August 16, 2023 • 36 mins
Cracking the code towards making profits in commodities. Have you ever wondered how commodity investors navigate the complex world of algorithms to make profitable decisions? In this video, we'll be discussing the art of making profits in commodities with Noah Healy. Look no further! Noah Healy, a visionary in his field, has developed an ingenious system that demystifies the intricate algorithms behind commodity investments. Tune in as he unravels the secrets to understanding these algorithms and shares invaluable insights that can lead to significant profits. Beyond his remarkable technological advancements, Noah Healy is on a profound mission – to construct superior markets that contribute to a more prosperous global community. Through his dedication and forward-thinking mindset, he envisions a world where wealth is more accessible, opportunities are optimized, and markets operate at their highest potential. Stay connected with us:
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hello, Welcome to another episode ofnight Be Media's Living the Dream. I'm
your hosting moderator. My name isGregory Tucker. I know it has been
a while we've been working behind thescenes and getting more guests to come on
the program and share their story.So in the upcoming episode, we have
some pretty interesting guests that will beappearing on this program. Again. Night
(00:25):
Be Media's Living the Dream is aboutthe entrepreneur story of how they turned a
dream into reality. Today, ourguest is going to be Noah Heally taking
us into the world of commodities.So I hope you have your pen and
(00:47):
paper already to take some notes forNoah. We'll be sharing this information with
us again. Want to emphasize ifthis is your first time visiting, please
leave a comment and if you findvalue in this program, please do us
a favor or do us this serviceand that is hit the like button,
(01:15):
subscribe and leave a comment. Welcometo Nightbeat Media's Living the Dream podcast with
your host Gregory Tucker, where wediscuss the entrepreneur's journey of turning a dream
into reality, showing you how tolearn, overcome, and acquire strategic action
(01:36):
steps. If you're ready to turnyour dream into a reality, then get
ready to take action. Here's yourhost, Gregory Tucker or us in the
opener, we're going to talk aboutnumbers, crunching numbers in how they play
(01:57):
a major part in our lives.Today. Our guest is mister Noah Heally,
and he has some very valuable informationto cheare with you. So I
hope you are sitting there staying tunedand ready to take notes. And with
(02:22):
that said, let's introduced our guests. As we like to always ask our
guest, tell us about yourself.Okay, Well, like you said,
Ms Noah, I live in thetown. I was born and raised in
(02:44):
Charlottesville, Virginia, and I'm I'ma recreational mathematician and I'm working on a
project to upgrade how commodity markets work. Would that say? What we're gonna
do, Noah is We're gonna jumpright into it now for some of our
(03:06):
viewers right here, commodities when youthink of about it, most people are
thinking, okay, they know aboutstocks, or they may not know about
stocks, but commodities is another partof the market place where a lot of
(03:29):
people are able to flourish, becomewealthy. You know to see how a
free market actually works. Now,one of the things that you've done,
Noah, is you've looked at themarket and you put a system. You've
(03:53):
kind of realized that there's a systemin place that many of us are totally
unaware of. So we we hearpeople every now and then turn on the
news and you'll ear pork bellies,for instance, that's one of the commodities
(04:15):
right there, or grains, oaksand grains, or soybeans. Now,
a lot of people are wondering wheredo people or where does the market get
that information? And how are thingspriced the way they're priced? Can you
(04:39):
up us with that? Absolutely?And it is a it's a fairly simple,
but at the same time sort ofindirect approach. So what the market
does is it provides a place forpeople who want to buy and sell to
come together, and then it publishesthe deals that get made in that forum.
(05:06):
And so what that means is thatas a buyer, you come in,
you get to see the deals thatare being made, and you could
to decide what sort of terms you'dlike to offer, and the same thing
happens for sellers. The thing thatgets tricky about this is that deals are
(05:26):
being made at an enormous rate ofspeed because people are coming into these markets
from all over the planet, andso it really isn't practical for individuals to
actually keep track of what's actually goingon. So you're talking about stocks,
(05:50):
people that are familiar with stock marketsknow that the map of what their prices
look like is just this sort ofway wildly swinging graph that's going up and
down constantly. That is that's aproperty of the market, this kind of
marketplace itself, because we use thesame kind of marketplace to trade stocks,
(06:16):
and so those that wild jag issort of around the point where the deals
are getting done, but sometimes instabilityoccurs and it suddenly jags off very high,
very low. And so that's that'sthe space that commodity markets operate in,
(06:40):
where the deals are sort of goodfor a microsecond and people are trying
to come to grips with this systemthat's just sort of always sliding away from
them. And the thing is that, particularly for commodities, because they are
(07:01):
these you know, industrial process typesof products, there is a more steady,
underlying, sort of facts on theground thing of what's going on.
There's so much desire for food.There's so much production for food. These
(07:23):
two things come together on a dayby day basis, and so there's an
opportunity to make this relationship much moredirect and to clean up a lot of
that instability that's intrinsic in doing itindirectly. Okay, and with that being
(07:43):
said, I'm going to go aheadand bring up your chart, so that
way it kind of gives them abetter idea for of how this is all
or how it all breaks down.You have your producers consumers, here's the
(08:03):
market speculators, and as far ashow it starts and how it ends,
could you break it our unrapid force, Noah, absolutely, So let's start
with this style of chart. Sothe basic idea here is that time goes
from top to bottom, so thisis effectively one trading cycle. This would
(08:30):
happen over and over and over again. But things that are at the top
of the page happened first, andthings at the bottom of the page happened
last, and this happens in order. So this kind of layout with arrows
connecting lines like this allows us todescribe relationships that are evolving over time with
(08:52):
multiple parties in a way that issomewhat clear. And again, what's going
on here is that there's three sidesin this market, not just two.
So the kind of easiest way tounderstand this is is to sort of walk
(09:13):
down it the first time, justsort of with things happening, and then
we're going to sort of walk backup and see why each of those things
happened. So let's start with stepone, publishing price information. The market
has its current view of what thepresent in future look like, and it
(09:35):
tells everybody what that is. Andthen the three sides split off because they
each have a different action to takebased on how they feel about what the
market thinks is currently going on.Producers offer to sell, consumers commit to
(09:56):
purchase, and speculators commit to futureprice updates. So what does that mean.
That means that based on where pricesare now and where prices look they're
like they're going. Producers decide howmuch they should sell today us versus how
(10:18):
much they should just keep in thebarn or in the warehouse or whatever,
and they offer to sell the amountthat it makes sense for them to sell.
Consumers at the same time offer tobuy the amount it makes sense for
them to buy, and the speculatorstake a look at what's going on,
think about what they know, andthink about where the errors are or even
(10:43):
where other people might think errors arethat should be restabilized, and so they
put in their least about the future. With that set of information, the
marketplace can then collate contracts to tradebetween buyers and sellers, which it sends
back out to them, and theycan aggregate the information that's coming in from
(11:05):
speculators and collect the moneies that they'veinvested in the future. So then we
have a phase where those contracts areactually executed. The producers make the deliveries,
which might in sort of small regionalmarkets might involve getting on a truck
(11:31):
and driving over to your neighbor's house, but in large organized markets basically involve
updating the escrow warehouse to let themknow that this palette doesn't bold you anymore,
it now belongs to this other person. The consumers confirm the delivery,
(11:52):
and at that point the market canrelease the escrow, so everybody's safe trades
can't happen, you know, youcan't be sort of your money's gone but
the stuff's not here, or youdelivered but there's no cash. Everything's set
up from that side, and alsoas the market tracks actual trades occurring,
(12:16):
it can measure how well the previousspeculators did and carve out their share of
the revenue that it's collecting to operateitself as its commission and so this kind
(12:37):
of thing that you could see inthe first phase it sort of we're starting
in the middle of things. Wehave price information, so it doesn't really
make sense where that comes from andwhy people are doing it. But now
that we've walked through, we walkback. We see that this is a
system of secured trade at known prices, which is very attractive to people that
(13:03):
make commodities for a living or needto buy them for a living. So
they're going to be coming in.They're going to be able to use this
speculator half of things to forecast ornegotiate those prices in in directions that are
useful for them. And third partieswill be able to come in to improve
(13:26):
that speculatively by putting useful information intothe system. And so that's that's where
this thing stabilizes towards a functioning marketplace. Okay, that was good right there.
(13:48):
How you broke it down what wesaw and we could actually see it
far as on the chart. Now, for those of you who are listening
to the podcast, we did havea chart that was on the screen.
If you look on our YouTube channel, you'll see the visual video podcast,
(14:16):
and that's where you can actually seethe chart what Noah was describing right there.
Now, there's a couple of factorsthat also play into this, right
Noah, and that the variables suchas what is it market makers? Could
(14:39):
you tell us about the market makers? Certainly so, market maker is a
role that exists in the existing marketplacebecause the market needs trades to be happening
in order to have prices to deliver, and so there are people whose job
(15:00):
it is to make deals even whennobody else wants to make a deal.
And that's something that has been beingdiminished somewhat by computer trades that are basically
so willing and so ubiquitous that tradescan sort of always be happening. But
(15:24):
even so, sometimes the computers stepback from the market, and there's a
role of stepping in and bringing thistogether. What what my system does is,
it is it essentially gives these peoplea different role of actually making the
marketplace in the first place, sothat market line. There's a role to
(15:52):
be had in my system to operatethe market in which you are simply providing
this sort of three sided service andcharging a commission on the trades facilitated,
and that can be significantly more remunerativethan the existing markets. To put some
(16:15):
numbers out there, the CME Groupis a publicly traded company and according to
their numbers, their annual revenue isabout four billion dollars a year. According
to the US Census figures, theamount of market transaction costs and commodities,
(16:36):
which isn't solely the CME Group,but they are by far the largest operator
of that sort of thing in theUnited States, is an excess of eight
hundred billion dollars a year. Sothey're collecting something like half a percent of
(16:57):
the transaction value chain by by beingmarket makers, by being market operators,
and a CDM style system, thisthis sort of thing would allow those people
to simultaneously shrink that very large numberand create a more efficient and prosperous economy
(17:22):
while growing that small number and thushaving a much more prosperous company. Oh
okay, so this right here,your system is designed in order to condense
it somewhat, but at the sametime give a bigger yield. Yes,
(17:48):
absolutely, So the key thing forany market system is volunteerism. So the
thing that makes economy is function andgrow is that people are willing participants.
If you're getting conned into buying thingson a regular basis, then probably things
(18:15):
aren't really going that well economically speaking. And certainly if if you're you know,
sort of being threatened into doing things, then then it's it's very bad.
Indeed. So a market needs tobe able to offer all the people
it needs to participate something that's agood deal from their perspective. It's not
(18:42):
enough that it's what you would want. It has to be what they would
want. And so for CDM tobecome successful, each of these three participant
groups and the operator themselves all needsto be able to get something out of
(19:03):
it. And since each of thesethings, you know, consists of businesses,
what they're looking for the out ofthese things is profits return on investment
those sorts of things. And bycreating a more efficient algorithm, we can
(19:25):
lower friction, lower cost, andactually offer a share of that improvement to
each of these roles and consequently havea better marketplace. Okay, Now there's
another term that I've heard, andthat is he'll climbing. What does that?
(19:48):
So he'll climbing is a term usedin like optimization theory for a generic
set of optimization strategies. So atthe very basic, imagine that you needed
(20:10):
to get to the highest point andhow could you do that. Well,
you know, here in our dayto day lives, you know, you'd
take out your phone and you'd askit for you know, turn by turn
directions to the top of Mount Everestand go do that. But in computer
(20:30):
optimization, we don't really get tosort of play those types of games.
So come up with an algorithm thatwould cause that to happen. So imagine
this, look around yourself one stepin each direction and figure out what the
highest point one step away from youis, and then step to there,
(20:52):
and now do it again. Justkeep doing that. He'll climbing is a
very nice algorithm because it's simple,it's it's very easy to understand how that
works. It's very easy to actuallyimplement that in abstract scenarios where you're not
(21:15):
really standing on a field or something, but you really do have some kind
of abstraction like supply and demand andpeople coming together, and so the algorithm
that existing markets implement is a hillclimbing algorithm. Basically, if the market's
out of balance, then you willmake more money by trading in the direction
(21:38):
towards the markets balance than away fromthe markets balance, and so the market
will hill climb towards these equilibrium positions. Hill climbing, like all potential optimization
algorithms, has drawbacks, and forhill climbing, the two big ones are
(22:03):
multidimensional systems. So usually hill climbingis first exposed to people in terms of
optimizing a function. So you justhave a line on a graph, and
so when you when you're looking atsort of all the steps that you can
take, there's only two steps youcan take. You can go right or
(22:23):
left. And that's pretty easy tounderstand. But if you think about like
the first thing I talked about,like if you're doing it yourself and you're
looking around yourself, there's sort ofa circle around you of you know,
an infinite number of directions that youcould potentially check. And in abstract spaces,
there's no reason to be restricted tosmall numbers of dimensions like we actually
(22:48):
visually engage with. So in anenvironment like the economy, where there are
dozens or hundreds of products that mighthave interrelations with one of another. Looking
at your neighborhood can involve an extremelylarge number of examinations, and that that's
(23:11):
a real cost. The second problemwith hill climbing, which probably isn't so
much of an issue for economies,is something called local maxima. So I
live in a hilly place. IfI were to engage in hill climbing,
I would wind up at the endof my block, because that's where the
(23:33):
highest point in the neighborhood is.But I would not wind up in the
highest point in the town that Ilive in because that's across town, and
it's across town. There's there's acouple of valleys between me and there,
and so hill climbing would never getme to there, And so that becomes
a challenge where you've got this maximizingthing, but it comes up against sort
(24:02):
of a a little shallow gap,but it can't bridge that gap. And
the way generally hill climbing can getpast those kinds of gaps is through randomness,
which now explains when we're talking abouthow markets sort of jump and then
suddenly jump around that's that's a normalhill climbing behavior of First off, you
(24:25):
never want your algorithm to settle downbecause if it does, you sort of
stagnate. And then two, whenwhen you're in an unstable environment, you
will suddenly find yourself in a positionwhere you've thought you were heading towards something
that you were pretty close to,and then you suddenly discover that just you
(24:45):
know a little bit over in thatdirection, there's a much better thing,
and everything starts flooding in that directioninstead. So that's that's that's how hill
climbing works. It's quite impressive thathuman beings sort of discovered a hill climbing
(25:06):
optimizer eight centuries ago, but injust the last eighty years, with the
advent of computer science and so on, we've actually learned an enormous amount about
optimization algorithms. And what my systemsactually doing with integrating multiple speculative points of
(25:29):
view is effectively creating what would couldbe termed a meta algorithm. So people
can engage in hill climbing algorithms tofigure out where prices are where they're going,
but people can also use other moreadvanced techniques from operations research and their
own planning and so on, andwhat my system will do is effectively aggregate
(25:52):
those into a super algorithm which willtake weighted values from each of those depending
on how valuable they're they're turning outto be. So what you get is
sort of a super intelligence that isextracting the most effective approaches from everybody that's
(26:19):
engaged in the marketplace. So there'sthe artificial AI. Is that what I'm
hearing? There's an aspect, there'san aspect that AI has come to be
a stand in term for one specificoptimization algorithm based around neural networks in these
(26:47):
in these days, But the generalterm artificial intelligence simply refers to systems capable
of sort of intelligent decision making thataren't human brains or some other animal brain.
And so marketplaces have been artificial intelligencesfor centuries before computers were really even
(27:18):
the thing, because they do theydo extract these multiple points of view from
people using the hill climbing algorithm.It's just they're using one specific algorithm,
which is which is sort of beingovertaken by events and technology, and so
(27:41):
if we want them to keep working, we need to update. We need
to update that algorithm. So inother words, we have to keep feeding
a machine right there, So insteadof it's just going to arbitrarily come out
with something you have to it onlycomes out with good quality if it's fed
(28:03):
good quality data. Exactly. Yes, uh yeah, the market, the
market's not a genie or an oracle. It's not. It's not telling us
what to do. It's taking onour our actions and our desires and finding
the best of those and and presentingthem as sort of that what the wisest
(28:26):
guidance that is available. Much likegovernment. Uh you know if if if
you don't participate, it gets veryvery bad. That it's there's not an
US and to them it's all usand us okay. And with that then
(28:47):
said, how long did it takeyou know what, to work your to
develop your system. I would say, I would say, to be completely
fair, six months from sort ofintuitive idea in order to actually said I'd
really solve the problem. I thinkthe key thing was getting the code written
(29:12):
and then analyzed. It took meabout three months to find a problem solution.
But writing code, particularly writing thefirst draft of code for something that
you've only got some math equations for, always has some tricks to it.
(29:37):
So I'd go with six months,okay, And one other thing in that
is how does this benefit the averageperson? Well, to go back to
those numbers, those hundreds of billionsof dollars show up in your grocery bill,
(30:02):
They show up in when you're buyinglumber, they show up in the
cost of clothing, they show upat the gas pump, they show up
in every part of your life,and they also show up in your business
choices. You know, we havethis this thought that, like, you
(30:26):
know, working for a bank inthe city is a good job because there's
you know, very high returns anda lot of opportunity, and working on
a farm in the country is abad job because there's very low returns and
not a lot of opportunity. Sothe kinds of things that you can do
(30:47):
with your money and the kinds ofthings that you can do with your life
are shaped by these costs, andmarkets only recently got this expensive. Part
of the large shift in behavior fromuh sort of goods and goods production to
(31:10):
services production is that there's been avast expansion in the amount of money that
can be made by by market servicesand financial services. So by simplifying this,
we reach a point where actual stuffis less expensive, can be made
(31:37):
with higher quality, and jobs makingactual stuff that's less expensive and our higher
quality are more available and more remunerative. So the common man, as it
were, gets to sort of goto a world where what they're doing is
(32:00):
just more useful. Okay, Wellthat was a great explanation in a wrap
up. Also, because the mainthing that we want to do here on
this program is to educate people atthe same time sharing journeys far as how
(32:22):
entrepreneurs or individuals overcame those obstacles ontheir journey far as creating or turning that
vision into a reality right there,And I think he did a great job
far as at summarizing that there,Noah, And for those of you who
(32:45):
look at it and say, well, what does all of this number crunching
or all this information has to door how it affects you know just mentioned
he just pointed it out that isis your quality of life. It's your
bottom line, because what happens tojet out on the farm definitely has effects
(33:13):
on you when you're bringing in foodto go on the table for your family
or even for yourself. Right there, So think about it the next time
in what would you like the audienceto walk away or leave with? Noah,
(33:38):
I think we're at an important pointin human history with computers. They
give us a lot of capacities whichnot merely couldn't have been imagined, but
couldn't really even have been expected people'speople's expectations were in the opposite direction of
(34:02):
imagining what was now possible. Andso, in addition to my system,
which I would hope to bring toeveryone who hears this, there are opportunities
(34:22):
at every level in our society andacross our entire society to simplify and increase
the intelligence of virtually everything that wedo. And look for those opportunities and
(34:45):
seek them out, because you know, the world's a competitive place, and
if if you aren't finding these things, then someday your lunch will be eaten
by the people that do very well. Put right there, and Noah,
how can people find out more informationregarding your system? So there's a website
(35:12):
at chorddisc dot com c O RD I s C. You can also
reach out to me directly. Pleasedo Noah peheely at yahoo dot com.
We'll find me quite readily, oryou can find me on LinkedIn. I'm
the Noah Heally on LinkedIn. Okay, well again, thank you for sharing
(35:35):
valuable information with it's Noah. Thanksfor listening to Nightbeat Media's Living the Dream.
If you enjoyed this podcast, pleaselive a comment or hit follow and
subscribe on our link so you canstay up to date on new episodes until
next time. When writing the storyof your life, be sure you're holding the pen
Hello, Welcome to another episode ofnight Be Media's Living the Dream. I'm
your hosting moderator. My name isGregory Tucker. I know it has been
a while we've been working behind thescenes and getting more guests to come on
the program and share their story.So in the upcoming episode, we have
some pretty interesting guests that will beappearing on this program. Again. Night
(00:25):
Be Media's Living the Dream is aboutthe entrepreneur story of how they turned a
dream into reality. Today, ourguest is going to be Noah Heally taking
us into the world of commodities.So I hope you have your pen and
(00:47):
paper already to take some notes forNoah. We'll be sharing this information with
us again. Want to emphasize ifthis is your first time visiting, please
leave a comment and if you findvalue in this program, please do us
a favor or do us this serviceand that is hit the like button,
(01:15):
subscribe and leave a comment. Welcometo Nightbeat Media's Living the Dream podcast with
your host Gregory Tucker, where wediscuss the entrepreneur's journey of turning a dream
into reality, showing you how tolearn, overcome, and acquire strategic action
(01:36):
steps. If you're ready to turnyour dream into a reality, then get
ready to take action. Here's yourhost, Gregory Tucker or us in the
opener, we're going to talk aboutnumbers, crunching numbers in how they play
(01:57):
a major part in our lives.Today. Our guest is mister Noah Heally,
and he has some very valuable informationto cheare with you. So I
hope you are sitting there staying tunedand ready to take notes. And with
(02:22):
that said, let's introduced our guests. As we like to always ask our
guest, tell us about yourself.Okay, Well, like you said,
Ms Noah, I live in thetown. I was born and raised in
(02:44):
Charlottesville, Virginia, and I'm I'ma recreational mathematician and I'm working on a
project to upgrade how commodity markets work. Would that say? What we're gonna
do, Noah is We're gonna jumpright into it now for some of our
(03:06):
viewers right here, commodities when youthink of about it, most people are
thinking, okay, they know aboutstocks, or they may not know about
stocks, but commodities is another partof the market place where a lot of
(03:29):
people are able to flourish, becomewealthy. You know to see how a
free market actually works. Now,one of the things that you've done,
Noah, is you've looked at themarket and you put a system. You've
(03:53):
kind of realized that there's a systemin place that many of us are totally
unaware of. So we we hearpeople every now and then turn on the
news and you'll ear pork bellies,for instance, that's one of the commodities
(04:15):
right there, or grains, oaksand grains, or soybeans. Now,
a lot of people are wondering wheredo people or where does the market get
that information? And how are thingspriced the way they're priced? Can you
(04:39):
up us with that? Absolutely?And it is a it's a fairly simple,
but at the same time sort ofindirect approach. So what the market
does is it provides a place forpeople who want to buy and sell to
come together, and then it publishesthe deals that get made in that forum.
(05:06):
And so what that means is thatas a buyer, you come in,
you get to see the deals thatare being made, and you could
to decide what sort of terms you'dlike to offer, and the same thing
happens for sellers. The thing thatgets tricky about this is that deals are
(05:26):
being made at an enormous rate ofspeed because people are coming into these markets
from all over the planet, andso it really isn't practical for individuals to
actually keep track of what's actually goingon. So you're talking about stocks,
(05:50):
people that are familiar with stock marketsknow that the map of what their prices
look like is just this sort ofway wildly swinging graph that's going up and
down constantly. That is that's aproperty of the market, this kind of
marketplace itself, because we use thesame kind of marketplace to trade stocks,
(06:16):
and so those that wild jag issort of around the point where the deals
are getting done, but sometimes instabilityoccurs and it suddenly jags off very high,
very low. And so that's that'sthe space that commodity markets operate in,
(06:40):
where the deals are sort of goodfor a microsecond and people are trying
to come to grips with this systemthat's just sort of always sliding away from
them. And the thing is that, particularly for commodities, because they are
(07:01):
these you know, industrial process typesof products, there is a more steady,
underlying, sort of facts on theground thing of what's going on.
There's so much desire for food.There's so much production for food. These
(07:23):
two things come together on a dayby day basis, and so there's an
opportunity to make this relationship much moredirect and to clean up a lot of
that instability that's intrinsic in doing itindirectly. Okay, and with that being
(07:43):
said, I'm going to go aheadand bring up your chart, so that
way it kind of gives them abetter idea for of how this is all
or how it all breaks down.You have your producers consumers, here's the
(08:03):
market speculators, and as far ashow it starts and how it ends,
could you break it our unrapid force, Noah, absolutely, So let's start
with this style of chart. Sothe basic idea here is that time goes
from top to bottom, so thisis effectively one trading cycle. This would
(08:30):
happen over and over and over again. But things that are at the top
of the page happened first, andthings at the bottom of the page happened
last, and this happens in order. So this kind of layout with arrows
connecting lines like this allows us todescribe relationships that are evolving over time with
(08:52):
multiple parties in a way that issomewhat clear. And again, what's going
on here is that there's three sidesin this market, not just two.
So the kind of easiest way tounderstand this is is to sort of walk
(09:13):
down it the first time, justsort of with things happening, and then
we're going to sort of walk backup and see why each of those things
happened. So let's start with stepone, publishing price information. The market
has its current view of what thepresent in future look like, and it
(09:35):
tells everybody what that is. Andthen the three sides split off because they
each have a different action to takebased on how they feel about what the
market thinks is currently going on.Producers offer to sell, consumers commit to
(09:56):
purchase, and speculators commit to futureprice updates. So what does that mean.
That means that based on where pricesare now and where prices look they're
like they're going. Producers decide howmuch they should sell today us versus how
(10:18):
much they should just keep in thebarn or in the warehouse or whatever,
and they offer to sell the amountthat it makes sense for them to sell.
Consumers at the same time offer tobuy the amount it makes sense for
them to buy, and the speculatorstake a look at what's going on,
think about what they know, andthink about where the errors are or even
(10:43):
where other people might think errors arethat should be restabilized, and so they
put in their least about the future. With that set of information, the
marketplace can then collate contracts to tradebetween buyers and sellers, which it sends
back out to them, and theycan aggregate the information that's coming in from
(11:05):
speculators and collect the moneies that they'veinvested in the future. So then we
have a phase where those contracts areactually executed. The producers make the deliveries,
which might in sort of small regionalmarkets might involve getting on a truck
(11:31):
and driving over to your neighbor's house, but in large organized markets basically involve
updating the escrow warehouse to let themknow that this palette doesn't bold you anymore,
it now belongs to this other person. The consumers confirm the delivery,
(11:52):
and at that point the market canrelease the escrow, so everybody's safe trades
can't happen, you know, youcan't be sort of your money's gone but
the stuff's not here, or youdelivered but there's no cash. Everything's set
up from that side, and alsoas the market tracks actual trades occurring,
(12:16):
it can measure how well the previousspeculators did and carve out their share of
the revenue that it's collecting to operateitself as its commission and so this kind
(12:37):
of thing that you could see inthe first phase it sort of we're starting
in the middle of things. Wehave price information, so it doesn't really
make sense where that comes from andwhy people are doing it. But now
that we've walked through, we walkback. We see that this is a
system of secured trade at known prices, which is very attractive to people that
(13:03):
make commodities for a living or needto buy them for a living. So
they're going to be coming in.They're going to be able to use this
speculator half of things to forecast ornegotiate those prices in in directions that are
useful for them. And third partieswill be able to come in to improve
(13:26):
that speculatively by putting useful information intothe system. And so that's that's where
this thing stabilizes towards a functioning marketplace. Okay, that was good right there.
(13:48):
How you broke it down what wesaw and we could actually see it
far as on the chart. Now, for those of you who are listening
to the podcast, we did havea chart that was on the screen.
If you look on our YouTube channel, you'll see the visual video podcast,
(14:16):
and that's where you can actually seethe chart what Noah was describing right there.
Now, there's a couple of factorsthat also play into this, right
Noah, and that the variables suchas what is it market makers? Could
(14:39):
you tell us about the market makers? Certainly so, market maker is a
role that exists in the existing marketplacebecause the market needs trades to be happening
in order to have prices to deliver, and so there are people whose job
(15:00):
it is to make deals even whennobody else wants to make a deal.
And that's something that has been beingdiminished somewhat by computer trades that are basically
so willing and so ubiquitous that tradescan sort of always be happening. But
(15:24):
even so, sometimes the computers stepback from the market, and there's a
role of stepping in and bringing thistogether. What what my system does is,
it is it essentially gives these peoplea different role of actually making the
marketplace in the first place, sothat market line. There's a role to
(15:52):
be had in my system to operatethe market in which you are simply providing
this sort of three sided service andcharging a commission on the trades facilitated,
and that can be significantly more remunerativethan the existing markets. To put some
(16:15):
numbers out there, the CME Groupis a publicly traded company and according to
their numbers, their annual revenue isabout four billion dollars a year. According
to the US Census figures, theamount of market transaction costs and commodities,
(16:36):
which isn't solely the CME Group,but they are by far the largest operator
of that sort of thing in theUnited States, is an excess of eight
hundred billion dollars a year. Sothey're collecting something like half a percent of
(16:57):
the transaction value chain by by beingmarket makers, by being market operators,
and a CDM style system, thisthis sort of thing would allow those people
to simultaneously shrink that very large numberand create a more efficient and prosperous economy
(17:22):
while growing that small number and thushaving a much more prosperous company. Oh
okay, so this right here,your system is designed in order to condense
it somewhat, but at the sametime give a bigger yield. Yes,
(17:48):
absolutely, So the key thing forany market system is volunteerism. So the
thing that makes economy is function andgrow is that people are willing participants.
If you're getting conned into buying thingson a regular basis, then probably things
(18:15):
aren't really going that well economically speaking. And certainly if if you're you know,
sort of being threatened into doing things, then then it's it's very bad.
Indeed. So a market needs tobe able to offer all the people
it needs to participate something that's agood deal from their perspective. It's not
(18:42):
enough that it's what you would want. It has to be what they would
want. And so for CDM tobecome successful, each of these three participant
groups and the operator themselves all needsto be able to get something out of
(19:03):
it. And since each of thesethings, you know, consists of businesses,
what they're looking for the out ofthese things is profits return on investment
those sorts of things. And bycreating a more efficient algorithm, we can
(19:25):
lower friction, lower cost, andactually offer a share of that improvement to
each of these roles and consequently havea better marketplace. Okay, Now there's
another term that I've heard, andthat is he'll climbing. What does that?
(19:48):
So he'll climbing is a term usedin like optimization theory for a generic
set of optimization strategies. So atthe very basic, imagine that you needed
(20:10):
to get to the highest point andhow could you do that. Well,
you know, here in our dayto day lives, you know, you'd
take out your phone and you'd askit for you know, turn by turn
directions to the top of Mount Everestand go do that. But in computer
(20:30):
optimization, we don't really get tosort of play those types of games.
So come up with an algorithm thatwould cause that to happen. So imagine
this, look around yourself one stepin each direction and figure out what the
highest point one step away from youis, and then step to there,
(20:52):
and now do it again. Justkeep doing that. He'll climbing is a
very nice algorithm because it's simple,it's it's very easy to understand how that
works. It's very easy to actuallyimplement that in abstract scenarios where you're not
(21:15):
really standing on a field or something, but you really do have some kind
of abstraction like supply and demand andpeople coming together, and so the algorithm
that existing markets implement is a hillclimbing algorithm. Basically, if the market's
out of balance, then you willmake more money by trading in the direction
(21:38):
towards the markets balance than away fromthe markets balance, and so the market
will hill climb towards these equilibrium positions. Hill climbing, like all potential optimization
algorithms, has drawbacks, and forhill climbing, the two big ones are
(22:03):
multidimensional systems. So usually hill climbingis first exposed to people in terms of
optimizing a function. So you justhave a line on a graph, and
so when you when you're looking atsort of all the steps that you can
take, there's only two steps youcan take. You can go right or
(22:23):
left. And that's pretty easy tounderstand. But if you think about like
the first thing I talked about,like if you're doing it yourself and you're
looking around yourself, there's sort ofa circle around you of you know,
an infinite number of directions that youcould potentially check. And in abstract spaces,
there's no reason to be restricted tosmall numbers of dimensions like we actually
(22:48):
visually engage with. So in anenvironment like the economy, where there are
dozens or hundreds of products that mighthave interrelations with one of another. Looking
at your neighborhood can involve an extremelylarge number of examinations, and that that's
(23:11):
a real cost. The second problemwith hill climbing, which probably isn't so
much of an issue for economies,is something called local maxima. So I
live in a hilly place. IfI were to engage in hill climbing,
I would wind up at the endof my block, because that's where the
(23:33):
highest point in the neighborhood is.But I would not wind up in the
highest point in the town that Ilive in because that's across town, and
it's across town. There's there's acouple of valleys between me and there,
and so hill climbing would never getme to there, And so that becomes
a challenge where you've got this maximizingthing, but it comes up against sort
(24:02):
of a a little shallow gap,but it can't bridge that gap. And
the way generally hill climbing can getpast those kinds of gaps is through randomness,
which now explains when we're talking abouthow markets sort of jump and then
suddenly jump around that's that's a normalhill climbing behavior of First off, you
(24:25):
never want your algorithm to settle downbecause if it does, you sort of
stagnate. And then two, whenwhen you're in an unstable environment, you
will suddenly find yourself in a positionwhere you've thought you were heading towards something
that you were pretty close to,and then you suddenly discover that just you
(24:45):
know a little bit over in thatdirection, there's a much better thing,
and everything starts flooding in that directioninstead. So that's that's that's how hill
climbing works. It's quite impressive thathuman beings sort of discovered a hill climbing
(25:06):
optimizer eight centuries ago, but injust the last eighty years, with the
advent of computer science and so on, we've actually learned an enormous amount about
optimization algorithms. And what my systemsactually doing with integrating multiple speculative points of
(25:29):
view is effectively creating what would couldbe termed a meta algorithm. So people
can engage in hill climbing algorithms tofigure out where prices are where they're going,
but people can also use other moreadvanced techniques from operations research and their
own planning and so on, andwhat my system will do is effectively aggregate
(25:52):
those into a super algorithm which willtake weighted values from each of those depending
on how valuable they're they're turning outto be. So what you get is
sort of a super intelligence that isextracting the most effective approaches from everybody that's
(26:19):
engaged in the marketplace. So there'sthe artificial AI. Is that what I'm
hearing? There's an aspect, there'san aspect that AI has come to be
a stand in term for one specificoptimization algorithm based around neural networks in these
(26:47):
in these days, But the generalterm artificial intelligence simply refers to systems capable
of sort of intelligent decision making thataren't human brains or some other animal brain.
And so marketplaces have been artificial intelligencesfor centuries before computers were really even
(27:18):
the thing, because they do theydo extract these multiple points of view from
people using the hill climbing algorithm.It's just they're using one specific algorithm,
which is which is sort of beingovertaken by events and technology, and so
(27:41):
if we want them to keep working, we need to update. We need
to update that algorithm. So inother words, we have to keep feeding
a machine right there, So insteadof it's just going to arbitrarily come out
with something you have to it onlycomes out with good quality if it's fed
(28:03):
good quality data. Exactly. Yes, uh yeah, the market, the
market's not a genie or an oracle. It's not. It's not telling us
what to do. It's taking onour our actions and our desires and finding
the best of those and and presentingthem as sort of that what the wisest
(28:26):
guidance that is available. Much likegovernment. Uh you know if if if
you don't participate, it gets veryvery bad. That it's there's not an
US and to them it's all usand us okay. And with that then
(28:47):
said, how long did it takeyou know what, to work your to
develop your system. I would say, I would say, to be completely
fair, six months from sort ofintuitive idea in order to actually said I'd
really solve the problem. I thinkthe key thing was getting the code written
(29:12):
and then analyzed. It took meabout three months to find a problem solution.
But writing code, particularly writing thefirst draft of code for something that
you've only got some math equations for, always has some tricks to it.
(29:37):
So I'd go with six months,okay, And one other thing in that
is how does this benefit the averageperson? Well, to go back to
those numbers, those hundreds of billionsof dollars show up in your grocery bill,
(30:02):
They show up in when you're buyinglumber, they show up in the
cost of clothing, they show upat the gas pump, they show up
in every part of your life,and they also show up in your business
choices. You know, we havethis this thought that, like, you
(30:26):
know, working for a bank inthe city is a good job because there's
you know, very high returns anda lot of opportunity, and working on
a farm in the country is abad job because there's very low returns and
not a lot of opportunity. Sothe kinds of things that you can do
(30:47):
with your money and the kinds ofthings that you can do with your life
are shaped by these costs, andmarkets only recently got this expensive. Part
of the large shift in behavior fromuh sort of goods and goods production to
(31:10):
services production is that there's been avast expansion in the amount of money that
can be made by by market servicesand financial services. So by simplifying this,
we reach a point where actual stuffis less expensive, can be made
(31:37):
with higher quality, and jobs makingactual stuff that's less expensive and our higher
quality are more available and more remunerative. So the common man, as it
were, gets to sort of goto a world where what they're doing is
(32:00):
just more useful. Okay, Wellthat was a great explanation in a wrap
up. Also, because the mainthing that we want to do here on
this program is to educate people atthe same time sharing journeys far as how
(32:22):
entrepreneurs or individuals overcame those obstacles ontheir journey far as creating or turning that
vision into a reality right there,And I think he did a great job
far as at summarizing that there,Noah, And for those of you who
(32:45):
look at it and say, well, what does all of this number crunching
or all this information has to door how it affects you know just mentioned
he just pointed it out that isis your quality of life. It's your
bottom line, because what happens tojet out on the farm definitely has effects
(33:13):
on you when you're bringing in foodto go on the table for your family
or even for yourself. Right there, So think about it the next time
in what would you like the audienceto walk away or leave with? Noah,
(33:38):
I think we're at an important pointin human history with computers. They
give us a lot of capacities whichnot merely couldn't have been imagined, but
couldn't really even have been expected people'speople's expectations were in the opposite direction of
(34:02):
imagining what was now possible. Andso, in addition to my system,
which I would hope to bring toeveryone who hears this, there are opportunities
(34:22):
at every level in our society andacross our entire society to simplify and increase
the intelligence of virtually everything that wedo. And look for those opportunities and
(34:45):
seek them out, because you know, the world's a competitive place, and
if if you aren't finding these things, then someday your lunch will be eaten
by the people that do very well. Put right there, and Noah,
how can people find out more informationregarding your system? So there's a website
(35:12):
at chorddisc dot com c O RD I s C. You can also
reach out to me directly. Pleasedo Noah peheely at yahoo dot com.
We'll find me quite readily, oryou can find me on LinkedIn. I'm
the Noah Heally on LinkedIn. Okay, well again, thank you for sharing
(35:35):
valuable information with it's Noah. Thanksfor listening to Nightbeat Media's Living the Dream.
If you enjoyed this podcast, pleaselive a comment or hit follow and
subscribe on our link so you canstay up to date on new episodes until
next time. When writing the storyof your life, be sure you're holding the pen
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