Announcing The Hypernomics YouTube Channel

It is the obvious which is so difficult to see most of the time.
Isaac Asimov, I, Robot

Here’s a question with a seemingly obvious answer:  How many stocks are part of the S&P 500?  If you guessed 500, you’d be close, as there are 504 companies listed there today.

You likely know that not all S&P companies have issued the same number of shares, nor do all share price match.  Too obvious?  Not really.

Consider what you were undoubtedly told if you ever took an economics class.  According to Paul Samuelson (Economics, 9th Ed., p. 63), “the equilibrium price, i.e., the only price that can last…must be at the intersection point of supply and demand curves.”  Samuelson would have you believe markets have but one equilibrium point.

But we know that is nonsense:  504 stocks in the S&P 500 form 504 quantity and price pairs.  While they are viable, all, in the language of Hypernomics, enjoy sustainable disequilibrium as their stock prices exceed their costs.

What’s really going on?  It turns out the value of products goes up as producers add features customers like.  At the same time, as prices go up, quantities sold fall.  To see this phenomenon, one must employ Hypernomics.

To find out how this works with as many as 8 dimensions, go to our new Hypernomics YouTube channel here:

#hypernomics #marketanalysis #prices #demand

Assumptions vs. Observations: The A380

Assumptions are what we don’t know we are making.
Douglas Adams

Launched in 2000, the Airbus ceased its A380 (A) production in December 2021, as the 251st unit rolled off the line.  That’s lots of big jets. But, their 20-year goal was 1250.  How did it go so wrong?

Assumptions are what we don’t know we are making – Douglas Adams

Launched in 2000, the Airbus ceased its A380 (A) production in December 2021, as the 251st unit rolled off the line.  That’s lots of big jets. But, their 20-year goal was 1250. How did it go so wrong?

Many pundits claim they knew it wouldn’t make its target.  Most appeared when the program floundered late in its lifespan.  What would it take to predict its future in advance?

Projects often use 1) business case analyses and 2) customer polls to “verify it pencils out.”  That works if 1) analysts conceive those cases fairly and 2) buyers convert at or above a target sales figure.

What if we don’t have to rely on those techniques?

To forecast the next 20 years, study the last 20.  As B reveals (summing all model types to base versions), the airliner market had a poorly correlated (Adj R^2 0.458) yet statistically significant (P-Value 0.035) Demand Frontier over that period.  Airbus’s target was nearly ten standard deviations past it.

The A380 took €25B to develop. It didn’t recoup its investment. Take time to model markets in advance. See what a market did to bound what it will do. You may not like the answers, but it beats losing billions.

#A380 #demandfrontier #hypernomics

Long Time Coming

It’s not that I’m so smart, it’s just that I stay with problems longer.
Albert Einstein

There’s something deeply affecting about staying with a problem for over 30 years. Once you get some resolution, part of you wonders why it took so long to get answers. A more forgiving part of you thanks Einstein for the inspiration to carry on. One can only be happy when that ah-ha moment finally arrives.

Such is the case with Hypernomics. After first entertaining the idea at 14, somewhere around 49, I saw the first hints of the practical applications of Hypernomics. 18 years later, we have evidence of its practicability in one of the most complicated markets, that of securities.

In Feb 2020, we made our first investments based entirely on Hypernomics. Far from being perfect, tests suggested that given a market downturn, we would suffer losses. Figure A shows we’ve endured setbacks in 2022. But backtesting supported the idea we would lose less than the competition.

In the longer run, in Figure B, the theory has had a chance to shine. Note the Hypernomics fund is doing more than 2X as well as Berkshire Hathaway and over 3X what the other major indices are doing.

#innovation #markets #investments #hypernomics

Market And Demand Formation

Tesla is here to stay and keep fighting for the electric car revolution.
Elon Musk

How do markets form?  What happens when they do?  Let’s look.

The modern mass-produced electric car market began in 2009.  As Figure A displays, there was a sole entrant then, the Mitsubishi i-MiEV.  By 2012, in Figure B, many more entrants came into play.  Three years later, with Figure C, prices for most models fell, and they attracted more customers.  Producers were able to drop prices because their production lines displayed learning curve effects.  They benefited from lower costs from more efficient workers, standardization, economies of scale, and other factors.

Figure D shows us that by 2018, many new models moved into the market.  Several models (all Teslas, marked with the yellow dots) combined to form the market’s Demand Frontier.  That line is highly correlated (adjusted R2 95.4%, P-value 5.04E-04) and relatively flat, with a slope of -0.36.

In 2019, electric car sales fell about 10% from 2018, despite Tesla’s Model 3 success.  Given the flattish Demand Curve, that suggests buyers would be eager for a high-range vehicle with a price lower than the Model 3.  All competitors priced less than the cheapest Model 3 have less range than it does.

#demand #marketanalysis #marketformation #demandformation #demandplanning #curve

Call Off the Panic

“Present fears are less than horrible imaginings.”—William Shakespeare

The FAA recently made clear it will impose more stringent requirements on Urban Air Mobility (UAM) vehicles.  In response, pundits started screaming about the end of that market even before it began.  They think the added costs are insurmountable.

Who told them that?

Yes, there will be significant costs in the added requirements.  But many companies have managed to work themselves through FAA regulations and come out with safe and profitable models.

Profitability, of course, is the key.  To clear development and certification costs, UAM manufacturers need to know if they can make money with their products.  All should note the United Airlines (UA) order from Archer.  UA will spend $5M for five-seat Archers, which are only slightly faster than five-seater Robinson R66s, which sell for $1.1M.  Oh, and the Archer has about a seventh the range of the R66.  The difference is the decibels.  Lower noise widens the market for UAMs, which should have comparable or lower costs than traditional helicopters (due to fewer parts) and higher prices.

Next time someone tells you the sky (or UAM market) is falling, see what they’ve shorted.

#urbanairmobility #UAM #markets #innovation #FAA

Life’s Easier With Enhanced Vision

The good thing about science is that it’s true whether or not you believe in it – Neil deGrasse Tyson

What would it be like to do astronomy without a telescope, biology sans a microscope, or defend air raids without radar?  We don’t have to live without these visualization aids in the modern world.  We needn’t rely on Stone Age tech in the Age of Information.

But you are very likely working from a like disadvantage in market analysis.  While we proved 4D data science works in fields as varied as beef production, package delivery, and spaceships, up till 2020, we had not taken a run at the stock market.

Then we did.

As shown below, the principles of Hypernomics have been applied successfully for picking securities, as it has for us for the last 26 months, with actual monies and stellar returns.  This fund is yet another story about how we applied the tool profitably.  We believe the fund will be to Hypernomics as books were to Amazon.  Eleven years after we started, we’re looking for partners.

Who wants to join us?

#datascience #hypernomics #innovation #marketanalysis

The Little Fund That Could – And Did And Does

Yeah. Beethoven was deaf.  Helen Keller was blind.  I think Rocky’s got a good chance.
Adrian, ‘Rocky’

Funny thing about entering a game late.  People think you can’t play just because you haven’t been on the field.

Make no mistake.  We’re a late entrant.  Many might think of us as a world-weary veteran reliever, coming in the bottom of the ninth to get out the last batter.

We see ourselves more as an untested first-round draft pick sitting on the bench.  And we’ve been studying the game – and we think we’ve figured a few things out.  Our fund reflects that.

We founded Hypernomics, Inc. (yes, it’s official, we were formerly MEE Inc.) to offer training, software, and consulting for the field we discovered, which, of course, is Hypernomics.  We still do that, and that’s what’s kept the lights on.

More and more, though, our advisors and we are seeing the potential of this fund.  We’re not open to the public, but we think one or more firms could benefit from licensing our analytics.  Just as we didn’t know about Hypernomics until we discovered it, we don’t know what to do or where to go exactly.

If you have some thoughts, please share them.

#hypernomics, #stockmarkets, #innovation, #stockanalysis

Love, Luck, And Technology

It was 20 years ago today/Sergeant Pepper taught the band to play.
The Beatles

Tim is always with me.

That’s not a metaphor.  It is a biological fact.

You see, 50 years ago, I was diagnosed with kidney disease.  Back then, such a condition was often a death sentence.  I knew kidneys excreted waste products and looked for ways to help mine out.

So, I started running – 30 to 50 miles a week.  For decades.  In the middle of that, in the early 1980s, I met Tim Schreiner while at Lockheed Martin, and we became friends.  He ran with me too, and we liked the same bands and the cool stuff we helped build at LM.

Some 21+ years after my diagnosis, the kidneys failed, and I went on dialysis for a year and a half.  Then I got a cadaveric kidney transplant, but it never worked right, and after another 6+ years, I was once again on the verge of kidney failure.

Enter Tim.  Ten people offered to give me their kidneys.  Tim demanded to be put at the front of the line.  He tested, matched, and decided to save my life.  I knew life would be better with a good kidney, but I never knew how much.  Tim offered me so much; I can only hope to repay society a fraction of what he did for me.  20 years later, we’re both doing fine.

#transplant #love #luck #technology

Abiding By Minimums

One bourbon, one scotch, one beer – George Thorogood

In addition to all the great music he made, George Thorogood knew when he wasn’t drinking alone, he could move it on over to his local tavern and abide by their two-drink minimum.

Bar owners found enforcing that requirement necessary to keep them in business when they had entertainment. Who wants free riders when you can find those who will pay?

Hypernomics knows that minimum requirements are just as crucial as those dealing with maximums. Businesses go under if they don’t make enough sales – we’ll have more on that in the future.

Military forces have similar considerations. The United States Air Force found that spreading their aircraft around gave them more flexibility to fly to distal locations. They typically group aircraft into squadrons of 12 or 24 planes. But, when it came to the B-2, they found themselves at a loss.

As its price soared past the $330M/unit limit backing the 132 bombers they wanted, they got 21 B-2s at $1.2B each instead. With so few, they put them all at a single site, Missouri’s Whiteman Air Force Base, losing flexibility and response time in the process.

Too often, as we try to get everything we want, we lose sight of what we need.

#hypernomics #minimum #markets

The Value And Demand For Taxpayer Dollars

Don’t Worry, Be Happy – Bobby McFerrin

In May 2020, CA Gov. Gavin Newsom said he wasn’t worried about Tesla leaving the state.  Last month, when Elon Musk announced he was moving Tesla to TX, the Gov. changed his tune.  It seems he felt he helped create the company, citing the tax breaks he gave them.

Hypernomics has seen this argument before.  Breaks in CA usually amount to slight and temporary reductions in the business-crushing tax rates CA has compared to other states.  That’s why companies by the thousands have been leaving CA.  A legislative “solution” to lost tax revenue is to have CA tax requirements follow businesses and individuals once they leave the state.  But that 1) denies some tax monies to other jurisdictions and 2) makes it less likely for new companies to enter CA.

CA has the best weather in the US, but the Tax Foundation ranks it next to last in its business climate.  As hypothesized below, the Value to taxpayers increases with the physical and business environments. Increasing the latter’s Value makes it more appealing to taxpayers – if they are attracted enough to come into the state, they offer more Ways for CA to get needed tax dollars.  At the same time, all mature markets have Demand Frontiers, which deliver the Means by which they must abide.  It’d take lots of work to learn these forces in detail. But avoiding that effort leads to unpleasant surprises.

And worry.

#hypernomics #innovation #taxpayer #taxanalysis #markets #economics