Let Dead Ideas Die

Some notions refuse to die, no matter how often they fail in practice. 

Just look at how the related ideologies of socialism, communism, and Marxism continue to grip the minds of the masses. 

I thought we buried these inhuman notions in the 90s – at least in America. But no matter the clear examples of failure, suffering, and abject misery brought on by the implementation of these ideas, they live on. 

Another, even older idea that persists despite proof to the contrary is that technological progress destroys jobs. 

It took root nearly 300 years ago during the Industrial Revolution. Textile automation spelled the end of the home seamstress. But the productivity brought on by this early innovation created wealth and opportunity to pull even more farmers out of the fields and into cities for more lucrative jobs. 

And despite centuries of growth and progress, luddite fears persist even today. 

Especially when it comes to how we think about artificial intelligence. 

Tools Are Agnostic 

I suppose we can blame The Terminator for clouding our thinking. 

Everyone likes a good narrative. And the AI-can-only-dominate narrative appeals to us because it projects our motivations onto a machine.  

But don’t confuse exponential leaps in a computer’s logical ability with motivation. 

We can expect AI to help us make some truly astounding insights. Insights that create opportunities for productive human activity that we can’t begin to imagine from where we stand today. But like all other technologies, AI will never be more than an extension of our will. 

Also like any other technology, AI isn’t inherently good or evil. It’s not communist like Peter Thiel recently stated. It is a tool. Whether it harms or heals lies entirely in our control. 

And whether you cling to the perpetually unfounded fears of luddites is fully in your control. 

Let it go, and you’ll be free to recognize disruptive innovations like AI for the powerful value creating tools they represent. 

And no AI company creates more value for shareholders today than Upstart Holdings (NASDAQ: UPST). 

The King of the AI Hill 

Upstart Holdings is a vertical AI play focused on the banking sector. Its platform takes on the resource intensive approval process for loans. To date, the company has originated over $10 billion in loans, 71% of which were fully automated credit decisions – often instantaneously. 

Founded by a handful of ex Google employees, the company has a couple of years of revenue under its belt. And, more importantly, it’s highly scalable AI enabled the company to generate economic value add margins of nearly 20% over the last year and deliver a return on capital of over 60%. 

I first recommended the stock, along with some call options, on July 26 when the stock traded at around $116 per share. Over the next month, the stock went on a tear, yielding an 88% profit on the stock and a nearly 400% profit on the calls for those of you that followed my recommendations. 

The stock continued relentlessly higher to over $400 per share a month ago. But has now pulled back nearly 50% from its peak, yielding a perfect opportunity to step back into the position. 

So, consider buying shares of UPST. The stock currently trades in the $230 range but could easily pass through $400 per share again over the next few months. It’s a stock to own for the long-term, so use pullbacks below $220 as an opportunity to add to your position.