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It is eerie still on the Atlantic Ocean in October. It is late afternoon and there is not a cloud in the sky. Makai, a 49-foot, 22-ton sailboat with two souls onboard bobs calmly up and down on the small endless waves coming from nowhere. We are on our way from Bermuda to the blue waters of the Bahamas. Our engine stalled after running for hours on the windless ocean. Yes I know, we should have… could have… but did not check the fuel we bought in Bermuda and now our filters are clogged with slime. Ah relax, chill out, this is what you came to do right? Pick up that book you’ve wanted to read for so long. No! I have raised the sail up the 63-foot mast several times, by hand, only to take it down again because the sigh of wind was just a sigh. I am frustrated. We turn to our GPS system to check our position and… bleep; all screens turn blank. What? The Bermuda triangle is supposed to be just a story, right? I rumble through my books and find one on celestial navigation. It has been on the boat for many years along with the missing sextant. Celestial navigation, really? I will wait for wind and sail west, just like Columbus did…
It is 1957. Sputnik, the first manmade soviet satellite, is launched into space. Two curious American physicists figured out how to track Sputnik by following its radio transmissions back to earth. While doing this they figured out how to track something at an unknown location in space from a known location on earth. Wow! The U.S. Navy asked if they could reverse the process since they wanted to track their missiles and they did. This process culminated in our current Global Positioning System (GPS), which was launched in 1970 and made available for non-military use in 1983. Today’s applications are numerous and many companies around the world made and will make fortunes off its technology. Just imagine reading a book in a self-driving Google car without it.
You see, we have come to rely greatly on robotics and the smart algorithms that control them. They are all around us and we often trust their technology and mechanics with our lives. Yet, when it comes to investing and wine, we remain very skeptical. Bordeaux is a wine region in France where wine has been produced for hundreds of years in more or less the same way. However, quality and price have varied substantially mainly due to weather variations. A Princeton professor wrote an algorithm predicting the quality of aged Bordeaux wines using detailed historic weather data. It was able to predict prices quit well much to the chagrin of the experts, who dismissed the algorithm as a hoax. This is much the same with investing. Stock markets have also been around for hundreds of years in more or less the same way. Prices vary mainly due to our collective mood swings. Algorithms do a great job filtering out biases, handling huge amounts of data and are getting better at predicting. Market connoisseurs talking about yesterday’s moves and tomorrow’s stock prices keep appearing to know it all. They should watch out, “GPS” for investing is coming.
For now, sniffing out that special bottle or that special company still requires much more than a robot can offer us. Just realize that if Columbus and myself had had working GPS-robots onboard our sailing would have been so much easier…