Saturday, August 18, 2012

Neural Networks in Finance and Investing

Neural networks are revolutionizing virtually every aspect of financial and investment decision making. Financial firms worldwide are employing neural networks to tackle difficult tasks involving intuitive judgement or requiring the detection of data patterns which elude conventional analytic techniques. Many observers believe neural networks will eventually outperform even the best traders and investors.

Neural networks are already being used to trade the securities markets, to forecast the economy and to analyze credit risk. Indeed, apart from the U.S. Department of Defense, the financial services industry has invested more money in neural network research than any other industry or government body. Unlike other types of artificial intelligence, neural networks mimic to some extent the processing characteristics of the human brain.

As a result, neural networks can draw conclusions from incomplete data, recognize patterns as they unfold in real time and forecast the future.

Great Book by the Authors : Efraim Turban and Robert R. Trippi.

See also this site that does the prediction work very easily :

Friday, June 22, 2007

Open Innovation and Other Foolish Ideas

The best ideas are often conceived of by trial and error, or even just by accident. Open source innovation can be the best path to discovery -- if you aren’t afraid to take the plunge.

Open source or distributed innovation is all the rage at the moment, but the hype glosses over one important fact -- most open source projects are total failures. But this fact is precisely why the open source innovation movement is so important.

Within traditional innovation models, the cost of failure is very high. As a result, stage gates, red lights, and funnels are introduced to control the number of new ideas that are developed and introduced in to the market. And that's the problem.

Nobody can ever know for sure what will work and what won't, until an individual makes a leap of faith and a surge of innovation is unleashed. Moreover, nobody can tell what’s silly and what isn’t without the benefit of hindsight. But with open innovation, researching and worrying about whether something will work or not is unnecessary because of the low cost of trying. Just do it and you’ll find out.

My own experience of open innovation within large organizations is relatively modest. The reason for this is that the idea is too new and unproven. Organizations like the sound of it in theory, but in practice relinquishing control to scores of unknown individuals scares the pants off them. Business, after all, is about order and control. But if they’re right then why do only 40% of major technical innovations come from large corporations?

Anyway, I’ve been playing with the idea myself of late. My first experiment was a little online trends newsletter called What’s Next. This isn’t openly created, because I create all the content myself, but I do receive a tremendous amount of user feedback so the business model is openly filtered. As a result the idea has been revamped several times, and while the current version isn’t perfect, it’s one hundred times better than when it started.

The key learning here is that the innovation process has been inverted. Previously, I would have worked up a handful of promising ideas and put them into focus groups to establish which concept was 'right.' I would have then polished up the winning concept and put it on the market. In other words, I would have created something, edited it, and then ‘published’ it. But these days you can also do it the other way around. You can create, then publish, and then let your customers edit the concept for you, especially if your product is digital or if it’s a service innovation.

My latest collaborative experiment in home-brewed innovation is something called Homepage Daily, which is an online newspaper. Will this work? I have no idea but the users will undoubtedly let me know. The point here (and most large organizations outside of the US at least really don’t get this) is that there is no lasting humiliation in giving it a go. You can fail like crazy and still keep going until you eventually stumble on success. Of course this presents big organizations with something of a problem. How can they fail like crazy without looking like idiots? The answer, in open innovation terms, is to facilitate and empower every employee, customer and stakeholder to become part of the innovation team and to then encourage them to perform small experiments.

For example, Mozilla Corp is the company behind Firefox, the wildly successful Internet browser. The company has 70 employees and almost 200,000 volunteer helpers. Moreover, Firefox 1.0 was developed, not on purpose, but by two renegade young programmers that went off in the wrong direction just because it felt right.

The idea of open or distributed innovation obviously links with other ideas like the wisdom of crowds, but the link I like the most is with James G. March’s idea of foolishness in organizations. March is a professor emeritus at Stanford Business School and one of his key insights is that companies need to mess around more.

What I think he means by this is that people should try more things out even if rationally they seem like silly ideas. For example, people should incorporate more ideas from outside their domain, or even make mistakes on purpose just to see where this takes them. It’s a bit like going on holiday. You can follow the guidebooks but often the most interesting and useful experiences come when you put the guidebook down and walk down an unknown street for no particular reason.

Of course, the idea of setting up an innovation process focused on making deliberate mistakes is itself a silly idea. At the moment, most organizational innovation strategies and processes are too sequential and too rigid. But moving to some kind of ‘anything goes’ system would be equally disastrous.

What’s needed is a balance -- a combination of tight and loose, where 85-90% of internal resources are spent on internal innovation that is tightly planned and controlled. The remaining 10-15% of time and money should then be spent on unplanned ideas that are developed by simply releasing them into the wild and seeing what happens.

by Richard Watson, CEO, Global Innovation Network

Monday, May 15, 2006

A Global FON for All ?

Here comes the FON movimiento - a serious threat to mobile telecoms

It's an international grassroots attempt -- started in Spain -- to patch the central weakness of Wi-Fi: spotty access. And it's spreading like wildfire.

Wireless connectivity hubs that use Wi-Fi technology are increasingly common: Many people are installing Wi-Fi at home to "extend" their broadband Internet access; antennas are replacing cables in office networks; and specific locations, such as airports, hotels, and coffee shops, offer access to the "cloud" of connectivity, often for a fee. But coverage remains limited. Even the presence of a public hub doesn't automatically mean that you can access it, due to too many different operators, high prices, no-roaming clauses, and so on.

LINUS OR BILL. Spanish serial entrepreneur Martin Varsavsky, who started FON last October, is out to change that. (See "From Hot Spots to Fon Zones"). Basically, FON is a bandwidth-sharing movement inspired by peer-to-peer principles. The idea is that if you're willing to share your bandwidth -- that is, share the Wi-Fi access point for which you pay a subscription to a broadband provider -- you can tap into the global network of "foneros" who are also willing to share theirs. Says Varsavsky: "You pay your bandwidth at home and can enjoy bandwidth wherever there are other foneros."

To become a fonero, you buy a FON-ready wireless router, or download a piece of Linux-based software that will rewrite the code of your existing router, adding access and billing layers and sharing a portion of your bandwidth with the FON network.

You can share your bandwidth as a "Linus" or a "Bill" -- obvious references to Linus Torvalds of Linux fame and Microsoft (MSFT) co-founder Bill Gates. As a Linus, you allow any other fonero to use your bandwidth, and in return can access that of anyone else in the network for free. As a Bill, you sell bandwidth from your hotspot for $2 or €2 a day to a third category of users -- the "Aliens," who aren't part of the network -- and you also must pay to use somebody else's hotspot. Revenues are shared with FON. The exact business model is still being fine-tuned. In this first phase, FON is limited to Linuses.

GLOBAL POOL. "The €2 rate is a bargain for 24 hours," says Varsavsky. "With this rate, we become the EasyJet [low-cost airline] of Wi-Fi."

Varsavsky, a multimillionaire telecom entrepreneur, personally invested €700,000 (roughly $834,000) in the venture, hiring about 20 people, before receiving $21.7 million in February from Skype, Google (GOOG), Swiss venture-capital firm Index, and Sequoia, a Silicon Valley VC.

Previous efforts to develop widespread Wi-Fi networks haven't exactly been overnight successes. During a recent discussion, Varsavsky said the bottom-up approach aims at creating a global pool of shared bandwidth, turning millions of private access points into a unified Wi-Fi network with a standard interface.

WI-FI HANDOVER. There are two parts to this plan: first, the unification of the network, through a free software-based roaming offering; and second, building an infrastructure through which it could become possible from almost anywhere (take that with a grain of salt) to place cheap or free phone calls using voice-over-Internet protocol software on a personal digital assistant (no wonder Skype is an investor). Beyond the PDA, Varsavsky has plans for another VoIP device, called WiFiFON.

Since "Wi-Fi handover" -- the technology that would enable a Wi-Fi-based conversation to be handed over from one access point to the next -- is getting closer to reality, the FON system could represent serious competition for mobile-telecom operators relatively soon. FON is also working on ways to share Wi-Fi bandwidth among laptops, in what's called a "mesh" network.

Numerous issues remain to be worked out. Right now, FON works on only a few models of routers. That will have to change if the service aims at mass acceptance. In order to implement the "Bill" option, FON needs a quite complex and secure billing system, which is no trivial task in this kind of distributed network. And questions of trust are not to be underestimated in access-sharing arrangements.

BLOGGERS ON BOARD. There are also legal implications. Some DSL providers have clauses prohibiting customers from sharing bandwidth. The coverage provided by foneros' hotspots is likely to be more indoor than outdoor. ("Nobody has all the solutions to the coverage problem," acknowledges the founder. "We will connect and collaborate with all the key players.") And FON isn't alone: Other companies, such as Wibiki, UnitedWiFi, and ShareMyWifi, are working on very similar approaches.

However, FON has already gained significant momentum -- virtually without spending a dime on marketing. It has been striking deals with Internet operators (who will sell "FON-ready" routers to their broadband customers in exchange for a portion of the revenues), and is counting on online word-of-mouth. To help that word-of-mouth along, Varsavsky made a shrewd move. He invited leading bloggers to join the company's advisory board, and gave them some equity -- plenty of incentive to spread the gospel of FON.

The move has paid off: After less than five months, FON is already breathing down the neck of global commercial Wi-Fi operators. The largest among them has slightly more than 20,000 hotspots, and that's approximately the number of people who have signed up as foneros so far -- nearly 5,000 of them in the U.S. (and growing very fast), 4,000 in the Spanish home base, and the rest in a couple dozen other countries. They haven't all activated their FON hotspots yet, but the trend is clear.

CITY TRAFFIC. Does a peer-to-peer design like FON's mean the end for commercial hotspot networks like those operated by T-Mobile and Swisscom Eurospot? Varsavsky enthusiastically believes it will, eventually. I'm a bit more cautious. I see FON's potential, assuming the scheme is correctly implemented, but then one could also ask: Is there a real need for FON (with all the weakness and uncertainties built into a grassroots volunteer network), when many cities and regions -- such as San Francisco, Philadelphia, Chicago, and Taiwan -- are starting to provide blanket Wi-Fi for free or for cheap?

Varsavsky's answer: "FON has been invited to make proposals to some major cities around the world. Cities like our offer because it doesn't turn them into telecom operators, relies on citizen participation, and is practically free to cities."

Local authorities, Varsavsky says, should just encourage citizens "to buy Wi-Fi routers and place them by their windows." That's one way to keep FON ringing.

By Bruno Giussani

Wednesday, March 22, 2006

The end of time and space

"The cornerstone for this millennium is the end of time and space. Most organizations today are run the same way as early-20th-century businesses. Everyone goes to his car, drives to work, has certain hours, has a certain job. It's all built on the factory model. Moving forward, it really isn't going to be important where you are in order to do your job. Ideas are being worked on 24 hours a day. Nobody seems surprised anymore if I wake up in the middle of the night and start IM-ing someone in Europe, because the fact is, they don't even know where I am. And it doesn't matter.

Fewer and fewer people will want to be employees of corporations, because corporations don't have anything to offer. Corporations don't provide security and provide fewer and fewer benefits. People may find new ways to sell their skills. I can imagine eBay or the equivalent of eBay being in the business of letting people bid on work all day long. Office buildings may turn into housing, or maybe individuals will rent office space as you would rent a hotel room.

And those individuals will compete with people from all over the world. This isn't globalization, because globalization to me feels big. I think it's the opposite, it's villagization--making everything smaller and in some sense more intimate. And that's very powerful. I'm totally capitalistic, but I don't like large organizations because they tend to want to control. If this reduces the power of corporations and governments to limit what human beings can do, the thing most exciting to me is the potential for everyone to participate."

By Avram Miller

Sunday, February 12, 2006

Internet censorship

Microsoft recently pulled the plug on Zhao Jing, a Chinese blogger, who was using an MSN Spaces online blog service to voice his opinion on a variety of topics. Such actions and many others by U.S. companies reflects their desire for profit, instead of supporting and promoting the basic human right of free speech.

The Internet was a place where information flowed freely and unabashedly. There was a time when the only thing that could restrict you was the lack of a user name and password. The Internet had little to hide and containment or control wasn’t something that most people thought about, in fact, the-more-information-the-better-it-is mentality dominated and this generally holds true today in most parts of the world. The idea that controlling the Net is virtually impossible however is being put to the test by the Chinese government. Not only are they trying to do just that, but they’re making companies adhere to free speech censorship.

Recently it was revealed that AOL, Microsoft and Yahoo! complied with Justice Department requirement to turn over search data. Google has made a very high profile statement that it will not.

There’s a bigger picture and a bigger struggle here. The government wants unfettered access to desired information about individuals’ behavior online and off and the NSA wiretapping and spying is reflective of that intent. As the NY Times piece points out:

Whatever the courts ultimately decide on the pornography law at issue, however, Tim Wu, a professor at Columbia Law School, said the Google case pointed to a larger struggle for the identity of the Internet.

“Search engines are at the center of that battle, both here and in other countries,” said Professor Wu. “By asserting its power over search engines, using threats of force, the government can directly affect what the Internet experience is. For while Google is fighting the subpoena, it’s clear that if they lose, they will comply.”

These actions will cause a greater state-controlled censorship on the internet, reduce people's ability to use the internet to communicate freely, and leave expansion of the internet in the hands of the people least capable of doing the job.

If you agree with this, here is a good web site with a tutorial on "how to bypass Internet Censorship"

Thursday, January 05, 2006

Regulation and wealth concentration

Governments around the world face the challenge to regulate the market without incurring in inequalities, to provide economic growth and wellness among the population.

Historically, utilities like telecommunications and electricity were considered natural monopolies and governments regulated them in order to provide universal access and fair prices. However, the privatization of those considered natural monopolies have brought high prices and poor services in the Telecommunication industry in some developing countries due to lack of competition and regulation.

New competitors are required to interconnect with incumbent operators and the conditions for that to happen have received widespread attention. In theory, it is possible for the incumbent to charge high interconnection fees to economically block competitors.

There is the perception of increased concentration of wealth due to privatization, however, there is not reliable information and data on this issue (at least I have not found).

On this matter, there is a phrase that best exemplifies the appropriate need for regulation and civic sector awareness to prevent further damage. The following text was written by Raghuram Rajam and Luigi Zingales.

“While the absence of rules makes the playing field uneven, too many rules of the wrong kind make ir uneven again- a truly free and competitive market occupies a very delicate middle ground between the absence of rules and the presence of suffocating rules. It is because this middle ground is so narrow that capitalism in it best for is very unstable. It easily degenerates into a system of the incumbents, for the incumbents, by the incumbents”

Sunday, January 01, 2006

Collaboration trends and the new Media

Giant media conglomerates have gained the control of the information and communication infrastructure and have a big impact over the general public opinion. Unfortunately, civic sector multi-way access to this powerful infrastructure is not encouraged.

Thanks to the internet and new open collaboration and distribution platforms, civic society is fighting back. New opportunities and threats offered by a global network society can't be ignored.

Important issues such as economic disparity and corruption are being discussed in a new way never tried before. New social initiatives, such as googlebombing and blog communities are being used as an effective form of social protest.

New and rich content is increasingly being available from "citizen reporters". This trend clearly is a big challenge for traditional media conglomerates, considering the fact that the gap between the professional and non-professional news gatherers is getting narrower.

We must try to keep the Internet as open as possible, despite the lobbing efforts of some companies to make the internet a toll road.