Selling stories, living by IFRS 16 and learning how to think
Herd instinct
There is somehow a tendency for people to encourage others to do the same thing just simply because it has worked out for them and they have benefited from it.
But it can be easy to forget that what is good for you may not be good for me.
Selling stories
At Berkshire Hathaway's 2023 annual meeting, Warren Buffett commented that access to capital has gotten so easy that there is an increasing trend of people raising money to fund (or gamble on) questionable projects.
With ample liquidity, a lot of money in the finance sector has been made from selling stories to investors who are looking to profit from companies beating expectations on their quarterly earnings. This trend has led to many firms getting carried away with chasing short-term publicity campaigns rather than delivering long-term value.
Instead of selling products, selling stories has become the name of the game for many businesses and investors.
"The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works." - Gordon Gekko (Wall Street 2, the movie)
Living by IFRS 16
If you own a leasehold, the house you live in is NOT an asset even if you plan to book a gain from a sale in the future.
The prudent thing to do is always to treat your mortgage as the sum of the future rent on your property.
Learning how to think
Artificial intelligence (AI) is so much more than just Trump and Musk dancing to the Bee Gees' Staying Alive.
At a meeting last week, I decided to try out an AI-enabled note taking app which parses conversations into written text. The results were shockingly accurate. There were also additional options for further transcribing the raw text into various formats, structures, and even translate where required.
Coming from a background where I am used to taking notes by hand, this is both game-changing and scary.
Of course the tech is not new. Companies have developed voice transcription devices decades ago, many apps also offer the ability to join your online Zoom meetings as a "note taking assistant", summarising the key points and follow up actions after that. The technology has just gotten better thanks to faster processing speeds and more evolved language datasets.
Young bankers today who pride themselves on pulling all-nighters to collect, organise and analyse data for their bosses are in for a nasty surprise.
The value-add used to be the stamina and accuracy of ploughing through heaps of financial data, formatting them nicely into powerpoint slides. Today, Microsoft has come up with something called Copilot which is apparently an embedded feature capable of doing all of this.
I hear that it can even generate a summary of your follow ups after returning from a two-week leave with hundreds of unread emails. Word is still out on how effective this can be.
Goodbye Clippy.
Copilot could be a formidable upgrade over its predecessor, the irritating Microsoft paper clip assistant.
If developed properly, it could potentially make the traditional work of junior investment bankers laughable.
Also, "AI can draft 95% of an IPO prospectus in minutes", according to David Solomon, CEO of Goldman Sachs, who at a recent AI summit said that an initial public offering document can be basically completed by robots.
If prospectuses can be automated, what of credit ratings, loan documents, information memos, financial models and process letters?
But there is a bright side to all this:
"The people that understand how to solve a domain problem in digital biology, or in the education of young people, or in manufacturing, or in farming...
Those people that understand domain expertise, now can utilise technology that is readily available..."
The playing field today is no longer about the ability to write code, but the ability to synthesize real world solutions, as it has always been. But in order to do that, one must learn how to think.
If thinking can be commoditized and outsourced, consider for a moment: AI will not only eliminate jobs, it will further exacerbate inequality between the rich and the poor, driven by widening the skills gap between those who know how to think and those who don't.