers” as all but inevitable, leaving us ample time to explore both our inner and outer worlds and experience the human condition to its fullest.

Purely digital agents might be the end station. They would receive input from our every move and interaction with the world. The internet of things guarantee we are always recognized, our activities gauged, categorized and the corresponding data securely transmitted to our digital copies roaming the net hunting down optimally tailored experiences for us. A simple RFID implant could do some of the tracking, but otherwise every single item we face would be the eyes, ears, LIDAR, X-ray vision, Ultrasound etc. of your agent’s.


Quadrillion dollar co.

What happens if you own your own data yourself, and your agent doesn’t need the “help (prying eyes)” of search engines and entertainment suggestion algos to sift through billions of choices? Amazon gone? Apple gone? Alphabet gone? Would end product companies stage a comeback, based on highest quality and best price/performance rather than highest portal visibility and most nefarious data scraping abuse?

And, will the Agent company become the first quadrillion dollar company?


Runway to sublimation (a popular post Singularity state)

In David Simpson’s most recent book, The Dawn Of the Singularity, Simpson envisions more or less every household buying or leasing humanoid robots; androids that are quite similar in function to Gibson’s digital agents, albeit in physical form.

Four billion robots at a clip of 1000 USD/month for the basic version and upgrade subscription can turn into serious money over time, in particular valued at 5 times sales. Higher priced versions, upgrades, and using the robots themselves as portals for other goods and services easily increase the numbers by a factor four, and voilà!

I can definitely imagine such robots as both part of the input function for reverse-engineering their owners, and as platforms for showing off your wealth (complementing your car and boat). Once household androids become useful enough, just picture the “Joneses” pitching their robots against each other in terms of best finish, speed, balance, range of functions, intelligence, model and not least price.

Mom, why is our android so slow and old?

I just got back from the Joneses, and they’ve just bought the HuBot2028 LAL. Maybe it’s about time we upgraded ours too


Summary – what to do?

Biotechnology, artificial biology, active nanotechnology (molecular replicators and molecular-sized computers and robots) in contrast to today’s inert nano materials; strong general artificial intelligence (and its current predecessor, deep learning), robotics, quantum computing, bionic limbs, AR/VR and various forms of entertainment etc. are all promising tech areas today.

Add in the potential of immersive computer games, sex robots, designer drugs — or a combination of all three and it’s easy to imagine an interesting near future. The question still remains, however, which companies will emerge as winners in this race. On the one hand, IBM, Alphabet, Amazon, TenCent, Alibaba, Apple and Netflix all have interesting AI software and quantum computing embryos, but on the other, all that research money doesn’t stop history from repeating with altogether new start-ups making the crucial inventions.

I would bet some money on each and every one of all the mentioned companies, but I would be even more ready to invest in new, truly innovative robot and AI companies, if I get a chance before they sell out to the FANGs.

Fortunately, you don’t have to get rich betting on the right digital agent company. The future will be bright enough just having access to them as a consumer; just as standard shipping containers have made us all rich without any of us ever having owned the company that invented them.

Talking about investments, wouldn’t it be cool if our agents could perform financial analysis? They could find out everything, and, if allowed, talk to other agents in as large groups as we grant authority. Thus we would actually know the sales and likely profits, thus enabling optimal investments. Brokers, gone! Portfolio managers, gone!


Interesting you say, but: bah, no robots, no agents, I just want to see what next year’s iPhone looks like.

Regretting decisions and frettings over losses and past events at best doubles the pain

“I’ve never experienced adversity”

That’s what I spontaneously say when asked

How about you, has your life experience been a total joy ride?


Topic: personal growth

Conclusion: counting your blessings and learning from your lossses

Teaser: My failures

Length: 5 minutes


Sure, I was bullied in school on account of my accent, of my poor family, small house, garden and single car garage (!), the wrong clothes, Asperger’s (before it was a thing) and so on. Oh, yeah, right, I’ve had 8 concussions, two torn ACLs, a few broken bones, heartbreaking break-ups etc., but I’ve never considered any of it facing adversity. Those are just facts and stories of the past. Experiences. They hurt in the moment of course, but real adversity should entail substantial and permanent loss, without compensation, shouldn’t it?

I can continue: my big brother drowned before my eyes when I was 8, which triggered my parents’ pretty ugly divorce shortly after; but how is that my problem? Hasn’t everybody divorced or dead family members? Don’t they, if you just extend your search a little? to be clear, right there and then, seeing my parents’ reaction to their first born son taken away so unexpectedly, shook me to my core.

Living my pre-teen, formative years in the tragic vacuum he left behind, and the tension between my parents, may ex plain my reluctance to commit to meaningful relations and awkward social competence. Maybe it has some bearing on my flat interactions with my father and somewhat sporadic and disengaged socializing with my siblings. I can definitely be perceived as cold and distant, so maybe I am “damaged”. The thing is I don’t feel damaged. On the contrary, Ola’s death probably contributed to my obsession with coding, which in turn gave me intense training in logic, English, perseverence, patience, responsibility (for bugs and finding them) and grit.

Most of all grit.

– – – – – – – trigger warning, sentimental stuff

When you’re 10, 11, 12, 13 years old, frequently physically bullied in school, your parents are arguing and involved in jealous and toxic scheming and monitoring new acquaintances, you’re the smallest and youngest kid in class, the new kid on the block, with Asperger’s on top and the only one in your neighborhood coding; imagine the required grit to code, debug, test and come up with solutions all alone. Need I remind you this was in 1982-1985; there was no internet, no one to ask. Was it difficult? Yes. Was it frustrating? Definitely. Did I want to smash my 22″ cathod ray tube TV set? Oh, yes! Was I devastated when the computer crashed mid-debugging? No, I just wanted to kill myself and burn everything around me down to the ground. I don’t know what drove me; perhaps I fled from facing my brothers demise or dealing with my and my family’s loss. In any case, my new core programming, manifested as indestructible neuron highways in my brain, regarding grit, will power, logic, algebra and optimization have proven invaluable.

I used to be a troubled child, but after my brother’s passing, and the second coming (the computer), I turned into an effective, and eventually immensely appreciative, serene and happy, pattern recognizer. I can’t see how I could ever have become a better person than I am — well, according to my preferences. Consequently, none of this can be considered a bad thing.

– – – – – – – – end of croc tear rant

Professionally, I’ve had to live with a few disastrous recommendations to clients (e.g., Prosolvia went bankrupt, the stock to zero, when I had a Buy recommendation on it), not to mention loss-making investments when I was a portfolio manager (shorting bank stocks en masse in the second half of 2013 was not my smartest move; actually it was my worst ever, I think). I’ve lent out money that I never got back. I’ve invested in several start-ups that all went belly-up.

To summarize: yes, I’ve lost friends, family members, girlfriends, limbs, money and honor. I just never think of that as adversity. It just is. Later in life I’ve learned that some people keep thinking about past events and past decisions, just as some people believe all their thoughts and cede control to them. Meditation seems to help center people in the present, but for me accepting my thoughts or stilling my mind or controlling my emotions have never posed a challenge.


I’ve heard somewhere that you don’t know how strong you are until it’s your only choice. A bit dark, don’t you think? Or, is it? It’s pretty hopeful to know there probably are hidden resources that appear right when you need them, should you ever.

You only get challenges you can (barely) handle“, goes another saying. I can’t say I agree with that one. Neither do, I imagine, many victims of violence, war and worse (murder). There’s still, however, some truth to the cliché. For moderately unwanted experiences you can choose how you frame them (it could have been worse) and how you choose to remember and deal with them and not least what you learn from them.


Today I’m exactly who I want to be.

Consequently, I wouldn’t change a single thing of my past if I could. I actually can’t see I’ve ever truly suffered, taken a real hit (street fights don’t count), or lost anything I didn’t learn more from than I paid.

What’s the worst thing I can remember that even in retrospect seems unnecessary? Maybe when my girlfriend’s old dog died. That was excruciating. No matter, it emphasized the importance of appreciating every day you get to experience with your loved ones, rather than telling me life hurts.


Why do we fall Bruce?

Once, I crashed my motorcycle in the woods and hurt my knee badly. I could say that I tore some ligaments, my right knee ACL and ruptured my meniscus and still had to walk the bike back to base, but my physician told me all that damage was already done some 8 years earlier. Actually his exact words were “13 years”, since I waited another 5 years before checking up on my increasingly unreliable knee. Anyway, lying there around April or May 2000, alone in the woods, screaming my lungs out, not even daring to look at or touch my leg, I thought “The good news is, whatever the damage, nanomedicine will sooner or later make my knee even better than the original”. Sunny disposition much?


Takeaway: love your losses — and yourself

Have you really had a tough life? Have you really experienced adversity, or are you just dwelling on the past, regretting decisions and events you had no control over?

Aren’t you a better person for all your experiences?

If not, perhaps now is the time to think about how you handle life’s little misfortunes. Why don’t you choose to learn, rather than just complain?

No investor on the stock market would blame bad luck or fret over losses in the past. They would just update their best practices list and strategy and make sure they do better next time. Life is no different, it’s an eternal cycle of trials, investing, losses, analysis, learning and improvement. Losses and “adverse” experiences are a natural and important part of the process — and the sooner the better. Logically you should love losses, since they are much more effective teachers than wins, in particular lucky windfall gains.


Man in the mirror

Aren’t you who and where you want to be?

WHY NOT? And…,

…who’s responsible for that? Either you change, or you change your mind (alternatively stay unhappy and hope for your miserable life to end as soon as possible)


CTA: By the way, how long has it been since you wrote an entry in your appreciation diary? What do you love? Who do you love? What are you doing to love life and yourself even more?

P.S. Actually, that hangover when I woke up, covered in blood, in a 3x3x3 ft (1 cubic meter) box at a gas station 15 miles from home might have been my low point.

P.P.S. No, come to think of it, when the Spanish police chased me with dogs and threatened to rip my “passaporte” to shreds unless I left the country might top the gas station incident

P.P.P.S. I almost forgot, the sleepover when I was 17, in a “house” in Amsterdam’s outskirts, built from driftwood, populated by drug addicts, that turned into a slow motion knife kerfuffle, could have ended in tears. No matter, that wasn’t even close to adversity, just an exciting experience.

Tell me again, how did I ever become a hedge fund manager? Oh, that’s right, I almost got fired even before I started on account of an interview I made between jobs back in April 2000.