[HN Gopher] Innovation Is Inherently Controversial
___________________________________________________________________
Innovation Is Inherently Controversial
Author : salakotolu
Score : 72 points
Date : 2021-05-29 16:02 UTC (6 hours ago)
(HTM) web link (www.etftrends.com)
(TXT) w3m dump (www.etftrends.com)
| xwdv wrote:
| 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 wrote:
| 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 wrote:
| 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 wrote:
| 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 wrote:
| 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 wrote:
| 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 wrote:
| 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]
| yellow_lead wrote:
| It's speculation, marketing, and size (as you suggest).
| Ambiguous words like "innovation" help them build a lot of FOMO
| for their holdings.
| stemlord wrote:
| Industrial society and its consequences have been a disaster for
| the human race
| RhodoGSA wrote:
| 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.
| inthewoods wrote:
| 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.
| internetslave wrote:
| You just made this up. I'm tired of people who don't understand
| investing writing these aphorisms about it
| inthewoods wrote:
| No I didn't - it's easy to research. See the articles I
| reference above.
| internetslave wrote:
| I work in the industry. Generally the winners keep winning.
| The same funds are always the top fund
| inthewoods wrote:
| That's great but you didn't answer one question I asked -
| mutual funds or hedge funds? AUM or performance?
| inthewoods wrote:
| So you're saying the same funds always have the top
| performance? Or have the top AUM? And are you talking
| about hedge funds or mutual funds?
| internetslave wrote:
| Yes the same funds usually are the top ones. There's one
| offs like people who made money in 2008 etc. but it's the
| same people always beating the market. The industry is
| really small, I don't need a false and misleading
| academic study
| RhodoGSA wrote:
| they provided study's and links, can you? Seems like
| you're the one just saying things.
|
| Not only does it make sense from a mean scenario, but it
| makes sense from a human scenario too. When i see a
| company like Tesla skyrocket to 700, every day that it
| posts a 10% gain i think it's at the end of it's rally.
| Eventually, the firm gets way too hot and pressure to buy
| cools down. Market cap is just how much people are
| willing to pay for something * outstanding shares. If
| suddenly everyone thinks the rally has gone on too long,
| buying pressure ceeds and thus market cap/ stock price.
| internetslave wrote:
| I've got better things to do, and it's widely known that
| finance academia is worthless. The inner workings of the
| investing world is opaque. That's why you see people
| posting logically sounding nonsense
| inthewoods wrote:
| Morningstar and S&P are not academic institutions. If you
| have data to refute what they're saying, I'd welcome it.
| fairity wrote:
| > 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 wrote:
| 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
|
| [2] https://peeranalytics.com/2018/05/21/hedge-fund-mean-
| reversi...
|
| [3] https://www.valuewalk.com/2015/05/hedge-fund-mean-
| reversion-...
| fairity wrote:
| 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.
| inthewoods wrote:
| You can find lots of research on it but first, between 85-90%
| of actively managed investment funds underperform their
| benchmark:
|
| https://www.ifa.com/articles/despite_brief_reprieve_2018_spi.
| ..
|
| That means it is very, very hard to outperform.
|
| Then, if you do outperform, that tends to be an exceptional
| year followed by not so great results.
|
| https://www.morningstar.com/articles/1017292/what-to-
| expect-...
|
| Key comment:
|
| "Of the 123 stock funds that gained 100%-plus between 1990
| and 2016, just 24 made money in the three years following
| their big gain, with the average fund losing around 17% per
| year."
|
| Now, is it possible that ARK is an exception - of course. But
| the math would tell you that is highly unlikely.
| fairity wrote:
| Interesting read, but the data seems extremely skewed.
|
| Quote from the same article: "Eighty-eight of the 123 funds
| were go-go tech/Internet darlings that soared in 1999 but
| crashed after, losing 24.1% per year from Jan. 1, 2000, to
| Dec. 31, 2002."
|
| So, it seems like the data comprising the "after-years" is
| highly skewed towards years when the overall market
| crashed, which explains the negative returns.
|
| If your claim is true, shouldn't there be a fund that
| simply indexes the broad market minus top performing hedge
| fund holdings? If not, why not?
| inthewoods wrote:
| Most active manager performance is mean reverting. They
| have a good year, and then there is little evidence of
| persistence in their future returns. Here's a larger
| study from S&P:
|
| https://www.spglobal.com/spdji/en/documents/research/rese
| arc...
|
| "We observe little to no evidence of performance
| persistence among active managers, except in the large-
| cap value and real estate categories. For example, out of
| 1,034 large-cap funds that existed in the universe as of
| Sept. 30, 2013, only 19.73%, or 204 funds, outperformed
| the S&P 500. In the following year, 15.69% of those 204
| funds outperformed the benchmark. By the end of the third
| year, none of those original 204 funds were able to
| outperform the S&P 500 on a consecutive basis."
|
| What is implied from this data is that if a manager has a
| good year, they are unlikely to match it going forward.
| So only 20% beat an index, and then only 16% of those
| that did beat it the next year.
| sys_64738 wrote:
| https://www.fool.com/investing/2021/05/28/5-reasons-i-regret...
| danboarder wrote:
| 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 wrote:
| 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 wrote:
| > _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 wrote:
| 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 wrote:
| 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.
| wearywanderer wrote:
| > _" 3D printing is really a subset of autonomous technology
| and robotics."_
|
| I'm confused, is this an objectionable statement? A lot of
| people seem to treat 3d printing as something truly special and
| unique, but actually 3d printing is a form of CNC; additive
| rather than subtractive like a CNC mill, but a form of CNC
| nonetheless. It's a technology firmly rooted in a broader tree
| of established technologies.
|
| I guess some people think of these machines as printers
| foremost, and thus perceive a huge conceptual jump or paradigm
| shift from 2d desktop inkjets to 3d printers. If somebody comes
| from a computer background rather than a manufacturing
| background, it's easy to see why this framing might be chosen.
| But I don't think that's the right way to look at 3d printers.
| Rather, 3d printers are the synthesis of two already well
| established concepts in manufacturing: making things by adding
| material, and controlling machines using computers.
|
| Edit:
|
| > _Wouldn 't 2D printers then also be a subset of autonomous
| technology and robotics?_
|
| The modern familiar forms of 2d printers are such a subset, yes
| (and I never implied otherwise.) These machines were preceded
| by other forms of 2d printing which are not autonomous but were
| nonetheless mechanical. They were also preceded by autonomous
| forms of 2d printing that didn't fit inside your living room,
| but were nonetheless familiar technology to the general public
| (because everybody knows books exist.) I believe this is the
| reason 2d printing is generally considered more mundane than 3d
| printing, which is treated like sci-fi technology that came out
| of left field. Again, understanding the historic context of
| these machines gives us insight into the reasons they are
| perceived the way they are.
| alfl wrote:
| I've recently been thinking about this in the context of web
| technology (revisiting some ideas from the 90s that didn't
| pan out then, but can be repurposed now).
|
| Your point here about CNC and additive versus subtractive
| manufacturing is also near to my hobbyist interests.
|
| Extending the idea a bit, I suspect the history of social
| changes that resulted from the advent of the printing press
| are an entryway into understanding the public's reaction to
| social media today.
|
| Aside from living through the history, can you recommend a
| way to build more of this knowledge? If it's a matter of
| being widely read do you know of something like a survey
| introductory text?
|
| I will google more, but thought I'd ask.
| rriepe wrote:
| Wouldn't 2D printers then also be a subset of autonomous
| technology and robotics?
| jazzyjackson wrote:
| From one angle, by looking at the bill of materials
| comparing a inkjet and makerbot, they both look like robots
|
| But from another angle, printing and publishing paper is a
| different industry than manufacturing objects, so the
| distinction is in their context
| smoldesu wrote:
| 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.
___________________________________________________________________
(page generated 2021-05-29 23:01 UTC)