As The World Turns

Disclaimer: All of this is speculation. Please do your own due diligence.

Let’s set the tone right. Here are some relevant quotes:

1. “Improvise, adapt, and overcome.” - Clint Eastwood
2. “Trust is like the air we breathe. When it's present, nobody really notices. But when it's absent, everybody notices.” - Warren Buffett
3. “It's better to have a partial interest in The Hope Diamond than to own all of a rhinestone.” - Warren Buffett

Bytes Of AI

The world seems to become more and more complex each day. More problems. More ideas. More data. More complications. More iterations. More escalations. More solutions. New problems. New ideas. New data…And the cycle continues. Humans will continue to discover problems that didn’t exist yesterday, attempt to solve them today, and hope for none tomorrow.? All this to say, humans will never be satisfied, and fortunately, keep evolving to the ever-changing times.

We live in an uncertain world with only a few pockets of stability, and a myriad of ways it could all change in an instant. I have already touched on the reality of onshoring vs offshoring in my previous memo. In this, we will instead focus on societal evolution that comes about from advancement in fields that could have a material impact globally.

Many have already heard of or have used ChatGPT. And ever since, “AI” has become the new buzzword everywhere. I first started using ChatGPT in its early days (December 2022) and found it somewhat entertaining. These are some very powerful tools, and at first glance, they will scare you. Menial, mundane, and process-driven tasks have and will become automated over time. Beyond that, even artistic fields that once seemed untouchable are now susceptible to being disrupted. If you really want to get a glimpse of that you should explore other tools, such as Midjourney, Dall-E, or Soundraw to name a few.

We have since witnessed a major influx of generative AI tools that many are appalled by. While these tools do help with productivity, their user experience and real-life applications feel far too scattered currently. If you have worked in technology, the current capabilities are also not as impressive to you as they may be to the general public. Things will truly take shape when we have a true vertical powered by generative AI tools that provide meaningful end-to-end experiences with ease. For instance, imagine being able to ask such a tool to plan a vacation for you and it automatically takes into consideration your budget, travel preferences, and contingency plans. And that tool will then leverage all the information at its disposal (banking, passport/visa requirement, dates, work schedule, user profile/interests, loyalty programs, etc.) and plan/reserve a whole itinerary from start to finish to your liking. Now, what impact would that have on the travel and hospitality industry?

Oddly enough, even this example is not far from being achieved today. It’s just a fragmented and not as smooth of an experience today than what it will be in the future. I would consider this example as a very trivial task given the complexities AI can sift through very efficiently. Nonetheless, it will be real-life applications such as those that will serve as an inflection point for the general public and provide capabilities that truly impact jobs, companies, industries, and society at large.?

Looking ahead and finding investment opportunities in that sector is quite risky currently, but it also has the most potential. However, I suspect that there will be considerable consolidation among the tech giants over time, as regulations take form and capital allocation is optimized. We are in the early innings and have got some way to go.

Power Of The Dollar

I find it quite comical that every few years there is widespread fear, speculation, and debate around de-dollarization. Since the Bretton Woods Agreement of 1944, the US dollar has remained the global reserve currency given the stability of the American economy, breadth and liquidity of the financial markets, and the depth of influence globally. At the risk of boring you by diving into what each of the pillars mean, ask yourself instead: if you could only hold a single currency and trust that it will retain value and influence against any other currency in 5/10/15 years from now, what currency would that be? One could easily argue that you can take a crisp USD $100 note anywhere in the world and it would be welcomed with open arms due to the inherent value, stability, and trust it represents unlike any other currency. Believe it or not, this also stands true for countries that have decided to not trade in US currency at all.

Incidentally, the crux of the debate also becomes that much more interesting when you look at the facts. The reliance on the US dollar globally has consistently risen and continues with no end in sight. For the skeptics, below are two charts I implore you to examine. The charts display a trend of the amount in circulation and its volume over the years, respectively.

A lot of these debates always existed but became even more widespread after the Russia/Ukraine war started. The world has become more polarized since, and the formation of BRICS has only fueled the fire that much more. The world has gone from settling all major transactions in USD to entertaining and even settling some trades in other currencies, such as the Chinese Yuan or the Indian Rupee in a few instances. Sure, we will have other currencies that are used to trade in various parts of the world, but the majority will likely remain in USD.?

The reality is that any given reserve currency, including the US dollar, will be at risk of becoming dethroned over time. It is part of natural progression as other countries attempt to secure their place on the world stage to become a superpower. However, some lack the foresight of the perils that exist when wholeheartedly believing the thought that other countries/currencies will topple an existing reserve currency easily and within even the next decade. That paired with the level of influence alongside the power and might that the US possesses and will continue to globally make me leery of such bold claims happening in my lifetime.

Lately

One thing is for certain: the human brain is very complex. The way we think, how we rationalize thoughts, and act on emotions is incredibly fascinating and unique. As a result, the progression from generative AI and instability in various currencies caused by rising interest rates or conflicts have brought forth some of the many interesting investment opportunities that will exist in the future.

In this memo, I intentionally covered two different yet tangential topics that reflect today’s investment environment globally. It serves as a stark reminder that one must continually learn and evolve their mindset if they aim to perform well in the market. Focus on the issues at hand and don’t dwell on the past, as what may have worked then will cease to. And what may work now will cease over time as well. Given the topics discussed, think about how the composition of society, economies, and workforces may change globally over the next 5-10 years or even beyond. That should help brainstorm some interesting ideas and potential investment prospects that will help create value over time. While it is very easy and fun to speculate during such exercises based on prices and perceived value, it just doesn’t pay to. Many know the price of everything and the value of nothing.