KS 6.528 9.687 This is a photograph by the artist uh Michael Najar
KS 9.687 11.004 um and it'S real
KS 11.004 15.177 um in the sense that he went there to Argentina to take the photo
KS 15.177 20.998 but it'S also a fiction, there's a lot of work that went into it after that, and what he's done IS he'S actually
KS 20.998 23.55 reshaped digitally all of the
KS 23.55 27.925 contours of the mountains follow the visissitudes of the Dow Jones index.
KS 27.925 29.585 So what you see
KS 29.585 34.871 that precipice, that high precipice with the valley is the 2008 financial crisis, the
KS 34.871 36.512 photo was made when we were deep
KS 36.512 39.712 in the valley over there, I don't know where we are now
KS 39.712 44.17 um this IS uh the Hang Seng index for Hong Kong and
KS 44.17 47.02 similar topography I wonder why
KS 47.02 50.989 and this IS art, right, this IS metaphor.
KS 50.989 51.9 But
KS 51.9 54.289 I think the point IS IS that this IS metaphor
KS 54.289 55.058 with teeth.
KS 55.058 57.083 And it'S with those teeth that I want to
KS 57.083 60.263 propose today that we re-think a little bit
KS 60.263 61.965 about the role of
KS 61.965 66.424 contemporary math, not just financial math, but math in general, that
KS 66.424 69.241 it'S transitioned from being something that we sort of
KS 69.241 71.897 extract and derive from the world to something
KS 71.897 73.904 that actually starts to shape it
KS 73.904 75.992 the world around us, and the world
KS 75.992 78.192 inside us, and it'S specifically
KS 78.192 79.733 algorithms, which are
KS 79.733 83.098 basically the math that computers use to decide stuff
KS 83.098 85.003 They acquire
KS 85.003 89.802 the sensibility of truth, because they repeat over and over again, and they kind of ossify
KS 89.802 91.342 and calcify, and they kind of
KS 91.342 92.255 become
KS 92.255 93.228 real
KS 93.228 94.829 And I was thinking about this
KS 94.829 97.89 of all places on a trans-Atlantic flight
KS 97.89 99.045 a couple years ago
KS 99.045 104.313 uh because I happened to be seated next to a Hungarian physicist about my age, and we were talking about
KS 104.313 108.164 what life was like during the cold war for physicists in Hungary
KS 108.164 110.656 and I said so what were you doing and he said well we were
KS 110.656 112.682 uh mostly breaking stealth
KS 112.682 114.466 and I said that'S a good job,
KS 114.466 116.03 uh that'S interesting,
KS 116.03 120.043 um how does that work, and so to understand that you have to understand a little bit
KS 120.043 122.278 about how stealth works, and so
KS 122.278 125.439 this IS a over-simplification but basically
KS 125.439 127.202 it'S not like you can just
KS 127.202 129.671 pass a radar signal right through
KS 129.671 134.535 a hundred and fifty six tons of steel in the sky, it'S not just going to disappear
KS 134.535 137.961 But if you can take this big massive thing
KS 137.961 139.497 and you could
KS 139.497 140.977 turn it into
KS 140.977 145.395 a million little things, something like a flock of birds
KS 145.395 150.704 well then the radar that'S looking for that has to be able to see every flock of birds in the sky
KS 150.704 153.926 and if you're a radar, that'S a really bad job.
KS 153.926 160.05 and he said yeah, but that'S if you're a radar, he said, so we didn't use a radar, we
KS 160.05 165.399 built a black box that was looking for electrical signals, electronic communication
KS 165.399 172.187 and whenever we saw a flock of birds that had electronic communication we thought, probably that has something to do with the Americans
KS 172.187 176.402 and I said yeah, that'S that'S good, so you've
KS 176.402 183.796 effectively negated 60 years of aeronautic research, what'S your act two? you know, like what do you do when you grow up?
KS 183.796 188.433 and he said uh he said well you know um financial services
KS 188.433 189.799 and I said oh
KS 189.799 192.9 because those have been in the news lately
KS 192.9 197.965 um and I said I said how does that work and he said well there'S two thousand physicists on Wall Street now
KS 197.965 199.322 and I'm one of them
KS 199.322 201.39 and I said well so what'S the black box
KS 201.39 202.525 for Wall Street?
KS 202.525 206.683 and he said well it'S funny that you ask that, because it'S actually called black box trading
KS 206.683 211.08 and it'S also sometimes called algo trading, algorithmic trading
KS 211.08 214.12 and algorithmic trading evolved
KS 214.12 215.174 in part
KS 215.174 220.465 because institutional traders have the same problems that the United States Air Force had,
KS 220.465 229.482 which IS that they're moving these positions, whether it'S Proctor and Gamble or Accenture, whatever, they're moving like a million shares of something through the market
KS 229.482 235.444 And if they do that all at once it'S like playing poker and just going all in, right away, right, you just tip your hand
KS 235.444 239.66 and so they have to find a way and they use algorithms to do this
KS 239.66 243.429 to break up that big thing into a million little transactions
KS 243.429 245.739 and the magic and the horror
KS 245.739 248.191 of that IS IS that the same math
KS 248.191 251.884 that you use to break up the big thing into a million little things
KS 251.884 257.572 can be used to find a million little things and sew them back together and figure out what's actually happening in the market
KS 257.572 258.527 so if you need
KS 258.527 260.128 to have some image
KS 260.128 261.303 of what's happening
KS 261.303 263.856 in the stock market right now, what you can picture
KS 263.856 265.457 IS a bunch of algorithms
KS 265.457 267.605 that are basically programmed to hide
KS 267.605 270.462 and a bunch of algorithms that are programmed to go find them
KS 270.462 271.394 and act
KS 271.394 272.388 and all of that'S
KS 272.388 274.009 great and it'S fine
KS 274.009 276.704 and that'S seventy percent
KS 276.704 280.128 of the United States stock market, seventy percent of the operating system
KS 280.128 282.458 formerly known as your pension
KS 282.458 285.498 your- your mortgage
KS 285.498 288.263 and what could go wrong?
KS 288.263 291.12 right, what could go wrong IS IS that a year ago
KS 291.12 293.207 nine percent of the entire market just
KS 293.207 297.503 disappears in five minutes and they called it the Flash Crash of two forty five
KS 297.503 298.272 right?
KS 298.272 300.663 all of a sudden, nine percent just goes away
KS 300.663 302.669 and nobody to this day
KS 302.669 303.743 can even agree
KS 303.743 304.818 on what happened
KS 304.818 305.892 because nobody
KS 305.892 306.472 ordered it
KS 306.472 307.628 nobody asked for it
KS 307.628 308.297 nobody
KS 308.297 309.574 had any control
KS 309.574 311.318 over what was actually happening
KS 311.318 312.535 all they had
KS 312.535 314.927 was just a monitor in front of them
KS 314.927 317.076 that had the numbers on it
KS 317.076 318.313 and just a red button
KS 318.313 318.982 that said
KS 318.982 320.077 stop
KS 320.077 321.09 
KS 321.09 324.382 and that's the thing, right, IS IS that we're writing things
KS 324.382 327.098 we're writing these things that we can no longer read
KS 327.098 331.234 and it'S- we've- we've rendered something kind of illegible
KS 331.234 332.572 and
KS 332.572 333.89 we've lost
KS 333.89 336.241 the sense of what'S actually
KS 336.241 337.113 happeneing
KS 337.113 338.653 in this world that we've made
KS 338.653 340.66 and we're starting to make our way
KS 340.66 343.437 there'S a company in Boston called NANEX
KS 343.437 345.143 and uh they use
KS 345.143 347.656 math and magic and I don't know what
KS 347.656 350.049 and they reach in to all the market data
KS 350.049 353.748 and they find actually sometimes some of these algorithms and they
KS 353.748 354.815 when they find them they-
KS 354.815 358.64 they- they pull them out and they pin them to the wall like butterflies
KS 358.64 359.248 
KS 359.248 362.065 and they do what we've always done when confronted
KS 362.065 364.68 with huge amounts of data that we don't understand
KS 364.68 366.301 which is that they give them a name
KS 366.301 367.375 and a story
KS 367.375 369.477 so this is one that they found
KS 369.477 370.673 they called
KS 370.673 371.929 the knife
KS 371.929 374.645 
KS 374.645 375.598 the carnival
KS 375.598 376.774 
KS 376.774 378.233 the Boston Shuffler
KS 378.233 379.794 
KS 379.794 380.504 Twilight
KS 380.504 381.983 
KS 381.983 384.37 and the gag IS that of course
KS 384.37 386.499 these aren't just running through the market
KS 386.499 387.897 right, you can find
KS 387.897 389.134 these kinds of things
KS 389.134 391.749 wherever you look once you learn how to look for them.
KS 391.749 392.885 right you can find it
KS 392.885 395.257 here this book about flies
KS 395.257 396.615 that you may have been looking at
KS 396.615 398.399 on amazon you may have noticed it
KS 398.399 401.4 when its price started at one point seven million dollars
KS 401.4 402.557 It'S out of print
KS 402.557 403.773 still
KS 403.773 405.071 
KS 405.071 409.987 if you had bought it at one point seven it would have been a bargain, a few hours later it had gone up to
KS 409.987 412.724 twenty three point six million dollars
KS 412.724 414.143 plus shipping and handling
KS 414.143 417.495 and the question IS nobody was buying or selling anything
KS 417.495 422.277 what was happening? and you see this behavior on amazon as surely as you see it on Wall Street
KS 422.277 424.871 and when you see this kind of behavior what you see
KS 424.871 425.925 IS the evidence
KS 425.925 427.851 of algorithms in conflict
KS 427.851 430.405 algorithms locked in loops with each other
KS 430.405 431.256 without any
KS 431.256 432.432 human oversight
KS 432.432 433.303 without any
KS 433.303 435.702 adult supervision to say actually
KS 435.702 437.161 one point seven million
KS 437.161 438.093 IS plenty
KS 438.093 440.384 you stick with that
KS 440.384 443.486 and as with amazon, so it IS with netflix
KS 443.486 443.967 
KS 443.967 445.406 and so netflix
KS 445.406 449.645 has gone through several different algortihms over the year, they started with cinematch and they've
KS 449.645 455.148 they've tried a bunch of others, there's Dinosaur Planet, there'S Gravity, they're using Pragmatic Chaos now. Pragmatic Chaos
KS 455.148 460.336 IS, like all of netflix' algorithms, trying to do the same thing, it'S trying to get a grasp on you
KS 460.336 463.239 on the firmware inside the human skull so that
KS 463.239 465.61 it can recommend what movie
KS 465.61 466.947 you might want to watch
KS 466.947 468.852 next, which IS a very very
KS 468.852 470.027 difficult problem
KS 470.027 474.854 but the difficulty of the problem and- and the fact that we don't really quite have it down
KS 474.854 475.428 
KS 475.428 479.096 it doesn't take away from the effects that Pragmatic Chaos has
KS 479.096 480.11 Pragmatic Chaos
KS 480.11 482.036 like all netflix algorithms
KS 482.036 483.698 determines in the end
KS 483.698 484.874 sixty percent
KS 484.874 485.806 
KS 485.806 486.88 of what movies
KS 486.88 488.056 end up being rented
KS 488.056 491.056 right, so one piece of code, with one idea
KS 491.056 492.638 about you
KS 492.638 493.347 
KS 493.347 495.374 IS responsible for sixty percent of those movies.
KS 495.374 496.022 
KS 496.022 497.34 but what if you could
KS 497.34 498.84 rate those movies
KS 498.84 500.259 before they get made
KS 500.259 501.759 right, wouldn't that be handy
KS 501.759 505.296 well, so a few data scientists from the UK are in Hollywood
KS 505.296 509.111 and they have story algorithms, in a company called Epigogics, and
KS 509.111 511.731 you can run your script through there
KS 511.731 516.556 and they can tell you quantifiably that that'S a thirty million dollar movie or a two hundred million
KS 516.556 517.407 dollar movie
KS 517.407 518.684 and the thing IS IS that
KS 518.684 519.961 this isn't Google
KS 519.961 523.325 right, this isn't information, these aren't financial stats
KS 523.325 524.501 this IS culture
KS 524.501 527.846 and what you see here, or what you don't really see,
KS 527.846 528.494 normally
KS 528.494 531.069 IS IS that these are the physics of culture
KS 531.069 532.36 
KS 532.36 534.274 and if these algorithms
KS 534.274 537.944 like the algorithms on wall street, just crashed one day and went awry
KS 537.944 538.714 
KS 538.714 539.894 how would we know?
KS 539.894 540.684 
KS 540.684 541.677 what would it look like?
KS 541.677 542.873 
KS 542.873 544.191 and they're in your house
KS 544.191 544.778 right?
KS 544.778 545.183 
KS 545.183 549.25 they're in your house right these are two algorithms competing for your living room, these are two different
KS 549.25 553.04 cleaning robots that have very different ideas about what clean
KS 553.04 554.479 means and you can see it
KS 554.479 556.374 if you slow it down and attach
KS 556.374 557.427 lights to them
KS 557.427 560.529 and they're sort of like secret architects in your bedroom
KS 560.529 563.813 you know and the idea that architecture itself
KS 563.813 566.714 is somehow subject to algorithmic optimization
KS 566.714 568.233 is not far-fetched it's
KS 568.233 570.421 super real and it's happening
KS 570.421 571.293 around you
KS 571.293 573.036 you feel it most
KS 573.036 574.353 when you're in a sealed
KS 574.353 575.731 metal box
KS 575.731 576.704 a new
KS 576.704 579.704 style elevator, they're called destination control elevators
KS 579.704 583.838 these are the ones where you have to press what floor you're going to go to before you get in the elevator
KS 583.838 585.986 and it uses what's called a bin-packing algorithm
KS 585.986 587.263 so none of this michigas
KS 587.263 589.735 of just letting everybody go into whatever car they want
KS 589.735 594.682 everybody who wants to go into the tenth floor goes into car two and everybody who wants to go to the third floor goes into car five
KS 594.682 595.698 and
KS 595.698 598.494 the problem with that IS IS that people
KS 598.494 599.527 freak out
KS 599.527 600.804 people panic
KS 600.804 604.29 and you see why, right, you see why, it'S because
KS 604.29 605.364 the elevator
KS 605.364 608.546 is missing some important instrumentation, like buttons
KS 608.546 610.026 right?
KS 610.026 612.316 like the things that people use
KS 612.316 613.532 all it has
KS 613.532 614.464 IS just
KS 614.464 615.497 the number
KS 615.497 616.794 that moves up or down
KS 616.794 618.111 and that red button
KS 618.111 619.043 that says
KS 619.043 619.873 stop
KS 619.873 620.968 
KS 620.968 624.86 and this is what we're designing for, we're designing for this kind of
KS 624.86 626.542 machine dialect
KS 626.542 629.035 right, and how far can you take that
KS 629.035 630.433 how far can you take it?
KS 630.433 634.909 you can take it really really far, so let me take it back to wall street
KS 634.909 635.739 
KS 635.739 636.286 ok
KS 636.286 638.435 because the algorithms of wall street
KS 638.435 639.428 are dependent
KS 639.428 642.105 on one quality above all else which IS speed
KS 642.105 646.012 and they operate on milliseconds and microseconds, and
KS 646.012 648.953 just to give you a sense of what microseconds are, it takes you
KS 648.953 652.421 five hundred thousand microseconds just to click a mouse.
KS 652.421 655.747 but if you're a wall street algorithm and you're five microseconds behind
KS 655.747 656.965 you're a loser
KS 656.965 658.973 
KS 658.973 660.801 so if you were an algorithm
KS 660.801 663.417 you'd look for an architect like the one that I met in Frankfort
KS 663.417 666.742 who was hollowing out a skyscraper, thowing out all the furniture
KS 666.742 669.174 all the infrastructure for human use, and just running
KS 669.174 669.904 steel
KS 669.904 673.047 on the floors to get ready for the stacks of servers to go in
KS 673.047 673.858 
KS 673.858 675.44 all so that an algorithm
KS 675.44 677.548 could get close to the internet
KS 677.548 678.866 
KS 678.866 681.339 and you think of the internet as this kind of
KS 681.339 684.096 distributed system, and of course it IS, but it's distributed
KS 684.096 688.658 from places, right, and new york this is where it's distributed from, the carrier hotel
KS 688.658 690.3 located on hudson street
KS 690.3 694.092 and this is really where the wires come right up into the city
KS 694.092 695.166 and
KS 695.166 700.236 the reality IS IS that the further away you are, you're a few microseconds behind every time
KS 700.236 703.701 these guys down on wall street, marco polo and cherokee nation
KS 703.701 706.235 they're eight microseconds behind
KS 706.235 707.876 all these guys
KS 707.876 711.124 going in to the empty buildings being hollowed out
KS 711.124 712.137 
KS 712.137 714.39 up around the carrier hotel
KS 714.39 715.565 right
KS 715.565 717.248 and that's going to keep happening
KS 717.248 717.957 
KS 717.957 719.457 we're going to keep hollowing them out
KS 719.457 720.288 because
KS 720.288 722.416 you inch for inch
KS 722.416 724.93 and pound for pound and dollar for dollar
KS 724.93 729.916 none of you could squeeze revenue out of that space like the Boston Shuffler could
KS 729.916 731.619 
KS 731.619 732.957 but if you zoom out
KS 732.957 733.93 
KS 733.93 735.165 if you zoom out
KS 735.165 738.855 you would see an eight hundred and twenty five mile trench
KS 738.855 739.788 between
KS 739.788 744.865 new york city and chicago 's been built over the last few years by a company called spread networks
KS 744.865 745.736 
KS 745.736 749.993 this is a fiber optic cable that was laid between those two cities
KS 749.993 750.337 
KS 750.337 752.953 to just be able to traffic one signal
KS 752.953 753.277 
KS 753.277 755.932 thirty seven times faster than you can click a mouse
KS 755.932 756.358 
KS 756.358 759.446 just for they algorithms, just
KS 759.446 761.573 for the Carnival, and the Knife
KS 761.573 762.12 
KS 762.12 763.62 and when you think about this
KS 763.62 764.207 that
KS 764.207 765.2 we're running
KS 765.2 767.612 through the United States with dynamite
KS 767.612 769.153 and rock saws
KS 769.153 769.599 
KS 769.599 771.829 so that an algorithms can close the deal
KS 771.829 773.775 three microseconds faster
KS 773.775 773.957 
KS 773.957 778.397 all for a communications framework that no human will ever know
KS 778.397 780.283 
KS 780.283 782.29 that's a kind of manifest destiny
KS 782.29 784.945 and we'll always look for a new frontier
KS 784.945 786.465 and fortunately
KS 786.465 788.552 we have our work cut out for us
KS 788.552 792.709 this IS just theoretical, this IS some mathematicians at MIT
KS 792.709 797.147 and the truth IS I don't really understand a lot of what they're talking about
KS 797.147 803.368 it involves light cones and quantum entanglement and I don't really understand any of that but I can read this map
KS 803.368 803.935 
KS 803.935 805.556 and what this map says
KS 805.556 809.889 IS IS that if you're trying to make money on the markets where the red dots are, that's where
KS 809.889 811.409 people are, where the cities are
KS 811.409 814.064 you're going to have to put the servers where the blue dots are
KS 814.064 815.685 to do that most effectively
KS 815.685 819.881 and the thing that you might have noticed about those blue dots IS that a lot of them are
KS 819.881 821.437 in the middle of the ocean
KS 821.437 822.288 
KS 822.288 828.65 so that's what we'll do, we'll build bubbles, or something, or- or- or platforms, we'll actually part the water
KS 828.65 833.311 right, to pull money out of the air, because it's a bright future
KS 833.311 835.054 if you're an algorithm
KS 835.054 837.122 
KS 837.122 838.378 and it's not the money
KS 838.378 841.843 that's so interesting, actually, it's what the money motivates
KS 841.843 843.385 right? that we're actually
KS 843.385 844.54 terraforming
KS 844.54 846.0 the earth itself
KS 846.0 848.371 with this kind of algorithmic efficiency
KS 848.371 849.851 and in that light
KS 849.851 853.48 you go back, and you look at Michael Najar's photographs
KS 853.48 855.893 and you realize that they're not metaphor
KS 855.893 857.069 they're prophecy
KS 857.069 858.771 right, they're prophecy
KS 858.771 859.602 for the kind of
KS 859.602 860.737 seismic
KS 860.737 861.385 
KS 861.385 863.837 terrestrial effects of the math
KS 863.837 864.83 that we're making
KS 864.83 865.498 
KS 865.498 868.902 and the- the landscape was always made by this sort of
KS 868.902 871.925 weird uneasy collaboration between nature
KS 871.925 872.857 and man
KS 872.857 876.691 but now there's this kind of third co-evolutionary force
KS 876.691 877.785 algorithms
KS 877.785 879.102 the Boston Shuffler
KS 879.102 880.095 the Carnival
KS 880.095 882.832 and we will have to understand those as nature
KS 882.832 884.007 and in a way
KS 884.007 884.96 they are
KS 884.96 885.973 thank you