How to Amplify Your Capabilities Like Elon Musk

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Hey, welcome to another episode of Capability Amplifier. This is Mike Koenigs. I'm here today with a very good friend of mine. His name is Howard Getson. And before we get into the interview, I want to set this up because the title of this podcast is Capability Amplifier. And that's really what this episode is all about. So here's the preamble. The most valuable companies in the world today are built on top of platforms. For example, the Apple App store grossed over $72.3 billion in 2020. Amazon Web Services produced 45.3 billion in 2020, which represents 63% of the operating profits across all of Amazon. Now today you're going to learn how Elon Musk has created platforms with Tesla, SpaceX, and now Starlink. And there's a pattern here, and we're about to see it repeat in the world of artificial intelligence, which will impact many industries, including trading. So if you want to find out how you can turn your ideas into profitable platforms, you're going to love listening to Howard Getzen and seeing him if you're watching this on YouTube. Now, Howard is the CEO of Capital Logics. They help businesses use artificial intelligence to make better decisions. Now you're going to learn a simple four step system that you can use to turn big ideas into profitable platform businesses. And who knows, you might be sitting on top of the next App Store, Tesla or SpaceX. So, Howard, great to have you here today.

Oh, thanks, man. It's been a lot of fun being here in San Diego with you.

Yeah. Oh, for sure, for sure. So I think the best way to get this thing rolling, and I know we're going to be talking about some of the stuff that we've been talking about, but you really impressed Dan very recently with the body of what we're going to be sharing today. And that's one of the reasons we decided to make this an episode.

Yeah. Interestingly, you know, the, the concept of getting to next or recognizing what's possible and then scaling that and really thinking about what those capabilities make you desire.

Leads to platform thinking. And it's a really simple technique if, if you're familiar with Strategic Coach and you understand the concept of 10x. Right.

Taking something from a capability to a prototype to a product to a platform are 10x multipliers again and again and again. But it's a great way of thinking so that you imagine what's possible, not what you have to build, but what the territory is going to look like so you can figure out where.

You want to Add value where you want to play. If that's going to be the future, then this is what I could do to be a part of it. And it's. It's just a great way to increase the probability of scaling your business while still focusing on your unique ability and what you love.

Okay. And one of the things that we're going to do today, that's very different, I'm going to encourage everyone to follow the liner notes, or if you are not watching this right now, I'm going to give you a link to follow to actually go and see this presentation, because the visuals are going to make a big difference. And that is capabilityamplifier.com capital. Okay. Made it really easy. So again, capabilityamplifier.com capital take you to this actual video. So, Howard, we're going to take a look at the screen right now, and let's just dive in. Okay?

Yeah. And at the end, I'll give people a form where they can use it to plan their own business and, in a sense, imagine the future.

Right on. Okay, let's do it.

All right. So for me, this is a story as old as time. It starts with a concept that says, change is coming. There's going to be new winners and new losers. It's obvious actions have consequences, but so do inactions. The challenge is you're the hero of this story, and your job is to figure out what's the best next step. In order to do that, you have to figure out, where are you, where do you want to go, and how are you going to get there? And in a sense, this presentation is really designed to make that a lot easier to figure out. Abraham Lincoln said, the best way to predict the future is to create it. I love that quote. And so many of the best entrepreneurs embody it. Steve Jobs, Elon Musk. As we were driving here, I was amazed at how many Teslas I saw.

Years ago, I would never have thought about driving an electric car. In fact, Prius was a joke, right When. When somebody said Prius, it almost meant negative things. And yet the concept of Tesla didn't just show up with a shiny red car that goes from 0 to 60 really fast. It had to start somewhere. Every process has a beginning, a middle, and an end. But something had to be the very first step. And in a sense, it's a new capability. So as I think about what caused somebody to say, ooh, I think I could build what ultimately became Tesla, it could have been the battery. It could have been the concept of an electric motor or an industry of cars that was driven by clean power because of all the carbon footprint stuff. But something was the beginning, Right. I've created a diagnostic that looks at Tesla and starts to say, all right, so let's examine their business and say, what was the capability? Assume it's the electric engine, right? The first thing you think about are constraints, right? In Strategic Coach, you do danger, opportunity and strength, or you do a strategy circle where you say, what are the constraints and what are the strategies? So as soon as you think about an electric engine, as they started to create this, you realize that somebody says, well, how much power is it going to need? Somebody said, is it safe? But as they start to stack the capabilities to the point where they can create a prototype, they have a new constraint and they're like, how far does it drive? Right. If it doesn't go 300 miles, nobody's going to want the car. And ultimately, when you think about the little clown car that was capable of going around a track for 300 miles, it had to be cool enough that somebody was willing to put up with the risks of this new platform. So they had to make it cool enough that it was worth the hassle.

Yeah, I know one thing I. When I first got mine, what sold me on the roadster and I bought it.

This, the line I heard was the fastest way to sell $125,000 car. Elon said, oh, in two. At the point, 3.7 seconds. That's how fast the roadster went. He said, floor it so you can make a buying decision less than five seconds.

You mean 3.7 to get from zero to 60.

That's correct, yeah. Yeah. And that was. And for me, I was willing to put up with the fact that I had to be local because there was no Tesla. You know, there weren't chargers all over the place at that time. It took all night. Charge the car because there weren't superchargers. My. They said I could go 190 miles. The truth is, the way I drove it, which was wide open all the time, I maybe got 90 miles. But the thrill of the car was worth it. I was willing to be an early adopter, but I know that we're not talking about mainstream.

No, no, but. But you are, because in a sense, that's a prototype, even though it looked like a product. Right on. The whole point of this model is that it's fractal, and that means that you can see it at the smallest level of magnification or bigger and bigger. So that first Car was cool, but it's like YouTube videos if, if you're not embarrassed by the one you did six months ago, you're not getting better fast enough.

That's right. Well as you say in the diagram, you know, it, its drivable distance didn't. Well again, 200 miles. It depends. Depends. If you drove like a grandmother, you drove like me, and then was it worth the hassle? You know again, the fun factor was worth it. But you're right.

So a new capability has to unlock a new level of performance or value. Right. In a sense, when you're thinking about a new technology, you're thinking about does it help me do what I already do, but better. It has to incrementally be better or who cares? Right. So when you get to a prototype, you, you, you can think of this as the 8020 rule where you're trying to do 20% of the work to get 80% of the benefit. It's a weighing machine. It's like something that says is it worth spending more time or energy? And if they couldn't get people like you to buy that initial car, then they wouldn't have thought, oh my gosh, I could create a whole line of cars. Right. But as it becomes like a full blown product, mass transportation, all of a sudden, they had to figure out things like how are we going to update the operating system and how am I going to create enough charging stations so that Mike doesn't get stuck in a cornfield in Iowa on his way to Minnesota. Right. Because those would have been inhibitors. Right, Right.

Yeah. And if you taking a look at the product, so from new capability to prototype to product, which as you said, okay, so it's affordable. The auto updates, which is really pretty remarkable, the charging stations, the superchargers and also the distribution.

Yeah. They had to come up with a dealer network because if you bought one, you had to be able to fix it. Right?

Yeah.

And then as it becomes a platform, then all of a sudden you realize that the US is going to have self driving capabilities across the spectrum. So the US has to start to build electric car infrastructure into the roads. That means that all of a sudden there's lobbying, you've got to work with state governments because who's going to buy a car that you're not allowed to drive in Nevada? I mean there has to be a whole lot of stuff. But as you're thinking about going from a capability to a prototype, you can think about making dramatically more amount of money when it becomes a product. The key distinction for me with a product is you want people you don't know to be able to enjoy it doing the thing you anticipate. But as it becomes a platform, people you don't know are going to be doing stuff with it that you didn't anticipate. And you have to think about how to refine the unique ability enough that you're really focused on what's valuable enough that people want to build on it.

Right.

And by anticipating the constraints, you can develop strategies. The key is this is not about building, this is about understanding the capabilities. Human nature says as soon as I have this capability, I'm going to want this one. And as soon as I have this one and that one, then I'm going to want the other. And it's all about being able to predict human nature rather than technology.

Great. So, and I'm going to add something here because in the diagram and we'll, I'll display it right now, is when it became a platform. As you say, it's a new empire, the energy business, self driving capabilities, the US electric car infrastructure. That's when it really became a platform. Some of that came from the fact that Elon and Tesla started licensing their patents at no charge and they also allowed anyone to model or use the supercharger connector cable, for example.

But let's talk about even the fact that you just mentioned the energy business. In many respects this business was a weighing and measuring tool that let him figure out where there was interest. But one of the things where there was amazing interest is the energy business. And Tesla's becoming a clean power company. And they're going to end up having massive business much bigger than their current car operations. Simply with that. My guess is they're going to license the self driving capability to other manufacturers. Because why would somebody invent it themselves if they can license that, they'll do the same thing with the ability to update the car operating system. And many things that were backstage just strategic byproducts of their operation become huge other businesses. And this is really where this model comes into play, is starting to think about how capabilities can be combined to create new things that create new audiences that become the platform that whole new industries are built on. And it can happen again and again.

Well, yes, and I was just thinking about this, which we didn't put in the, in your slide deck is the fact that Tesla has their solar side. They bought the solar company and they've got the powerwall, the batteries which they leveraged on top of the car platform. And you'll see that continue as well. So again, there's so many industries, can't.

You imagine them even licensing some of that back to the government? Of course. So the concept here isn't about Tesla, it's about the, the exponential thinking that's really focused on capabilities rather than technologies and how it's going to make people greedy for more. But as you can anticipate what people are going to want, you can figure out where you, as an entrepreneur want to play.

Right on. Okay. And I think what's going to happen next is we're going to go through how this is done with SpaceX and then we're going to switch gears a little bit and talk about how AI is doing the same thing. So keep on rolling.

But in a sense, it's about creating new worlds or new opportunities. And.

I have something that I typically say, be so good at something, it requires a new name to describe what you do. And you said it with Tesla. He created a feature called Ludicrous, which is when you floor it, it goes from zero to 60 in a ludicrous amount of time. But this is part of what you want to do, is figure out a capability that's so valuable that it's a demand creation engine.

Right.

And build around it. So you go from capability to prototype to product to platform, and it happens again and again.

Right on. So, yeah, I'll give you one, one more example. I told you this earlier, we call that a category of one brand because when iPhone came out, right now you can just say smartphone or iPhone, everyone knows what it means with one word. But if you went back in time 100 years and tried to describe what an iPhone was, you'd have to describe many, many layers of technology to get the point across.

Yeah. On the other hand, for the people listening, think about the one capability that if you solve that or you added it, it would unlock a whole host of new opportunities. And it's not about something that you have to build yourself. You can build it, you can buy it, you can license it, you can partner, you can collaborate. All you have to do is recognize that you need it. But let's talk about SpaceX. It's a great way to do the same thing again just to show the platform. So when Elon got involved with SpaceX, there was this thing called the Anseri X Prize. Right. And it was a cloud crowd based innovation prize that said you get a certain amount of money if you can figure out how to vertically take off.

And land and reuse the spacecraft.

Yeah. So in A sense, though, it's about privatized spaceships. It's saying governments haven't done what we really think, but we know that this is the capability that's going to unlock new worlds. Right. So there was a couple constraints. One was funding. Another is there was no new tech because there wasn't funding. It didn't send the economic signal to entrepreneurs to say, spend your time, your money, your energy. And the other thing is, it was super expensive to try to send stuff up into space. Right. So once they figured out how to do a little bit of the vertical takeoff and landing, the next step is to prototype. And. And now once you can do more than just take off and land, you actually have to get to space and accomplish some missions. But then you have to be able to land safely. A couple reasons. One, because you want it to be reusable, but even more importantly, because if you have a goal of getting to Mars or having people go into space, they probably want to get home safely. Right. Right. Now, Elon Musk has recently said a lot of the people who go to Mars first are going to die. So that's a pretty limiting factor. On the other hand, it's about rapid iteration, and they don't want that to happen a lot.

Yeah, some people would be willing to do it.

On the other hand, think about how many new capabilities they had to string together to get a prototype of something that actually went to space. And if you, like, do a Google search for Elon Musk SpaceX and fail. There's many, many, many failures. But the point is, they did rapid iteration. They're learning from what's going on. You know, experience Transformers, what did I learn? What am I going to do differently? And they've now got it to the point where pretty much you expect the rocket to go to space, do what it's supposed to, and get back. Yeah.

And I'd go so far as to say Elon was smart enough to get the government to pay for the development and the prototypes and use it. And of course, creating Starlink, he's using his own technology to launch satellites. Yeah.

But realize that. And I'm gonna make up one of the names. The Falcon rocket or whatever. Yeah, yeah, they thought of that as a product, but really that's a prototype for what's coming. Even though it looked like a product at the moment, it really was just part of the grander plan. And the real plan was.

Space transportation, not just space travel, space transportation. And I think what you're going to find out is they're going to make a whole bunch of money bringing stuff into space almost as a delivery service for the space station. If you're going to build a habitable environment on another planet, how do you get the materials there? Well, they've already reduced the cost by one tenth of what it used to cost to get something into space, which all of a sudden changes the economics of the space business. And I recently saw a chart that says there's now over 10,000 companies devoted to the business of space, and almost half of them are in the United States. So the bottom line is this product has started to spawn a new industry. And if you think about the platform, the platform is to commoditize space travel. But you realize very quickly.

Almost like Amazon, where it started as a bookstore, it then became an online marketplace. But now Amazon makes so much money with Amazon's cloud or their AI services, or so many of the other features that were. Again, backstage, I think you're going to find out that SpaceX makes a ton of money being the delivery service, that that helps all the other companies actually do business in space. But they're also going to make a ton of money being the new communication form with Starlink, where all of a sudden they are literally creating new worlds. The scope and scale of what they're doing is astounding. They're trying to solve problems off world. They have to think about the wild, wild west of infinity. And if they build something really cool on Mars, what's to stop China from taking it? They're going to have to build security. They're going to have to build defense. They're going to have giant, giant businesses that have nothing to do with vertical takeoff and landing or reusable components. But it's almost like the gold rush of 1849. Some people made money as miners. They were speculators hoping to pan for gold. And other people made money selling booze and hotel rooms to the miners, picks and shovels or.

And then later on, mechanical, like, they started automating stuff.

But, you know, Wells Fargo actually started as the wagon service that would safely bring your valuables somewhere. So it was protection, and it became one of the biggest banks.

Yep.

Right. So these capabilities turn into prototypes, become products, become platforms. And what I'm encouraging people to do is start to think about how these new capabilities are going to start to stack to create the product of the future. And then how that product is so good. It doesn't just change the game you're playing, but it causes people to come to you with ideas and Money and say, wouldn't it be cool if we did this or that? It's, it's getting to the point where the idea is good enough that people you don't know start to use it in ways that you never anticipated. And all you do is smile and say, that's awesome. Right? Yeah. But realize people rarely try to accomplish something they don't believe is possible. And it's, it's a framework like this, it's working through the logic where you think about what's the capability and what's the constraint that makes it possible. And as an entrepreneur, this is really the entrepreneurial challenge of getting to next is constantly saying what's possible? And then how do I take something that's possible and make it likely? How do I take something likely and make it more likely? How do I take something that's that likely and make it inevitable? And then how do I take the stuff that's inevitable and do it more efficiently, more effective, or with more certainty so that we get to next faster?

Well, I think if you look at what Google did, for example, the secret was we were all beta testers since the very, very beginning. It's iteration, iteration, iteration, which is, back to your point, a prototype, sell a prototype. That's what Elon did and Tesla did so well, and they've done it with SpaceX as well.

But when they started the search, do you think that they thought about AdWords? No, but it's a massive business. Did they start to think about all the location data and the tracking and how it was going to be monetizable? No. They created whole new industries. But as soon as they started to figure it out, all of a sudden they started to deploy resources. They spent time, money and effort starting to imagine the bigger future and what they were going to have to do to send a signal to people who were going to collaborate with them or invent new stuff that simply made the space more valuable? Right on. Yep.

Now it's impressive. All right, so next one.

Yeah. You don't have to predict the future. This is not about figuring out what technology is going to do. This is about understanding human nature and saying, as there is a capability.

What is it going to make people greedy for? What's the likely next step? And then based on that likely next step, what products, services or offerings are people going to want? And as that matures.

How is that going to create a platform that people build on? And then you can think of that in strategic coach terms almost as, who do I want to be a hero? To four steps into the future. So each one of those is a future DOS target. Right. It's a future hero that you want to do a deep DOS insight to figure out if I'm at stage two or if I'm at stage three, what are the dangers, the opportunities, the strengths, what capabilities would we have to have? And you're going to end up figuring out not only capabilities, you're going to think about the constraints, the milestones, but also the evidence of success, which means the key metrics that let you know you're moving in the right direction. And the trick is, and I'm going.

To just stop for a little bit of decoding here, which is.

In strategic coach speak, D is dangers or opportunities. S are strengths. You're good. And that's all. It's a framework that Dan designed for identifying opportunities, solutions, but also constraints, problems. But we also use it in sales tools. So it's a really, really powerful framework. But keep on going.

But for me, when you think about the. The current state of where you are, and then you think about what would somebody need at stage one, two, three, and four. Right. Again, the capability, the prototype, the product and the platform. It allows you to envision future states of customer and what capabilities are going to need to be developed. And on a longer term, it creates a product roadmap.

Drawn in pencil. Right. But on the other hand, it's a North star that lets you know whether your activities are aligned and moving in the right direction. And again, the thing that I want to make a big point about is it's not about creating the better technology. It's about figuring out what's going to get adopted. Okay, so you don't. It's like the Betamax versus the VCR. Beta was better VCR1 because of adoption. But in this case, you don't even have to invent the vcr. You only have to figure out what's going to win and what you want to build along that path. So now I want to explain the framework more directly for you. It it turns out that since the beginning of time, humans have been confronted with radical new technology. It started with the fire and whee, Right? And since then, time and technology have continued to bring us disruptive technology after disruptive technology. And even though all of those things have changed, human nature hasn't. Right? So this is really about figuring out human nature. Stage one is basically saying, so what? Who cares if there's a new capability? The caveman part of our brain is saying, if it's not important to my survival, then I don't have time or ability to focus on it. So it has to help me do what I'm already doing or play the game I'm playing better. But the metrics that help us figure that out are typically based on efficiency, effectiveness, or certainty. You're trying to save time, effort or win more frequently. Right. As soon as the new technology does help you do what you already want to do, just better, then you move to stage two. And, and again, this is like a 10x multiplier, but really it's a value creation step that says, as I start to combine capabilities.

What could I do? Or what should I do? So instead of how do I do what I've already done, you start to get greedy and say, well, what could I do? Or what should I do? Stage one is typically about you doing what you do. But in stage two, with a prototype, you're sharing it with your team, right? So the capability is now good enough that it spreads to other people in your office or directly in your control. So in my model, this is people you know doing things that you understand.

And I would add that in an amazing business, you've got the guts to sell it. Also, like going back to what Tesla did, what SpaceX did, and most tech companies, you know, they understand how valuable it is to build a community and connections with the prototype. And in the case of like a Google or a Facebook that's built entire industries around their products too, later you're.

Going to figure out you were selling a prototype. But at the beginning, it's probably helping you do what you already do to make money. It's just helping you be more profitable or more successful at doing it right. You're still playing the same game, just with better capabilities and better results. Stage three is when you're really inventing yourself. You're proud of the new capabilities, your new identity, and you want to express it by creating a product, a service or an offering that is strategic and unique, that takes you out of that competitive red ocean and separates you from the pack.

It changes your reputation, it sends a signal to the market. But the truth is, you're now having people you don't know use your product to accomplish things you do know. But you're playing a new game because you're no longer doing it directly. And it means you need new metrics, new KPIs. And if you're still using the same KPIs and metrics as before, you're not really optimizing, you're not steering as skillfully as you could. Stage three is a huge multiplier opportunity, but the even bigger multiplier opportunity is when it sends a signal to the market where other people are like, wow, I, if, if you do it this way, what if we did it that way? Or could you also do it here? Can I do it there? And so stage four is about transform because it changes the game other people play and it changes the playing field. This is really the platform thinking and this is where way more than 10x is possible because you're no longer responsible for doing it. You are not even the limiting factor. It's really about free zone collaboration. And you have to get really smart about what core capability is. Simple enough that it sends the message to others that are like, I really want to build upon this. Because this changes the game for me. It attracts a whole new audience and.

Causes growth to happen in unanticipated ways. You've seen it with electricity, you've seen it with the Internet, you're about to see it with AI. But when somebody invented electricity, they probably knew it could light a light bulb, but they probably didn't think about how it would help pick cotton, or how it would transform the.

Vacation industry in Alaska, or make places that didn't used to be habitable. Habitable, habitable. I mean, it changed everything. The Internet's the same way. I remember knowing that the Internet was going to be huge, but it would never occur to me that it would cause me to stop going to movies in a theater, or that I could buy a car, have my car updated based on it, or that compusa would go out of business. But on the other hand.

It'S still having massive impact. Well, AI is going to terraform the planet in the same way, but so will blockchain. So would so many other things. And the thing is, for everybody listening to this podcast, it's just as true for them as it is for you or me. And the only thing that's different is what you decide to do with it. So. Right.

And I'm going to add one quick thing here with regards to the platform and just remind everyone, I think one of the best examples of that goes back to the App Store. I remember when Apple decided to make the App Store available to outside developers, because prior to that, you just got Apple apps and suddenly we had a multi billion dollar industry. And that was one of the biggest gold rushes. And you look now like most of us do our banking from our phone, we are paying our bills, it's changed the credit card industry. Now with Apple Pay, Apple got into the credit card business. And you know that's how you get.

On an airplane, right? I mean, it doesn't even occur to me to go to the ticket counter anymore. I mean, and the interesting thing about banking or airlines is think how much it radically changed the economics of their business. Or Zoom. Think how Zoom decimated a whole layer of business travel. Because if you can have the same conversation.

Digitally, why take the time, the effort, the risk, and the fact that you can't do anything else when you're doing that? I mean, it changes everything.

Yes. I've got one something I can share. A friend of mine, I won't mention his name because I don't have permission, but he just did a big, big event.

And I said, how'd your event turn out? Now, his industry, he was always doing live events and he'd make millions of dollars per event. But his response to me, I said, how did your event turn out? And he says, abs. And by the way, it was all done completely via Zoom with because of capacity. Now he can have hundreds of people instead of a hundred based on something that was high touch in the past. He says, abso freaking lutely. Crush it way exceeded everyone's expectations. My own even blew everyone away and did a $7.2 million in backend. Where in the past it might have been two nuts. Love this new world. Now he's not everyone. But this is consistently people who adapted to the new standard, the Zoom standard. It's a pretty, pretty good example of a new platform. And it took a pandemic to flip the switch. But look at what happened to Hollywood. We've all been looking for it, but Hollywood resisted the desire that we all had, which is, I want to watch a first run movie in my house, and I'm willing to pay a premium for that. I don't want to get up and go to the theater. And now the world will never change again.

Yeah, well, the world will never be the same again.

Never be the same again. You're right. Yes. That's what I meant to say. Good job. All right, let's review the model.

But it's also like a who, not how model. Because in a sense, in the old days, your business was based on what you did or what you can control. And we're now getting more and more comfortable that many of the things that I want to do. The trick is to find somebody that it's their unique ability and collaborate digitally or let them do it outsourcing. But the next concept is to recognize that technology can be the who. You could develop AI or automation that does exactly what you wanted to hire, but it's going to change the economics of your business, because if you have a digital employee that does that capability, it doesn't come in sick. If you didn't use it last month, you don't mind paying for the electricity that it took to monitor. These are all dramatic multipliers that are creating new possibilities. And you just have to decide, here's where I am, here's where I want to go, and here's how I'm going to get there. And instead of figuring out all the things you can do, you want to figure out what capabilities you want to acquire the ability to do, even if you don't do them yourself. Right.

And I'm going to just rephrase what you just said as you cue this up, because I know we're going to go through the AI model. But in the case of an AI, you can have, it'd be like having a thousand different specialists work for you. And if you had a traditional business, you'd have to pay for all the specialists all the time, even if only three or five or seven of them were being used. And the AI model, you can have all these different minds ready, waiting, observing an opportunity where they can add huge value and create huge multipliers, literally at the speed of light, not at the speed of human or as you like to say, meat suits.

But that's really what we're going to move into right now.

Sure, but it doesn't even have to be AI. It's just technology or automation. You do it with your website, you do it with a chatbot, you do it with a funnel. Write a landing page. A landing page is like an employee who's there to greet somebody and get their information so you can follow up. That used to be my assistant. It's amazing that we have something that works 24 hours a day while you're sleeping. It never makes a mistake. It doesn't come to work with a hangover. It doesn't have relationship problems. And you can continually make it better instead of focusing on the technology that makes that possible. The trick is to focus on the capability that you want. And then how, if you add that capability to another capability, what does it let you prototype? What product does that make possible? And then what are you going to build on it?

All right, let's show it off.

Yeah. So let's talk about my own business. I'm an entrepreneur, and, you know, Capital Logic started in the year 2000. And I had just had a successful exit from another AI company that I ran for 10 years. So I ended up double digit millions. Turns out my dad had just died and I inherited some money as well. And I was in my very young 40s, but I started to think about.

Maybe I could retire.

But you know, being an entrepreneur, it's almost like I had to join a.

A special group that says, hi, my name is Howard and I have to start a company. And it's either you know, EO, the Entrepreneur Organization or Strategic Coach or Abundance360. But somebody who. That certainly was not done right. So one of the things I wanted to do was make more money with my money. And I got really involved in trading. This was, remember, late 90s, early 2000s was a giant bull market. In the same way we're seeing everybody talk about crypto, crypto and NFTs and how cool it is back then everybody was wearing the black fake turtlenecks, drinking wine and talking about Internet stocks, right? And it's really easy to find a good stock in a bull market. But so the first new capability that I really wanted was algorithmic trading systems. A way to systematize the decision to buy or sell. So what to buy, what to sell, what markets to trade, what techniques to use and how to do that to be more consistent, to improve.

Well, really to eliminate the fear, the greed, the discretionary mistakes that the meat suits bring to trading. And as we started to do it, I got greedy, right, because the capability makes you want more. And I said, oh, instead of having one, I want to be sensibly diverse. I want to have multiple techniques on multiple markets and multiple timeframes. And ultimately I wanted to do algo trading at scale. And we invented a new capability that I thought was a strategic byproduct at the time. We called it omni testing. And it was the ability to test an algorithm on every market and every timeframe and to save the results so I could see what was skillful and what was lucky. But what happened way faster than I ever imagined is we became paralyzed with too much data.

And we realized that not only did we have too much data, but the data wasn't clean. We didn't know how to keep it up to date, we didn't know how to fix it, and we didn't know what to do with it because we weren't data scientists. So even though we had this capability, we had these constraints that called for new capabilities that needed who's not housed fast forward a bit. And we now have a product that is a hedge fund that is run with truly autonomous AI. And frankly, you know, I was in strategic coach 20 years ago, but. But in the early 2000s, in fact, I think it was 2004, they were doing this thing called the Bigger Future. And I wrote down my 20 year plan and I talked about the concept that seemed totally science fiction to me at the time, but it was this concept of a wholly autonomous AI that would figure out which markets to use, which techniques to use, what risk levels, what allocation strategies, and to turn these tech techniques on and off based on what's happening in real time all the time. And again, it was science fiction. And it took about 15 years, not 20, but we've truly done it. And as soon as we did, we realized that the product isn't really the product, it's the prototype for next. Because instead of doing that, somebody says, well, couldn't you do that with crypto? Or could we do that as with a currency fund or a metal fund? Because gold is, you know, doing what gold is doing. And then we realized, you know, the strategic byproduct that lets this be possible is something that internally we call the Capital Logics Insight Engine. And that's just a strategic coach naming tool to create a name for something that's less tangible in real life. It's thousands of equations, algorithms, automation, testing, tool validations, recipes for success, execution capabilities. And as I start to talk about it, even my eyes start to glaze over. It's like a Charlie Brown movie where the adults talk and you hear, wa wa, wa, wa, wa wa. And as an entrepreneur, I realized that nobody cares how we do what we do. They care about what they get. And so as I thought about the Capital Logics Insight Engine is kind of a noun, this thing we're building. But what we wanted to do is think about the verb, what are we creating? And the answer was amplified intelligence. The ability to make better decisions, take smarter actions, and continually improve performance. And then it hit me in another Strategic Coach session. Everybody wants that. It has nothing to do with hedge funds, in a sense, by me being so myopic and thinking selfishly only about the thing that we do. I've been rewarded by that my whole career. As you get more and more focused, people clap. But at a certain point you have to say, what does it cost me? And it costs you everything else. So this capability is something that could be easily used to create many products in many industries. And I recognize that the next scaling for us is all about Collaborations with people who want to use it to enhance their unique abilities in other places.

So the bottom line is you've got an AI that can be repurposed, reused, and licensed to just about any industry.

Yeah. As a platform. And so that's really where this tool came from, was the ability for me to think about where had I come from and what was next, and to think about what were the likely constraints, the milestones and the key metrics that were going to make it possible. And because of that, we realized your imagination is your ultimate competitive advantage. I wanted this framework to unleash your imagination, and I created it to help other people think about how they would use AI to expand their platform. And so we created this form that we call the Technology Adoption Model for entrepreneurs. But it's really what we've already gone through in each of the examples today. It's about a new capability. The so what? Who cares? That creates a prototype. So it's what's new or what. What could I do or should I do? That creates the product.

That then becomes a platform. And so we're making this available to all your listeners. They can download it. It's part of that download that they'll get with the slide deck. But my goal is to challenge people to say, you can do anything you commit to. And I want people to think about a bigger future, think about the capabilities that it's going to unlock so much more. And I want to figure out how we can help.

That's awesome. So I'm going to ask you a couple more questions and also translate this for someone who might be either listening or watching and saying, okay, how can I use this right now? And my shortcut is if you take Howard's form and you fill it out. We've been doing this with a client right now who's also in the money business, but they've developed a really amazing way to sell, and they've used that internally. They've raised billions of dollars in the industry. And I'll just tell you who it is. It's Dakota, and it's another member of Genius Network and strategic coach. His name's Geek Austin. So they've raised billions of dollars and. But it's always been used internally. And the conversation we had is, why don't we leverage your IP and create a training program, which in turn can become a recurring income stream that has a software component, a data component. So they're selling their. Effectively their secret sauce and their process, but enables them to scale and also stabilize revenue.

And.

And they also are building a community in the meantime. And the offshoot of creating a successful platform with lots and lots of highly educated salespeople in itself can be an ecosystem or an economy in itself. Right?

Yeah. But what you're really saying is if you apply this model with short term thinking, you might be saying, what capability would I have to add to what we already do so that I can have a strategic and unique product that attracts somebody that wants to do a joint venture that's in a slightly different space and you don't even have to think about Tesla or SpaceX. It's really about how do I get out of my own way and make it so that we're not the biggest constraint, so that you can, you can take what you're great at and you can be the whole that does the how for somebody else, rather than only thinking about finding who's to do the how for you.

And I think if you spend a little time thinking, you might have to listen to this again, watch it again and take a look at the form, which by the way is@capabilityamplifier.com capital. That's where you can download the form, some more details. You also learn more about Howard and his organization. But.

I remember when I first saw this, I was like, Howard, you've got a great model here that's easy to understand, applicable. And we did go into a lot of detail, no doubt about it. But I've got two more questions for you if that's all right.

Sure.

Okay, so the first thing is.

In a conversation we're having earlier, you said that 99% of all trading is done electronically. Okay, 70% is algorithmic trading. And then you're doing AI based training. So what's the difference between AI and algorithmic trading?

Okay, well.

Let'S go back. First I talk about something I call the new new world of trading. And the reason I do that is the old world of trading is when people traded against people. And if you think back to like movies you've seen of the stock market, you saw people in the trading pits waving their arms and transacting. And the markets themselves represented the collective fear and greed of people of populations. It was the law of large numbers. The new world of trading is when all of a sudden computers let you do it. And all of a sudden it became a huge advantage to have a faster computer or access to more data.

But then it became algorithmic and you started to use equations. And these weren't really smart equations, but they're still equations. And it could Be a moving average or a Bollinger band. It was a way to calculate the probabilities or the risk to reward. It was just a way to eliminate fear, greed, discretionary mistakes, and automate best practice. And so if you think about, gee, in a business plan, this is what I say I want to do. If you automate it, then best practice can become common practice. But with AI, it's really a new, new world, because all of a sudden, it's not based on what humans used to do. It's based on trillions of observations or things that we just don't have enough life spans to become that good at. And I would estimate that less than 2%. In fact, it's far less than 2%. But I picked 2% because I figure people will listen to this for a while, but far less than 2% of real trading is real AI. And by that I mean something that's learning and making distinctions and evolutionary. But the thing is, is if you came back in five years, that number is going to be much higher. And if you came back in 10 years, it's going to be even higher. And so there's an incredible opportunity right now, if you understand it's inevitable. I'm not telling you what algorithm is going to win. I'm not telling you which markets are going to do the best. I'm simply saying focus on what's not going to change. Right? The things that are going to change are markets are going to go up and down, algorithms are going to go in and out of favor, and new, better ones are going to come. But if you start to figure out how AI can help measure what's making or keeping money, all of a sudden it changes the game from being about guessing and taking tentative action to knowing and taking certain action. And you can do the same thing in your industry. It doesn't have to be trading.

Thank you. That's great. So just to wrap this up then, for people, beyond getting the form and learning more about how to use it, how do people get a hold of you? Get hold of capital Logics, learn more about what you guys are doing from a platform perspective, but also from. To learn more about the fund, go.

To capitallogix.com we have a website that makes it easy to figure it out. CapitolLogix is C A P I T A L O G I X. There's only one L in the middle. We also write a weekly newsletter for clients, but for your podcast, people will get it to them for free. On Fridays, we send a list of curated links everybody asks who does it, it's really me. It's the stuff that I read over the last week that I thought was the best. Some stuff is about new technology or life, and then some are about money and markets. But it's a really good list. And then on Sundays, we do a thought piece. Anyway, this has been a lot of fun, Mike. Thanks for having me on and I look forward to seeing you again soon.

Yeah, you got it. Thanks. It's been a pleasure. And let's say goodbye. Thanks for watching. Watching everyone.