The Big Short on Terror — #117

Good Morning!

Next Sunday, you’ll get the last Newsletter before the winter holidays. I’m looking forward to some time off, but also to get some time to summarise the year. It’s been a ride.

This week, I confused some people on LinkedIn who thought I had killed my company (🤷‍♀️). That is not the case; I will explain below. Better Odds had one of its more promising weeks this year.

This little hiccup made me realise two things:

1. When people don’t understand what you’re saying, they fill the gap with the (to them) most probable interpretation

2. Few people start product companies. Most business owners I know sell time as freelancers, agencies or consultants.

Let’s dive into that second part, and I’ll look at the difference.

Starting a business that does not sell your time often means having a product you can sell. This means you must invest time and money into starting the company before you make any money. This gap between investment and return can be solved in different ways.

Many tech companies like Better Odds raise venture capital, meaning a company or person buys part of your company when it’s small, hoping it will grow and their stake will be worth much more later. When you raise money, you pitch your company to investors, selling them what it will become.

If your fundraising is successful, you can immediately recruit the people you need, build the product, spend money on sales, and more.

The earlier you are on your business venture, the more uncertain it is that your company will succeed, so it is a bigger risk for an investor. This means you have to give them a larger share of your company for less money in return.

Many companies raise money more than once after making certain milestones, and there are a lot of technicalities around this. However, the investors who work with companies in the earlier stages are called “Angel Investors”. Sometimes, these investors invest in a company even before it has any tangible product, which is naturally a lot of risk.

Bringing in investors can be an opportunity for the entrepreneur, too. They will get the resources needed to build their company, and the right investors will also help the entrepreneur succeed in different ways because they want to ensure they get a good return on their investment.

On the other hand, bringing in external money creates expectations and pressure on the entrepreneur. Your business needs to deliver results back to the investors. When I started Better Odds and spoke to a handful of friends with the experience of bringing on investors, they unanimously said, “Don’t do it unless you really have to”.

Also, they said it is better to get as far as possible without external money and, if needed, raise it when the company has proven itself a bit. (This is relevant for several reasons I won’t explain here.)

However, I did take the advice of trying to get as far as possible without external money …

The alternative route to venture capital, which I’ve used for Better Odds, is that you can cover the gap until you get a return on your investments with your own money. Maybe you have savings or can start your business on the side when you still have a salary. In my case, I’m doing consulting in parallel to starting Better Odds (and … I’ve also used up a lot of my savings).

In practice, this means I pay myself a minimal salary and invest all the money I can from consulting into Better Odds, where we have a small team working (part-time) on building the product. Just because I’m the founder doesn’t mean it’s my job to do everything — some things, like building AI models, should be handled by pros anyway.

But as long as you’re not Elon Musk, this method often doesn’t allow the company to recruit heaps of people, spend lots of money on marketing, etc.

One unexpected bonus from this has been that I’ve now finished all the weird skincare products I had gathered in the back of my bathroom cabinet. 🧖‍♀️ Tiny budgets are not only bad — when it’s by choice.

Naturally, this setup makes starting Better Odds a bit slower, but it also forces us to be strategic, innovative and disciplined. We must ensure we do the right things with our limited resources.

I’ve written before about specific types of slowness being a strength. And especially for an early start-up phase, bringing in external money puts you at risk of running fast — in the wrong direction. Instead, we’ve been able to find our path with minimal resources. This is called bootstrapping.

I don’t mind this setup at all. It has given us time to figure things out at a reasonable pace. Today, when I speak with customers and investors, I know precisely and with confidence:

1. What problem we solve

2. How we solve this problem

3. Why this problem is worth solving

4. How big the market for solutions to this problem is

Sometimes, it takes a couple of iterations before you have satisfactory answers to these questions. It took us about a year. Now, we’re at a place where we could probably confidently raise external capital.

But, another question to ask yourself is what you need.

The challenge for Better Odds’ right now isn’t money. Instead, we need relevant customer data and real-life use cases to inform how we should further develop the product. So, our primary focus right now is to find relevant pilot customers. (Large companies whose business is continuously impacted by the crazy world we live in).

And, since I have an excellent set-up with Marcus, Emilia and Elsa, who are helping me build the Better Odds product and brand, I think I can continue to take on relevant consulting assignments instead of raising money — for now —getting us even further before we consider bringing angel investors in.

I don’t know what assignments I will spend time on next year (yet). And when I revealed this on LinkedIn to check if anyone might need someone like me, I accidentally caused the death of Better Odds (the post is now updated).

Things happen. And this was a very long illustration of life as an entrepreneur.

Also, you now know that if your company needs a tool that predicts upcoming business disruption and suggests what actions to take to navigate the storm smoothly or if you need someone to support you on any strategic change, I have solutions to both those needs. (Replies to this email land in my inbox).

I think that’s been enough self-promotion for the rest of this year. Let’s get started with the rest of the Newsletter! ✨

Anna

📍Five Small Things

Traditions — Every year, I remind you to send physical holiday cards. I do it today and will do it next year, too.

Decisions — Are you trying to make decisions ahead of the new year? The Decision-Making Calculator, developed by the Dynamic Network Lab at Columbia University, is designed to assist individuals, teams, or groups in thoroughly evaluate significant decisions. Its goal is to enhance decision-making clarity, confidence, and satisfaction while minimising regret. Based on scientific decision-making research, the tool evaluates your particular arguments and counterarguments and suggests the best path ahead.

Book — Wintering - The Power of Rest and Retreat in Difficult Times by Katherine May explores how we can care for and repair ourselves when life knocks us down. Perfect for end-of-year reflections.

Tool — Scribe transforms the daunting task of crafting detailed guides into a breeze. Whether you are curating a comprehensive how-to or a detailed industry report, this tool simplifies the process, making guide creation a delightful experience.

Creativity — Can ChatGPT can help you with your music career? This thread on Reddit is stacked with prompts to use when asking ChatGPT for advice on music production. The thread starter claims it can be used for any music genre. Give it a try!

🗞️ The News Section

Apple Confirms Foreign Governments Engaged in Push Notification Spying

Internet, Surveillance, Human Rights

Apple has confirmed that foreign governments have been conducting "push notification spying." The United States government previously prohibited the company from disclosing this practice. Still, the issue came to light after Senator Ron Wyden, a member of the Senate Intelligence Committee, received a tip and investigated it.

Push notifications are delivered through services like Apple’s Push Notification Service and Google’s Firebase Cloud Messaging, making Apple and Google intermediaries. Governments can then make Apple and Google hand over push notification data. While not revealing message content in end-to-end encrypted messaging services, push data can still disclose significant information, such as approximate location or communication patterns.

Apple and Google have been restricted from publicly releasing information about these government demands. For example, this practice was not included in Apple's annual transparency reports due to the requirement for secrecy.

Senator Wyden has written an open letter to the United States Department of Justice asking to repeal or modify the policies preventing transparency about these demands. With the issue now public, Apple will begin including this data in its transparency reports, showing the scale of the issue and the nations involved. However, specific targets of surveillance will not be disclosed.

Google's Strategic Leap in Advanced AI Capabilities Questioned as a Marketing Stunt

Artificial Intelligence, Marketing

This week, Google rolled out its Gemini AI model with a launch video that quickly went viral with 2.2 million views on YouTube, suggesting a significant advancement in the company’s AI capabilities. Despite its delayed launch, Gemini proposed a rigorously tested and cost-effective AI solution.

But what seems too good to be true might just be that …

The Gemini demo shows an AI responding to spoken-word prompts and a real-time video of a person drawing. And in the video description, Google disclosed that the responses were sped up for the sake of the demo.

But that disclaimer is far from enough. In a blog post where Google laid out how it made the video, it admitted that the AI was not responding to voice or video but to still images and text prompts. Additionally, sequences interacting with the model were shortened, making it look brighter than it is.

Another example of this deception is a segment in the demo showing how the AI invents a "guess the country" game using emojis. However, what was not showcased was how the AI was given specific instructions and examples for this task.

This means that Google's AI model uses still images and text-based prompts, similar to OpenAI's GPT-4. A Google spokesperson said the demo video was “made to showcase Gemini's capabilities and inspire developers”.

Personally, I believe that truthfulness in showcasing AI capabilities, especially for marketers, is crucial for several reasons: The AI industry is still developing, with many potential users and stakeholders trying to understand and trust the technology. Any deception in demonstrating AI capabilities can lead to a loss of trust, not just in the specific product or company but in the technology itself. Trust in a brand is hard to build, and losing it is costly.

But there is also an element of long-term viability. For AI technology to be sustainable and evolve, it is essential to set realistic expectations. Overhyping capabilities can lead to a 'hype cycle', where disappointment with early versions of technology leads to reduced interest and investment in future developments. Or, customers try to implement the technology for use cases it cannot handle, making it expensive or creating a strategic risk.

All in all, maybe this launch showcased Google’s marketing department more than its AI capabilities.

Leaked Letter Reveals OPEC's Concern Over Potential Fossil Fuel Ban Discussions at COP28 Summit

Climate, Geopolitics

A confidential letter reveals that OPEC has alerted its members about escalating pressures against fossil fuels, potentially leading to significant, irreversible outcomes at COP28.

The correspondence indicates OPEC's worry over discussions at the UN climate summit about a possible "fossil fuels phase-out." It advises OPEC nations to oppose any proposals at COP28 that focus on fossil fuels instead of emissions.

Authentically verified and dated 6 December, the letter is signed by Haitham al-Ghais, OPEC's secretary general. It was dispatched to the 13 OPEC member states, including major oil producers like Saudi Arabia, Iran, Iraq, and Nigeria, which hold 80% of the world's oil reserves and account for approximately 40% of global oil production in the past decade. Additionally, the United Arab Emirates, the host of COP28, and 10 OPEC+ countries, such as Russia and Mexico, received the letter.

Over 100 countries are advocating for the final COP29 resolution to endorse a fossil fuels phase-out, citing the primary role of carbon emissions from fossil fuel combustion in driving the climate crisis. To maintain global temperature rise within the 1.5C limit, emissions need to be nearly halved by 2030 and reach net zero by 2050.

While OPEC and OPEC+ countries assert their commitment to addressing climate change and highlighting their history of climate initiatives, they prefer to concentrate on emissions. They propose carbon capture and storage (CCS) as a viable solution. Nonetheless, experts argue that CCS cannot be scaled up adequately to offset emissions from the oil and gas sector under the current business model. A report from the University of Oxford, released on 4 December, warns that relying heavily on CCS to achieve net zero by 2050 would be financially problematic, costing at least $30 trillion more than transitioning to renewable energy.

Sultan Al Jaber, the COP28 president and CEO of the UAE’s state oil company, initially suggested that phasing out fossil fuels is not the sole method to reach the 1.5C goal, a claim many scientists dispute. He later reiterated the necessity of gradually reducing and eventually eliminating fossil fuel usage. Various NGOs and climate advocacy groups have criticized OPEC's position, stressing the urgency of shifting swiftly to renewable energy and phasing out fossil fuels.

The European Union Sets Global Precedent with Landmark Artificial Intelligence Act Set for 2025 Implementation

Artificial Intelligence, EU

Lawmakers in Brussels reached a provisional agreement on the European Union’s Artificial Intelligence Act, anticipated to be the world's first comprehensive set of rules to govern AI. The earliest date for these rules to come into force is 2025, and the regulations are expected to become a benchmark for other regions looking to pass similar laws.

The first draft of the EU’s AI Act was unveiled in 2021 and has undergone numerous revisions, particularly in light of emerging generative AI tools like ChatGPT and Stable Diffusion. The law still needs to go through some final steps for approval; further negotiations and votes by Parliament’s Internal Market and Civil Liberties committees are required before the AI Act comes into force. But the political agreement means the core has been set.

Specific applications of AI are banned, including scraping facial images from CCTV footage, categorisation based on sensitive characteristics, emotion recognition at work or school, creating social scoring systems, manipulating human behaviour, and exploiting vulnerabilities. There are also safeguards and exemptions for law enforcement use of biometric systems.

The AI Act includes responsibilities for high-impact general-purpose AI (GPAI) systems, including risk assessments, adversarial testing, incident reports, and transparency requirements, including technical documentation and detailed summaries about training content.

Under the new law, citizens will be allowed to launch complaints about AI systems and receive explanations for decisions made by high-risk systems that impact their rights. The Act further outlines a framework for fines for companies that violate its rules, with penalties ranging from 35 million euros or 7 per cent of global revenue to 7.5 million euros or 1.5 per cent of global revenue.

📈 The Insights Section

Study Reveals Unusual Short Selling in Israeli Stocks Before Hamas Attack

Finance, Geopolitics

This paper by Robert J. Jackson Jr. and Joshua Mitts shows a notable increase in the short-selling of the MSCI Israel ETF and Israeli securities before Hamas attacked Israel — suggesting that some traders might have anticipated the attack.

Two things to know to understand what this means:

1. Short selling is a trading strategy where an investor borrows a financial instrument (like a share of a stock) and sells it on the open market, hoping to repurchase it later at a lower price to profit from the difference.

2. The MSCI Israel ETF is an exchange-traded fund that aims to track the investment results of a broad-based index composed of Israeli equities, providing investors with exposure to the Israeli stock market.

By examining trading activities in Israeli securities markets before the Hamas attack, the article found that a significant spike in short selling of Israel was documented five days before the attack. The increase in short selling was unusual compared to other market activities and historical data, suggesting that the trading activities were not random but likely had knowledge of the impending attack.

One possibility could be that Hamas used this tactic to finance its activities. Similar trading patterns were observed in April 2023, coinciding with reports of a planned Hamas attack. Increases in short selling were also noted in specific Israeli companies on both the United States and Tel Aviv Stock Exchanges.

However, applying current securities and illicit finance laws to such trading activities is challenging, highlighting gaps in enforcement mechanisms. However, trading based on knowledge of terrorist attacks raises ethical and policy concerns, such as the potential use of trading profits to finance further attacks.

At the same time, this suggests how deviant trading data may be a relevant data source to monitor when predicting upcoming attacks, hopefully making it possible to mitigate them altogether.

Retailers Embrace 'Keep It' Policies For The Holiday Rush to Safeguard Profits

Business 

Post-Black Friday and Cyber Monday, retailers are increasingly adopting "returnless" policies where customers can keep items if the return shipping costs exceed their value.

This year, 59% of retailers have adopted these "returnless" policies, a significant increase from 26% last year, according to a survey from goTRG. However, details about which companies are implementing these policies are kept confidential to prevent misuse by shoppers.

Shoppers in the United States are expected to return goods worth $173 billion this holiday season, a 28% increase from last year. The average return cost for retailers is $30, and the constant returns impact profits.

After the pandemic, the rate of returns nearly doubled, accounting for 16.5% of total US retail sales last year, which is approximately $816.8 billion in returned goods, according to Appriss Retail and the National Retail Federation.

Approximately 90% of retailers have revised their return policies this year, introducing changes like store credits and return charges and promoting in-store returns for online purchases.

Retailers like Amazon, eBay, and Wayfair advise customers against returning items between $20 and $300, citing cost management and customer convenience. For example, Amazon allows customers to keep some items for convenience while trying to maintain competitive prices.

Maybe it is time to question if being both the cheapest and the most convenient is a net-positive position.

Instagram and Pinterest Unveil 2024's Top Trends: From 'Blue Beauty' to 'Eclectic Grandpa'

Internet, Gen Z

As we are moving into 2024, the trend report season is here. This week, two major social media platforms, Instagram and Pinterest, revealed their trend predictions for the upcoming year.

Instagram unveiled the 2024 Instagram Trend Talk, a comprehensive guide that delves into the preferences and trends of Gen Z. While Pinterest released its yearly “not-yet-trending” report, offering a broader perspective on what's catching the world's fancy.

And yes, there are similarities across the two …

1. Fashion and Beauty: Both platforms predict a focus on individuality and creativity in fashion and beauty. Pinterest highlights trends like "Blue Beauty" and "Make It Big" for bold and expressive styles, aligning with Instagram's prediction of Gen Z seeking their 'core' aesthetic and creative dressing.

2. Social Media and Digital Engagement: Pinterest's emphasis on "Big Talk" for deeper connections resonates with Instagram's finding that Gen Z values meaningful connections on social media. Both platforms see a trend towards using social media for more personal and intimate interactions.

3. Lifestyle and Self-Expression: Pinterest's "Eclectic Grandpa" and "Kitschens" trends, focusing on unique and personalised styles, align with Instagram's insight into Gen Z's preference for clothing and items expressing comfort and individuality.

4. Food and Drink Preferences: Pinterest see "Melty Mashups" and "Tropic Like It’s Hot" trends in food that align well with Instagram's observation of Gen Z's interest in trying trending foods and ingredients, indicating a shared focus on innovative and fusion cuisines.

5. Celebrations and Entertainment: Pinterest's "Groovy Nuptials" and "Jazz Revival" trends complement Instagram's findings on Gen Z's evolving tastes in entertainment and celebrations, with both platforms highlighting a return to retro and vintage themes.

6. Activism and Social Issues: Pinterest's focus on activism through "Give a Scrap" and "Upcycling" aligns with Instagram's finding that Gen Z plans to take action on critical issues through education and social media awareness.

7. Well-being and Travel: Both platforms highlight a trend towards well-being and relaxation. Pinterest's "Rest Stops" and "Big Talk" resonate with Instagram's emphasis on Gen Z focusing on self-improvement and development.

8. Hobbies and Interests: Pinterest's trends like "Making a Racket" and "Be Jelly" suggest unique hobbies and interests, which align with Instagram's findings on Gen Z's pursuit of individuality and self-expression through various activities.

In a time where we all want to be unique like everyone else, these platforms become digital crystal balls for marketers, creators, and consumers alike, offering a panoramic view of the future, where individuality, sustainability, and innovation take centre stage.

Thank you for reading. I hope you learned something new. ✨

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