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Uphill to Stupid: Universality Abounds

All schools and colleges have two great functions: to confer and conceal valuable knowledge.
Mark Twain

Some writers have gained more attention than their ideas merit. It takes little thought to discard them.

Take Karl Marx and his school of thought, for example. In his Communist Manifesto, he wrote, ” Modern bourgeois society… is like the sorcerer who is no longer able to control the powers of the nether world.” Later, in his Capital: A Critique of Political Economy, Marx stated, “So far, no chemist has ever discovered exchange-value in …a diamond.” He wants you to believe that the bourgeois economy runs by magic.

Hypernomics knows better. And so do you. A diamond’s value is a function of its carats, color, clarity, and cut. Marx certainly knew of the Hope Diamond and that it was worth more than smaller stones. He was pulling the wool over readers’ eyes. There is not a lick of sorcery in diamond valuations. Thus, his view about diamonds is downhill of stupidity. He was more sinister than that. Instead, he concealed valuable knowledge. This would-be sleight of hand had implications for states that followed his lead.

In 1985, the USSR artificially constrained all salaries to 400 rubles or less per month (Alexeev, Michael V., et al., “Income Distribution in the USSR in the 1980s,” 27 Nov 1992), defying conventional (i.e., non-Marxist) economic wisdom. Doctors made little more than janitors. It made sense to the central planners. And then their economy collapsed—not despite their best efforts, but because of them.

When it comes to Valuing physical products (like a flawless, colorless, round, brilliant two-carat diamond or an Oscar II nuclear cruise missile submarine weighing nearly 15K tons with a top speed of 32 knots) instead of people, there’s no option other than Hypernomics.

In (C) below, the angled plane projects the value of Russian nuclear submarines using performance and price data from 20 and 57 ship classes in the United States and Russia, respectively. The equation used for that surface has a p-value of 9.85E-40. In (B), reflecting the same equation with its step function, the US pays about 60% more for the same tonnage and speed as comparable Russian boats, likely due to factors not considered separately in this equation (such as safety, max depth, comfort, etc.). All navies have behaved like that since they began.

With (A), the US and Russian navies abide by statistically significant but distinctly different Demand Frontiers, each with a p-value of about 0.03. Demand comes not from Marxist rants but from how all buyers purchase goods as their prices change. The slopes may change, but the central tenet does not.

When next you meet a Marxist, tell them the Eastern Bloc buys naval vessels the same way as the West. In other words, they buy like the bourgeoisie. And that is so bourgeois.

Which, despite the would-be disparaging tone, is a good thing.

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Seeing Problems from a Distance and Getting To No. 1

I have been trying to point out that in our lives chance may have an astonishing influence and, if I may offer advice to the young laboratory worker, it would be this—never neglect an extraordinary appearance or happening. It may be—usually is, in fact—a false alarm that leads to nothing but may, on the other hand, be the clue provided by fate to lead you to some important advance.
Sir Alexander Fleming

Knowledge and science are nothing but perception.
Plato

I had the great fortune of seeing The Rolling Stones in concert on Wednesday and having gone to concerts for decades, it was the best I had ever seen. The high-resolution video screen, at 55m wide and over 14m tall, was almost worth the price of admission by itself. But, of course, all eyes eventually trained themselves on Ronnie Woods, Keith Richards, and Mick Jagger. Jagger, now 80, skipped about the stage like a grade schooler, belting out one monumental hit after another with a voice seemingly untouched by age. I cannot recommend this show enough. I’d tell my friends to see them before they’re gone, but then I said the same thing the last time I saw them—in 1981.

As someone prone to figuring out how buyers work in markets, I stared into the seats numerous times. Like everyone else, We purchased our tickets online and weighed the distance and angle to center stage against the prices offered for each seat. Ticket prices ranged from about $80 to over $6400. Sitting up 14 rows above the floor in the far end zone of So-Fi, I noticed a lack of uniformity in how the seats filled up. In (A) and (B) below, I found a pair of matching seat banks on either side of the venue that never filled in like the rest of the facility. Those seats were better than ours, closer to the stage, but the added cost didn’t justify us buying a seat there. That’s the way we saw it.

Everyone else saw it the same way. They sat vacant until the show started.

Simply put, the prices for those seats put people off. They were too high.

Now, in a place with over 70,000 people for a football game, losing revenue on a few hundred seats is not a big deal to The Rolling Stones.

However, it points to a central tenet of my book, Hypernomics: Using Hidden Dimensions to Solve Unseen Problems: buyers ultimately determine prices for all products based on their features.

A few months after its release, on July 11, 2024, that book reached Number 1 on the Amazon Best Sellers list in its Macroeconomics section (C).

If you manage The Rolling Stones and know rock fans worldwide will come to their concerts, you needn’t worry about the finer points of getting your product and its price right.

But if you don’t run the Stones and want to understand how the economic world works, read my book. It doesn’t so much change the world as it reveals it.

You’ll want to read it before you leave 500 seats vacant.

#hypernomics #value #therollingstones

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Saturday Morning Quarterbacking: First-Person Shooter Games

Common sense always speaks too late. Common sense is the guy who tells you you ought to have had your brakes relined last week before you smashed a front end this week. Common sense is the Monday morning quarterback who could have won the ball game if he had been on the team. But he never is. He’s high up in the stands with a flask on his hip. Common sense is the little man in a grey suit who never makes a mistake in addition. But it’s always somebody else’s money he’s adding up.
Raymond Chandler

Lots of people can tell you what you should have done after the fact.

You should have anticipated the cornerback jumping the route. Didn’t the situation call for an extra blocker on the strongside tackle when you ran a sweep his way? Why didn’t you expect they would run a blitz when they tended to do that on every fourth down? That’s what Monday Morning Quarterbacking is.

What about Saturday Morning Quarterbacking? Wait. What? What is that? Well, that’s a series of studies one puts into place to anticipate what will happen Sunday, based on the distant past, near past, and present. And for that, we’ll need data.

As any researcher knows, when it comes to data, Mick Jagger warned us, “You can’t always get what you want, but if you try sometimes, well, you might find you get what you need.”

Sometimes, large, important pieces of a picture help to envision the whole.
In (A), I wanted to get some idea of the Demand for video games, specifically the ones of “First Person Shooter” ilk. I chose that group because it is one of the most popular video game categories, with scores of titles from which to choose. I didn’t have the time to study all of them. So, I picked 26 leading titles and made some exciting discoveries.

Most surprising to me was the Outer Demand Frontier. With a slope of -1.33, more money is at the top of this line than at the bottom. Note Call of Duty—Modern Warfare 3 (COD—MW3). It helps form that Frontier, and with $2.22B in revenue, it exceeds the revenues of all but a handful of films. Apex Legends was at the low end of that line and commanded revenues of $1.21B, and, at the same time, also helped form part of the Inner Demand Frontier, which has a very flat slope (-0.404).

Figure B shows us that in fantasy, as in reality, those who play the games must make some tradeoffs. My son showed me some of the dials one can set in these games. You can have extremely high resolution or ultra-fast frame rates, but you can’t have both. Depth of field is crucial, too, and you may want to set it to the farthest reaches possible, which we might call “X.” There, you will find that your frame rate and resolution limits are lower than if you were to set the depth of field to 0.5X.

Players in the game, either the people with the controllers or the game developers, need to see how all features work in concert.

And they need to do that on Saturday morning.

#hypernomics #markets

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Market Limits and Infinite Dimensional Compression

Genius may have its limitations, but stupidity is not thus handicapped.
Elbert Green Hubbard

The International Cost Estimating and Analysis Association (ICEAA) recently held its annual Professional Development & Training Workshop in Minneapolis, Minnesota. This event, a cornerstone of professional development for our members, was a remarkable success. I submitted a paper to it, and it won the award for best paper overall.

“Market Dimensional Expansion, Collapse, Costs, and Viability” delved into several crucial yet under-explored areas. Dimensional expansion and collapse are vital to comprehending market evolution. In it, I unveiled a groundbreaking method to compress standard 3D Cartesian Coordinate Systems into as many as 16 dimensions. Theoretically, there is no upper limit to the number of dimensions that can be depicted using these methods. Equally significant was the exploration of multiple views on Demand Frontiers.

In (D), I plotted the ten-year demand figures for 95 Western Bloc business aircraft, with the horizontal axis for their quantities and the prices on the vertical. Several crucial limitations become evident when one does that.

An Outer Demand Frontier reflects the market’s saturation threshold. Any model attempting to exceed this line will find that the market has exhausted its buyers. One can drop one’s price and gain more sales, but this line is very steep and will soon intersect any Learning Curve associated with the aircraft model that forms it. Note that none of the planes in the study vastly exceeded this limit.

The Lower Demand Frontier reveals a market’s margin limitation. There are planes priced below this line but fall into the General Aviation category. They are not for business travel due to the stricter regulations by which Business Aircraft abide.

Inner Demand Frontiers are efficiency-limited. Planes to the left of this line are either 1) reconfigured airliners (where the main airliner line keeps the learning going), 2) ramping up production, 3) winding down their line, or 4) underwritten by governments. In this case, all Textron planes are going extinct, as the company gave up building these aircraft types. The Dassault planes benefited from a large subsidy from the French government, and Piaggio got the same treatment from the Italian state.

The Upper Demand Frontier is the limit that took down the Aerion AS2, as it attempted to go far beyond it. In a different market, this made the B-2 bomber stop at 21 units rather than the 132 vehicles the USAF sought.

In sum, it pays to know where your contest’s boundaries lie. In markets, as in competitive games, there are boundaries. In business, your buyers form those boundaries. Knowing what your buyers can and can’t afford is critical to developing a product with a chance for success.

In (A), I hold a 2D Demand Plane in one hand, and a 3D Value Space in the other. The paper I gave using this concept won the awards in (B), allowing me to speak to 450 People (C). Among other things, my paper addressed markets’ Demand Frontiers (D).

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The Premature End of the B-21

What did the President know, and when did he know it?
Howard Baker, Watergate Hearings.

Last month, in a hearing before the U.S. House Armed Services Committee, Lt. Gen. Richard G. Moore Jr., Deputy Chief of Staff for Plans and Programs, U.S. Air Force, reaffirmed the USAF’s commitment to buy 100 Northrop B-21 bombers by 2039. The Gen told the Committee he needed to get “predictable funding.”

That won’t happen. The 100-unit bit, that is. We’ve got the “predictable funding” covered.

On September 26, 2018, after giving an award-winning paper at an international annual conference (iceaaonline.com), I was asked to present it again to its Southern California chapter. The venue was a Northrop Grumman facility, with several NG people in attendance.

It turns out that the funding the Gen receives for bombers, fighters, and attack aircraft is very predictable. But its limits are far lower than Gen Moore imagines. The Demand Frontier for this market has been stable for over 25 years and will limit the purchase to just over 50 units. Even if the program makes its FY 2016 target of $610M/plane, it has a slim chance (< in 1M) of making 100.

When it stops in 2039, people will point to “changing environments.”

But the target was never in reach. We knew that in 2018.

When I related that to the crowd, nobody ran out the door, telling the company to “hold the presses” on the B-21 sales prediction. Why?

How long will it take a military branch unequaled in precise targeting to realize that the time to take aim at program requirements is when the program launches, not when it falls apart decades later?

#hypernomics #b21 #innovation

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Time to Double

Most inventors who have an idea never stop to think whether their invention will be saleable when they get it made. Unless a man has plenty of money to throw away, he will find that making inventions is about the costliest amusement he can find.
Thomas Edison

Edison knew. Our invention cost a bundle. But now, 5 years after its patent and 4 years since we used it for equities, our Hypernomica™. software only now reveals its power to the masses.

In the late 1400s, Luca Pacioli likely discovered the “Rule of 72.” As shown in A, with annual compounding, dividing 72 by the periods needed to double an investment gives a reasonable estimate of the effective interest rate. According to Investopedia, “The average annualized return [of the S&P index] since inception in 1928 through Dec. 31, 2023, is 9.90%.” Late last year, Charlie Munger said that “even wealth managers now have almost zero chance of outperforming the S&P 500.”

We wanted to do better than that. And we did, using Hypernomica™ to speed up our “Time to Double” investment (B).

There are worlds you’ve never seen working in their own non-physical dimensions. Hypernomica™ lets you see and work within these previously unseen structures, optimizing your outcomes. Find out what it can do for you.

#hypernomics #innovation

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Market Anatomy: 7D View In Rotation

The whole aim of comparative anatomy is to discover what structures are homologous
Libbie Henrietta Hyman.

In mammalian anatomy, we can find several similar structures in disparate species. In (A), the human arm has the same parts as a cat. Humans and cats have a median or sagittal plane running through the body’s midline, which divides the body or parts into right and left halves. That plane is at right angles to the coronal or frontal plane, one running from side to side, which divides the body or any of its parts into anterior and posterior portions. The intersection of the sagittal and frontal planes forms the body’s vertical axis.

Hypernomics finds similar structures in markets. In (B), the market for business jets, the vertical price axis separates the green Value Space from the red Demand Planes, as in (C), the market for the turbofan engines that power business jets.

Just as mammalian limbs work in concert with the rest of their bodies, the market for business jets depends on the one for turbofan engines. They meet at the vertical price axis. To see this 7D system in motion, go to https://lnkd.in/gvvxVrCq

#hypernomics #marketanatomy #innovation

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Inflation Bites

Inflation is the one form of taxation that can be imposed without legislation
Milton Friedman

Most people have nostalgia for their youth. Being a kid. High school.

Me, I’m rather fond of 2019.

As shown in (A), those halcyon pre-COVID-19 days found government currencies stable. The United States Dollar (USD), The World’s Reserve Currency, found its appropriate resting spot at the vertex of the Outer Demand Frontier while resting squarely on the Upper Demand Frontier simultaneously. As shown in (B), for the six years before 2020, M2 grew slowly (< 1% annually) and predictably.

USG initiatives to keep the economy moving started with COVID-19 and continued for over two years, during which the Fed swelled the growth rate of M2 to nearly 17% annually. We can predict the primary effects of that action on USD in (C). There, a 55% instant increase in M2 drops the value of USD to $0.93 along the Upper Frontier and to $0.51 on the Lower Frontier.

While these movements occurred over time and in relation to other countries’ money supplies, we still feel those effects today.

The amount of currency is a primary determinant of its value. Reserve banks will be well-advised to examine the Demand for their currency before issuing vast amounts more.

#inflation #hypernomics

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All-Time Highs, But

On average, people should be more skeptical when they see numbers. They should be more willing to play around with the data themselves
Nate Silver, founder and editor-in-chief of FiveThirtyEight</small

They stood there laughing/They’re not laughing anymore—The Call, The Walls Came Down

Recently, it seems that everybody has been shouting about the financial markets. It seemed the markets set new records daily this week, which is excellent for those invested in these pools. The best firms and exchanges in the world are doing the best they’ve ever done. A skeptic might ask, is that all there is?

Well, I’m a skeptic.

About four years ago, using the principles I had discovered while writing my book, I took my money and used our software to create the Hypernomics Fund. There may be thousands of viable fund variations, but ours, based only on S&P 500 stocks and always going long, works better than many of the leading names in the business.

A few years from now, everyone will use Hypernomics principles or be behind those that do since it lets you see more of the markets’ inner workings than the alternatives.

You wouldn’t study the stars without a telescope. Don’t research your markets without Hypernomics.

#hypernomics #stockmarkets #innovation

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Safety Pays

We think we know what we’re doing / We don’t know a thing / It’s all in the past now / Money changes everything.
Cyndi Lauper

When trying to increase profits, many companies often chant the same old mantra, “Let’s cut costs.”

Aerospace is not immune to such cries. Recent events at The Boeing Company have highlighted how hurrying planes out the door led to a door bolting off a plane. The no-door idea works for Jeep but is a bad look on an airliner. Many see safety requirements as just another hurdle to jump on the way to making money. It’s a cost once sunk, never to be seen again.

But data analysis tells a different story.

All the excellent work Boeing (before Max) and others did to reduce loss rates increased airliner Value (sustainable prices). Below, the Boeing 737-800 had a hull loss rate of 0.2 per million flights. At less than 1/31st of the Tupolev Tu-204 loss rate, it explains how the Boeing 737 series commanded a higher price and sold over 100 times as many as its Russian counterpart with less capacity, range, and speed.

Diligent workers want to put out the best possible products. Keeping their established quality helps the brand’s Value and bottom line.

Take 52 turboprop and jet airliners (19 shown here) and determine their Value (sustainable price) based on their Payload and Maximum speed in MPH. You’ll get a nicely correlated answer. But add their loss rates into the mix, and you’ll get a better one (its p-value 1.47E-05). Being 10X safer costs time and money but adds over 50% to airliner Value.