Heat inevitably changes the future

Nadia Patel
Sep 4, 2018 · 5 min read

…Basically, I’m trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible.

This proposal to go private would ultimately be finalized through a vote of our shareholders. If the process ends the way I expect it will, a private Tesla would ultimately be an enormous opportunity for all of us. Either way, the future is very bright and we’ll keep fighting to achieve our mission.

~Elon Musk (excerpt from letter to employees on August 7th, 2018)

Recently a friend of mine lent me a small book after a brief conversation we had about physics (I know, it sounds ultra cool, yet nerdy, unfortunately, neither are the appropriate descriptors for randomized comments shared between two people!); it was entitled, Seven Brief Lessons on Physics, written by Carlo Rovelli. While its appearance is modest, it is far from it. I recall one concept he shared regarding thermodynamics, which in brief described, the future is ultimately altered when heat is transferred to an object that is cooler than itself. Many of us think about about the future, like Elon Musk, who have decided “…the future is bright”, but there are few who are thinking about cause and effect. Rovelli astutely observes that “the future” is altered by the transfer of energy. Interesting concept. I began to ponder about its application against a vast array of things that we see around us. Further, I want to question how much of this transference (the metaphorical version) is within our control — there are an unending number of heat sources that seek out the best conductors for a variety of motives.

One recent example comes to mind. A few weeks ago, Elon Musk made a comment on social-media (his conductor) i.e. Twitter (his modus) about taking Tesla private. This undoubtedly set ablaze reactions from investors in the company to observers of the industry and then some. It was decreed by many as the largest potential LBO transaction on record to date based on initial valuations. The impact was so rapid that trading on the company’s security was halted intra-day. I do not (as many observers or practioner investors) believe that shares were halted because the market had an informed view which was able to foreshadow the outcome and impact of these comments to shareholders i.e. there was no “invisible hand”, however, I’d like to posit that this was a reflection of the lack of information which led to reactions i.e. investor sentiment, rather than a relfection of the fundamentals (which to some extent has come under pressure) concerning the company by investors of all kinds. In short, this was a moment where a “hot topic” set ablaze the market and minds of people who instead of evaluating outcomes based on facts, reacted exclusively on sentiment. Yet again, a hot topic ravages the press headlines and small-talk is littered by people who know nothing about the company’s fundamentals or ideals.

I will submit that this is not the first time we have witnessed gyrations like this in the market, after all, investor sentiment has modulated the market throughout history; Nor are we witnessing reactions without substantiation for the first time, but I do observe, that the ability to pause and thoughtfully remark has been adulterated by an untenable reliance on social media like Twitter (our conductor that has roughly 335 million active monthly users) and other conductors of short-form text. In the investment world, sentiment is a signal or food for investment specialists who are looking to systematically understand behaviours that influence the market and more specifically a security being traded, like Tesla and in social science it is the ability to detect things like social and political sentiment through text-based analysis. This is incredibly powerful and important to generating alpha and understanding social change.

Note Tesla’s share price from August 7th (when Elon Musk sent his employees a letter and Tweeted about taking Tesla private) where it was halted intra-day at $371/share and closed the day up 11%, to the end of August, where it has fallen ~19% since. Source: Yahoo.

The Fire-Starters

While I’ve highlighted the reactions of the consumers, I cannot ignore the our heat sources — in other words, our “Fire-starters”. In the case of the former example, this was Elon Musk, who, by way of his letter to employees, seems to come from a place of that is, at best, ignorant to the impact that his words carry, moreover, oblivious to the knock-on effects that his choice of conductor (Twitter) has on the outlook of his company.

Other “First-Starters” include decision/policy-makers, protectorates, academic authorities, our mentors or inspirers. We live in a world where the modus of communication has evolved from letters, to email to Tweets and other social-media posts; and the conduction rate has exponentially changed (due to the growth in microprocessing) from days or weeks to minutes and seconds. Take for example, the impact that a Presidential administration can have on the way society evolves. Once upon a time, diplomacy across major nations was the modus by which mutual understandings (whether we agreed to them or not) and to some extent social order was achieved. Today, we have casually accepted that Tweets from offices of power is the means by which we are to understand the intention (in 280 characters) of an authority who has oversight of an entire country. In fact, while the numbers have decreased due to Twitter policy changes, the POTUS has roughly 53.4 million people (globally) following his profile. In other words, the destiny and fate of corporations, organizations and people (since we’re a global society, I deliberately do not make this impact exclusive to the USA) are determined with short-form text and characters. As a note, according to the US Census Bereau, as of July 4th, 2018, there are roughly 328 million people in the country and, on average, 61.4 % of the voting population in the US voted during the 2016 elections. In otherwords, 137.5 million people voted for the current POTUS, which begs the question of where this population is informing their decisions, if not by Twitter. Maybe there is hope. While I love a good meme or cartoon (mostly from The Economist or Mr. Bingo) it would tickle me if we (as as society) could avoid Orwellian outcomes and evolve towards higher ground and slow Ray Kurzweil’s prediction (a depiction of computational speed to describe his prediction is seen below).

Source: R. Kurzweil http://www.singularity.com/charts/page70.html

However you think about this the support of short text scanning versus the power of long-form writing is rabid and in turn requires very little kindle to stoke a fire. I too believe the future is bright, but much of this requires critical thinkers and those who are willing to ignore and quash the folly in making (important) decisions based on short-form text. Being a “Fire-Starter” does not have to concern negative or Orwellian outcomes, but can mean that we create better thinkers who can shape change for a better outcome.

“Each generation imagines itself to be more intelligent than the one that went before it, and wiser than the one that comes after it.”

~George Orwell

Data Driven Investor

from confusion to clarity, not insanity

Nadia Patel

Written by

Observationist; Reinventing amid disruption…dynamite

Data Driven Investor

from confusion to clarity, not insanity

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