The risk and reward of using AI in stock market

Got invited to a talk on “A.I. for wealth creation in the stock market” at an investor’s meet in my hometown and came away completely bamboozled. The speaker, the CEO of a brokerage firm, seemingly an expert on stock markets had zero knowledge about how AI works. He threw up a few slides on AI that were incomprehensible to the largely local non-tech savvy attendees and then started demonstrating ChatGPT as the way of using AI in the stock market to make better returns. But when he was asked to query ChatGPT to predict the next day’s stock market outcomes it couldn’t.

AI is mostly being used in automation and prediction now. Fundamental to AI is data and data analytics which leads to predictive analytics. The core aspect of AI is machine learning (ML) and there are two basic types of learning – supervised and unsupervised learning. All predictions from continuously changing data such as forecasting stock or trading outcomes and market fluctuations is through supervised learning. Pattern recognition is how AI systems identify patterns in data and then use those patterns to make decisions or predictions. One of the prevalent algorithms used for more accurate predictions is the backpropagation algorithm.

Now, an ideal investment portfolio would be a combination of high risk high reward investments (stocks, mutual funds) and low risk low reward investments (government bonds), the low risk ones to offset potential losses from high risk ones. Better AI prediction models can increase investment in high risk stocks leading to higher gains. But human sentiments and emotions play a major role in stock values and we are prone to mass hysteria. AI has no emotional intelligence so AI prediction models cannot factor in data on human emotions and can consequently lead to huge stock market losses.

Degrees of customer centricity in today’s business world

Born in the 70’s, “Customer is King” was the business mantra I grew up listening to. But it no longer seems to be the case. While the advent of Internet has been the biggest disruptive force to hit the world of business, there is a lot more behind the journey of the business world to where it is now.

There are two factors to be clearly understood and even wary about when driving a business enterprise to it’s success – acceptance and adoption. In the brick and mortar model of business, it is extremely difficult to foresee changing customer preferences or what factors would drive customers to change their preferences. A simple example is the Indian film industry. A commercially successful movie was supposed to have a certain number of action sequences, songs, dance scenes, emotional scenes and comedy. It was the blueprint for success in Bollywood (and still is in some regional film industries) until a first time director (Farhan Akhtar) shattered the stereotype in 2001. It was the fear of acceptance that had kept Bollywood from evolving out of the rut it got stuck in. Same was the case with the world of business as well. The same fear of acceptance kept Kodak from disrupting it’s own business model by embracing the digital camera before it was too late.

The increased adoption of technology in business made collection of data from business easier and software applications made it possible to collate data from different business segments, analyze them and understand what factors are driving businesses up and down. Adoption of the internet and the advent of eCommerce finally broke the fear of acceptance and adoption as online stores does not even cost a fraction of the brick and mortar ones.

One fear gave way to a new one – customer support and satisfaction. As customers started adopting to technology and accepting new and radical products, it became imperative to measure and understand how satisfied the customers are. Back in 2004, my life was meandering through regular IT support jobs when I was hired for the project of a European client, at a time when I had no idea that IT support services were getting outsourced. One incident changed my professional life and helped me understand my way ahead. One of the client’s software applications had stopped working and it was reported to the support team I was part of. We worked on the issue as per the priority on which the issue was reported. When we informed the client that the issue was resolved, we got the feedback that what we worked on was an invoicing application and in the time we took to resolve the issue, they had lost a number of orders. The problems associated with it were manifold. Poor understanding of client’s business applications, wrong prioritization of their issues, all of these stemmed from the lack of understanding of client’s business environment and their requirements which led to the support team working on an issue with no understanding of its business impact.

In my next job, I worked on a product in a client’s environment for more than 2 years and was able to create a new system design for the product’s upgrade in a few hours, not merely because of my knowledge of the product but because of my understanding of the client’s business environment and the needs of its different business units. When I was sent to a client’s premise in the UK as the leader of a team for a large transition program, what was important to me was to understand the client’s business environment and what technical issues were currently affecting the client’s business. As the client’s entire IT activities were getting outsourced to the company I was working for, it was just commonsense for me to understand and resolve existing issues before owning the responsibility of the environment.

That was back in 2010 and technology has come a long way from that time. This is the age of AI and Analytics and putting them together has resulted in predictive analytics which is helping businesses to take informed decisions and make successful plans for their future. But how much of all of these have filtered down into the traditional brick and mortar stores? At home, we buy groceries on a monthly basis from a grocer we have been customer of for 15 years. For daily purchases, we go to a nearby supermarket store. There is a particular pattern to the items we buy from the supermarket store, like milk, eggs, bread, etc but more importantly there is a pattern to the items we do not buy, like cooking oils, pulses, rice, wheat, soap, etc. No one in the store has asked us yet where we buy these items from. To be successful in business in these times, companies have to be at the top of their game and continuously keep looking for opportunities to be innovative to not only attract new customers but to retain them as well.

I received a call from an aspiring startup’s co-founder some time back for advise. They were planning to create an online platform from where anyone could place an order for any item and they would deliver it. The word anyone was a concern for me. There is a very good reason why India will never be a completely digital market – people’s purchasing power or the lack of it. A big chunk of its population of people make their daily purchases on debt. The local grocers keep accounts of these purchases and people keep paying as and when they have money with them. Even the local restaurants in many places especially the smaller eateries do the same. This is a business model supermarket stores can never replicate and hence they can never erode the relevance of local grocers and small time traders.

This is an important reason why the India government’s decision to demonetize its currency notes has destroyed India’s economy as it has further weakened people’s buying ability. When I mentioned these aspects to the startup’s co-founder and asked him how he was going to tackle them in his business model, he had no answer. Borrowing or getting inspired by a business model in another country is fine, but there can be no excuse to not knowing about their own country’s business nuances.

As products and companies of all sizes throng the online market and jostle for space to find their feet, nothing is more valuable in business now than customer loyalty and repeat customers. One look at Amazon’s fulfillment center (https://gadgets.ndtv.com/videos/behind-the-scenes-at-an-amazon-fulfillment-centre-521443) is enough to understand the complexity of its customer-centric business model. More than the number of its business segments, what is mind boggling is the fact that an individual could be its customer in multiple business segments and would expect the same level of customer service across all business segments. Multiply this by the probability of doing business with a few thousands or a million such concurrent customers and maintaining the highest quality of service across business segments is beyond comprehension.

Is customer still the King or has business become the Emperor of the King?

The incredible secrets of astrology

Astrology is an integral part of Hindu life in India and probably of Hindus all over the world. Hindu culture is steeped in numerous Gods, temples, worship and mythological stories; in fact Hindu culture is so old that it has become a way of life. It is a mighty challenge to live in a country which is the most multicultural land in the world. Most aspects of Hindu culture are not comprehensible and sometimes we end up making fun of them in certain situations. When I traveled to Netherlands and returned to India after 6 months, my mind started asking questions about my life and everything in it in India.

It was during this time that my parents were trying to get me hitched. It all starts from matching the horoscope of mine with that of a woman. I was extremely apprehensive about the entire process. Astrology is all about mathematical calculations and mistakes can happen during calculations. An astrologer had almost screwed up a marriage proposal a friend had received. I was actually putting the most important decision of my life and my future in the hands of people whom I have never known before. That was the time when I decided to understand astrology better. I didn’t start learning astrology as such but I wanted to understand the background of astrology. There was a time till not so long ago when parents used to fix up marriages and the boy and girl used to see each other only on the first night of their union. There had to be some way to match the boy’s and girl’s personalities. What I wanted to know was about the parameters that are used in astrology to check for compatibility. One specific aspect caught my eye. From the horoscopes it can be found out if the lifespans of the boy and the girl would be affected if they were brought together in marriage. It struck me immediately. Energy and vibrations. Too much attraction or repulsion of energy can be catastrophic to one person or both. Then I realized that astrology is all about energy. In astrology it can even be checked if two people are sexually compatible. This is advanced science. But how is it possible? Big Data and Predictive Analytics, the current raging storm in technology has been quietly working in astrology for thousands of years. Patterns have been established by observing people’s lives and predictions are made from these patterns. For example, Jupiter in 8th house indicates high probability of incarceration which is proving to be true for people.

To make a horoscope, the essential components are date, time and location. Based on these factors, the positions of sun, moon and other planets in the solar system are calculated and from this data, their influence on each person’s life can be inferred. This points to a specific question. Are we born randomly or are we born on a specific date at a specific time in a specific location?  Ancient texts indicate that Gods incarnated on earth under these specific parameters and the heavenly bodies were aligned in such a way as to be helpful in fulfilling their purpose of incarnation. If this is true, aren’t we also born in the same way? All of us have unique experiences in life and not all of us get Jupiter in the 8th house. What does all of this mean? Karma in our present and past lives. Lord Rama killed a monkey king by deceit and Lord Krishna gets killed by an arrow from a hunter who happened to be the monkey king in one of his past lives. This is all about some sort of celestial accountability. No karma, be it good or bad goes unnoticed. We have to fulfill our karma in present life and also account for karma in our past lives for which we have to be born under certain conditions.

But one question bothered me. Why are we born under the influence of celestial bodies? Why doesn’t their influence affect the animal world? There could be only one reason. The frequency of energy of human beings is tuned to the frequency of energy received by earth from other celestial bodies. This means we are created specifically in this way which would mean that Mother Nature did not create us. This is why we are not part of the food chain. This is why we are destroying nature, a behavior that no other animal exhibits. Add to this the concepts of karma and rebirth. It is said that our souls are cleansed before it is proceeds to afterlife. This must mean that our memories and effects of celestial bodies are erased before we are reborn. Maybe this is why we do not have memories from our past lives but we still have to deal with karma from those lives without remembering about them. The influences celestial bodies bring to each person’s life is clearly connected to their karma which is why different people encounter success and failure in their lives in unique ways. Isn’t this a system put in place to manage and monitor us? Birth, life, death, and the cycle goes on and on. Aren’t we prisoners in the system? Is this the Matrix we are all stuck in and saints like Sankaracharya supposedly escaped from? What is the purpose of the system? Is this a model that works for beings with higher intelligence all across the Universe? Or is this a model experimented on us so that it can be replicated to the worlds of other intelligent beings? Most importantly, aren’t we the aliens on our planet?

Whatever it may be, nothing happens by chance or accident in the cosmos. There is a specific reason associated with every event. Research suggests that we make friends based on how closely our DNA resembles theirs. There must be a reason why out of the billion people on earth, we know only a few hundreds and very few of those hundreds end up as our good friends. I met a girl when we were both 6 years old and as we grew up I started feeling that if I let her go away from my life I may never find anyone else again. That’s exactly what happened. Intuition? Connection from a past life? I may never know. All I have with me is a haunting feeling that there is some sort of connection with her. What’s worse, our horoscopes may have matched perfectly well.

Questions were twirling in my mind after I returned from Netherlands. No astrology exists there but life is better by a 100 times. Don’t celestial bodies affect people there? I realized later that they do. The differences I observed have been created by us only. India is bursting at her seams with population growth. It is impossible for social benefits to reach all people. Everything is controlled and managed in Netherlands so there is prosperity. But this doesn’t mean celestial bodies and karma have no bearing on their lives. They simply don’t know enough about all of it to consider their influences in their everyday life. The system works precisely everywhere. Different skin color, races, religions, castes, the system keeps us divided perpetually so that we are chasing our lives all the time and never get to even know that a system that controls us is in place. Who runs this show? Would be fun to exit the system and meet the Great Manipulator.

 

How Analytics and AI are joining hands to transform our world

The other day, I was in my induction session at IBM’s office when the lady who was conducting the program started talking about how IBM is knocking on new frontiers in the areas of Big Data and Cloud and is developing strategies based on cognitive methods. She introduced us to IBM Watson and how it is being used in oncology to improve cancer research and treatment. The words Big Data, Cloud, analytics and cognitive immediately gelled together in my mind and there I was, staring at how Analytics and AI are joining forces to make our world better.

My first brush with AI was a long time back, during the final year of my engineering course when I did a project on character recognition. It sounded fancy at that time and the team somehow managed to complete the project mainly because it was too much to handle for our young heads. We had to implement machine learning algorithms for weight training the computer based on the principles of back propagation in C language. The objective was to train the computer with different representations of the English alphabets on a definite area of the screen and then make it identify new representations of the alphabets from the information it has gathered through the training process. We had heard only of pattern and sound recognition being done in similar ways so we actually had no clue about the implications of what we had done at that time. This was in 1998-1999.

Fast forward to 2015 when my friend asked me to help him do project management for his startup company. In a nutshell, he explained to me that 1SDK collects data from mobile app marketing campaigns and provides predictive analytics to app owners by running the data through machine learning algorithms. All my senses stood up in interest. I was able to seamlessly put together what he was doing with what I had done in my project. Suddenly I realised that I was actually seeing an industry level implementation of the concepts I had used in my project. For all these years I had wondered how I could have leveraged what I had done in my project and use that knowledge somewhere in a job role. That was the only time I cursed myself for switching from programming to systems and networking. How I wish I could have had rolled up my sleeves and implemented those algorithms in Python.

So when I heard about IBM Watson, one word struck me. Data. The lady said something very relevant, that data is the new and most abundant natural resource. 1SDK is using all the data they are gathering from mobile app advertisement campaigns of each of their clients to provide them predictive analytics in a very drilled down manner, which means 1SDK can look at the predictive analytics results and tell the clients which campaigns run on which days under what circumstances gave them the best results. This is clearly going to define the future of mobile apps and how app owners would want to promote them to the clients. My understanding is, IBM is on the same road with regards to Watson. All available data from cancer treatment and research would get accumulated on IBM’s Cloud from where Big Data analysis would throw out best possible methods of treatment when symptoms and observations for a particular form of cancer is provided as input. What I find more interesting is that, between any two visits of a patient to the hospital, so much data would have come in and more Big Data analysis would have been done on the entire data, a treatment method or medicine more refined or more suited to the patients may have come up, thereby helping doctors provide personalized treatment methods to each patient. All of this fundamentally follows the DIKW (Data->Information->Knowledge->Wisdom) model. Big Data analysis will provide us information from data and using the information creates knowledge and wisdom in us.

There are two aspects to any analytics: user engagement and user retention. More number of patients would want to engage with Watson but question is, would it be possible to retain them with mainstream allopathic treatment methods and medicines alone? This is the area where I would want to watch how Watson would grow. Traditional treatment methods are making a massive comeback around the world. Awareness of the benefits of ancient treatment methods, organic food, leading a healthy life and finding work life balance are becoming top priority for people. Diagnosis of diseases in allopathy is completely dependent on technology whereas traditional treatment methods still rely on human touch for diagnosis. My acupuncture doctor in Shanghai was able to read my pulse and diagnose correctly that I was having cold and fever for the past 3 days. For diagnosis of diseases, I follow the procedures of X-rays, scans and ECGs only to identify/confirm diseases. I always look for traditional treatment methods especially for older people because they no longer have the body strength to endure the ravages that tablets and radiations cause. If Watson’s analytics includes details of traditional methods of diagnosis and treatment as well, then that would truly usher in a new era of battling cancer. Every person’s physical composition is unique be it in the same or different geographies so treatment methods also have to be unique for each patient. I am sure that if all the treatment methods can complement one another, it will be possible to beat cancer in a short time and if Watson can do this job, it would be an innovation of a lifetime.

The exploding universe of mobile apps

The world of mobile apps has become a galaxy of apps in no time but I was completely unaware of it. Being a die hard Nokia fan (for which I get ridiculed sometimes), I tried using a few of Nokia’s smartphone models a few years back, but all the features were a bit overwhelming for me, so I switched back to a basic Nokia model. Mobile phones, for me, are just meant to be phones, to talk and to message. In the past few years, I have watched the meteoric rise of the iPhone and Android phones as Nokia’s firm grip on the mobile world loosened and collapsed. The final nail in the coffin was when Microsoft bought over Nokia’s mobile phones unit. Now I have three options when it comes to smart phones. iPhone which is too expensive, Android phones I am wary of because of performance concerns (open source means apps may not have been made with the same baseline hardware configuration) and Microsoft phones which has Windows and Windows need a bunch of security updates every now and then because Microsoft has never mastered the skill to make a fully stable operating system. Given a choice, I would still buy the Microsoft phones because their hardware was designed by Nokia and Nokia team had tested the Windows operating system thoroughly on those phones. So I am still living blissfully with one of the last Nokia models having the Symbian operating system, but one incident jolted me to reality. I was in Chennai recently and due to the high volume of calls during peak hours (6-10 am and 6-10 pm), all cab service providers are redirecting customers to their mobile apps to book the cabs. Thats when I realized how far and fast mobile apps have penetrated into Indian market.

It is no surprise though. When I was in Shanghai, travelling in metro trains were like spending time in a monastery, albeit with big crowds. Everybody’s necks would be bent down and staring into their mobile phone screens. Some would be watching movies, some would be watching music videos and some would be reading. Can’t really blame the people though. In the early 1980s, when western countries moved manufacturing to China in search of cheap labour, the only thing China asked in return was for transfer of technology. No one even imagined that Chinese people would find ways to use the same technologies to dominate world trade some day. A simple stroll on the streets of Shanghai and there will be atleast a couple of guys who would come around asking if I wanted to buy an iPhone. The phones they have look exactly like an iPhone but only the things Apple has patented like the mobile screen is different. Android, being open source and available for free has fuelled the development of a number of low cost Android phones and together with that, the number of Android app developers have also risen exponentially. For internet crazy people in countries like China and India, buying stuff through their mobile phones makes them look cool and uber. Couple all of this with the rapid penetration of internet into rural areas and there is a silent app revolution going on.

This explosive app industry has astronomically increased the volume of one thing: Data. There is so much data coming through from the apps that companies have sprung up which are trying to analyze the data and find patterns that can help app owners to improve the performance and usability of their apps. Attribution analytics and retention rate analysis are some of the new words buzzing around. Big Data and Hadoop have become job markets by themselves. In-app monetization is another buzzword, which essentially means generating revenue from the apps. The idea is to keep app users engaged with the apps through discounts and reward points so that these users will continue buying things through the apps. Some companies are even going the extra mile to do predictive analytics to give greater insights about the performance of the apps to the app owners. Then there are companies that run marketing campaigns for these apps to understand their popularity among the people and there are companies that advertise these apps in different websites. There is a huge ecosystem that has been created around the app industry and it is growing phenomenally.

Cut a few years back in time and there is a retail giant in the UK for which I worked on one of their projects for a while. They have fabulous stores, lots of space and amazing ambience. They weren’t very keen on ecommerce and selling on the internet so over a period of time, their sales dropped. Then they realised their mistake and invested hugely to set up an ecommerce enabled website. But then, the number of visitors to their stores trickled down rapidly. So the dilemma they had was, how to attract people to their brick and mortar stores and make them feel the experience of regular shopping. One of the few ideas I suggested was to put up video cameras all over the stores so that customers who connect to their website can view the products and interact with the customer service executives. This would give the customers a sense of regular shopping though virtually. Now when I think about buying things through apps on mobile phones I am thinking on similar lines. How to give customers the experience of buying from a real store through the app? Maybe a hologram that represents me walking through an app that represents a real store and use a camera and kinetics to manage the hologram? Wouldn’t that be interesting? I am sensing that this idea is already being worked upon or is already out there in the market but I am not aware of.