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Computer Algorithms and Unintended Consequences

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  • Computer Algorithms and Unintended Consequences

    Some interesting reading about the current state of technology.

    Significantly, Johnson’s paper on the subject was published in the journal Nature and described the stock market in terms of “an abrupt system-wide transition from a mixed human-machine phase to a new all-machine phase characterized by frequent black swan [ie highly unusual] events with ultrafast durations”. The scenario was complicated, according to the science historian George Dyson, by the fact that some HFT firms were allowing the algos to learn – “just letting the black box try different things, with small amounts of money, and if it works, reinforce those rules. We know that’s been done. Then you actually have rules where nobody knows what the rules are: the algorithms create their own rules – you let them evolve the same way nature evolves organisms.” Non-finance industry observers began to postulate a catastrophic global “splash crash”, while the fastest-growing area of the market became (and remains) instruments that profit from volatility. In his 2011 novel The Fear Index, Robert Harris imagines the emergence of AGI – of the Singularity, no less – from precisely this digital ooze. To my surprise, no scientist I spoke to would categorically rule out such a possibility.

    All of which could be dismissed as high finance arcana, were it not for a simple fact. Wisdom used to hold that technology was adopted first by the porn industry, then by everyone else. But the 21st century’s porn is finance, so when I thought I saw signs of HFT-like algorithms causing problems elsewhere, I called Neil Johnson again.

    “You’re right on point,” he told me: a new form of algorithm is moving into the world, which has “the capability to rewrite bits of its own code”, at which point it becomes like “a genetic algorithm”. He thinks he saw evidence of them on fact-finding forays into Facebook (“I’ve had my accounts attacked four times,” he adds). If so, algorithms are jousting there, and adapting, as on the stock market. “After all, Facebook is just one big algorithm,” Johnson says.
    As we wait for a technological answer to the problem of skyrocketing algorithmic entanglement, there are precautions we can take. Paul Wilmott, a British expert in quantitative analysis and vocal critic of high frequency trading on the stock market, wryly suggests “learning to shoot, make jam and knit”.
    Last edited by WARFAB; 08-30-2018, 09:49 AM.
    NRA Life Member
    NRA Basic Rifle Instructor

    I was thinking of his cannon.