The Jimmy Nail Experience

In a previous post I briefly introduced the concept of a “Black Swan”- a rare, unpredictable event beyond the realm of normal experiences that people have a hard time understanding.

OK, background out of the way, here goes my addition to this conversation. I believe that one of the most significant black swans in history is looming over us and the spectacular thing is that we know all about it: climate change induced by anthropogenic carbon dioxide emissions.

A defining characteristic of a Black Swan is that it is unpredictable. So the most strict sense, some people might argue that climate change doesn’t count. But it does for every other reason- the fundamental cognitive failures that are causing us to double guess the science, to put off taking it seriously, and to not price in catastrophic disruptions to the world’s economy in present day markets are exactly the same cognitive failures that Taleb spends an entire book describing.

So we know its coming, we know from Taleb that people will ignore it and mis-price all the way to last possible minute, my question is- how can one profit from it? (before jumping all over me about that, here’s my basic approach- it’s going to happen, I can’t do anything to stop it- probably no one can- so I ought to prepare myself in the best way I can).
Yes green energy is hot these days. But I’m looking for things more fundamental than somewhat faddish popular memes. A change is coming, maybe one of the biggest changes ever- where are the massive fortunes going to be made (and lost!) ?

If I figure it out, there might be a part 3!

Here’s my first post on what I think will become one of the major themes of this blog- energy.

I’m a big fan of Nassim Nicholas Taleb and his new book The Black Swan. For the uninitiated, Nassim’s big idea is that history is dominated random and mostly unknowable events he calls “Black Swans”. A “Black Swan” is a large-impact, hard-to-predict, and rare event beyond the realm of normal expectations. Nassim’s claim is that almost all consequential events in history come from the unexpected. Throw in mix of well documented cognitive biases and Nassim has described a widespread, systematic failure in our collective ability to make decisions, understand history, and make smart predictions about the future.

It is this last point- predicting the future- that most people find most interesting in Taleb’s work because predicting the future is at the core of understanding risk, which is at the core of our modern financial system. Taleb argues that black swan types of risk are incorrectly priced because of all of these reasons. Those that understand randomness and uncertainty and can make decisions with a eye towards their own inevitable cognitive failures can make a lot of money.

I believe that one of the most significant black swans in history is creeping up on us. The amazing thing is that we all know it’s coming! I believe more money will be lost and made because of it than of any other event in human history. What the hell am I talking about? Look for part 2, coming as soon as I have the chance to finish it…

If you agree with O’Reilly (I do) that the web right now is about controlling data, then smart companies are trying to understand their business in terms of what kinds of data they are building. Big winners are those who own/control/provide access to classes of valuable data. Some examples: eBay owns that data on the secondary market, Google owns the data on the data, and Facebook owns the data about who knows who.

At TN, we think we are onto a real and valuable class of data that nobody has really identified and defined yet. We call it the “Product Graph”. I’m pretty sure we coined the term (first mention I can find is this interview with Gordon), and here is my current working definition:

The Product Graph:

The network of connections that exist through which people communicate and share information about products and brands and the resulting preference patterns visible in such information flows.

I’m sure we’ll come up with more elegant ways to express this idea, but the basics are there. The Product Graph is a real and valuable class of data that nobody has tried to index, characterize, and provide access to- yet. This is a big part of what we are working hard to do at ThisNext.

I’m gonna try and start blogging.  I think I know the drill well enough- post regularly, post with brevity, make it interesting.  All easier said then done and we’ll see how long I can keep it up.  Why start now?  We’re doing some pretty cool things over at ThisNext (where I work on product) and I need a soapbox to spread the word!

 I prey to the almighty FSM, please let somebody find and read this.