Reid Holloway Blog | Forests, Trees, Algos and Honesty | TalkMarkets
Rlh Consulting/Hedge Manager for private clients
Reid Holloway’s client roster has included Young & Rubicam, Inc., Philip Morris, Pfizer Pharmaceuticals, and The Trump Organization. Mr. Holloway began his career as an editor with Harcourt Brace Jovanovich Publications in 1976. In 1978 he joined Sanford C. Bernstein & Co., ...more

Forests, Trees, Algos and Honesty

Date: Tuesday, August 15, 2017 5:13 PM EDT

When I was a young boy on his way to grade school (actually just running down the driveway of a subdivision split level suburban house typical of the 1960s to catch the bus that picked us up), my dear mom, always the bright, optimistic cheerleader and zealous defender of her boys, would wave enthusiastically, calling out “Knock ‘em dead, Reid!”  I loved that!  It made me feel great.  I miss her, and I miss her encouragement.

 

So, being an amateur diagnoser and self-medicator of psychosis, the chief component of which is having the brain overactivity of seeing too many connections between and among too many things, that was what popped into my consciousness when the news bulletin flashed that some bonehead had rammed his car into the counterprotestors at Charlottesville.  “Man,” I thought to myself, “I hope he didn’t have a well-meaning mother who told him to do what my mom did.”  Life can be like that, you know.  Upside down and right side up at the same time.  Baffling, confusing, depressing, darkly comical, all kinds of mixed-up things, all at the same time.  In an era in which religion is bashed and atheism is touted (especially as “logically superior,” a claim that always makes me chuckle), I have no trouble at all finding plenty of secular (that’s right, I said secular) wisdom in my Christian bible.  Chiefly, that life is imperfect, and that, in being so, there is nothing to fear about mortality in the comforting knowledge that it will all be over soon enough, an outcome you may find attractive when you are seeing the senselessness of things.  It’s the outcome you’re going to get, whether you find it attractive notwithstanding.

 

And yet, having said that, think of it.  If the world were devoid of all the monstrous problems it actually has, from starvation to disease to what Sweeney Todd so aptly identified as a wonder of the world—“the cruelty of men”—there would be nothing to do.  There would be no opportunity, and we would all be broke.  Is perfection also imperfect, one might wonder?

 

And yet even this doesn’t add up, because the most affluent places on our dear planet are still very screwed up, and the most screwed up places (with the most opportunity) are also the poorest and most lamentable.  So nothing really makes any sense and you can’t really come to many obvious, clear or consistent conclusions no matter how hard you try and how carefully you observe.  That’s indeed the essence of imperfection, I suppose.  Isn’t that precisely why the devout take vows of poverty?  This will not stop well-meaning people from turning away and not giving a damn, and it also won’t stop equally well-meaning people from scratching their heads and trying to make sense of things, wondering if there’s some good they can do, or some way to understand the insanity.  So there I was having a conversation with a nice woman I know who offered the opinion that the white supremacy movement was about and inspired by white people losing their economic opportunity as low or no skilled labor.  And I had to agree with her.  And I pointed out it happens to black people too.  Look at Ferguson.

 

The veterans of World War II came home to find growth, enthusiasm and gung ho optimism.  Factories were buzzing.  Jobs were abundant, and for guys that age, most of them were low skilled jobs.  There were a lot of those kinds of jobs up here in the Naugatuck Valley, along with a lot of skilled jobs too.  So if a vet came back from the war and went out on a job hunt, it was not unusual for him to find a job the first day he looked, and it was also common for the employer to make a snap judgment based on that young man’s name and his family’s reputation, as opposed to any match between who he was and what he could do and what the job entailed.  To the employer it was something like this, “Oh, are you related to Sandy Smith?  He worked for me for 20 years.”  Young applicant vet’s response: “Yes, sir. That was my uncle.”  Employer: “You’re hired.”  The fact that the employer’s business fabricated stamped metal wastebaskets and other sheet steel products never even came up in the conversation.  It was just about social connections, knowledge of reputation, belief in family and country.  And you could be relatively confident in that kind of process that six months down the road, that new employee would in fact learn all about the sex life of stamped metal wastebaskets and be an efficient human resource to the enterprise.  After all, he was a vet who won a war.

 

If you were an employer, would you make a hiring decision that way today?  Things have changed, to coin a phrase, and while technology is simultaneously a culprit as well as a boon in that change texture, there’s a lot more than technology to consider in analyzing the many changes that have occurred over the past seven plus decades.  It’s really cultural change, of which technology is a huge part.  And the bivalence of one thing’s effect on the other and then, because of that, the other thing’s effect back on the first thing.  For example, the so-called “Amazon effect.”  As retail bricks and mortar are naturally crushed by the scale of “direct to consumer” online commerce, yes, the consumer gets a better value in many ways.  At least a better price, anyway.  Goods delivered to your door, you don’t have to drive or spend money on gas; you don’t have to risk having an accident.  But the local human connection is destroyed, and that’s a value.  You don’t see Miss Smith behind the counter or stocking the shelves or have her to ask a question, and that’s the same Miss Smith your sister went to ballet class with.  That changes the look and feel of the experience.  Similarly, and with far greater financial consequence, we are about to see the total destruction of the retail branch banking business, and the value changes that will bring on will be a lot dicier than the difference between buying a blender from your local retailer vs. ordering it online.  Those local bankers’ main play was the residential home mortgage, and the value of the local branch banker was rooted in his “localness.”  He knew which side of town had the good real estate, and those things about reputation and family and patriotism carried over from as far back as World War II used to have a value in determining creditworthiness.  Now if you do those things you may be committing a crime.  So all that branch guy does is fill out forms and send them to the bank headquarters he's never even seen, and at which he’s never even spoken to anyone except on the telephone, facelessly.  The credit risk is determined by a program, and that is what decides if the mortgage will be originated.  And not many years from now, if even that, as more and more banking is done on mobile devices, the branch office isn’t even going to be a place to help you fill out the forms.  It will be “Amazoned,” and there won’t be much of an outcry about it, but a lot of jobs will be lost.

 

 

So my conversation with the woman I mentioned above about the roots of white supremacy being in loss of low skilled labor opportunity thus continued along these lines.  I knew I had covered more than everything as her eyes began to glaze over.  “You know I just read an article about the effect of autonomous vehicles,” I droned.  “I’ve read a lot of articles like this.  It’s all about transportation logistics.  They are getting rolling stock to roll instead of sitting idly parked on the streets or in lots.  That’s all Uber and Lyft are.  So if Detroit puts out 10 million units a year now, they are only going to need to put out two million, and then you will see skilled labor with big wages get put out of their jobs too.”

 

I didn’t offer an opinion as to what this would imply for the white supremacy movement because, frankly, I was so lost in my vanity droning away about transportation logistics and algos that I had forgotten what we were talking about and no doubt, feeling ignored, that’s probably why her eyes were glazing over.  I was boring her to death.

 

Since that conversation I have also been contemplating the psychological implications as well as the cultural ones alluded to above.  And I’ve come to the conclusion that it’s like the old saw about the difference between a recession and a depression.  It’s a recession if you lose your job.  It’s a depression, on the other hand, if I lose mine.  But AI is not about cyclical factors.  It’s secular.

 

And that in turn made me realize that thinking that the white supremacy movement could be related to technological advances was in some way analogous to oft-voiced discussions about liberal arts educations vs. what are alleged to be more practical varieties.  The defenders of the liberal arts will tell you that that kind of education teaches you to think, adding, somewhat triumphantly, “and they’ll never get a machine to do that.”

 

Well I’m here to tell you that that’s a lot of bunk and that artificial intelligence will be doing just about everything you know of that people can do, including thinking, along with thousands of new jobs that haven’t even been dreamed up yet.  My mind wandered, and I remembered “Terminator: Judgment Day,” the movie about Skynet establishing self-consciousness.  I’m stealing this from a review I read at the time, yet when I saw the film it hit me on my own too.  And that’s the scene in which the young John Connor teaches the cyborg how to adapt his phraseology to the vernacular.  Such expressions as “Fuck off, asshole!” and “No problemo” are learned and perfected, high fives exchanged and thus a “human rapport” is established between a boy and a machine, a machine the likes of which in future years he will be at war with to save the world but for now, in that moment, is filling a void because Sarah Connor is a single mom and her son has never had a father figure, a role being diligently performed by a contraption.

 

 

Yeah, that’s right.  AI can do that, father-son bonding, and a lot more.  And a liberal arts guy who protests “but I know how to think” is not going to be saved by that.  Because all thinking is is learning how to observe, and then analyzing the resulting knowledge, weighing it and connecting it to certain decisions controlling certain outcomes.  And if you keep the individual tasks narrow and binary enough, machines can do that very well, really much better than humans.  And then all you need is to have them doing billions of those narrow tasks and it not only approximates human intelligence, it leaves it in the dust.  But what if those knowledge elements connected to outcomes change, you might ask?  Doesn’t that make the human superior to the machine in recognizing dynamic environments and adapting?  No, because with the machines all you do is change a few lines of code, or maybe as little as a few elements of one line of code.  And now there are even machines modifying the code and learning when it needs to be done.  They mine mountains of data to recognize those needs, much more than humans can.

 

So don’t get sentimental about “knowing how to think.”  It’s just another stamped metal wastebasket, and you’re the wastebasket.  And when push comes to shove, you won’t even fight it, because when it’s time for you to have heart surgery and you look at the evidence of who does a better job—the man or the machine—you will pick the alternative that saves your precious little ass and become part of your own economic suicide in order to survive.  Hell, we all will.  And what do you think that will be in a few years?

 

So knock ‘em dead.  Life was never meant to be sensible or understandable.  And the machines will care a lot less about that than you do.  They’re just about doing jobs.  And they can do them better than you can.  We are all going to have to adapt and improve by thinking about how to do things that are much bigger and more important than “jobs” and “tasks.”  I think the big assets will be in abilities to conceptualize, and I also think that enormous strengths that will aid us will come from ancient wisdoms, including religion.  Spiritual strength and spirituality will come to be seen as an asset by an atheist-weary population feeling useless and looking for practical—yes PRACTICAL—answers.  Namely, courage instead of whining and violence.  Because it is going to take all of that and more.  That’s what it takes to have the balls to see the future with a smile instead of dread.  The power to see and conceptualize the problems before us for what they are.  The example that comes to mind is how the railroads failed to compete with the airlines after the jet engine was invented.  Why?  Because they thought they were in the railroad business, and they tried to sell the notion that the railroad travel experience could be pitched as superior to the airline travel experience.  Years later, when the rail passenger business had been pounded into the ground by the airlines, it finally dawned on the big business and academic geniuses of the world that it’s about the TRANSORTATION business; that is, business people who need to get from point A to point B as efficiently as possible, and stockholders who get a little cranky about rates of return if a $50-million investment banker is still in transit doing nothing except collecting $5,000 an hour when he should have already gotten there and made some money for the bank.

 

 

AI will disrupt and dislocate.  That’s what it’s supposed to do.  That’s what change is.  That’s where opportunity is born, because that’s where stress and confusion are born.  The world will not make any more or less sense.  But the strength that will carry the day for humans worried about their future will be what it has always been:  courage.  And we’d better get damned creative about finding that courage, and a lot less whiny and violent than we are now.  Those who do that will be just fine.  Just like the victorious vets of World War II who walked on the sunny side of the street, turned out stamped metal wastebaskets and had kids and exchanged smiles with their neighbors, leading contented and fulfilling lives.

 

Litchfield County, Connecticut

August 15, 2017.

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