Spotify earnings miss – 20180502

Timeline

  • 20280430 – Bought into position at 162 –
    • 65 shares
    • 20180430
  • 20180501 – Doubled down at 164 –
    • 400 shares
    • 20180501
  • 20180502 – tripled down at 168
    • 200 shares
  • 20180502 – after hours
    • shares drop to USD156 from USD170
    • miss target revenue by USD0.2billion
    • total loss in market cap – USD3billion
    • percentage loss of market cap % – 10%

lessons learned

  • Beware of greed – Trading with the expectation of good news upon good news is asking for trouble
    • Don’t make bets on the unknowns
    • Don’t chase after momentum
  • stick to strategy of loss aversion and reversion to mean
    • market over reacts with missed earnings
    • trade on the position after
      • company missed earnings
      • company’s revenue and earnings grew substantially YoY
    • Don’t double down on a bad decision
      • only double down if the fundamentals are strong and Wall street temporarily miss priced

Moving forward

  • To study crowd behavior of the following earnings missing episodes
    • Positive examples – fundamentals were strong
    • Negative examples – fundamentals were weak
      • Snap – 20180501

Sitting session with Adi

  • Demonstrate value
    • Choose generic language that non-technical people will be familiar with
      • use google trends
    • dedicsted product areas to show case use cases
  • bring the visibility of the product functionality upfront
    • sone functionalities might need initial prompt
  • Increase the visibility of the reason to become a subscribed users as opposed to a free one in different areas of the product
    • Product feature pricing metric
    • Show disabled features very clearly
  • discoverability
    • the constrain
    • force users to create labels

Dinner with Wally – Product Narrative

  • What is the narrative/story behind the product
    • what is the value I get using this product
    • how do I use it
      • showcase individual use cases
  • Onboarding/design is about driving the user through each step of the story
    • helping users understand the full narrative fast – hitting limbic brain
    • Reduce occurrences of fumbling around – expanding precious mental energy in the neo-cortex

Learnings about markets from lunch with Richard

Trading hours

  • pre-market: 4am to 6.30am
  • market: 6.30am to 1pm
  • post-market: 1pm to 5pm

Behavior of analysts

  • write reports to drive trading activities/volume for company
  • should be following some workflows to come up with reports
  • assumptions
    • need a way to pull in all the news to synthesize content for reports
  • names of analyst could be found on public reports

Reminder to self

  • Cost averaging is a very bad strategy if fundamentals are weak
  • Don’t double down more resources on a bad strategy

Reflections for the evening

  • Balance and counter balance / Yin and Yang
    • history is a vast early warning system, Norman Cousin
    • the further forward you want to see the further back you need to look
    • to sing high, you need to sign really low
    • the higher the ups you want to go, the deeper the lows
    • the further the arrow you want to shoot, the further back you need to pull
  • Economics
    • game theory and local proximity optimization ( hill climbing algorithm) locks you in to a specific local proximity
    • the outliers that don’t have to deal with this legacy will always find the higher hill top
    • core versus crowd – learning at the fringes does not always get to the core
  • seeing relationship through tainted lens
    • prevents the  ability to see resources that are available to enhance the experience
    • examples
      • damsel in distress
      • knight in shining armor
    • prevents the ability to explore new potential possibility

Insight on big tech search inclinations

  • Cost/benefit analysis does not favor Google to do personalized news
    • every hard to determine the best news headlines to show you from the 100,000++ available news sources
    • the training data available about you is very sparse
    • the actual increase in conversion rate click through is very low
    • Google does not serve ads for news – against their policy
  • Facebook determines the best content to serve you based on the behavior of your connections
    • the content set that your connections interacted with is smaller
    • the number of your connections are relatively small

Reflections for the morning

  • Due to the limited supply of will power, there is a limited number of good quality decisions you can make per day
  • Qualities of good decision making
    • process: calm and serene.
    • The outcome: strong, resolute and still
  • Do not overtax your will power
    • place restrictions on number of decisions per day
    • prioritize order of decisions that needs to be made

External references

Book Summary: The Age of Spiritual Machines

Metaphysics

  • Chaos and order can Co-exist
    • chaos increases in the universe,
    • evolutionary processes create increasingly intricate order patterns
  • An organism is part of the larger environment
  • Evolution as a process
    • written record of achievement to avoid finding solutions to already solved problems
    • Examples
      • DNA
      • Technology
  • Period required for salient event decrease as order increases
    • chaos is measured as events that are relevant to the process
    • order is information that fits a purpose
      • organism’s purpose is survival

Technology 

  • Arthur C Clarke’s three laws of technology
    • Anything a man can envision is almost always possible
    • Any sufficiently advanced technology is indistinguishable from magic,
    • The limits of the possible is discovered when we venture beyond them
  • Language is a technology
  • When elements of invention as assembled in the right way, they transcend beyond their individual parts
  • Stages of technology life cycle
    • Stage 1 – nascent stage
      • curiosity
      • scientific skills
      • determination
      • showmanship
    • Stage 2 – Development
      • Protected and supported by doting guardians
    • Stage 3 – Pretenders
      • Threatens to eclipse older technology
      • providing distinct benefits
      • missing some key element of functionality or quality
      • Fails to dislodge existing technology
      • Finally dislodges existing technology
    • Stage 4 – Antiquity
      • 10 percent of life cycle
      • gradual decline
      • purpose and functionality subsumed by new competitors
  • Improving a solution to a problem increases order
    • defining a problem is the key to finding the solution
  • Technology is an evolutionary process
    • speeds up
    • innovative is multiplicative not additive

Organism versus evolution

  • Organism – starts out fast and then slows down
    • humans
    • universe big bang
  • Evolution – starts out slow and then speeds up

Consciousness

  • Schools of thought
    • DJ Chalmers: The hard problem – the mystery of the experienced inner life
    • Consciousness is just a machine reflecting itself
    • We are too stupid
  • Descartes:
    • mind-body problem
    • the paradox of how mind can arise from nonmind

Neural Networks

  • Can learn subject matter with unreliable teachers
  • Trained network reduces information
    • information is destroy during training

human versus computer brain

  • human brain better at pattern recognition than thinking through logical sequence
  • human neurons very slow speed
  • computers are really fast at performing logical sequence operations

Quantum computing

  • Hard to test
  • Answer is not there until we look at it
  • potentially use DNA molecules
  • Penrose: Consciousness observing quantum uncertainty causes quantum decoherence

Next steps

  • Uploading of consciousness
  • Since 1997, wealth increase is caused by knowledge content of product and services
  • Machine dependency
  • Technology imposed unemployment
  • Inter-steller colonies
  • Evolutionary algorithms