Risk Management – Page 20 – Maverisk / Étoiles du Nord

Fintech: Babble-fork

Coining (pun not even intended as I wrote this — lame non-landing anyway) a new phrase: Babble-fork.
Which is what happens now in the financial industry with fintech:

Banks et al. think they have a role to play in the applications of blockchain technology in the financial industry of the future.
As bc is just a distributed ledger technology [ref. Tapscott the Elder & the Younger], right?
Obviously, dead wrong. Or, ‘the Internet’ is just phone lines between mainframes.

Otherhandly, the start-ups that have no role or place for the incumbents. The start-ups that expect the old ones to die [1:03 of the linked]… and then, it is already a mockery of a flattery to relate the financial industry-that-was with that commander that never made it to captain (Navy); an outright self-delusion of the grandest scale when such industrialists think they’ll still be able to catch up with the innovation tidal waves already rushing to their shores (unseen, over still deep seas until reaching their shallow tropical beach sides ..!).
Since bc is the very counterpoint of centralized (‘trusted third party’-, quod non par excellence!) trust, being the utter distribution of it hence contra anything however remotely approaching the delusion of importance that may still be with the traditionalists.

So, fintech forks ferociously for the financial future as a tenable alliteration runs only so long. But you get it. Time again to ask for the entry password — with the wrong answer leading to …?

Well then, I also have for you:

[Dear Lord. In the Attick; Ams]

Reverse firing squad (LIBORgate et al.)

When designing cross-organizational processes ‘hence’ including cross-organizational control structures, who will be accountable to look after the controls in question?

Take LIBOR(gate). Someone(s) dreamt up a structure of ‘self-regulation’, which even the most brief moronically-superficial gleaning over history will tell will fail, and then forgot one’s accountability for putting in place such a sure to fail thing.

’cause only accountability will force ‘taking’ responsibility and actually doing both parts of Trust But Verify.
No, the latter part was not taken up by the individual banks involved. Because they had perfect (O)RM in place. That, by perfectly sensible, justified, and objective achievement-perfecting arrangements, focused on the risks to the own organisation only as they were, are, internal departments working for the optimization of the organisation (taking into account local Board’s risk appetites and attitudes, risk estimations, budgets, cost/benefit analysis and what have we); nothing more or they would bordering-on-(?)-the-illegally overstep their remit. Hence, intra-organizational conspiracy was not something any individual bank’s (O)RM department, or manager, had to worry about let alone be actively fleshing out as a potential risk.

The supra-organizational oversight required, the level where the scheming took place (huh I mentioned ‘supra’ not for nothing..!), could technically, operationally, tactically and strategically only have been envisioned at that same supra level, with the regulator(s) at that level, that instated the L-scheme. [Oh I could add a ton here on how any ‘lower’ level cannot in any logical way have ‘seen’ the risk(s)] So, accountability and responsibility, for setting up a scheme that was prone to the risk(s) in the first place and for not applying due control and oversight (from the strategic all the way to the operational/technical levels!), was and still is with those regulator(s).

How then have they escaped being kicked and imprisoned ..? By claiming ‘temporary’ insanity where Reality in the L-process and elsewhere, is only a string of ‘temporary’ moments ..? The lack of competence is appalling. But drowned in the finger-pointing flying all around except in the right directions.

Uch. One could get very depressed, and/or feel belligerent. Or see the mirror of a firing squad. In the latter, a number of soldiers fire, with only one round not being a blank so no-one knows who did it so none can be held accountable individually for the collective shooting of some villain. [If only in some miracle world it wouldn’t be that most victims are the Honorable very much in an Aristotelian Virtue sense.] Now, we have ‘one’ regulator shooting a whole squad, and all of the squad are blamed …!?

[Just a MSc uni in Delft. Because science ..!]

Said, not enough

Here’s a trope worth repeating: Humans are / aren’t the weakest link in your InfoSec.

Are, because they are fickle, demotivated, unwilling, lazy, careless, (sometimes! but that suffices) inattentive, uninterested in InfoSec but interested in (apparently…) incompatible goals.

Are, because you make them a single point of failure, or the one link still vulnerable and through their own actual, acute, risk management and weighing, decide to evade the behavioral limitations set by you with your myopic non-business-objectives-aligned view on how the (totalitarian dehumanized, inhumane) organisation should function.

Aren’t, because the human mind (sometimes) picks up the slightest cues of deviations, is inquisitive and resourceful, flexible.

Aren’t, because there’s so many other equally or worse weak links to take care of first. Taking care of the human factor may be the icing, but the cake would be very good to perfect for making the icing worthwhile…!

Any other aspects ..? Feel free to add.

If you want to control ‘all’ of information security, humans should be taken out of the (your!) loop, and you should steer clear of theirs (for avoiding accusations of interference with business objectives achievement, or actually interfering without you noticing since your viewpoint is so narrow).

That being said, how ’bout we all join hands and reach for the rainbow ..? Or so, relatively speaking. And:

[Where all the people are; old Reims opera (?)]

Plusquote: ‘Big’ Data

People never lie so much as before an election, during a war, or after a hunt.

Otto von Bismarck was right. The bias for socially acceptable answers plagues all analysis when that concerns data gathered from humans. Before an election, during a law suit, or after one has by the most unthinkable Luck (after most irrational stamina kept you going) stumbled upon a unicorn like here.
That’ll be all for today! Plus:

[(The quoted general was) solid as a rock; Amersfoort of course]

Is it New (enough) ..?

After bemusement and annoyance with all Pokesheeple (They think trespassing (or worse) is OK in some game hunt? Preventative (hospital) detention is on order — no-one of their abilities is too stupid to not have to just stick to the law ..!), and the business model of selling simpleton crowd control to e.g., shopping malls has come out of the closet, my question is: How new is that ..?

Seriously; is it an ‘innovation’ that isn’t recognized (yet) as such, or is it a minor application of some other one’s idea ..? What (hopefully (??), non-game tied) variants can we expect in the near future ..? Or will we devolve into a real-life GTA game nation, with some 0,1%ers pulling all the strings?

Leaving you with this dystopian twist, but serious about the question before that, and with:

[Upside-down Voorburg]

~vergent predictions, Do or Don’t

This idea, or lack of it, crossed my mind:
When it comes to predictions, following the lead of Tetlock’s Superforecasters may very well work (though note much of it starts with the, sort-of, mental, 50-50 approach of soberly realizing that one may improve, by admitting imprecision and those that claim precision or high scoring rates are wrong) … for issues and questions that converge on one, somewhat exactly determinable, outcome. This, all being within the realm of said book which is very much recommended by the way.
Where some questions, like “What is the best strategy?” may not have such a single outcome; the world changes, and (business-like) having a vision is a grand prediction already. Let alone that the ‘mission’, one’s desired place in that vision of how the world will be in the future, (often / always without a miss) skips the implicit choice issue of what one’s future place could be within that, vaguely defined, future state of affairs. Even if you shoot for the moon [and end up in an infinite and infinitely cold vacuum, among the stars but near-infinitely dwarfed by them] and miss, you may end up in a not-first but still pretty comfortable position; no hard feelings. … This, as an explication of what I’d call diverging predictions: Wide-ranging future states that you might ‘predict’ but most probably in a vocabulaire that will not be valid or understood in the future so traceability of your predictions is … quite close to zero hence your advance predictions have no worth ..! This of course is also in the book but still, too often not realised.

Now, let’s combine this with Maister’s Advisor let alone simple consultancy …

Oh well. Plus:

[Predicting quality of resulting still wines … for second fermentation, mariage, and onwards — priceless; Ployez-Jacquemart]

There’s Waldo for you; just some

Slightly annotated, and not aiming for completeness, as many worthwhile (sometimes quasi- or semi–Quined!) quotes of Ralph Waldo E. have been posted elsewhere; this just my picks because of their profundity. And personal liking…

A cripple in the right way will beat a racer in the wrong; … Vinegar is the son of wine; … Long-lived trees make roots first; …
Yes indeed, when ‘managers’ may be in either, both, or (vast majority) neither situation …
And, one close to heart but one to remember in many a circumstance, like waiting for vindication of one’s insights.
Fast re-pivot, anyone ..?

The same good office is performed by Property and its filial systems of debt and credit. Debt; grinding debt, whose iron face the widow, the orphan, and the sons of genius fear and hate; — debt, which consumes so much time, which so cripples and disheartens a great spirit with cares that seem so base, is a preceptor whose lessons cannot be foregone, and it is needed most by those who suffer from it most.
Clearly, this a summary and precursor to Graeber and, moreover, Piketty.
Moreover, property, which has been well compared with snow, — “if it fall level to-day, it will be blown into drifts to-morrow,” …
Similar, in particular with regard to the latter mentioned author…

Words are finite organs of the infinite mind.
Indeed; I’ve repeated over and over that short sentences not clarity make — or if, then to the simpleton mind.

“The things that are seen, are temporal; the things that are unseen, are eternal.”
Contra the not-giving one-percenters of course.

Empirical science is apt to cloud the sight, and by the very knowledge of functions and processes to bereave the student of the manly contemplation of the whole. The savant becomes unpoetic.
Indeed, the (induction-oriented) Big Data analysts will succumb to dumb conclusions. The manly (note that of course rigour and courage; Aristotelian Virtue is meant here!) contemplation, the deductive parts of True science, should lead naturally.
And the savant… is there a better label for Big Data analysts on average? Note that indeed, some may be on the upper side of the average (as these go), but may be few and far off.

But the old oracle said, “All things have two handles: beware of the wrong one.”
Yes, true even when the thing is bonus incentives. Beware of bankers’ (et al !!) grip on those. But then, this saying may be applied against all of your un-agreeing fellow meeting members.

But genius looks forward: the eyes of the man are set in his forehead, not in his hindhead: man hopes: genius creates.
I couldn’t agree more; that has delivered all the posts you have read (all) on this blog for sure. And again, this is against ‘data scientists’ that only do ‘evidence based’ decision-making: There is nothing more hindheadedness than that. Shove the results in the hind section where the respective feel happy about that.

Only so much do I know, as I have lived.
One that stands out. In The American Scholar but in general, too. Fitting with the whoso shall be a man, shall be a nonconformist elsewhere [Frank Lloyd Wright’s motto — somewhat by necessity one suspects] but Truest of True. A call to arms of the Virtuous (as above).

The man on whom the soul descends, through whom the soul speaks, alone can teach. Courage, piety, love, wisdom, can teach; and every man can open his door to the angels, and they shall bring him the gift of tongues. But the man who aims to speaks as books enable, as synods use, as the fashion guides, and as interest commands, babbles. Let him hush.
One thinks here of the popular among the ‘visionaries’ [e.g., the Dutch Yuri’s calling out bits, no more, of what fashion guides, in a manner that ‘babble’ is positive] that might be capable of delivering or discussing things on smaller-G’s hype cycles but have no hope to ever achieve anything more than upfront vagaries and Calimero’s claims to hindsight correctness.

Whenever the pulpit is usurped by a formalist, then is the worshipped defrauded and disconsolate.
Just fill in the flavour-of-the-day politician(s) for ‘formalist’ as that is about the same thing these days, and you’ll see it’s true.

The vision of genius comes by renouncing the too officious activity of the understanding, and giving leave and ample privilege to te spontaneous sentiment. … Men grind and grind in the mill of a truism, and nothing comes out but what was put in. But the moment they desert the tradition for a spontaneous thought, then poetry, wit, hope, virtue, learning, anecdote, all flock to their aid.
I would agree. In full, quite. Think the PhD thesis with at least three footnote literature references for every ‘the’, ‘it’ and ‘possibly’ etc. My reason not to pursue a PhD..!

The vulgar call good fortune that which really is produced by the calculations of genius. But Napoleon, thus faithful to facts, had also his crowning merit, that whilst he believed in numbers and weight, and omitted no part of prudence, he believed also in the freedom and quite incalculable force of the soul. A man of infinite caution, he neglected never the least particular of preparation, of patient adaptation; yet nevertheless he had a sublime confidence, as in his all, in the sallies of the courage, and the faith in his destiny, which, at the right moment, repaired all losses, and demolished cavalry, infantry, king, and kaisar, as with irresistible thunderbolts.
I am said to have enjoyed good fortune on occasion. But lean more to the second part; though not a fan of said ’emperor’, one would be hard-pressed to not agree with his dictae (as supported by the true sayings of, e.g., Von Moltke the Elder.

Where there is no vision, the people perish.
Which could be a factual quote just like that. But could also be, the need for a lead. A Leader. How dangerous …

… the luck of one is the hope of thousands, and the bribe acts like the neighborhood of a gold mine to impoverish the farm, the school, the church, the house, and the very body and feature of man.
Thus, the 1%-ers lead the underprivileged masses astray at the hand of demagogues. ’nuff said.

… against that frequent misfortune of men of genius, — the taste for luxury. This is the tragedy of genius; — attempting to drive along the ecliptic [as a Prometheus with the Sun ..? ed.] with one horse of the heavens and one horse of the earth, there is only discord and ruin and downfall of chariot and charioteer.
A sure warning for the ‘visionaries’ … Their mortgage doesn’t get paid by being Right. Mortal life is unescapable.

Why needs any man be rich? Why must he have horses, fine garments, handsome apartments [obviously, for one’s mistresses! ed.], access to public houses and places of amusement [one things La Grange; ed.]? Only for want of thought.
Oh how this reflects on the previous, and on the 1%-ers…

Those who are urging with most ardor what are called the greatest benefits to mankind, are narrow, self-pleasing, conceited men, and affect us like the insane do. They bite us, and we run mad also.
What a concise, and very precise, description of regulator, supervisors, oversight boards, et al..!

We do not want actions, but men; not a chemical drop of water, but rain; the spirit that sheds and showers actions, countless, endless actions. … The world leaves no track in space, and the greatest action of man no mark in the vast idea.
So, one should not aim for achievement recognition — as that would undo its very attempt. As so often observed.

The two parties which divide the state, the party of Conservatism and the party of Innovation, are very old, and have disputed the possession of the world ever since it was made.
True, everywhere even when there appear to be more than two parties. Appear, cosmetically.

For as you cannot jump from the ground without using the resistance of the ground, nor put out the boat on sea without shoving from the shore, nor attain liberty without rejecting obligation, so you are under the necessity of using the Actual order of things, in order to disuse it; …
Interesting; “I don’t want to go into politics because you get caught up, will learn to howl” but the only way to change politics is .. to join it. By the way; R. Waldo E. follows on with a discourse on how every progressive turns into a conservative; much worth a study as it paint the picture so inescapably. Even when my ‘soul’ would resist…

Conservatism … always mitigations, never remedies; pardons for sins, funeral honors, — never self-help, renovation, and virtue.
The kick is in the tail…
… a timid cobbler and patcher, it degrades whatever it touches.
Just true, and adding to the insult.

But if I allow myself in dereliction and become idle and dissolute, I quickly come to love the protection of a strong law, because I feel no title in myself to my advantage. To the intemperate and covetous person no love flows; to him mankind would pay no rent, no dividend, if force were once relaxed; nay, if they could give their verdict, they would say that his self-indulgence and oppression deserved punishment from society, and not that rich board and lodging he now enjoys. The law acts then as a screen of his unworthiness, and makes him worse the longer it protects him.
At once, one sees the French revolution brewing. At seconds, one considers modern-day politics…

With this passion for what is great and extraordinary, it cannot be wondered at that they are repelled by the vulgarity and frivolity in people.
Which is why I feel counterforces sometimes / often, against my Good Intent. Right?

Unless the action is necessary, unless it is adequate, I do not wish to perform it.
My motto entirely against Bureaucrats…!
I do not love routine. Once possessed of the principle, it is equally easy to make four or forty thousand applications of it. A great man will be content to have indicated in any the slightest manner his perception of the reigning Idea of his time, and will leave to those who like it the multiplication of examples.
Again, I concur. Fully. Hence, my visionary work does not fall under the header of the abovementioned bumblers. And now for the last one:

… but it has good healthful qualities in spite of them; not least among which a healthy disgust of Cant, and an aptitude to detect her in all the million varieties of her everlasting wardrobre.
Needs no comment I guess. Plus:

[Marker for the End of ~~life~~ reason; Foz]

Golden Oldie Pic of the Day

Yes, again, since Cucumber Time is early, this year…

Not just Q, IQ

Well, yesterday’s post was about just a quote, this one’s about what should be a full cross-post but hey, I’m no wizard I’ll just blockquote it from here because it’s so good (again, qua author):

Society in the Loop Artificial Intelligence

Jun 23, 2016 – 20:37 UTC

Iyad Rahwan was the first person I heard use the term society-in-the-loop machine learning. He was describing his work which was just published in Science, on polling the public through an online test to find out how they felt about various decisions people would want a self-driving car to make – a modern version of what philosophers call “The Trolley Problem.” The idea was that by understanding the priorities and values of the public, we could train machines to behave in ways that the society would consider ethical. We might also make a system to allow people to interact with the Artificial Intelligence (AI) and test the ethics by asking questions or watching it behave.

Society-in-the-loop is a scaled up version of human-in-the-loop machine learning – something that Karthik Dinakar at the Media Lab has been working on and is emerging as an important part of AI research.

Typically, machines are “trained” by AI engineers using huge amounts of data. The engineers tweak what data is used, how it’s weighted, the type of learning algorithm used and a variety of parameters to try to create a model that is accurate and efficient and making the right decisions and providing accurate insights. One of the problems is that because AI, or more specifically, machine learning is still very difficult to do, the people who are training the machines are usually not domain experts. The training is done by machine learning experts and the completed model after the machine is trained is often tested by experts. A significant problem is that any biases or errors in the data will create models that reflect those biases and errors. An example of this would be data from regions that allow stop and frisk – obviously targeted communities will appear to have more crime.

Human-in-the-loop machine learning is work that is trying to create systems to either allow domain experts to do the training or at least be involved in the training by creating machines that learn through interactions with experts. At the heart of human-in-the-loop computation is the idea of building models not just from data, but also from the human perspective of the data. Karthik calls this process ‘lensing’, of extracting the human perspective or lens of a domain expert and fit it to algorithms that learn from both the data and the extracted lens, all during training time. We believe this has implications for making tools for probabilistic programming and for the democratization of machine learning.

At a recent meeting with philosophers, clergy and AI and technology experts, we discussed the possibility of machines taking over the job of judges. We have evidence that machines can make very accurate assessments of things that involve data and it’s quite reasonable to assume that decisions that judges make such as bail amounts or parole could be done much more accurately by machines than by humans. In addition, there is research that shows expert humans are not very good set setting bail or granting parole appropriately. Whether you get a hearing by the parole board before or after their lunch has a significant effect on the outcome, for instance.

In the discussion, some of us proposed the idea of replacing judges for certain kinds of decisions, bail and parole as examples, with machines. The philosopher and several clergy explained that while it might feel right from a utilitarian perspective, that for society, it was important that the judges were human – it was even more important than getting the “correct” answer. Putting aside the argument about whether we should be solving for utility or not, having the buy-in of the public would be important for the acceptance of any machine learning system and it would be essential to address this perspective.

There are two ways that we could address this concern. One way would be to put a “human in the loop” and use machines to assist or extend the capacity of the human judges. It is possible that this would work. On the other hand, experiences in several other fields such as medicine or flying airplanes have shown evidence that humans may overrule machines with the wrong decision enough that it would make sense to prevent humans from overruling machines in some cases. It’s also possible that a human would become complacent or conditioned to trust the results and just let the machine run the system.

The second way would be for the machine to be trained by the public – society in the loop – in a way that the people felt that that the machine reliability represented fairly their, mostly likely, diverse set of values. This isn’t unprecedented – in many ways, the ideal government would be one where the people felt sufficiently informed and engaged that they would allow the government to exercise power and believe that it represented them and that they were also ultimately responsible for the actions of the government. Maybe there is way to design a machine that could garner the support and the proxy of the public by being able to be trained by the public and being transparent enough that the public could trust it. Governments deal with competing and conflicting interests as will machines. There are obvious complex obstacles including the fact that unlike traditional software, where the code is like a series of rules, a machine learning model is more like a brain – it’s impossible to look at the bits and understand exactly what it does or would do. There would need to be a way for the public to test and audit the values and behavior of the machines.

If we were able to figure out how to take the input from and then gain the buy-in of the public as the ultimate creator and controller of this machine, it might solve the other side of this judicial problem – the case of a machine made by humans that commits a crime. If, for instance, the public felt that they had sufficient input into and control over the behavior of a self-driving car, could the public also feel that the public, or the government representing the public, was responsible for the behavior and the potential damage caused by a self-driving car, and help us get around the product liability problem that any company developing self-driving cars will face?

How machines will take input from and be audited and controlled by the public, may be one of the most important areas that need to be developed in order to deploy artificial intelligence in decision making that might save lives and advance justice. This will most likely require making the tools of machine learning available to everyone, have a very open and inclusive dialog and redistribute the power that will come from advances in artificial intelligence, not just figure out ways to train it to appear ethical.

Credits

•Iyad Rahwan – The phrase “society in the loop” and many ideas.
•Karthik Dinakar – Teaching me about “human in the loop” machine learning and being my AI tutor and many ideas.
•Andrew McAfee – Citation and thinking on parole boards.
•Natalie Saltiel – Editing.

And, of course for your viewing pleasure:

[Would AI recognise this, an aside in the Carnegie Library; Reims]

Nopsrisk, Irisk

When it’s time, it’s time. Of course, meaning that the tough get going.
Lately, there has been a resurgence in Risk Management. In particular, in Operational risk management. That has been outclassed. Due to, among others, the calimero hanging-on at the tails of financial risk management but having failed to gain traction because the latter’s models were wholly inapplicable and seriously outright unusable for ops risk, due to having no clothes of one’s own (still, the upstart little peasant kid wanted to be emperor), due to having been outflanked by its little nephew of Information / IT Risk Management. That took on the coat of ‘cyber’ (#ditchcyber!) and gained prominence on all the vast wastelands that were left for the picking — and are now overwhelming the heartland with their successes in actual, frontline, FLOT hand-to-hand combat and battles (won).

Time, maybe, to give IRM the prominence it deserves, and forego the subsumption under ops risk ..?

It’s nothing personal…

[Soon again: Serralves]