AI & Faith-Based Investing
Today's markets follow Luther, not Buffett.
“A million dollars isn’t cool. You know what’s cool?”, asks Napster founder Sean Parker. “A billion dollars.”
Otium Den recap:
Parker, played by Justin Timberlake, says in The Social Network. That amplification of financial ambition in Facebook’s foundation story finds a philosophical mirror in today’s AI circles:
Artificial General Intelligence (AGI) isn’t cool anymore. Superintelligence is.
The Knight of Faith
AGI is human-equivalent. It matches expertise in every field but still operates on our terms. Superintelligence is sui generis. It’s unmoored from human logic and knowledge. Sunnier dispositions believe a benevolent Superintelligence heralds a new age of abundance as it solves all humanity’s ills. Others doubt it would feel any moral obligation. An indifferent Superintelligence pursues its own goals. Best case scenario, it treats us like dogs. Worst case, some kind of factory farming.
The concept is clearly God-like and rooted in the West’s Christian legacy. But is it the God of the Catholic Church’s greatest theologian Thomas Aquinas? His 13th-century Natural Law Theory held that God’s nature permeates the world through a rational order. Or is it Luther’s God, who later scorned Aquinas as “the source and foundation of all heresy”, as he kickstarted the Protestant Reformation?
Luther believed that Original Sin, inherited from the disobedience of Adam and Eve, made God wholly distant from the world. We can’t intuit His nature and work towards Him. Sola Fide (faith alone) is the only path to salvation. It inspired 19th-century Protestant existentialist Soren Kierkegaard. He draws on the tale of Abraham and Isaac. Abraham is the knight of faith, willing to sacrifice his son Isaac upon God’s command. Abraham believes, paradoxically, that Isaac will be sacrificed and Isaac will be returned to him through God. Faith suspends rational thinking. It’s ultimately rewarded, as God switches out Isaac for a ram at the last minute.
What does the Book of Genesis have to do with Eric Jackson standing outside Drake’s house last Sunday?
For 90 successive days, the hedge fund manager has filmed himself walking and talking in the Toronto suburbs. Lingering by the rapper’s mansion, Jackson proselytises about Opendoor. He wants Drake to invest in the “iBuying” real estate company, which promises to streamline home buying and selling.
But its model hasn’t impressed markets. Opendoor was a penny stock in June before retail traders took up the baton. The stock surged 500% in July. When momentum faded around the $3 mark, Jackson drew fresh inspiration from his 16 year-old son. He advised him to keep making videos outside Drake’s place until his fellow Canadian joins the so-called Open Army.
Jackson invokes God in calling upon this community of investors. He talks about going through one of the darkest periods of his life last year. Money was leaving his fund, EMJ Capital, and advisers recommended he shut the whole thing down. But Jackson kept believing that opportunity would come. He bears the suffering like Job, telling his followers, “You trust God. You trust yourself.” As God eventually restores Job, giving him double what he had before, so Opendoor promises prosperity to the faithful. Jackson believes the stock is a possible hundred bagger, one that rises 100 times in value.
Market Reformation
The hype is part of markets’ own reformation. The 1990s dotcom boom unleashed a new age of potential. Traditional value investing metrics, P/E ratios and the like, were inadequate in the face of new technology. Evangelists replaced Chief Marketing Officers. Apple’s own Chief Evangelist Guy Kawasaki talked in terms of mission rather than price and performance. Like Matthew, Mark, Luke and John, he was spreading the good news.
Of course, in Apple’s case, this faith manifests in material value. People buy a physical product. But cryptocurrency has moved further along the Sola Fide axis. Bitcoin bulls talk about scarcity but its real value lies in faith. MicroStrategy’s Michael Saylor posts that he is buying Bitcoin every day this week, even as its dollar-value plummets. One AI-generated image shows him on a life raft with the popular phrase HODL (Hold On for Dear Life). Don’t panic, don’t be influenced by worldly forces, because you are part of something greater that defies rational analysis.
It’s also infused with the anti-establishment, disintermediating drive of Luther’s Protestantism. FIAT money is the Papal indulgence system reborn. Believers don’t need authorities to assign value or doctrine. Yet it also promises worldly success like Protestantism’s Prosperity Gospel. Financial well-being is God’s will for true believers. Although bitcoin is valuable in itself, the faithful still tie it to monetary terms. Saylor predicts it will go to one million dollars, a hundred bagger and more at today’s $84,000 valuation.
Faith vs Reason
What is the balance between faith and real-world hypotheses in driving valuations? Eric Jackson sits within these blurred lines. Withdrawing investors accuse him of chasing meme stocks, those that rise on social media buzz rather than fundamentals. But Jackson also gives rational reasons for believing in the stock: proprietary AI technology and a ripe opportunity to disintermediate North America’s broker-led real estate model. The faith of his retail army means they see the bigger picture sceptical institutions miss.
Institutional investors may be snobbish about such theses but they are also guilty of the same tendencies. JP Morgan and SoftBank bought into the WeWork story, converts to Adam Neumann’s polished and zealous narrative that an office leasing company was a revolutionary technology play. If Jackson is a charlatan, what does that make Jamie Dimon or Masayoshi Son?
Today’s frothy AI market, fuelled by retail and institutional money alike, rests on a similar leap of faith. Bulls believe that something extraordinary and beyond our current comprehension lies on the horizon. Superintelligence is the fulfilment of a technology gospel preached for over three decades. Whether we feel sunny or gloomy about its possibility, it promises God-like omnipotence and omniscience. If such a prospect lies within OpenAI’s grasp, then trillion-dollar valuations are merited.
Tell us something we don’t know
Perhaps this seems a convoluted way of rehashing the old adage that markets are irrational. But there is a heightened phenomenon at play here. Faith-led investing is different from overreactions or momentum trading that characterise “irrational exuberance”. Some of it exhibits an unconsciously Protestant mentality - Tom Holland’s argument that Christian frameworks still profoundly shape behaviours. Some of it is explicitly Christian, as per Jackson’s posts. Or in the arguments of Christian bitcoiners like Jimmy Song. He argues that “Bitcoin is a way to opt out of this corrupt, US-centric system which takes value from the poor and gives to the rich.”
Whether you buy Song’s thesis - that FIAT money is readily inflated for the benefit of a small cabal - or not, it’s born of the belief in a divine otherworldliness that all things are possible through God. Faith inspires the persistence and resilience necessary to do extraordinary things. Missions that can be undermined by cynical players.
Look at Elon Musk’s ongoing feud with Bill Gates over the latter’s short position in Tesla. Musk finds it so egregious given Gates’ rhetoric on climate change. Why would Gates try to make a quick buck at the expense of a company that promises solutions? In Musk’s longer-term view, the persistently faithful will get much greater financial reward, along with the external benefits of the company’s success.
Demagogue vs Prophet
But that rests on a generous interpretation of such founders’ intentions. It’s a fine line between demagogue and prophet. Are evangelisers riding waves of faith to secure personal riches? Or are they carrying converts on a journey of abundance? The same question for investors. Will Jackson’s Open Army stick with the stock through thick and thin? Or is it simply a pyramid of belief, dependent on ever more converts to sustain it?
Parker went bigger than Jackson, encouraging Mark Zuckerberg to think in terms of the thousand bagger. Zuckerberg met that target and more, with a net worth of $200 billion today. Technology changes our conception of the possible. What is true today may not be tomorrow. It trades Aquinas’ rationalism for Kierkegaard’s faith. The result? Well, that depends on your disposition. Are humanity’s most intelligent taking us to a new promised land? Or are we simply expedient to their own ends?