17/1/19: Why limits to AI are VUCA-rich and human-centric

Why ethics, and proper understanding of VUCA environments (environments characterized by volatility/risk, uncertainty, complexity and ambiguity) will matter more in the future than they matter even today? Because AI will require human control, and that control won't happen along programming skills axis, but will trace ethical and VUCA environments considerations.

Here's a neat intro: https://qz.com/1211313/artificial-intelligences-paper-clip-maximizer-metaphor-can-explain-humanitys-imminent-doom/. The examples are neat, but now consider one of them, touched in passim in the article: translation and interpretation. Near-perfect (native-level) language capabilities for AI are not only 'visible on the horizon', but are approaching us with a break-neck speed. Hardware - bio-tech link that can be embedded into our hearing and speech systems - is 'visible on the horizon'. With that, routine translation-requiring exchanges, such as basic meetings and discussions that do not involve complex, ambiguous and highly costly terms, are likely to be automated or outsourced to the AI. But there will remain the 'black swan' interactions - exchanges that involve huge costs of getting the meaning of the exchange exactly right, and also trace VUCA-type environment of the exchange (ambiguity and complexity are natural domains of semiotics). Here, human oversight over AI and even human displacement of AI will be required. And this oversight will not be based on technical / terminological skills of translators or interpreters, but on their ability to manage ambiguity and complexity. That, and ethics...

Another example is even closer to our times: AI-managed trading in financial assets.  In normal markets, when there is a clear, stable and historically anchored trend for asset prices, AI can't be beat in terms of efficiency of trades placements and execution. By removing / controlling for our human behavioral biases, AI can effectively avoid big risk spillovers across traders and investors sharing the same information in the markets (although, AI can also amplify some costly biases, such as herding). However, this advantage becomes turns a loss, when markets are trading in a VUCA environment. When ambiguity about investors sentiment and/or direction, or complexity of counterparties underlying a transaction, or uncertainty about price trends enters the decision-making equation, algorithmic trading platforms have three sets of problems they must confront simultaneously:

1. How do we detect the need for, structure, price and execute a potential shift in investment strategy (for example, from optimizing yield to maximizing portfolio resilience)? 
2. How do we use AI to identify the points for switching from consensus strategy to contrarian strategy, especially if algos are subject to herding risks?
3. How do we migrate across unstable information sets (as information fades in and out of relevance or stability of core statistics is undermined)?

For a professional trader/investor, these are 'natural' spaces for decision making. They are also VUCA-rich environments. And they are environments in which errors carry significant costs. They can also be coincident with ethical considerations, especially for mandated investment undertakings, such as ESG funds. Like in the case of translation/interpretation, nuance can be more important than the core algorithm, and this is especially true when ambiguity and complexity rule.

12/7/18: Technology, Government Policies & Supply-Side Secular Stagnation

I have posted about the new World Bank report on Romania's uneven convergence experience in the previous post (here). One interesting chart in the report shows comparatives in labour productivity growth across a range of the Central European economies since the Global Financial Crisis.

The chart is striking! All economies, save Poland - the 'dynamic Tigers of CEE' prior to the crisis - have posted marked declines in labour productivity growth, as did the EU28 as a whole. When one recognises the fact 2008-2016 period includes dramatic losses in employment, rise in unemployment and exits from the labour force during the period of the GFC, and the subsequent Euro Area Sovereign Debt Crisis - all of which have supported labour productivity to the upside - the losses in productivity growth would be even more pronounced.

This, of course, dovetails naturally with the twin secular stagnations thesis I have been writing about in these pages before. In particular, this data supports the supply-side secular stagnation thesis, especially the technological re-balancing proposition that implies that since the late 2000s, technological innovation has shifted toward increasingly substituting sources of economic value added away from labour and in favour of software/robotics/ICT forms of capital:

Human capital is the only offsetting factor for this trend of displacement. And it is lagging in the CEE:

But the problem is worse than simple tertiary education figures suggest. Current trends in technological innovation stress data intensity, AI and full autonomy of technological systems from labour and human capital. Which implies that even educated and skilled workforce is no longer a buffer to displacement.

As the result, in countries like Romania, with huge slack in human capital and skills, investment is not flowing to education, training, entrepreneurship and other sources of human capital uplift:

While barriers to entrepreneurship remain, if not rising:

In effect, technological innovation in its current form is potentially driving down not only productivity growth, but also labour force participation. The result, as in the economies of the West:

1. Notional large scale decline in official unemployment (officially unemployed numbers are down)
2. Significant lags in recovery in labour force participation (hidden unemployed, permanently discouraged etc numbers are up)
3. The two factors somewhat offset each other in terms of superficially boosting productivity growth (with real productivity actually probably even lower than the official figures suggest)

These three factors contribute to an expanding army of voters who are marginalised within the system.

Romania is a canary in the European secular stagnation mine. 

31/5/2013: Bank Holidays Links: On Art, Science and In Praise of Unfocused Thoughts

For the bank holiday - an alternative (to economics) reading list of things artsy & scientific…


A quick note before I launch into the links: I will be taking part in http://www.rar.ie/ on June 13th.


Wired.com [http://www.wired.com/wiredscience/2013/05/neurologist-markam-human-brain] article on a fascinating project to build a computer to replicate human brain "down to the individual ion channel". The newsy bit here is that on January 28, 2013, the EU Commission awarded the lead research group (headed by Henry Markram) EUR 1 billion to attempt to perform that task. There is much of interest here - beside the fascinating technology behind. Here are some questions that puzzle myself and many others:

1. As article points out, the task is multi-dimensional: it is one thing to build a replica of neurons and physical interfaces. It is yet an entirely different thing to build a replica of consciousness. "The way Markram sees it, technology has finally caught up with the dream of AI: Computers are finally growing sophisticated enough to tackle the massive data problem that is the human brain. But not everyone is so optimistic. “There are too many things we don’t yet know,” says Caltech professor Christof Koch, chief scientific officer at one of neuroscience’s biggest data producers, the Allen Institute for Brain Science in Seattle. “The roundworm has exactly 302 neurons, and we still have no frigging idea how this animal works.”"
2. Is the EU Commission engaging in an absurd gamble with taxpayers money is another, perhaps mundane question, but the one that arises on foot of (1). 
3. Bigger question of the two above - can consciousness be reproduced? Is consciousness even a logical system system?

ArsTechnica piece on the role of focus (singularity of objective) in raising IQ [http://arstechnica.com/science/2013/05/if-everything-fades-into-the-background-you-may-have-a-high-iq/] might be leading to an interesting set of questions - possibly even related to the previous link. If focusing on a task help raise our IQ, then:

1. How meaningful is IQ as a measure of human capacity to think vs to create? After all, focus can also be seen as concentrating attention on a singular subject or even an aspect of a subject. In doing so, we forego the breadth of inquiry for the depth of inquiry. If IQ is positively and strongly correlated with the depth (focus), is it not then negatively correlated with the breadth? 
2. Is IQ a tool/source of incremental uncovering of knowledge as opposed to revolutionary discoveries? Again, focus can be helpful in the former, but it can also be detrimental to the latter.
3. In modern academia and even art, specialism is the core driver of publications and output, and the latter are the core drivers of earnings, promotion, access to research and creative funding etc. Does this focus --> IQ --> incremental productivity nexus lead to a dramatic reduction in encyclopaedic inquiry? We are having more and more specialist researchers and fewer and fewer Leonardo's and the reason for this might not be the difficulty of engaging in encyclopaedic inquiry, but a disincentive to engage in it contained in the added capacity for pursuing the IQ-based forms of incremental inquiry that also tend to generate higher career payoffs?

As you can see, I am not attempting to exert too much focus here… perhaps because I don't really care if I do sound like a Mensa member…

And here's a link to show that focus --> IQ link might be complete rubbish:
http://blog.foreignpolicy.com/posts/2013/05/30/why_indian_americans_dominate_spelling_bees Now, the article quotes: "The first generation immigrant parent brings with her/him a set of memories about how education works and what is to be valued. For Indians that is a memory of endless class tests doled out on a regular basis to evaluate our ability to retrieve information - spellings of words, names of world capitals, cash crops of states, length of rivers, height of mountains, and a plethora of minutiae charmingly labeled as General Knowledge." ... Err… so Indian-Americans are more focused on the task of spelling stuff. Great. I am looking forward to them starting to focus on content of what they are spelling more… which, automatically means they will have to stop focusing and start thinking much broader. Great art and science are not made out of 'focus' - they are made out of wandering.


Now onto art - let's start with kitsch, but brilliant efforts of the Northern Irish and British authorities at creating a Potemkin Village out of Belcoo, Co. Fermanagh in the anticipation of the G8 summit later this month:
http://www.irishtimes.com/news/recession-out-of-the-picture-as-fermanagh-puts-on-a-brave-face-for-g8-leaders-1.1409112 Here's an image from the Irish Times of a comer butcher's shop in town now transformed into a window-display of fake prosperity.

I class this 'art' because to really describe the nature of what is happening in this instance one would need volumes of unpleasant explicatives... let's keep things academic, instead.


Onto serious art: Biennale is on in Venice and I am going to keep linking to it. One of the most memorable things I did so far in my own life was to take part in 2006 Beinnale by writing an essay for irish entry volume.

The main link to this year's Biennale is here: http://www.labiennale.org/en/Home.html and a couple of images / stills from there:

Those heading for Venice for Biennale - do not miss http://www.villamanin-eventi.it/eng/index.php great venue for art in Friuli.


On art, @Saatchi_Gallery twitter account was posting some stunning images this week.

One worth checking out is https://twitter.com/saatchi_gallery/status/339672007127998465/photo/1 and this comes via PetaPixel article: http://petapixel.com/2013/05/30/miniature-world-photo-manipulations-by-14-year-old-photographer-fiddle-oak/

Another one is from Art Basel Hong Kong show:

This is the first and probably the last VW, that I would love to own… Artist's work is discussed here: http://www.mondecor.com/kuratorial/ichwan-noor-solo-exhibition-english-version and Art Basel page for the artist: http://abhk.insideguidance.com/artists/ichwan-noor

A quick synopsis of some of the best works at Art basel this year is here: http://www.highsnobiety.com/2013/05/29/10-great-artworks-from-art-basel-hong-kong-2013/  One of my other favourites is:

Bruegelesque (as in Peter Bruegel's Seven Deadly Sins etching)…


Cool tech thinking from the 1970s? Sure: http://www.businessinsider.com/what-is-elon-musks-hyperloop-2013-5 And it proves, in passim, that much of the cutting-edge-new is really a well-forgotten-old…


Tripping spirituality meets art and collides with nature? Only in NYC, but stunningly so:
http://www.amnh.org/our-research/hayden-planetarium/resources/manhattanhenge


From things brilliant to brilliant narrative. Here's a superb blogpost on the nature of the value of expressed beliefs: http://noahpinionblog.blogspot.ie/2013/05/bets-do-not-necessarily-reveal-beliefs.html  This treats beliefs in the context of revealed preferences - many analysts and now even journalists make the argument that to reveal true underlying motives for a judgement, one has to have "a skin in the game". I myself was on a receiving end recently from a business editor of one of the major newspapers. When I queried if an interview with investor in one of the banks was fully open and transparent in his/her praise for the bank in a totally uncritical interview with the investor published by his newspaper, the editor simply accused me of not having "a skin in the game" and thus not having a valid point of view to offer. Idiotic? You betcha: anyone's starting position for a conjecture has nothing to do with validity of the conjecture or with testability of this validity. Double idiotic because as a taxpayer and a bank customer, I do have probably more "skin in the game" than the said investor. Nonetheless, the entire incident reminds me that people often think that someone placing a bet (say going long VIX) is equivalent to them revealing their true belief (that for example volatility will rise in the future). Actually, it is not. And the blogpost linked above explains why. It is all really basic, but we too often forget that basic things are the first ones to be forgotten by us…


Lastly, here's an excellent article (based on a very interesting paper) that argues that sustainability of 'local' food sources might be severely over-exaggerated: http://www.guardian.co.uk/lifeandstyle/2013/may/26/worrying-about-food-miles-missing-point?post_id=100005271660100_143433612509027#_=_ Now, one additional point is that we are talking here about UK (heavily subsidised) agriculture vs New Zealand (zero subsidies regime). Should the balance of carbon required to produce subsidies be entered into the equation? I doubt anyone would then be 'ethically' buying much of anything local… The original paper referenced in the article is here: http://www.lincoln.ac.nz/documents/2328_rr285_s13389.pdf

So enjoy the long weekend!

25/5/2013: Saturday Reading Links

Some interesting reading links:

FT Weekend edition has a full supplement on Venice Biennale 2013 - no link, but here's the official page: http://www.labiennale.org/en/art/exhibition/index.html?back=true


A fascinating article from The Economist on the movement toward technology displacing 'knowledge' workers next: http://www.economist.com/news/business/21578360-brain-work-may-be-going-way-manual-work-age-smart-machines

This cuts across my own view that we are seeing rising complementarity between technology and human capital, as opposed to substitutability thesis advanced in the article. The Economist view is thought provoking, for sure.


At last, there is a proof of the theorem that postulates that gaps between prime numbers are bounded: http://blogs.ethz.ch/kowalski/2013/05/21/bounded-gaps-between-primes/ and more on same http://www.slate.com/articles/health_and_science/do_the_math/2013/05/yitang_zhang_twin_primes_conjecture_a_huge_discovery_about_prime_numbers.single.html


An excellent piece on the changes big data is bringing to economics - not from the point of view of new studies directions, but from the point of view of verifiability: http://www.guardian.co.uk/business/economics-blog/2013/may/17/economic-big-data-rogoff-reinhart?CMP=twt_gu
There added 'bonus' points in the article discussing overall relationship between the research recognition, rewards and background work.


And a brilliant example of just how atavistic and primitive is the understanding of the web-based and mobile-platformed services in the top political echelons in Europe:
http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/electronics/10054717/France-preparing-tax-on-Apple-and-Google-to-fund-culture.html
Apparently, dinosaurs in French political elites have trouble comprehending just how revolutionary to culture and its creators (artists, thinkers, analysts, developers etc) Apple 'i'- and Google platforms are. It is highly likely that iTunes, for example, are doing more to distribution of Francophone music across the world than the entire Ministry of 'French' Culture. Then again, the entire tax debate in Europe is never about culture or arts or anything tangible, but about finding ever more elaborate and bizarre paths for milking the economy to sustain ever expanding state.


While on topic of matters European, a fascinating study on genetic persistency in European populations covered in http://www.presseurop.eu/en/content/article/3770411-europeans-we-re-all-kissing-cousins
Given it comes from the US (original home to Apple and Google), may be the French can pay a special levy to the US for bothering to include their subjects in global research? Afterall, shall they fail to pay up, ignoring France should not be that hard - it works in geopolitics and economics, after all...