Investment Capitalist

I believe free white papers are an invaluable resource when written by a niche expert, and this is one of those instances where I think knowledge has to be shared when it is discovered. NetConcepts has written a wonderful (and free) white paper worth bringing attention to. As much as I use writing as a platform to freely express my thoughts and ideas, often I find myself blogging as a way of speaking to individuals in my life (somewhat anonymously) such as a colleague, thinking this indirect form of communication is a more subtle way of taking leadership initiative.

Perhaps I am trying to help my partners, employees and colleagues discover their core skill sets’ application to search engines. In other words, what are you very good at doing and how can this be directly applied to implementing a successful marketing campaign or building a successful business? Many companies still do not understand the concepts of “direct to consumer” (D2C) marketing. Many are timid to even broach the subject for fear of looking prehistoric in front of their colleagues when most members of the executive floor are also quite uninformed.

In the trading community, there are many proprietary quantitative traders that became obsessed with cracking the long tail riddle and focused their energy on search engine algorithmic research rather than building trading algorithms. This natural transition for these talented programmers is an obvious choice because no matter how good of a programmer you are, you must still be a good trader and market analyst in order to monetize your programming skills. With online marketing, one must be a good programmer and understand how search engine algorithms function.

Making the connections between an observation of search behavior and functioning code that seeks to accomplish a specific marketing objective is a much gentler mental exercise than dealing with the market’s never ending stream of non-linear data. And therein lies the edge that an individual schooled in algorithmic trading has in the world of internet marketing. Your work will be primarily within the more rational world of linear data analysis so no chaos theory to drive you crazy.

As the cliche suggests in financial trading, “trend following” is about finding and staying with a trend for a bulk of that move. The ‘chaos’ factor kicks in when there is some systemic market shock that triggers behavior the models aren’t built to predict. As the algorithmic trading article highlights, even Renaissance Capital, the famed quant shop, got short circuited by a 30 sigma event. Trend predicting in consumer behavior for search engine marketing purposes is not susceptible to central bank sovereign debt defaults!

In fact, many active traders have side hobbies involving online marketing because it provides an alternative to hours of mind numbing boredom and stress. What me or you or anyone searching for information is really after is a smarter, better search experience. This is the holy grail but creating a search engine is one of many roads that can lead to the holy grail. How do we define a perfect search experience today?

A “perfect” search experience would imply landing on exactly what you want with 100% certainty. Because this is technically impossible right now, search engines are constantly increasing the number of input variables in their search algorithms each day. Trying to understand the ‘trend’ of underlying search patterns is a crucial component of solving the traffic puzzle. In a nutshell, one must learn to speak the language of search engines in a way that will help deliver the information the engine is looking for when visiting (i.e. spider’ing) a web site. Often times, what the search engine spider wants is very different than what a human visitor wants.

There are many layers to this onion though…

• Holy grail = long tail
• Long tail = holy grail

Financial traders are generally always pressed for time so there is an ongoing mental optimization that seeks to organize incoming data so that it processes correctly the first time. If another piece of data comes later that conflicts with the ongoing process, the trader seeks to find a solution to the conflict. This approach to business is very practical and generally the reason why many financial traders succeed in other business ventures as well. But the whole ‘Open Source’ thing changes the dynamics of entrepreneurial process in a significant way. I fear this is a point generally not understood by colleagues of mine but one that I don’t necessarily mind others being unaware of for obvious reasons (greed is one).

Is there a way to create things for purely economic reasons without getting sidetracked in the romance of building something new from the ground up? Although certainly this is a noble goal. When novel and new concepts fall upon a consumer driven society, for many years to come that new technology is at worst good enough and at best presenting unfathomable opportunities to exploit the technology for profit.

Which likelihood would you suggest is the rational one to place a wager? Remember, we are pursuing a path to exploit inefficiencies brought upon by major dislocations in consumer taste as a result of a new technology. Just as market inefficiencies evaporate due to hedge fund and proprietary trading, technological exploitation leads to the emergence of enormous business opportunities such as Facebook and the numerous parasite sub-communities they foster until the technology can no longer be exploited and the inefficiency is eliminated.

I don’t believe I can find a single person willing to suggest Social Networking is not a revolutionary marketing platform, nor is it any less obvious that this is a new phenomenon captivating a consumer and capitalistic global society. On the other hand, I’m sure I can find people willing to suggest certain ubiquitous tools such as Google Search are not up to acceptable standards and technologies are lacking intuitive intelligence. As the open source platform has shown us, by providing an open sharing of software code, we are in fact enhancing economic opportunities for the masses by taking away from the intellectual property value of the few.

Ultimately, in today’s society, it is my view that any person trying to pursue an idea that involves confidential intellectual property is not only a dinosaur, but also just doesn’t get it! A person must honestly decide whether they are a communist that philosophically does not believe in pursuing profitable objectives, or realizing that it’s about improving available code in a way that improves the overall experience for the person using what you’ve created. If you develop this tool or widget or plug in or whatever you want to call it, and place all of your energy on making it valuable for the user in a utilitarian spirit, you will achieve great economic success. But “valuable” can have several meanings. For example, convenience, efficiency, profitability, privacy, etc….

As an “engineer”, it is often wise and best to not attempt to consider business aspects of the corporation, but often times this leads to engineering impracticality. Executives are always bitching that the engineers just don’t f***ing get it, and the engineers are always saying the executives just don’t f***ing get it. Ultimately, the engineer must always be able to honestly (at a personal level) assess their individual skill sets as they apply to their immediate surroundings.

What’s interesting is that “all” successful traders make very astute and perceptive businessmen, but not all businessmen can become traders [and] all good traders are good businessmen. Follow that logic sequence in reverse and you’ll see the path to becoming a successful trader and long term investor.