Networks are having a moment, or rather, they’ve been having it for quite some time, long before the big contagion and the flattening of curves, but the moment is expanding. Stephen Wolfram is working on a new physics model that would explain the universe in terms of network evolution and lead to the long-sought Unified Theory in the field. Niall Ferguson published a book that presents modern history as a series of network events, governed by network behavior and attributes. It is generally recognized in financial markets (themselves dense network structures) that the modern economy was borne of the InterNET…


Two characteristics of the Bitcoin trade are generally overlooked in the discussion: (1) Distributed networks tend to concentration over time, and (2) the price of Bitcoin can’t, by definition, be a bubble.

If a value bubble is definable as a wide and growing gap between the technicals of a traded asset (financial supply and demand) and the asset’s fundamentals (product or use case supply and demand), then in the case of Bitcoin the technicals and fundamentals are the same — its principal use case (for now at least) being financial speculation.

In this activity, the asset’s network profile is, or…


From a recent interview around the release of his new book, the following remark by Daniel Kahneman stands out: “The technology is developing very rapidly, possibly exponentially. But people are linear. When linear people are faced with exponential change, they’re not going to be able to adapt to that very easily.” The observation is broader, I believe, than strictly about technology and its societal effects, even if those things are now central. More broadly, the multitude of inputs in a complicating world, which burst out in a multitude of outcomes and effects that circle back to shape new inputs in…


Towards the end of last year, I published a series of short posts on what I saw as a newly emergent but potentially powerful trend in financial markets, in which sentiment seemed to overshadow analysis and fundamentals as a driving force. In light of recent eventsthat is, the surging stock price of GameStop and related others, the explosive influence of retail traders and the message boards where many converge, and the observed ripple effects into other parts of the investment worldI am combining the original articles into a longer essay, edited for consistency and to eliminate…


When an economy is understood, up or down, it’s possible to plan, to concentrate resources, and to invest with reasonable confidence, even if results don’t follow as expected. Below is a market thesis for the year ahead, which may be different from those behind, in an economy that isn’t understood and can’t be trusted.

  • The life-long economic plans and actions of an individual — an education, a career, a residence — are concentrated investments that can’t be easily diversified or hedged, offloaded, changed, or liquefied. …

There are any number of ways to define, or interpret, sentiment. As with many definitions and interpretations, this can depend on context. For financial markets, which are multivariate and deep, the context and its drivers, the resulting definitions and interpretations, are like a mosaic — personal, social, geographical, political, historical, economic, industrial, educational, speculative — and it’s all speculative, really. The markets are a network system in which clusters form or dissipate, to varying degrees, to build or shrink the sentiment of an idea in its particular time.

In a narrow finance sense, a definition that may be most closely…


The last two posts in what is turning out to be a sort of mini-series have been about the emergence of sentiment as a principal driving force in 2020 financial markets. The first, The most basic fundamental, lays out the initial argument and identifies some key resulting market aspects in such an environment. The second, The biggest risk, outlines the ways in which financial value metrics are being gradually displaced by pure sentiment, which unlike traditional reference points is difficult to quantify and even more so to predict. …


Our favored valuation multiples have over time climbed up the income statement ladder, rung by rung, and, before long, we may transcend the income statement altogether.

We used to chart the P/E multiples back when, feeling as though earnings were a close enough cash flow proxy, which then was what we really cared about. D&A, it was implied, was capital investment to replace the old, so that E and FCF resembled one another well enough. In the next phase through the years, when CAPEX was replaced by software builds — a direct income statement item for most — the valuation…


Financial markets are sentiment markets, even as we feign to strip out the emotion from the buy or sell decision. It is a matter of degree, perhaps, and self-control, to stick with data, the practiced formula and its principles, the so-called fundamentals that are taught. Even in so doing— rigidly, consistently, like a machine — one makes a statement about one’s view, or of a view that one envisions, and by contrast about all the others who may or may not share it. That’s not something lacking in emotion and there’s no escaping sentiment. Even algorithms and black boxes are…


1.

The thread of which this post is a continuation began with an early look into what have since become the Big 5 (Apple, Amazon, Facebook, Google, Microsoft) at a time when their market capitalization leadership was still a novelty. In Networks 3.0: Defined by digital dimensions (2016), the argument was made that these aren’t technology companies as a defining measure — as was and commonly still is the accepted classification — but rather multi-dimensional network platforms with deep network effects, whose rich network qualities were the driving force behind their (at the time, new) leadership position. …

Dan Ramsden

Investment, finance, strategy, execution in the networked tech economy. https://www.linkedin.com/in/danramsden

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