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Whew. Wow. Holy shnikes.
I’ve gotten maybe six hours’ sleep, total, in the past 72 hours.
This was intentional (if wholly unplanned) — for reasons I will explain…
First, let me apologize for the tidal wave of ideas and concepts I am about to deluge you with. I mean, I really went nuts here. I’m not sure I have ever written anything this “visionary”… or possibly this plain nuts, take your pick. I had to get this out, though, so c’est la vie.
We are building out a communication plan — a “master plan” if you will — and part of the plan is moving away from these massive blocks of thought in our regular email broadcasts and posts. We are, in fact, going to move towards much more digestible (and pre-planned for the most part) information modules, served in smaller more digestible chunks (and linked together in a powerful connected architecture).
For now, though, you get the firehose once again — assuming you want it, heh — because it’s all I’ve got at moment… and writing this up will help immensely with further head clearing for the insane amount of “breakthrough” I’ve had to process in the past 72 hours.
I also had a plan for what I was going to tell you today, in the more “normal” communication that was going to fill this space. That is out the window temporarily — our publishing schedule out of whack too (very temporarily) — mainly because I have just been so knocked sideways by the massive, massive impact of research breakthrough that happened in the past 72 hours. (The reason I am on close to zero sleep.)
I am going to be passionate and somewhat stream of consciousness in what follows. Again, this ain’t our normal fare.. but I suppose if you feel like not reading you will just stop reading anyway. So here goes. I will share a few relevant background concepts and then just firehose you with the breakthrough concepts at hand.
The first thing to understand is that trading is all ones and zeroes. It is nothing but bits and bytes, pieces of information. Everything is reducible to architecture. Everything is reducible to information. There is not one single thing about trading that is magical or mystical or out of reach of logical analysis and reproducible technique.
It can all be broken down. All of it. Every. Single. Piece.
What is a computer? A computer is a dumb box built to process ones and zeroes. What is a computer program? Just layers of intertwined commands… a sort of seven-layer lasagna, except instead of seven layers there are seven thousand layers and each one is made up of digitally encoded bits of information.
All information encoded within the entire universe can be represented by ones and zeroes in the end. That means that everything is reducible to its simple parts. Now, this is not to say that understanding the parts is the same as understanding the whole. You can break down a whole into ones and zeroes… and then put it back together again… but it is important to also remember that the whole is “other” than the parts.
You can put together layers of ones and zeroes in such a manner as to produce an entity with properties of a complex system… and those properties will be “emergent” in the sense that they are “other” and cannot be predicted from the parts alone.
(A human being shares 50% of its DNA with a banana. The configuration, however, is obviously different…)
The point about ones and zeroes, though, is that any process can be broken down into its constituent parts, analyzed and subjected to theory, and then put back together again. You can get as granular with this as you want. Technically speaking, if you had the tools and the time, you could break a process down to atomic sublevel if you chose.
One of my favorite movie sequences of all time is from the movie SeaBiscuit with Jeff Bridges and Tobey Maguire. In the scene, Jeff Bridges (the eventual wealthy business owner who buys SeaBiscuit) is starting out as a mechanical whiz who opens a bicycle repair shop. There is not much business, so Bridges finds himself standing around. On a slow business day, the owner of a smoke-billowing Ford Model T pulls up and asks Bridges’ character if he can fix it.
Bridges has never tried to fix a Model T, or any automobile for that matter, but he says “sure” and gives it a shot. The next thing you see is Bridges sitting on the floor of his shop, with an entire Model T engine spread all around him — hundreds of parts, just laying all around on the floor. You see his character deep in thought. Then he takes two pieces and puts them forcibly together.
Cut to the next scene: Bridges is talking excitedly to the customer about how he improved the original engine design. He not only fixed the problem, he figured out how to get X percent more horsepower from the engine. Bridges’ character winds up going into the engine modification business, improving Ford engines. He gets rich doing this and thus has the money to later buy SeaBiscuit.
This is, as I said, my favorite movie sequence of all time because it captures so perfectly how my brain works. It also captures, in abstract, the whole joyous process of tackling a complex problem, figuring it out, and then achieving a result that provides deep satisfaction (and the fruits of commercial gain). We can abstract out what happened:
Bridges has mechanical knowledge in area X (bicycles).
A customer has a problem in area Y (smoking Model T).
Bridges applies general mechanical knowledge to Y.
He completely dismantles the Model T engine.
He puts it back together and absorbs the theory.
He conceives of improvements and adds value.
He no doubt gets deep satisfaction from this process…
And eventually reaps large commercial reward from that.
That is me too. That is how my brain works. I love figuring things out, coming up with ideas and solutions. I have joked that my brain is like an enthusiastic dog that constantly wants to fetch tennis balls. The tennis balls are interesting puzzles or problems that have a payoff. Pragmatic implication is part of it too — there has to be real world connection.
Like Bridges, my brain constantly wants to pull things apart, put them back together, and come up with insights or solutions or improvements or all three. It is a joyous activity that delivers satisfaction, for deep biological reasons probably related to why dogs love to run and romp in grassy spaces.
Speaking of which, just for fun and because I am being ridiculously self-indulgent here, here is a pic of George Soros, our five-month old rottie, romping behind our house. The pic is also a metaphor for my brain running toward a puzzle with a pragmatic payoff. Just feel that bounding joy:
Okay so what does this have to do with ones and zeroes?
Well, we’ve demonstrated (or at least explained our theory) that everything is ones and zeroes. Everything is reducible to information components.
Through the SeaBiscuit example, we’ve shown how breaking down a problem or a process, and then rebuilding it, has a pragmatic payoff. Bridges’ character figured out how to take apart a Model T engine… absorb the theory of how it worked… and then put it back together not just in working order, but in a more useful and powerful configuration than before.
By the way this also reminds me of another great movie — “The Fastest Indian” with Anthony Hopkins. This movie is about a New Zealander named Burt Munro who likes to tinker with motorcycles.
Munro was seen as little more than a quirky tinkerer… and yet he was able to modify a motorcycle in his backyard shed… take a trip halfway around the world with his modified ride… and then use it age sixty-eight (!!) to break an official land-speed-record in the Bonneville salt flats.
So it’s all ones and zeroes… and there is a storied history of guys taking apart machines, then rebuilding those machines better than before, in ways that are inspiring and powerful. And isn’t this is pretty much what Elon Musk is doing with cars and rockets? If humans get off-planet, this is the way.
Where are we going, okay let’s keep moving…
So the guy who asked Bridges to fix his Model T had a problem (the smoking engine). I also had a problem — I needed to figure out how to become a Market Wizard.
In college I studied English and Philosophy. I thought I was going to be an English professor and rock it Robin Williams style in Dead Poets’ Society. Tweed jacket with suede elbow patches, riding around campus on a bicycle, smoking a meerschaum pipe, wearing flip-flops to class, being the “cool professor” and writing books in summers… I thought that would be my gig.
I wanted to do something abstract, something with my mind, and I showed writing skill from a young age so I gravitated toward academia. My idea of the worst conceivable jobs imaginable — I remember this from high school — were either running a restaurant or running a grocery store, because of all the headaches you had to deal with: People, perishable food, customers, low margins, constant transactions. I wanted to go the other way… if I could, I wanted to find a Yoda-like gig where you could just float above all that stuff.
But then my academic dream was shattered by a cynical philosophy professor. In one afternoon of class he shattered my dream by suggesting that liberal arts professors are a dime a dozen… that aspiring academics would have to start in some crappy college in a godforsaken corner of a flyover state they couldn’t choose.. and would then have to fight brutal office politics battles over vanishingly small stakes and do grunt work for years before building a career and a reputation that gave satisfaction.
In retrospect I think he was too bitter. I don’t think the academic path would necessarily have been as bad as that. But the damage was done, my dream at the time was shattered into a thousand pieces.
This left me with no idea what I wanted to do. I was staring down a “mid-college crisis” of existential proportions. The thought of being chained to a desk, choking down some shit job until I was old, to pay for a lame retirement and the trappings of a boring life, was so awful it made me borderline clinically depressed.
I had no clue what I was going to do. I switched my major to computer science — for about three weeks, before realizing that was an absolutely horrible idea. I got zen and realized okay, I’ll just finish with English and Philosophy — I was really digging philosophy by then — and I’ll figure out the rest. It will come to me, I thought.
It did. Not long after I found the book “The Investment Biker” by Jim Rogers on a friend’s dorm room floor. That book, if you don’t recall, is about an ex-hedge fund manager who takes a motorcycle trip around the world with his girlfriend, deciding whether or not to invest in the countries he passes through.
This idea — of traveling around the world, investing (or not investing) in various places — was the closest thing I had experienced to “Making money by thinking.” It was the yoda thing, floating abstractly above the fray. And it had global travel thrown in!
I was instantly hooked. I knew that investing and trading was my profession of choice. There was never any doubt from that moment on.
So I started reading…. and reading… and reading… I devoured hundreds of books. I read everything I could get my hands on, even stuff with the barest thread of connection to trading. I was reading about chaos theory and theoretical physics and complex adaptive systems in 1996, trying to figure out how it might give me a mental model edge.
And then I came across the Market Wizards series and my whole world changed. I mean, I read Market Wizards for the first time and it was just one of those jaw-dropping moments.
I remember being a college student and summer intern at Raymond James and Associates, a stock brokerage in Atlanta, working for a stockbroker named Vic Fisher. I would get my series seven via Raymond James sponsorship the following summer. For all I know Vic is still at that Raymond James office. Maybe someone will forward him this.
During this summer internship, I remember getting my first copy of Market Wizards. I still have it. I remember the first time I read the PTJ interview. I was sitting in a Subway on my lunch break eating a tuna salad foot long with everything on it. And that book absolutely blew my mind.
Jerry Seinfeld talks about, when first started as a comedian, his attitude was: “I want to be one of THOSE guys.” He just wanted to be one of those guys — the comedians who got up on a stage and did their thing. So he moved in that direction.
That was my exact attitude reading Market Wizards. My thought pattern was, “I want to be one of THOSE guys. I want to be a Market Wizard. How the heck do I do it? Am I even capable of doing it? I can try my ass off, that’s for sure…”
So now we come back around to the ones and zeroes and the machine teardowns and rebuilding.
I had a problem — a puzzle with a potential solution: “How to become a Market Wizard?” Or rather, “How to become a Master Trader?” How to fulfill the amazing and incredible vision that was set before me?
I then proceeded to pursue that vision for twenty years straight. I am still pursuing it, from age twenty on through to the forty-year-old me of today. The vision only got stronger over the years as I quickly realized that the pursuit of trading gives you permission to pursue EVERYTHING… to really master trading you have to master human nature, math, science, game theory, emotional control, history, sociobiology, neuroscience, on and on… and my puzzle-solving brain absolutely loved that.
So my belief back then, and my belief still today, was that it is all information. It is all process. You can take virtually anything apart, put it back together again, and derive a sense of process knowledge from that. And my goal was to become a master trader — to attain a measure of true Market Wizardry — and to do so from scratch, without benefit of a true master to teach or guide me, except from afar and through books… and so I set my sights on doing that.
I was fortunate, too, to gravitate toward global macro in the beginning, because global macro is perhaps the most challenging and intellectually enriching and deep experience based style of trading and investing in the world.
Global macro, like trading and investing broadly, is another excuse to “learn everything, study everything,” and apply it all as a powerful interdisciplinary seek-and-deploy tool.
These quotes from the late Barton Biggs give context:
“There are no relationships or equations that always work. Quantitatively based solutions and asset-allocation equations invariably fail as they are designed to capture what would have worked in the previous cycle whereas the next one remains a riddle wrapped in an enigma.The successful macro investor must be some magical mixture of an acute analyst, an investment scholar, a listener, a historian, a river boat gambler, and be a voracious reader…”
“It’s not just about wrestling with the global environment and getting your asset allocation positioned. Good information, thoughtful analysis, quick but not impulsive reactions, and knowledge of the historic interaction between companies, sectors, countries, and asset classes under similar circumstances in the past are all important ingredients in getting the legendary “it” right that we all strive so desperately for…”
As an aside, this speaks to a big reason we use fundamentals alongside technicals — because the bigger your information edge, the better. Is it possible to make money with price alone? Certainly. Is it possible to reach higher echelons that are orders of magnitude larger in scale and scope via artful and wise combination of ALL inputs? Unquestionably.
In the great debate between price alone and price plus fundamentals — consider the following levels of hypothetical possibility in poker (No Limit Texas Hold ‘Em):
In poker it is possible to have a strategy based entirely on the cards — what you have in your hand and what shows up on the flop.
In poker it is possible to have a higher level strategy that incorporates both cards and psychology — the mental state of one’s opponents.
In poker a yet higher strategy state is available, incorporating cards, psychology, and mathematical strategies based on stack size and volatility exploitation.
And yet higher strategy levels still are available via adding things like nuanced profiles of opponent playing style… reflexive awareness of image transmitted (how you appear to opponents)… layers of strategic context based on multiple players in hand… deeper considerations and configurations… on and on.
Here is the point of the proper progression — with each level of progression, your edge INCREASES. It actually goes up. It gets stronger. This is why, in turn, you are able to safely deploy larger amounts of capital with each level of advancement. The more information you are able to use profitably, truly assimilating it into your system, the stronger your edge becomes.
In trading there is a similar pattern:
You can trade a price pattern alone…
OR you can trade a price pattern plus fundamental awareness…
And then you can add industry awareness…
And general conditions awareness…
And sentiment awareness of opponents…
And so on.
And with each added layer your edge increases.
Adding information that can be profitably processed is adding edge. You increase your odds of success, increase your ability to add size at the right time, increase your ability to scale across capital and timeframes, or some combination of all the above.
And more edge is superior. Period. This is just basic math and common sense. There is no arguing with this.
There ARE arguments for not incorporating more information (e.g. fundamental inputs) into a strategy however. Those arguments are based on LIMITATION. For example:
if the trader cannot profitably process added information…
it may be wiser to leave it out.
if the trader has satisfaction with a simple configuration…
it may be wiser to shun complexity.
if the trader does not aspire to scale…
then it may make sense to stay modest.
The above logic chains are legitimate… but again, they are based on limitation. They are kind of the trading equivalent of saying the following:
“You know, my trading style is a Ford Festiva, but that is okay because I really like my Ford Festiva. I don’t have the time or energy to try and upgrade to a more powerful model of car. And besides, I’m not sure I would drive a more powerful model all that well. I might crash it or put it into a wall. And besides, I’m comfortable with my Ford Festiva and I believe (as many preach) that I should drive what works for me. So I am gonna stick with my Ford Festiva and I feel okay with that.”
The alternative attitude here is that of Burt Munro — the Kiwi who tinkered with motorcycles to the point of being able to break a land-speed record, at age sixty-eight, on his own bike. The alternative is to embark on a path of evolution, of forward movement and growth — to say something like the following:
“It doesn’t matter where I start… it matters where I finish. I may be driving a Ford Festiva for now… but I am gonna show the guts and gumption to learn to drive more powerful models, and keep practicing and upgrading, moving through the ranks until I finish with a Tesla, or whatever is well beyond that — by the end who knows, maybe a flying rocket car… “
So the main business of Mercenary has been cracking codes and figuring out upgrades. How to elevate to that level?
And a lot of this has to do with information architecture, and process and technique — stuff we have written about extensively, and will further evolve in future in terms of presentation (bringing it all together in a totally connected whole).
Okay! So what have we got so far? Here is a superfast bullet recap:
It is all ones and zeroes.
You can break it all down to process.
Taking it apart and putting it back together is key.
I had a problem like the Model T guy in SeaBiscuit.
The problem was how to become one of “those guys”…
aka how to be a Market Wizard aka Master Trader.
in this quest global macro was discovered…
with higher level disciplinary gains showing more edge…
because more info used PROFITABLY increases power.
which leads to information architecture.
Information architecture is huge to a trader because information is what you work with.
When making decisions relating to trading and investing, you are deciding to allocate capital. Whether you allocate it for five years or five minutes, it is still a capital allocation decision. And the decisions made are entirely based on information.
But information is not just an abstract thing. There are forms of information, types of information. There are different ways to receive it and process it. You can get information from a Bloomberg terminal. You can get it from physical newsletters that show up in your mailbox. You could hand-draw charts with a rule and ball point pen, or surf charts on your computer. And you have systems and tools for PROCESSING all this information.
The challenge of processing information, meanwhile, is like searching for needles in a haystack. You have these large piles of information, or rather flows of information, that are like continuously replenishing haystacks. And you have to find the “needles” — the concentrated elements of awareness and insight — and pull them from the haystacks.
Everybody processes information — probably large volumes of it. The more information you can process elegantly and efficiently in a tight space of time, the bigger your potential edge. This is of course true for global macro traders… but also for regular investors and even for purely price-based traders. Because even if all you trade is price, you still have to consume large volumes of chart-based information. And you have to discern opportunity from dozens or hundreds of patterns that may well look the same.
You can try to hand it all off to a computer, but you are still information-based. You are just asking the computer to process the information for you based on a crystallized set of rules. There is a notion that simple is better, but as we have clarified this is an argument based on limitation. Even if you believe passionately that dead simple is superior, you are still arguing from a place of limitation — arguing that additional information inputs will not be processed profitably. There is no other way to argue against additional layers of edge theoretically available to the individual who is willing to design or incrementally evolve a system that can incorporate and process those edges.
So information is key. Like the guy said in the movie Sneakers, “It’s all about the information.”
But not information that is secret or proprietary or has to be protected or stolen. No, no, no. It is all about the AVAILABLE information. The information that flows all around us.
We live in an unprecedented age of access to analysis. We live in an age where more and better information is freely available — or low cost available — than at any prior point in history.
This creates huge opportunity for those who can develop an edge by more profitably assimilating and synthesizing that information — as the brilliant biologist E.O. Wilson, one of the brightest minds of the 20th century, spelled out:
We are drowning in information, while starving for wisdom. The world henceforth will be run by synthesizers, people able to put together the right information at the right time, think critically about it, and make important choices wisely.
The ability to synthesize information rapidly and wisely is THE skill to have in the 21st century. That is because we are seeing incredible gains from the technology stack, and information synthesizers are now at the very top of that technology stack.
What is the technology stack? Consider that, as John Burbank points out, the first internet boom was not really an “internet boom.” It was more like an internet INFRASTRUCTURE boom.
Back in 2000 or thereabouts, some very exciting things were happening. The backbone of the future was being built. Fiber Optic cable was being laid, information networks being conceived, and so on…. “the cloud” was being born, with Amazon Web Services coming into existence in 2003… Google was an infant… it was early days for the infrastructure of the internet.
Now we see cloud computing companies dominating all others in terms of global scale and potential profit scope. Amazon Web Services is growing three times as fast as the e-commerce side of the business and is crazy profitable. The “cloud” winners are leveraging infrastructure built years ago.
Now look at Uber, a company valued at $50 to $70 billion at last count. Even if that is seriously inflated, there is no doubt Uber is one of the most rapid value creation events in history. And Uber was built on a “technology stack.”
As a Bitcoin technologist put it in a recent Forbes article, you have layers of technology enabling each other like successive layers of a cake. To have Uber you need Google Maps…. which requires GPS and smartphones… which requires low cost computing power… and global wireless networks… and a widespread payment architecture… and so on.
New companies and edges and possibilities exploit “the stack” of technology that has layered in to enable their existence. Uber could not have been born five years prior to its arrival and Facebook hit the sweetspot of arrival too. The preceding infrastructure, the “technology stack,” was key in respect to implementing and enabling the visions that unfolded… visions that incorporated a cutting edge synthesis of all the technology advantages that came before.
The above helps explain why I believe the financial publishing industry, the money management industry, and the business of trading itself are all ripe for massive, massive disruption. These three industries — financial publishing, money management, and trading in general, have three things in common:
The winners in all three areas are highly profitable.
The general “way of doing things” is well established.
The systems and processes deployed are antiquated.
That is to say, the true power of synthesis is not deployed.
The internet is used… computing power is used…
But the fundamental processes have not evolved.
Strategy, methodology and architecture have not changed.
Given the above, I think these industries — financial publishing, money management, and trading generally — are all extremely ripe for disruption. (It’s no coincidence that Mercenary Trader sits at the intersection of all three.)
We know why incumbent habits haven’t really changed… the incumbents are still making a lot of money, a great incentive to not do things all that differently.
We also know that, sometimes, technology and process advantages allow for huge leaps — and the time to prepare and exploit such a leap is BEFORE the potential sea change becomes obvious.
Remember the Nokia candy bar phone? It was probably still dominant, and raking in the bucks, when the first iPhone was in prototype stage.
Then, too, doing things completely differently — i.e. ripping up the standard blueprint and creating a wholly new configuration — can lead to unmatched breakthroughs.
From what I understand — and I may botch some of the technical detail here — Tesla can now claim the fastest accelerating sports car in the world. No matter the internal combustion engine or supercar in question, Tesla can smoke it in a contest off the line.
This happened because, at the base of it, the delivery of power via pure electric technology is just brute force superior to ICE (internal combustion engine) technology. With electric you just have raw power going straight to the wheels.
But Tesla, at one point, ran into a physical hardware problem: You could run huge amounts of power to the wheels, but beyond a certain surge amount, the contact wires delivering the power (transferring it from the battery to the wheels) would actually melt. So the upper bound on Tesla’s acceleration capability was neither the battery nor the wheels or what have you, but the contact wires and their maximum”non-melting” throughput.
So that means that, once an engineer had a single “a-ha!”’breakthrough as to how to shift the configuration to prevent melting, everything changed. Tesla’s incremental breakthrough insight allowed more power to be delivered through the contact wires without melting them… which, in turn, allowed Tesla to be able to beat every ICE engine ever produced off the line, which will in turn have long run impact in the psychological momentum of technology transition and burying ICE tech forever, sending it the way of the buggy whip.
We like Tesla not just because Elon is a visionary example, but because there are useful mental models there in respect to the advantages of taking a known technology (e.g. the automobile) and then changing the configuration in useful ways that have never been done before.
Certain aspects of Tesla count as “old” technology, and others are 100% brand new. It is the intriguing mix of the two (established technology and new innovation) that creates the magic mix, the whole that is “other” than a mere sum of parts. Put the combination of proven technology and completely new configurations of key processes into one package, add innovation and a flash of insight… and you get the potential for non-conventionally delivered “best in the world” performance.
Another interesting thing about Mercenary Trader — not only are we are at the intersection of financial publishing, money management and individual trading, but we are “cooking from scratch” in all three areas at the same time.
Our business model was based on having substantial preexisting knowledge going into Mercenary’s creation — specific and deep knowledge of trading, money management, and the financial publishing world — and then combining that with a willingness to do things in a completely different way if need be.
While our competitors in all these areas are huge, like multi-billion-in-aggregate huge, and fat with profits to boot, they are also burdened with “legacy systems:” Old technologies that still suffice, old configurations that are heavy on silos, and old information architectures that are not super-efficient.
This makes them vulnerable…
So now — finally, ha! — I can tell you about the “breakthrough” that has kept me from sleeping the past few days… in a way I’ve been telling you about it this whole time, just leading up to it in terms of describing “elements of the stack”…
Hopefully I have convinced you by now that the ability to process information is crucially important… and the means by which information is absorbed, distributed, analyzed and shared makes a huge, HUGE difference.
Consider, for example, the difference between integrated teamwork and silos. In the financial publishing business, most editors work in silos. This is, in part, because getting editors or analysts to collaborate together is like herding cats. (I should know… I was a cat herder, I mean editorial director, within a division of a giant financial publishing entity for four-plus years.)
Similarly, in money management and in trading, most funds have a silo or style box approach and most methodologies are silo-approached. This is, in part, because investors want simplicity in their choices. But a larger reason is because it is hard getting methodologies and strategies to synergize and work together. The complexity of the endeavor is daunting, but “finding simplicity on the other side of complexity” thus produces powerful and sustainable edge.
Given the above, as an organization Mercenary is obsessed with a few specific process elements:
general planning efficiency (reducing “friction”)
teamwork and collaboration
scalable information architecture
That stuff may sound boring, but it is only boring the way huge profit margins are boring. It all comes down to synthesizing information and executing fluidly based on informed decisions… and the more efficient you are, the more dialed in and streamlined you are, the better you can succeed at this.
And, in fact, if you can create a team structure, in which real collaboration takes place, and effort across a group of individuals is all guided toward one synergistic end, you can go “beyond the silo.” You can form up like Voltron or the transformers, creating a sort of self-aware entity, “machine,” with the capabilities of a distributed global hive mind.
Still moving toward the breakthrough description… I’ll try to wrap the nitty gritty here:
One of the reasons for the seeming slow pace of Mercenary’s evolution — why we haven’t moved even faster these past few months — is because of the intensive work we have been doing on collaborative processes and systems behind the scenes.
We have had to build, from scratch, a process and a system, based on a highly customizable productivity software platform, our entirely custom made internal company architecture for managing projects, tasks, and research collaboration.
We have focused on making this system “scalable and self-aware,” meaning that the same basic architecture we use to coordinate the efforts of three people will prove baseline scalable to thirty people, or possibly even to three hundred people.
In a prior era it might have seemed crazy to talk like this… but now incredible new things are possible, because of the cloud and the modern day technology stack. Here today, in 2015, there are cloud-based tools and low friction organization management platforms available that make it really and truly feasible to, say, build a system for three people that can scale to three hundred. (The proof is in the pudding — we have done it.)
The thing that blew me away this weekend, as various layers of crystallization converged, was this:
In our efforts to build a “processes and systems” architecture…
We simultaneously built a global information architecture without realizing it.
We now have the tools to synthesize information in ways never imagined.
How to explain the power of this? Well, imagine you had twenty-five analysts show up on your doorstep. Twenty-five sharp and hungry researchers on your doorstep. What would you do with them? How much use would they prove to you? Well, that all depends on how effectively you could USE their output. How well could you synthesize the flows of information taken from them? How well could you dovetail it, make it synchronize, turn it into viewpoints and actionable inflection points and profit via trades?
I believe we have built this system. I believe Mercenary now has the core version of it. We have a means of taking the input from dozens of analysts — there is no limit to the scale here really, the technology this is based on is “industrial cloud strength,” which means it is designed for multi-thousand employee organizations — and structuring it in a combined way as such that it all synchronizes and is all complimentary.
Our efforts to solve the collaboration problem, and to maximize our ability to synthesize information, have led to system and process breakthroughs, enabled by the cloud with proprietary layers of organization on top, that will enable us to build a true global hive mind, both internally and externally.
In respect to building a hive mind internally, we now have the ability to scale analyst coverage almost at will, because we have created a system that can take firehoses of information without limit. The challenge with taking in large volumes of information is being able to profitably store it and use it. Another challenge with multiple information SOURCES is making sure they are collaborating, not overlapping or wasting efforts via duplication.
With the recent last-mile breakthroughs just put in the books — specifically the ones that kept me up for a couple days straight almost — I believe we have cracked the nut of the above problems. This is the information synthesis equivalent of Tesla figuring out how to keep the wires from melting, as such to deliver enough power to the wheels to beat any internal combustion engine in the world.
I believe the way Mercenary is building its collaborative analyst infrastructure is possibly different than any other organization in the world. I think we are doing things differently than any other organization in the world. We are taking proven systems and processes, like Tesla’s basic automobile principles, and adding completely organic and cutting edge technology, like our cloud-based collaboration processes that no predecessor has designed because these processes, this particular way of working, was not even possible as recently as three to five years ago.
I think these breakthroughs will radically change and upgrade our ability to process information internally. What does this mean in practical terms?
Here is one way to put it: Mercenary is developing an Eye of Sauron. (Except used for the power of good, not evil.) We are developing the ability to see anywhere, to have eyes and ears everywhere. With the right system architecture, we can expand our information intake by a factor of ten… or even a hundred… and yet STILL MAKE SENSE OF IT ALL, in real time, without the normal friction loss or analysis paralysis born of complexity overload.
The more we can “see” and process, the more quickly we can synthesize information on, and drill down into, almost any investment opportunity in the world. And the more information throughput we have, the more haystacks we can search through, which means successfully finding and exploiting more “needles” on a regular basis.
I have implied this is a game changer internally. It is also a potential game changer externally — meaning, among traders in the Mercenary community, and eventually among all traders throughout the world at large. That is for at least four reasons: First, because we will make the output of our global information synthesis available to you — as our research products get better and better and more powerful; Second, because we will share the tools and streamlined elements we use to make this happen; Third, because we will be able to leverage and harvest the massive input and insight from a growing Mercenary community all the better with this new architecture; And fourth, because the more power we evolve, the more resources we have to accelerate our educational efforts, which in turn makes everyone in our community more powerful, which then increases the value of the information and insight they provide us in a beneficial reflexive feedback loop.
I have titled this monster of a missive “Global Information Architecture and the Future of Trading.” Why? Where did such grandiose phraseage come from?
In part used that title because a cloud-based “Global Information Architecture” is what we have built — and the full realization of that is what kept me up these recent nights. And I am not talking hypothetically either — I mean we have ACTUALLY BUILT this damn thing, right down to steps and rulesets sitting on an industrial-strength cloud platform of repurposed productivity management software (which, in turn, will be able to handle the fifty firehoses of flow we point at it because the software itself evolved to support the project information flows of thousands of users, simultaneously, within a single organization.).
Regarding the second part, “The Future of Trading” — that comes down to the fact that, in some ways, trading will always stay the same… but in other ways Tesla versus deprecated ICE tech is the better metaphor.
Human emotion will always be a factor. Discipline will always be a factor. Market counterparts will always make collective mistakes. Staying a step ahead of the herd will always be rewarded.
But the thing is, in 2015, there are increasing numbers of traders who remain true to the “old school” ways… yet have figured out how to collaborate, while strapping on mech suits and jet packs, as such to achieve much more powerful outcomes in result. How does one trader, striving to compete on his own, fare against ten traders or a hundred traders, united in a conspiracy of excellence with their best ideas merged? How does an investor attempt to logically invest fundamentally, with no information platform, in comparison to investors plugged into a truly global investment platform, with “Eye of Sauron” level information processing capability and maximally evolved processes and systems, all surfing the edge of the cloud?
I believe the future of trading is tied to information synthesis. I think E.O. Wilson was right, that the future will belong to “synthesizers,” and that the ability to process information quickly, creatively and ideally collaboratively, leveraging the strengths of colleagues, will be THE skillset that dominates in the 21st century.
I think we are on the cusp, the very early edges, of seeing what “the future of trading”… and of financial publishing, and market research and money management for that matter… can truly look like… and I believe Mercenary Trader, in its own quiet and eventually not-so-quiet right, will be leading the way.
May the Cloud Be With You,
JL (jack@mercenarytrader.com)
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