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Beware The Boston Shuffler

Do yourself a favor and watch this video first. Then ask yourself a question: what’s the value to you of human judgment in our economy and our government?

One way or another, this is what I'm truly into, what I've been studying for years, one way or another. Computers are an integral part of our decision making process nowadays. They can make the decisions faster, and in ways we couldn't do so precisely or accurately on our own. They're also stupid as hell.

The ability to make a decision is not the ability to understand that decision. If you're playing a video game, that bad guy you just threw the grenade at is probably programmed to run from it. But they won't understand why, and unless somebody programs them to, they won't get ideas on their own, like throwing themselves on that grenade to save their comrades from the blast. Their decisions have meaning in consequence, not meaning in terms of judgment or character.

Take Google. They've got algorithms of all kinds, meant to take your input (now in real time) and feed back to you not only search results meant to be reasonably accurate in terms of what you're looking for, but also advertisement meant to cater to your likely wants or needs. That second part, in fact, is part of what makes Google a rich company.

Google's system creates its winners and its losers, as do many such algorithms, so people have learned to exploit the algorithms. Algorithms are works of logic, and like all works of logic, can be turned on their heads if you understand their underlying sense. So, people exploit Google's algorithms, by various methods, in order to prosper, fairly or unfairly, by the attention they draw. Google, in turn, has to evolve its algorithms in order to still serve their customers and clients well. Otherwise the results would be just trash.

It's worth remarking here that this is much like what is happening in the markets, in fact what is happening 70% of the time when a stock trade is made. It's worth noting, too, that what the big movers and shakers in the market are doing much of the time is trying to hide their decisions, their operations and behaviors from the rest of the market. In other words, hide the price signals, so their sudden interest in a stock doesn't send the price upwards too fast as they're trying to buy their mega-shares in the companies, like it probably should.

As I look at the various crashes and corporate downfalls of the last decade, at the manufactured energy crises and the overinflated commodities prices, I can only see the notion that this system could possibly police itself as naive. The system itself, as its builders would make it, is inhuman in its decision-making. It's not looking to make a moral or even a fundamental judgment about a business. It's simply looking at a number and making a decision off of that, sixty percent of the time. A human being is involved in their at some point of the time, but even then, things can go really wild, as is evidenced in the Flash Crash of 2010 (or as its also known, The Crash of 2:45)

Computers can't really think, at least in terms we'd understand as proper, balanced, human thought. They don't care whether a sell-off wrecks the economy, or even the position of the trader that the program is supposed to serve. They don't have the judgment that we humans can develop by trial and error, the humanity in the judgment that we develop from years of interacting with, and being affected emotion by other people.

People are blasting through mountains to shave milliseconds off of a lightspeed pulse from New York to Chicago. They are considering dumping computer stations off in the middle of the ocean. They're emptying out building and filling them with servers. The idea that springs to my mind, and it's not too cheery of one, though I might say there's some humor to it, is of those Zombie Ants that get taken over by a fungus which forces them to do things that make the ant more likely to get eaten, or do some other stupid thing.

Only in this case, we're getting taken over by algorithms that parasitically shape our economic activity towards ends not our own. Or is the algorithms that are the true parasitic force?

There is room for a good financial system, but the purpose of the system ought not to be to grow at everything else's expense. The decision-making of the computers is, in many ways just an extension of the decision making of those programming it, and those who are employing those who are programming it. The behavior of the algorithms might deviate from the desired purpose, but in essence, the computer is doing what the programmer is telling it to do, and the programmer is doing what the Wall Street financial company is telling them to do.

And what are the programs meant to do? A great deal that may not square with fair, supply and demand driven ideals of how the markets are supposed to work.

The purpose of these activities is simply to make money. Some may find that unobjectionable, but like I've said before, the most efficient way to make money is to cheat somebody out of it. I mean, think about it: somebody gives you money, and you give them nothing, or next to nothing in return! But of course, that's not efficient in economic terms. That's people giving away their economic power for nothing. It's a poor exchange for the other side, by any definition.

We can compare the genes of that ant-hijacking fungus to the organizing principles of a company whose main stock in trade is to fool people into giving it more money. Yes, this is nature, and we see it in nature, but the question is, do you want to be the economic equivalent of that ant with a mushroom sticking out of its head?

The nice thing about being a thinking human being, is that you can reprogram yourself, redesign your algorithms, your decision making processes to compete with such trickery. You can decide that you will support laws that put such bad actors on the defensive, that force them to waste time coming up with other ways to bilk people, or better yet compel them to behave more productively. You can decide that you're not going to reward the folks on Wall Street who have devoted more and more of our wealth in this country to speculation and parasitic economic behavior. You can decide that this country should do more than just support an upper class of financial game-players who we hope bring us jobs and prosperity out of the heretofore unmentioned goodness of their hearts.

You can chose which direction you want to take in this algorithmic ecosystem. You don't have to be host to a parasitic line of thought that preys on your own interests.

Posted by Stephen Daugherty at August 13, 2011 3:23 PM
Comment #327637

SD wrote; “The decision-making of the computers is, in many ways just an extension of the decision making of those programming it, and those who are employing those who are programming it. The behavior of the algorithms might deviate from the desired purpose, but in essence, the computer is doing what the programmer is telling it to do, and the programmer is doing what the Wall Street financial company is telling them to do.”

Actually, your statement about computer programing makes more sense if you apply it to the modeling used by the MMGW fanatics. In this case, they are programing the computer to justify governments around the world spending huge sums of money combating something that only exists in the mind of the programmer who programs the results.

It makes no sense for a Wall Street financial company to program a computer to do what the company is “telling them to do.” If the company already knows the result it wants, why bother.

That would be like programing a computer to pick your favorite horse in a horse race. Easily done, but it certainly doesn’t ensure your horse will win, only that the computer will favor the horse you have chosen.

Posted by: Royal Flush at August 13, 2011 5:18 PM
Comment #327642

Royal Flush-
A global warming simulation is usually done by chopping up a simulated globe into cells, and inputting the initial conditions into those cells in order to get the ball rolling. Then, over simulated time, every cell and every piece of the puzzle is iterated, the results from the last calculation fed back into the new one, over and over again.

This process is not meant to produce a known result. In fact, the very first climate simulations introduced the world to the phenomena that came to be studied in the field of chaos theory.

More to the point, while precise prediction is beyond any reliable model of climate, you can get a range of what outcomes are likely, and we’ve been seeing those.

Global Climate Change is not merely in anybody’s head. The reason most climate scientists believe that it’s a reality, and that we’re the cause is that the evidence is overwhelming, and the models, while imperfect, have good at showing us ahead of time what the general effects we should look out for are. We’re seeing the kinds of things that the models are predicting. We’re seeing greater warming in the Arctic as opposed to the tropics. We’re seeing more chaotic weather. We’re seeing abnormal droughts and rain patterns.

It makes no sense for a Wall Street financial company to program a computer to do what the company is “telling them to do.” If the company already knows the result it wants, why bother.

Why bother, indeed. Well perhaps the reason is that there’s a difference between wanting something and having something. Wanting twenty miles of pipeline that is corrosion resistant for the sake of carrying oil is one thing. But you need engineers, metallurgists, and petroleum experts to build it right.

Wanting to trade millions of dollars in stocks without your competitors getting wind of it is one thing. Actually achieving that is quite another, especially if its being done electronically. You think people would pay millions of dollars to rent buildings and fill them with servers if there was no point to it? It’s being done. 70% of the stock trades are being done this way.

What is it with people these days, and the unwillingness to accept overwhelming evidence?

Posted by: Stephen Daugherty at August 13, 2011 7:38 PM
Comment #327646

Analogy, like strapping a bomb to a young man and sending him out to do your bidding.

Posted by: jlw at August 13, 2011 8:38 PM
Comment #327675

I’m not sure what you mean, but if I have you right, you’re comparing the parasitic fungus I talked about, and the parasitic ideas I talked about to that, and in many ways they are similar.

In this case, though, the game is a lot more complicated, because what they want people to do is support an elitist agenda as if it were a populist one, to support tax cuts for the rich, as if they were the ones getting money back in their wallet.

The irony is, Obama cut taxes more for the Middle Class than Bush ever did, but of course, that gets ignored because the Republicans aren’t interested in tax “relief” for those it would actually be an economic relief for. That’s just how you sell it to people who aren’t going to benefit from it so much.

Oh, and what makes it even richer, is that Republicans use the fact that their laws exempt so many from paying income taxes, laws they themselves wrote, to push for lower taxes on the rich. They’re complaining about a light burden they themselves lightened.

Posted by: Stephen Daugherty at August 14, 2011 10:05 AM
Comment #327688

What is it with people these days, and the unwillingness to accept overwhelming evidence?

Posted by: Stephen Daugherty at August 13, 2011

LOL…like MMGW I suppose?

On computer trading, you seem to be on both sides. I guess you just don’t understand and I will give you a pass.

Posted by: Royal Flush at August 14, 2011 2:22 PM
Comment #327740

Royal Flush-
You can’t get away with claiming my ignorance to support your own. You talk about MMGW as it it’s some academic conspiracy.

Well, I’m waiting for real evidence of widespread academic fraud, and its not forthcoming. You? You’re satisfied with the word of those who have a financial conflict of interest with reductions in fossil fuel usage, and are using intellectually dishonest methods to disparage what scientists have concluded based on the evidence.

Of course, you don’t believe this yourself. What leads you to this mistaken approach, I think, is that you approach this subject first from a political perspective, and you trust the politics more than you do the science. Me, I’m the other way around. In this case, I believe the policy must flow from science.

Politics is making decisions based on how other people make decisions. Nowhere is this more evident than in the way that Republicans went from supporting cap and trade and giving lip service to the existence of Global Climate Change, to the current hardline denial of global warming, and the denouncing of the ironically conservative cap and trade method of controlling carbon emissions. And why are they doing all this? To not be on the same side as Democrats, who favor this approach as well.

For ages, the GOP approved Debt Ceiling increases as a matter of course, no fanfare, no announcement of holding it for ransom, few credible leaders of the party out there saying default would be a good thing. They ran up debts blithely, deflecting and ignoring criticisms about their fiscal irresponsibility.

Then, of course, the financial crisis comes, and a Democrat is elected, and suddenly everybody sees the light, and economy be damned, there are going to be offsets for the whole thing, and if we default, that’s okay, nothing bad will happen.

The problem with that, of course, is that something did happen, and merely because we got close to it, and because Republicans publically stated that they were willing to do this again.

All to do what? Make the party look more fiscally responsible? Keep the tax cuts for the rich going?

When politics becomes this irresponsibly contrarian, when the evidence of past events and past troubles are not taken into consideration, when politicized conspiracy theories are attended to, as the consensus of scientific exports is not only ignored, but demonized as part of some socialist conspiracy, then we’re in real trouble, because then we’re not using our ideas and our brains to get us out of trouble, we’re chasing something that’s just in our heads, just to satisfy the organizational needs of a certain group of people.

I’ve built my political sensibilities on the notion that you can never really escape the consequences of the real world by deflecting things rhetorically and/or politically. So long as the real problem remains, it will have its effect, and your battle to force your will on the situation will be a losing one.

It’s time for Republicans to deal with reality for a change, not merely make themselves the fungus-fuddled worker ants of their organizations. It’s time for Republicans to start thinking, and start questioning the dogmas of their organization.

Posted by: Stephen Daugherty at August 15, 2011 8:52 AM
Comment #327758

Good post Stephen. Understanding the increasing role computer models & algorithms play in our lives is crucial to being an informed citizen.

However, we need to demystify the allure of computers. Some people are apt to say “It must be so because a computer said so”, which is a terrible fallacy. Computers are merely tools, and they are only good at one thing: computing the result of basic mathematical problems. Hence the name computer. Ask a computer to do anything else and it will fail miserably. Fortunately, very intelligent people over the past century have done a lot to harness the power computers and write algorithms and programs that mimic the real world through the use of mathematical equations. This has led to all the software with all the useful applications we love today.

Nevertheless, no human programmer is perfect and every program contains bugs of various sorts. This is why we need to be cautious when we grant programs and algorithms great responsibility such as the programs that control vast sums of money on the stock market. Also, every computer program reflects the biases of its writer to a certain extent. It is the responsibility of the modeler to have his work reviewed by others to weed out such biases. This is partly why the scientific method’s tradition of peer review has been crucial in humanity’s progress. All conclusions published in the scientific community have undergone the scrutiny of peer review.

This is also why any claim supported merely with a computer model should be met we skepticism. Questions to ask the advocates of any such claim include: What assumptions went into the model? What are the known limitations of the model? What are the models’ inputs? What are its outputs? How does the model parametrize certain values? Do the answers to the above make sense in light of what we know from empirical observation of the world?

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