I need to clear my mind a bit. For the last few weeks, I have been working a lot on revising an article of mine, and I feel I need a little bit of a shake-off. I know by experience that I need a structure to break free from another structure. Yes, I am one of those guys. I like structures. When I feel I lack one, I make one.
The structure which I want to dive into, in order to shake off the thinking about my article, is the thinking about my investment in the stock market. My general strategy in that department is to take the rent, which I collect from an apartment in town, every month, and to invest it in the stock market. Economically, it is a complex process of converting the residential utility of a real asset (apartment) into a flow of cash, thus into a financial asset with quite steady a market value (inflation is still quite low), and then I convert that low-risk financial asset into a differentiated portfolio of other financial assets endowed with higher a risk (stock). I progressively move capital from markets with low risk (residential real estate, money) into a high-risk-high-reward market.
I am playing a game. I make a move (monthly cash investment), and I wait for a change in the stock market. I am wrapping my mind around the observable change, and I make my next move the next month. With each move I make, I gather information. What is that information? Let’s have a look at my portfolio such as it is now. You can see it in the table below:
|Stock||Value in EUR||Real return in €||Rate of return I have as of April 6ht, 2021, in the morning|
|CASH & CASH FUND & FTX CASH (EUR)||€ 25,82||€ –||€ 25,82|
|ALLEGRO.EU SA||€ 48,86||€ (2,82)||-5,78%|
|ALTIMMUNE INC. – COMM||€ 1 147,22||€ 179,65||15,66%|
|APPLE INC. – COMMON ST||€ 1 065,87||€ 8,21||0,77%|
|BIONTECH SE||€ 1 712,88||€ (149,36)||-8,72%|
|CUREVAC N.V.||€ 711,00||€ (98,05)||-13,79%|
|DEEPMATTER GROUP PLC||€ 8,57||€ (1,99)||-23,26%|
|FEDEX CORPORATION COMM||€ 238,38||€ 33,49||14,05%|
|FIRST SOLAR INC. – CO||€ 140,74||€ (11,41)||-8,11%|
|GRITSTONE ONCOLOGY INC||€ 513,55||€ (158,43)||-30,85%|
|INPOST||€ 90,74||€ (17,56)||-19,35%|
|MODERNA INC. – COMMON||€ 879,85||€ (45,75)||-5,20%|
|NOVAVAX INC. – COMMON STOCK||€ 1 200,75||€ 398,53||33,19%|
|NVIDIA CORPORATION – C||€ 947,35||€ 42,25||4,46%|
|ONCOLYTICS BIOTCH CM||€ 243,50||€ (14,63)||-6,01%|
|SOLAREDGE TECHNOLOGIES||€ 683,13||€ (83,96)||-12,29%|
|SOLIGENIX INC. COMMON||€ 518,37||€ (169,40)||-32,68%|
|TESLA MOTORS INC. – C||€ 4 680,34||€ 902,37||19,28%|
|VITALHUB CORP..||€ 136,80||€ (3,50)||-2,56%|
|WHIRLPOOL CORPORATION||€ 197,69||€ 33,11||16,75%|
|€ 15 191,41||€ 840,74||5,53%|
A few words of explanation are due. Whilst I have been actively investing for 13 months, I made this portfolio in November 2020, when I did some major reshuffling. My overall return on the cash invested, over the entire period of 13 months, is 30,64% as for now (April 6th, 2021), which makes 30,64% * (12/13) = 28,3% on the annual basis.
The 5,53% of return which I have on this specific portfolio makes roughly 1/6th of the total return in have on all the portfolios I had over the past 13 months. It is the outcome of my latest experimental round, and this round is very illustrative of the mistake which I know I can make as an investor: panic.
In August and September 2020, I collected some information, I did some thinking, and I made a portfolio of biotech companies involved in the COVID-vaccine story: Pfizer, Biontech, Curevac, Moderna, Novavax, Soligenix. By mid-October 2020, I was literally swimming in extasy, as I had returns on these ones like +50%. Pure madness. Then, big financial sharks, commonly called ‘investment funds’, went hunting for those stocks, and they did what sharks do: they made their target bleed before eating it. They boxed and shorted those stocks in order to make their prices affordably low for long investment positions. At the time, I lost control of my emotions, and when I saw those prices plummet, I sold out everything I had. Almost as soon as I did it, I realized what an idiot I had been. Two weeks later, the same stocks started to rise again. Sharks had had their meal. In response, I did what I still wonder whether it was wise or stupid: I bought back into those positions, only at a price higher than what I sold them for.
Selling out was stupid, for sure. Was buying back in a wise move? I don’t know, like really. My intuition tells me that biotech companies in general have a bright future ahead, and not only in connection with vaccines. I am deeply convinced that the pandemic has already built up, and will keep building up an interest for biotechnology and medical technologies, especially in highly innovative forms. This is even more probable as we realized that modern biotechnology is very largely digital technology. This is what is called ‘platforms’ in the biotech lingo. These are digital clouds which combine empirical experimental data with artificial intelligence, and the latter is supposed to experiment virtually with that data. Modern biotechnology consists in creating as many alternative combinations of molecules and lifeforms as we possibly can make and study, and then pick those which offer the best combination of biological outcomes with the probability of achieving said outcomes.
My currently achieved rates of return, in the portfolio I have now, are very illustrative of an old principle in capital investment: I will fail most of the times. Most of my investment decisions will be failures, at least in the short and medium term, because I cannot possibly outsmart the incredibly intelligent collective structure of the stock market. My overall gain, those 5,53% in the case of this specific portfolio, is the outcome of 19 experiments, where I fail in 12 of them, for now, and I am more or less successful in the remaining 7.
The very concept of ‘beating the market’, which some wannabe investment gurus present, is ridiculous. The stock market is made of dozens of thousands of human brains, operating in correlated coupling, and leveraged with increasingly powerful artificial neural networks. When I expect to beat that networked collective intelligence with that individual mind of mine, I am pumping smoke up my ass. On the other hand, what I can do is to do as many different experiments as I can possibly spread my capital between.
It is important to understand that any investment strategy, where I assume that from now on, I will not make any mistakes, is delusional. I made mistakes in the past, and I am likely to make mistakes in the future. What I can do is to make myself more predictable to myself. I can narrow down the type of mistakes I tend to make, and to create the corresponding compensatory moves in my own strategy.
Differentiation of risk is a big principle in my investment philosophy, and yet it is not the only one. Generally, with the exception of maybe 2 or 3 days in a year, I don’t really like quick, daily trade in the stock market. I am more of a financial farmer: I sow, and I wait to see plants growing out of those seeds. I invest in industries rather than individual companies. I look for some kind of strong economic undertow for my investments, and the kind of undertow I specifically look for is high potential for deep technological change. Accessorily, I look for industries which sort of logically follow human needs, e.g. the industry of express deliveries in the times of pandemic. I focus on three main fields of technology: biotech, digital, and energy.
Good. I needed to shake off, and I am. Thinking and writing about real business decisions helped me to take some perspective. Now, I am gently returning into the realm of science, without completely leaving the realm of business: I am navigating the somehow troubled and feebly charted waters of money for science. I am currently involved in launching and fundraising for two scientific projects, in two very different fields of science: national security and psychiatry. Yes, I know, they can conjunct in more points than we commonly think they can. Still, in canonical scientific terms, these two diverge.
How come I am involved, as researcher, in both national security and psychiatry? Here is the thing: my method of using a simple artificial neural network to simulate social interactions seems to be catching on. Honestly, I think it is catching on because other researchers, when they hear me talking about ‘you know, simulating alternative realities and assessing which one is the closest to the actual reality’ sense in me that peculiar mental state, close to the edge of insanity, but not quite over that edge, just enough to give some nerve and some fun to science.
In the field of national security, I teamed up with a scientist strongly involved in it, and we take on studying the way our Polish forces of Territorial Defence have been acting in and coping with the pandemic of COVID-19. First, the context. So far, the pandemic has worked as a magnifying glass for all the f**kery in public governance. We could all see a minister saying ‘A,B and C will happen because we said so’, and right after there was just A happening, with a lot of delay, and then a completely unexpected phenomenal D appeared, with B and C bitching and moaning they haven’t the right conditions for happening decently, and therefore they will not happen at all. This is the first piece of the context. The second is the official mission and the reputation of our Territorial Defence Forces AKA TDF. This is a branch of our Polish military, created in 2017 by our right-wing government. From the beginning, these guys had the reputation to be a right-wing militia dressed in uniforms and paid with taxpayers’ money. I honestly admit I used to share that view. TDF is something like the National Guard in US. These are units made of soldiers who serve in the military, and have basic military training, but they have normal civilian lives besides. They have civilian jobs, whilst training regularly and being at the ready should the nation call.
The initial idea of TDF emerged after the Russian invasion of the Crimea, when we became acutely aware that military troops in nondescript uniforms, apparently lost, and yet strangely connected to the Russian government, could massively start looking lost by our Eastern border. The initial idea behind TDF was to significantly increase the capacity of the Polish population for mobilising military resources. Switzerland and Finland largely served as models.
When the pandemic hit, our government could barely pretend they control the situation. Hospitals designated as COVID-specific had frequently no resources to carry out that mission. Our government had the idea of mobilising TDF to help with basic stuff: logistics, triage and support in hospitals etc. Once again, the initial reaction of the general public was to put the label of ‘militarisation’ on that decision, and, once again, I was initially thinking this way. Still, some friends of mine, strongly involved as social workers supporting healthcare professionals, started telling me that working with TDF, in local communities, was nothing short of amazing. TDF had the speed, the diligence, and the capacity to keep their s**t together which many public officials lacked. They were just doing their job and helping tremendously.
I started scratching the surface. I did some research, and I found out that TDF was of invaluable help for many local communities, especially outside of big cities. Recently, I accidentally had a conversation about it with M., the scientist whom I am working with on that project. He just confirmed my initial observations.
M. has strong connections with TDF, including their top command. Our common idea is to collect abundant, interview-based data from TDF soldiers mobilised during the pandemic, as regards the way they carried out their respective missions. The purely empirical edge we want to have here is oriented on defining successes and failures, as well as their context and contributing factors. The first layer of our study is supposed to provide the command of TDF with some sort of case-studies-based manual for future interventions. At the theoretical, more scientific level, we intend to check the following hypotheses:
>> Hypothesis #1: during the pandemic, TDF has changed its role, under the pressure of external events, from the initially assumed, properly spoken territorial defence, to civil defence and assistance to the civilian sector.
>> Hypothesis #2: the actual role played by the TDF during the pandemic was determined by the TDF’s actual capacity of reaction, i.e. speed and diligence in the mobilisation of human and material resources.
>> Hypothesis #3: collectively intelligent human social structures form mechanisms of reaction to external stressors, and the chief orientation of those mechanisms is to assure proper behavioural coupling between the action of external stressors, and the coordinated social reaction. Note: I define behavioural coupling in terms of the games’ theory, i.e. as the objectively existing need for proper pacing in action and reaction.
The basic method of verifying those hypotheses consists, in the first place, in translating the primary empirical material into a matrix of probabilities. There is a finite catalogue of operational procedures that TDF can perform. Some of those procedures are associated with territorial military defence as such, whilst other procedures belong to the realm of civil defence. It is supposed to go like: ‘At the moment T, in the location A, procedure of type Si had a P(T,A, Si) probability of happening’. In that general spirit, Hypothesis #1 can be translated straight into a matrix of probabilities, and phrased out as ‘during the pandemic, the probability of TDF units acting as civil defence was higher than seeing them operate as strict territorial defence’.
That general probability can be split into local ones, e.g. region-specific. On the other hand, I intuitively associate Hypotheses #2 and #3 with the method which I call ‘study of orientation’. I take the matrix of probabilities defined for the purposes of Hypothesis #1, and I put it back to back with a matrix of quantitative data relative to the speed and diligence in action, as regards TDF on the one hand, and other public services on the other hand. It is about the availability of vehicles, capacity of mobilisation in people etc. In general, it is about the so-called ‘operational readiness’, which you can read more in, for example, the publications of RAND Corporation (https://www.rand.org/topics/operational-readiness.html).
Thus, I take the matrix of variables relative to operational readiness observable in the TDF, and I use that matrix as input for a simple neural network, where the aggregate neural activation based on those metrics, e.g. through a hyperbolic tangent, is supposed to approximate a specific probability relative to TDF people endorsing, in their operational procedures, the role of civil defence, against that of military territorial defence. I hypothesise that operational readiness in TDF manifests a collective intelligence at work and doing its best to endorse specific roles and applying specific operational procedures. I make as many such neural networks as there are operational procedures observed for the purposes of Hypothesis #1. Each of these networks is supposed to represent the collective intelligence of TDF attempting to optimize, through its operational readiness, the endorsement and fulfilment of a specific role. In other words, each network represents an orientation.
Each such network transforms the input data it works with. This is what neural networks do: they experiment with many alternative versions of themselves. Each experimental round, in this case, consists in a vector of metrics informative about the operational readiness TDF, and that vector locally tries to generate an aggregate outcome – its neural activation – as close as possible to the probability of effectively playing a specific role. This is always a failure: the neural activation of operational readiness always falls short of nailing down exactly the probability it attempts to optimize. There is always a local residual error to account for, and the way a neural network (well, my neural network) accounts for errors consists in measuring them and feeding them into the next experimental round. The point is that each such distinct neural network, oriented on optimizing the probability of Territorial Defence Forces endorsing and fulfilling a specific social role, is a transformation of the original, empirical dataset informative about the TDF’s operational readiness.
Thus, in this method, I create as many transformations (AKA alternative versions) of the actual operational readiness in TDF, as there are social roles to endorse and fulfil by TDF. In the next step, I estimate two mathematical attributes of each such transformation: its Euclidean distance from the original empirical dataset, and the distribution of its residual error. The former is informative about similarity between the actual reality of TDF’s operational readiness, on the one hand, and alternative realities, where TDF orient themselves on endorsing and fulfilling just one specific role. The latter shows the process of learning which happens in each such alternative reality.
I make a few methodological hypotheses at this point. Firstly, I expect a few, like 1 ÷ 3 transformations (alternative realities) to fall particularly close from the actual empirical reality, as compared to others. Particularly close means their Euclidean distances from the original dataset will be at least one order of magnitude smaller than those observable in the remaining transformations. Secondly, I expect those transformations to display a specific pattern of learning, where the residual error swings in a predictable cycle, over a relatively wide amplitude, yet inside that amplitude. This is a cycle where the collective intelligence of Territorial Defence Forces goes like: ‘We optimize, we optimize, it goes well, we narrow down the error, f**k!, we failed, our error increased, and yet we keep trying, we optimize, we optimize, we narrow down the error once again…’ etc. Thirdly, I expect the remaining transformations, namely those much less similar to the actual reality in Euclidean terms, to display different patterns of learning, either completely dishevelled, with the residual error bouncing haphazardly all over the place, or exaggeratedly tight, with error being narrowed down very quickly and small ever since.
That’s the outline of research which I am engaging into in the field of national security. My role in this project is that of a methodologist. I am supposed to design the system of interviews with TDF people, the way of formalizing the resulting data, binding it with other sources of information, and finally carrying out the quantitative analysis. I think I can use the experience I already have with using artificial neural networks as simulators of social reality, mostly in defining said reality as a vector of probabilities attached to specific events and behavioural patterns.
As regards psychiatry, I have just started to work with a group of psychiatrists who have abundant professional experience in two specific applications of natural language in the diagnosing and treating psychoses. The first one consists in interpreting patients’ elocutions as informative about their likelihood of being psychotic, relapsing into psychosis after therapy, or getting durably better after such therapy. In psychiatry, the durability of therapeutic outcomes is a big thing, as I have already learnt when preparing for this project. The second application is the analysis of patients’ emails. Those psychiatrists I am starting to work with use a therapeutic method which engages the patient to maintain contact with the therapist by writing emails. Patients describe, quite freely and casually, their mental state together with their general existential context (job, family, relationships, hobbies etc.). They don’t necessarily discuss those emails in subsequent therapeutic sessions; sometimes they do, sometimes they don’t. The most important therapeutic outcome seems to be derived from the very fact of writing and emailing.
In terms of empirical research, the semantic material we are supposed to work with in that project are two big sets of written elocutions: patients’ emails, on the one hand, and transcripts of standardized 5-minute therapeutic interviews, on the other hand. Each elocution is a complex grammatical structure in itself. The semantic material is supposed to be cross-checked with neurological biomarkers in the same patients. The way I intend to use neural networks in this case is slightly different from that national security thing. I am thinking about defining categories, i.e. about networks which guess similarities and classification out of crude empirical data. For now, I make two working hypotheses:
>> Hypothesis #1: the probability of occurrence in specific grammatical structures A, B, C, in the general grammatical structure of a patient’s elocutions, both written and spoken, is informative about the patient’s mental state, including the likelihood of psychosis and its specific form.
>> Hypothesis #2: the action of written self-reporting, e.g. via email, from the part of a psychotic patient, allows post-clinical treatment of psychosis, with results observable as transition from mental state A to mental state B.