Thursday, February 22, 2018

Cambridge, Oxford Uni's, Electronic Frontier Foundation Report: "The Malicious Use of Artificial Intelligence:..."

It's all about risk.

First up, Engineering & Technology, Feb. 21: 

AI is a threat to global stability, warns Cambridge University report
Artificial intelligence (AI) could be used by rogue states to cause havoc and disruption, according to a new report from Cambridge University’s Centre for the Study of Existential Risk. 

In a report titled The Malicious Use of Artificial Intelligence: Forecasting, Prevention, and Mitigation, the university body warns that malicious manipulation of AI could create a destabilising effect and calls on governments and corporations worldwide to ensure that this does not happen.
It also warns of the rise of “highly believable fake videos” impersonating prominent figures or faking events to manipulate public opinion around political events.

The 100-page report identifies three security domains (digital, physical and political security) as particularly relevant to the malicious use of AI. It suggests that AI will disrupt the trade-off between scale and efficiency and allow large-scale, finely-targeted and highly-efficient attacks.
The authors expect novel cyber-attacks, such as automated hacking, speech synthesis used to impersonate targets, finely-targeted spam emails using information scraped from social media, or exploiting the vulnerabilities of AI systems themselves (e.g. through adversarial examples and data poisoning).

Likewise, the proliferation of drones and cyber-physical systems will allow attackers to deploy or repurpose such systems for harmful ends, such as crashing fleets of autonomous vehicles, turning commercial drones into face-targeting missiles or holding critical infrastructure to ransom....MORE
At the EFF, Feb. 21, their particular interest:

The Malicious Use of Artificial Intelligence: Forecasting, Prevention, and Mitigation
...At EFF, one area of particular concern has been the potential interactions between computer insecurity and AI. At present, computers are inherently insecure, and this makes them a poor platform for deploying important, high-stakes machine learning systems....  
From GigaOm (yes, they're still alive) some additional thoughts:

What’s missing from the Malicious Use of Artificial Intelligence report?
Only a fool would dare criticise the report “The Malicious Use of Artificial Intelligence: Forecasting, Prevention, and Mitigation,” coming as it does from such an august set of bodies — to quote: 
“researchers at the Future of Humanity Institute, the Center for the Study of Existential Risk, OpenAI, the Electronic Frontier Foundation, the Center for a New American Security, and 9 other institutions, drawing on expertise from a wide range of areas, including AI, cybersecurity, and public policy.”
Cripes, that’s quite a list. But let me at least try to summarize its 100 pages of dense text.
– There’s a handy executive summary and introduction
– 38 pages cover all the things that could go wrong
– 15 pages describe ways to not let them happen
– 33 pages cover the people and materials referenced
It’s difficult to argue with any of it, on the surface at least. Particularly the overall message: there could be bad things, and we should not sleepwalk into them. While this is welcome advice, one factor is noticeable by its absence. Strangely, as the report comes from groups for whom the scientific method should be as familiar as brushing one’s teeth in the morning, it lacks any discussion, or indeed conception, of the nature of risk.

Risk, as security and continuity professionals know, is a mathematical construct, the product of probability and impact. The report itself makes repeated use of the term ‘plausible’, to describe AI’s progress, potential targets and possible outcomes. Beyond this, there is little definition.

We can all conjure disaster scenarios, but it is not until we apply our expertise and experience to assessing the risk, that we can prioritise and (hopefully) mitigate any risks that emerge.
So, without this rather important element, what can we distil from its pages? First we can perceive the report’s underlying purpose, to bring together the dialogues of a number of disparate groups. “There remain many disagreements between the co-authors of this report,” it states, showing the reality, that it is a work in progress: to coin an old consultancy phrase, “I’m sorry their report is so long, we didn’t have time to make it shorter.”...MUCH MORE
And the report via the EFF (101 page PDF)

Wednesday, February 21, 2018

Questions America Wants Answered: "How can I optimise my wardrobe?"

From The Economist's 1843 Magazine, Feb. 6:

An economist’s guide to dressing well
Captain Samuel Vimes, denizen of Terry Pratchett’s “Discworld”, posited the “Boots” theory of socioeconomic unfairness: the rich were rich because they could afford to buy boots that cost $50 today but lasted a decade, while poor Vimes (with his copper’s coppers) was stuck buying $10 boots that wore through in a year. The seemingly cheaper boots would cost him twice as much in the long run, and leave his feet wet most of the year to boot (if you will). Banerjee and Duflo might phrase it differently, but the general concept of capital constraints preventing long-term optimal spending is familiar to any economist.

In theory, then, buying costlier clothes might be prudent in the long run. After all, the actual value of an item of clothing is the purchase price divided by the number of times you wear it: an expensive jacket that you wear every day is ultimately better value than a sale-rack shirt that you only wear once. However, that logic depends on whether your $50 boots are truly going to last a decade. The savings evaporate if you’re liable to lose them, or if you’ll be embarrassed to wear them once fashions change, or if, heaven forbid, some expensive items of clothing are not actually better quality, but just charging for a logo.

That said, a further consideration is whether by dressing to impress you can, for example, acquire a better job that will get you to a higher salary bracket, far exceeding the cost of your fancy threads. “Costly thy habit as thy purse can buy…For the apparel oft proclaims the man,” advised Polonius, a figure of noted acuity. Many economists have similarly suspected that, in the world of business, a fine wardrobe and bland opinions will get you further than the inverse.

However, this is the kind of tricky signalling question where causality is very hard to establish. Do people do well in business because, to quote the economist J.K. Galbraith, they successfully “articulate the currently fashionable cliché”, or because they’re the kind of person with the social and financial capital necessary to climb the greasy pole and to stay on top of fashion trends (without getting too much grease on their outfit)? If you buy a $1,000 dollar suit, will your bosses be impressed, or mortified that you paired last-season’s shirt with the wrong brand of cufflinks? As Marge Simpson once discovered, a $28,000 suit can get you invited to the country club, but once you get there someone will notice that you always wear the same suit. Almost by definition, the kind of class-based signalling that expensive clothing aims to achieve is hard to get right; if it weren’t, it wouldn’t be an effective signal.....MORE
Somehow related at Going Concern, February 2014:
 
Turns Out Your Non-Diverse Wardrobe Probably Makes You a Better CPA
Guys in public accounting, how many blue shirts do you own? For the ladies, how many of the same cardigan in different colors do you own? I get it, I rotate the same few suits when I actually have to appear in public for work in Washington, with the scarf I tie around my neck the most exciting and varying part of my sensible outfit.

As it turns out, those of you with fewer wardrobe choices might actually be at least as smart as our own president, at least according to this Fast Company piece:
As he told Vanity Fair:
"You'll see I wear only gray or blue suits," [Obama] said. "I'm trying to pare down decisions. I don't want to make decisions about what I’m eating or wearing. Because I have too many other decisions to make."
This is because, the Commander in Chief explained, the act of making a decision erodes your ability to make later decisions. Psychologists call it decision fatigue: it’s why shopping for groceries can be so exhausting and judges give harsher rulings later in the day....MORE

"Six factors driving Iran’s sudden currency devaluation"

Following up on last week's "Iran’s police step in to contain foreign currency debacle".

From Al-Monitor:
A major and unexpected devaluation of the rial on the free currency market has taken many in Iran by surprise. Analysis of the behavior patterns in the Iranian foreign exchange market suggests that six main parameters need to be assessed to understand what has contributed to recent events.

First is the application of the inflation differential between Iran and the global inflation levels. This factor has previously been discussed by Al-Monitor, and there have been strong signs that the Rouhani administration has sought to maintain a degree of stability in order to contain the inflationary impacts of a devaluation. If one would have applied the inflation differential, the free market rate of the US dollar would have been around 48,000 rials in October 2016, meaning it would have theoretically far surpassed 50,000 rials by now. Based on statements by top officials, the Central Bank of Iran (CBI) and the administration remain committed to managing the value of the national currency. However, there is continued inflationary pressure on the rial, especially as Iranian exporters wish to see a weaker currency that makes their products more competitive. The ongoing ambiguity surrounding exchange rate policies, and especially the guessing game about the long-promised unification of the official and free market rates, continue to unsettle the market, which enters into panic mode whenever there are sudden fluctuations.

Second is the CBI’s intervention in the currency market. The free currency market is fully managed by the Central Bank, which intervenes to balance supply and demand. Evidently, if the CBI fails to inject enough funds, the demand side will push up the price. This seems to have occurred in recent weeks — both due to a shortage in CBI injections as well as the sudden hike in demand as a result of panic buys. One can speculate whether the CBI’s actions were intentional or due to operational limitations. Respected economist Farshad Momeni has speculated that the Rouhani administration is manipulating the foreign exchange market to benefit from the arbitrage between the official and free market rates in order to compensate for its budget deficit. Others have reported that the CBI has faced difficulties in repatriating hard currency, thus the shortage on the domestic market. But both these explanations would only justify parts of the problem as the Rouhani government and the CBI always have alternative plans in place. As such, it is more likely that a chain of events and rumors, and especially talk of that the CBI would allow the rial’s value to slide, led to unexpectedly high demand for which the CBI was not operationally prepared.

Third is the ability of the CBI to repatriate external funds. Besides managing the foreign currency market, the CBI is also clearing the overall transactions between international and Iranian banks — a process that is growing in volume due to the gradual normalization of banking relations between Iran and international second- and third-tier banks. The CBI’s ability to handle the growing volume of transactions has also been a factor in the recent hiccups in the market. Some explain the operational shortcomings as a function of international, and especially Emirati, banks not cooperating with the CBI. But it is also conceivable that there are some internal shortcomings, taking into account new compliance standards to which all Iranian banks have to adhere. Such operational hiccups are immediately understood as unsettling factors that lead to rumors that the CBI is short of funds. Thus, it is evident that the CBI and Iranian banks need to further upgrade their systems to manage the growing financial flows in order to prevent such bottlenecks....
...MUCH MORE

Central Banking: "The Powell Fed Is Starting to Take Shape"

From the WSJ's MoneyBeat blog:
Wall Street has had a long list of questions for new Federal Reserve Chairman Jerome Powell since his nomination last November. It may finally be about to get some answers.

Minutes from the Fed’s last meeting, on Jan. 30-31, are due out Wednesday afternoon. Those are expected to shed light on the last conclave under the stewardship of former Chairman Janet Yellen, but may also offer some early hints about how her successor is thinking.

“The FOMC minutes should give financial markets a good idea of the tone of Chair Powell’s formal remarks,” said NatWest Markets economists in a research note.

Even stronger clues on his thinking about everything from tighter monetary policy to U.S. inflation are likely to come from Mr. Powell’s first testimony as chair before Congress next week, as The Wall Street Journal’s Morning MoneyBeat newsletter noted on Wednesday.

Mr. Powell previously has stressed continuity and indicated he will maintain the slow-and-steady approach toward interest-rate moves that Ms. Yellen stuck to during her four years at the helm.
The worry among many investors is that the Fed turns more hawkish as the U.S. economy and inflation begin to pick up after years of sluggishness. “​The most likely surprise in the Fed minutes…is that they may be leaning to four hikes in 2018,” said Steven Englander, head of research and strategy for Rafiki Capital Management. The Fed had previously penciled in three rate-increases for 2018.

Expectations that the Fed will tighten policy more aggressively have helped drive up U.S. Treasury yields. The yield on the 2-year U.S. government note rose to its highest level since 2008 on Tuesday, while the 10-year yield is nearing 3% for the first time in four years....MORE

"US companies might be liquidating their offshore bond hoards"

Alexandra seems to be one of the few journos bulldogging what for market operators is a pretty important story. As noted in the intro to Feb. 4's "Bonds: 'Apple, Alphabet and Microsoft... — might consider borrowing some bond-market manoeuvres from the Federal Reserve.'":
If the companies simply repatriate the dollar amount they will only have to sell enough  assets to pay the tax. If they plan to distribute/invest the cash they will have to sell into already weakening markets.
I haven't seen this point raised anywhere in the media other than...

From FT Alphaville, Feb. 1:...
And from FT Alphaville, Feb. 20:

Something odd has been happening to short-term bank bonds.
So far this month, spreads on banks' two-year bonds have widened by more than 15 basis points, according to Bank of America Merrill Lynch. For all US corporate debt maturing in 1-3 years (which includes bank bonds), spreads have widened 8bps, according to BofAML ICE's index. Spreads on three-year and four-year securities have widened by about 11bps and 12bps, respectively:
https://www.ft.com/__origami/service/image/v2/images/raw/http%3A%2F%2Fd1e00ek4ebabms.cloudfront.net%2Fdafabaff-7559-4678-b826-b9d1990c1fa4.jpg?source=Alphaville
This is more likely a sign of selling from big multinational companies, rather than a change in traders' beliefs about bank creditworthiness. Many multinationals had said they would liquidate savings they had invested offshore after tax reform. Companies that invested primarily in corporate bonds, such as Apple, were large buyers of short-term bank bonds, Zoltan Pozsar wrote in a note last month.
Bank of America strategists wrote in a note today that they expect the short-term funding pressures to continue:
The other aspect of overseas cash repatriation we have pushed for this year is that financial markets are losing one of the biggest providers of funding in the front-end... We think liquidations the past two weeks of 1-3 year paper in the corporate bond market is to some extent driven by this story. We are also seeing stress in the commercial paper market, 2-year swap spreads and LIBOR-OIS and one of the drivers we think is the overseas cash repatriation story... We continue to expect wider credit spreads in the front end of the curve.
Maybe companies are going by the two-year timeline estimated by Pozsar:...MORE

Monkeys Are Transcribing The New York Times, Typing Hamlet at 12 Words Per Minute

If it makes anyone feel better they're Stanford monkeys.

Note: we're aware these are either bonobos or chimps. (you try finding a pic of monkeys at the keyboard)

From Engineering & Technology, Sept. 13: 
Monkeys transcribe Hamlet with new brain-reading tech

Monkeys equipped with a brain implant, which reads their thoughts in order to move a cursor, have been able to transcribe passages from Hamlet or the New York Times at 12 words per minute. 
The technology, developed by Stanford University researchers, has been hailed as a major breakthrough for people suffering from severe paralysis such as physicist Stephen Hawking.

According to the team behind the invention, directly reading brain signals to interpret thoughts and drive a computer cursor would allow users to communicate faster than existing technologies allow. For example, the system developed for Hawking by Intel and SwiftKey relies on tracking the movement of facial muscles. Alternatively, eye movement tracking can be used but this doesn’t always work. For example in Hawking’s case, eye movement tracking didn’t work because of droopy eyelids.

"Our results demonstrate that this interface may have great promise for use in people," said Paul Nuyujukian, postdoctoral fellow at Stanford, who developed the system together with professor of electrical engineering Krishna Shenoy. "It enables a typing rate sufficient for a meaningful conversation."

Surprisingly though, the researchers estimate humans will be typing more slowly using the technology than the monkeys involved in the experiment. While the monkeys were just transcribing given passages, humans will be slowed down by thinking about what they actually want to communicate and will also think about how to spell words correctly.

"What we cannot quantify is the cognitive load of figuring out what words you are trying to say," Nuyujukian said....MORE
Here's the Stanford press release, Sept. 12, 2016.

In other primate news:
Chimps begin to grow embarrassed by their close relation to humans 
Today In History: Swedish Chimpanzee, Ola, Wraps Up Investing Career
What Monkey Pornography and Celebrity Worship Tells Us About Human Nature  
Commodity traders superior to chimpanzees, research shows 
Jim Cramer beats Monkey in Stock Picking Contest!
UPDATE-Jim Cramer Beats Monkey in Stock Picking Contest
What Jim Cramer Does After Beating the Monkey

Batteries: "Apple in Talks to Buy Cobalt Directly From Miners"

From Bloomberg, Feb. 20:
  • iPhone maker is one of the largest end users of the metal
  • Cobalt is a key ingredient in mobile phone batteries
Apple Inc. is in talks to buy long-term supplies of cobalt directly from miners for the first time, according to people familiar with the matter, seeking to ensure it will have enough of the key battery ingredient amid industry fears of a shortage driven by the electric vehicle boom.

The iPhone maker is one of the world’s largest end users of cobalt for the batteries in its gadgets, but until now it has left the business of buying the metal to the companies that make its batteries.
The talks show that the tech giant is keen to ensure that cobalt supplies for its iPhone and iPad batteries are sufficient, with the rapid growth in battery demand for electric vehicles threatening to create a shortage of the raw material. About a quarter of global cobalt production is used in smartphones.

Apple is seeking contracts to secure several thousand metric tons of cobalt a year for five years or longer, according to one of the people, declining to be named as the discussions are confidential. Its first discussions on cobalt deals with miners were more than a year ago, and it may end up deciding not to go ahead with any deal, another person said.

An Apple spokesman declined to comment. Glencore Plc Chief Executive Officer Ivan Glasenberg late last year named Apple among several companies the miner was talking to about cobalt, without giving further details.

Securing Supplies
The move means Apple will find itself in competition with carmakers and battery producers to lock up cobalt supplies. Companies from BMW AG and Volkswagen AG to Samsung SDI Co. are racing to sign multiyear cobalt contracts to ensure they have sufficient supplies of the metal to meet ambitious targets for electric vehicle production.

Australian Mines Ltd., developing the Sconi mine in Queensland state, this week agreed a cobalt and nickel supply deal with SK Innovation Co., South Korea’s top oil refiner, that’s worth about A$5 billion ($3.9 billion) at current prices, the Perth-based company said Wednesday in a presentation.
SK Innovation, which plans to use the raw materials at an EV battery manufacturing plant in Hungary, agreed to buy all of the project’s planned output for up to 13 years, according to the filing.
BMW is also close to securing a 10-year supply deal, the carmaker’s head of procurement told German daily FAZ in early February....MORE

Slow-Moving Drought Returning to California, Expanding in Midwest

We've mentioned a preference for the Palmer Drought Index presentation of conditions for some applications, despite a somewhat justified concern the methodology behind it is 'simplistic' when compared with the University of Nebraska U.S. Drought Monitor.
Here they are side by side: