How algorithms shape our world | Kevin Slavin

484,372 views ・ 2011-07-21

TED


Please double-click on the English subtitles below to play the video.

00:15
This is a photograph
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by the artist Michael Najjar,
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and it's real,
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in the sense that he went there to Argentina
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to take the photo.
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But it's also a fiction. There's a lot of work that went into it after that.
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And what he's done
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is he's actually reshaped, digitally,
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all of the contours of the mountains
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to follow the vicissitudes of the Dow Jones index.
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So what you see,
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that precipice, that high precipice with the valley,
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is the 2008 financial crisis.
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The photo was made
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when we were deep in the valley over there.
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I don't know where we are now.
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This is the Hang Seng index
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for Hong Kong.
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And similar topography.
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I wonder why.
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And this is art. This is metaphor.
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But I think the point is
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that this is metaphor with teeth,
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and it's with those teeth that I want to propose today
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that we rethink a little bit
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about the role of contemporary math --
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not just financial math, but math in general.
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That its transition
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from being something that we extract and derive from the world
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to something that actually starts to shape it --
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the world around us and the world inside us.
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And it's specifically algorithms,
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which are basically the math
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that computers use to decide stuff.
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They acquire the sensibility of truth
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because they repeat over and over again,
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and they ossify and calcify,
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and they become real.
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And I was thinking about this, of all places,
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on a transatlantic flight a couple of years ago,
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because I happened to be seated
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next to a Hungarian physicist about my age
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and we were talking
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about what life was like during the Cold War
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for physicists in Hungary.
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And I said, "So what were you doing?"
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And he said, "Well we were mostly breaking stealth."
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And I said, "That's a good job. That's interesting.
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How does that work?"
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And to understand that,
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you have to understand a little bit about how stealth works.
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And so -- this is an over-simplification --
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but basically, it's not like
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you can just pass a radar signal
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right through 156 tons of steel in the sky.
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It's not just going to disappear.
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But if you can take this big, massive thing,
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and you could turn it into
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a million little things --
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something like a flock of birds --
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well then the radar that's looking for that
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has to be able to see
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every flock of birds in the sky.
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And if you're a radar, that's a really bad job.
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And he said, "Yeah." He said, "But that's if you're a radar.
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So we didn't use a radar;
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we built a black box that was looking for electrical signals,
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electronic communication.
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And whenever we saw a flock of birds that had electronic communication,
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we thought, 'Probably has something to do with the Americans.'"
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And I said, "Yeah.
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That's good.
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So you've effectively negated
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60 years of aeronautic research.
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What's your act two?
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What do you do when you grow up?"
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And he said,
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"Well, financial services."
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And I said, "Oh."
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Because those had been in the news lately.
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And I said, "How does that work?"
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And he said, "Well there's 2,000 physicists on Wall Street now,
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and I'm one of them."
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And I said, "What's the black box for Wall Street?"
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And he said, "It's funny you ask that,
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because it's actually called black box trading.
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And it's also sometimes called algo trading,
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algorithmic trading."
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And algorithmic trading evolved in part
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because institutional traders have the same problems
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that the United States Air Force had,
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which is that they're moving these positions --
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whether it's Proctor & Gamble or Accenture, whatever --
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they're moving a million shares of something
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through the market.
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And if they do that all at once,
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it's like playing poker and going all in right away.
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You just tip your hand.
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And so they have to find a way --
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and they use algorithms to do this --
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to break up that big thing
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into a million little transactions.
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And the magic and the horror of that
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is that the same math
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that you use to break up the big thing
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into a million little things
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can be used to find a million little things
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and sew them back together
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and figure out what's actually happening in the market.
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So if you need to have some image
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of what's happening in the stock market right now,
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what you can picture is a bunch of algorithms
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that are basically programmed to hide,
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and a bunch of algorithms that are programmed to go find them and act.
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And all of that's great, and it's fine.
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And that's 70 percent
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of the United States stock market,
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70 percent of the operating system
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formerly known as your pension,
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your mortgage.
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And what could go wrong?
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What could go wrong
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is that a year ago,
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nine percent of the entire market just disappears in five minutes,
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and they called it the Flash Crash of 2:45.
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All of a sudden, nine percent just goes away,
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and nobody to this day
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can even agree on what happened
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because nobody ordered it, nobody asked for it.
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Nobody had any control over what was actually happening.
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All they had
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was just a monitor in front of them
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that had the numbers on it
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and just a red button
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that said, "Stop."
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And that's the thing,
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is that we're writing things,
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we're writing these things that we can no longer read.
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And we've rendered something
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illegible,
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and we've lost the sense
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of what's actually happening
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in this world that we've made.
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And we're starting to make our way.
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There's a company in Boston called Nanex,
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and they use math and magic
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and I don't know what,
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and they reach into all the market data
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and they find, actually sometimes, some of these algorithms.
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And when they find them they pull them out
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and they pin them to the wall like butterflies.
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And they do what we've always done
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when confronted with huge amounts of data that we don't understand --
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which is that they give them a name
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and a story.
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So this is one that they found,
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they called the Knife,
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the Carnival,
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the Boston Shuffler,
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Twilight.
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And the gag is
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that, of course, these aren't just running through the market.
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You can find these kinds of things wherever you look,
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once you learn how to look for them.
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You can find it here: this book about flies
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that you may have been looking at on Amazon.
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You may have noticed it
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when its price started at 1.7 million dollars.
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It's out of print -- still ...
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(Laughter)
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If you had bought it at 1.7, it would have been a bargain.
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A few hours later, it had gone up
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to 23.6 million dollars,
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plus shipping and handling.
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And the question is:
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Nobody was buying or selling anything; what was happening?
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And you see this behavior on Amazon
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as surely as you see it on Wall Street.
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And when you see this kind of behavior,
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what you see is the evidence
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of algorithms in conflict,
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algorithms locked in loops with each other,
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without any human oversight,
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without any adult supervision
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to say, "Actually, 1.7 million is plenty."
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(Laughter)
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And as with Amazon, so it is with Netflix.
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And so Netflix has gone through
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several different algorithms over the years.
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They started with Cinematch, and they've tried a bunch of others --
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there's Dinosaur Planet; there's Gravity.
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They're using Pragmatic Chaos now.
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Pragmatic Chaos is, like all of Netflix algorithms,
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trying to do the same thing.
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It's trying to get a grasp on you,
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on the firmware inside the human skull,
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so that it can recommend what movie
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you might want to watch next --
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which is a very, very difficult problem.
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But the difficulty of the problem
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and the fact that we don't really quite have it down,
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it doesn't take away
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from the effects Pragmatic Chaos has.
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Pragmatic Chaos, like all Netflix algorithms,
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determines, in the end,
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60 percent
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of what movies end up being rented.
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So one piece of code
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with one idea about you
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is responsible for 60 percent of those movies.
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But what if you could rate those movies
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before they get made?
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Wouldn't that be handy?
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Well, a few data scientists from the U.K. are in Hollywood,
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and they have "story algorithms" --
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a company called Epagogix.
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And you can run your script through there,
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and they can tell you, quantifiably,
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that that's a 30 million dollar movie
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or a 200 million dollar movie.
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And the thing is, is that this isn't Google.
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This isn't information.
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These aren't financial stats; this is culture.
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And what you see here,
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or what you don't really see normally,
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is that these are the physics of culture.
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And if these algorithms,
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like the algorithms on Wall Street,
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just crashed one day and went awry,
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how would we know?
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What would it look like?
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And they're in your house. They're in your house.
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These are two algorithms competing for your living room.
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These are two different cleaning robots
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that have very different ideas about what clean means.
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And you can see it
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if you slow it down and attach lights to them,
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and they're sort of like secret architects in your bedroom.
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And the idea that architecture itself
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is somehow subject to algorithmic optimization
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is not far-fetched.
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It's super-real and it's happening around you.
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You feel it most
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when you're in a sealed metal box,
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a new-style elevator;
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they're called destination-control elevators.
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These are the ones where you have to press what floor you're going to go to
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before you get in the elevator.
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And it uses what's called a bin-packing algorithm.
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So none of this mishegas
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of letting everybody go into whatever car they want.
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Everybody who wants to go to the 10th floor goes into car two,
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and everybody who wants to go to the third floor goes into car five.
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And the problem with that
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is that people freak out.
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People panic.
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And you see why. You see why.
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It's because the elevator
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is missing some important instrumentation, like the buttons.
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(Laughter)
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Like the things that people use.
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All it has
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is just the number that moves up or down
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and that red button that says, "Stop."
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And this is what we're designing for.
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We're designing
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for this machine dialect.
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And how far can you take that? How far can you take it?
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You can take it really, really far.
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So let me take it back to Wall Street.
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Because the algorithms of Wall Street
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are dependent on one quality above all else,
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which is speed.
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And they operate on milliseconds and microseconds.
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And just to give you a sense of what microseconds are,
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it takes you 500,000 microseconds
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just to click a mouse.
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But if you're a Wall Street algorithm
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and you're five microseconds behind,
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you're a loser.
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So if you were an algorithm,
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you'd look for an architect like the one that I met in Frankfurt
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who was hollowing out a skyscraper --
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throwing out all the furniture, all the infrastructure for human use,
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and just running steel on the floors
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to get ready for the stacks of servers to go in --
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all so an algorithm
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could get close to the Internet.
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And you think of the Internet as this kind of distributed system.
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And of course, it is, but it's distributed from places.
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In New York, this is where it's distributed from:
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the Carrier Hotel
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located on Hudson Street.
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And this is really where the wires come right up into the city.
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And the reality is that the further away you are from that,
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you're a few microseconds behind every time.
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These guys down on Wall Street,
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Marco Polo and Cherokee Nation,
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they're eight microseconds
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behind all these guys
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going into the empty buildings being hollowed out
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up around the Carrier Hotel.
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And that's going to keep happening.
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We're going to keep hollowing them out,
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because you, inch for inch
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and pound for pound and dollar for dollar,
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none of you could squeeze revenue out of that space
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like the Boston Shuffler could.
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But if you zoom out,
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if you zoom out,
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you would see an 825-mile trench
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between New York City and Chicago
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that's been built over the last few years
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by a company called Spread Networks.
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This is a fiber optic cable
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that was laid between those two cities
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to just be able to traffic one signal
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37 times faster than you can click a mouse --
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just for these algorithms,
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just for the Carnival and the Knife.
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And when you think about this,
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that we're running through the United States
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with dynamite and rock saws
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so that an algorithm can close the deal
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three microseconds faster,
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all for a communications framework
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that no human will ever know,
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that's a kind of manifest destiny;
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and we'll always look for a new frontier.
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Unfortunately, we have our work cut out for us.
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This is just theoretical.
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This is some mathematicians at MIT.
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And the truth is I don't really understand
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a lot of what they're talking about.
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It involves light cones and quantum entanglement,
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and I don't really understand any of that.
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But I can read this map,
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and what this map says
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is that, if you're trying to make money on the markets where the red dots are,
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that's where people are, where the cities are,
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you're going to have to put the servers where the blue dots are
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to do that most effectively.
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And the thing that you might have noticed about those blue dots
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is that a lot of them are in the middle of the ocean.
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So that's what we'll do: we'll build bubbles or something,
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or platforms.
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We'll actually part the water
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to pull money out of the air,
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because it's a bright future
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if you're an algorithm.
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(Laughter)
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And it's not the money that's so interesting actually.
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It's what the money motivates,
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that we're actually terraforming
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the Earth itself
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with this kind of algorithmic efficiency.
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And in that light,
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you go back
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and you look at Michael Najjar's photographs,
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and you realize that they're not metaphor, they're prophecy.
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They're prophecy
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for the kind of seismic, terrestrial effects
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of the math that we're making.
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And the landscape was always made
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by this sort of weird, uneasy collaboration
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between nature and man.
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But now there's this third co-evolutionary force: algorithms --
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the Boston Shuffler, the Carnival.
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And we will have to understand those as nature,
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and in a way, they are.
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Thank you.
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(Applause)
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About this website

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