Kevin Slavin - How algorithms shape our world

Summary

In this thought-provoking talk, the speaker explores the intertwining of algorithms, financial markets, and cultural influence. Through the lens of Michael Nar's digitally altered photographs, which mirror stock market fluctuations, the discussion reveals how algorithms shape our world and even our understanding of reality. From Wall Street's black box trading to Netflix's recommendation systems, the speaker illustrates how these invisible forces operate without human oversight, creating a new landscape where financial and cultural dynamics are fundamentally altered. Ultimately, the talk challenges us to rethink the role of math and technology in our lives.

Takeaways

• 📸 Michael Narm's photograph serves as a metaphor for the financial crisis, illustrating how art can reflect economic realities.
• 📈 Algorithms play a critical role in shaping our world, transitioning from tools that describe reality to those that define it.
• 🦅 Stealth technology in military applications parallels algorithmic trading, where breaking down large operations into smaller, less detectable transactions is essential.
• 📊 The majority of Wall Street trading (70%) is conducted by algorithms, demonstrating the increasing reliance on automated systems in finance.
• ⚡ The 2010 flash crash exemplifies the unpredictability of algorithm-driven markets, where significant market shifts can occur without human intervention.
• 🔍 Companies like Nanex analyze market data to uncover hidden algorithms, assigning names and narratives to better understand them.
• 📚 Similar behaviors seen on Wall Street can be observed in online marketplaces like Amazon, revealing the impact of algorithms on pricing and sales.
• 🎥 Netflix’s algorithm, which determines a large portion of movie rentals, showcases the cultural influence of algorithms in entertainment.
• 🏢 Destination control elevators illustrate how algorithms optimize human experiences, often leading to confusion and panic when they lack intuitive interfaces.
• 🌊 The quest for algorithmic efficiency drives physical changes to the environment, such as laying extensive fiber optic cables, raising concerns about the implications of this 'manifest destiny' approach.

Q & A

What is the significance of Michael Nar's photograph mentioned in the transcript?

Michael Nar's photograph illustrates the relationship between art and reality, depicting the contours of mountains reshaped to reflect the fluctuations of financial indices, particularly during the 2008 financial crisis. It symbolizes the complex interplay between nature and human economic activity.

How do algorithms influence contemporary mathematics and society?

Algorithms have transitioned from being tools for understanding the world to forces that actively shape it. They acquire a sense of truth through repetition and can influence societal structures and human behavior in profound ways.

What analogy is drawn between stealth technology and algorithmic trading?

The analogy suggests that both stealth technology and algorithmic trading aim to manage complexity and opacity. Just as stealth technology disperses radar signals, algorithms in trading obscure large transactions to avoid tipping their hand in the market.

What does the 'flash crash' illustrate about modern trading systems?

The 'flash crash' demonstrates the unpredictability and lack of human oversight in algorithmic trading. In this incident, 9% of the market value disappeared in five minutes without any clear reason, highlighting the risks associated with automated systems.

How do algorithms impact cultural consumption, as mentioned in the transcript?

Algorithms, like those used by Netflix for recommendations, significantly influence cultural consumption patterns. They determine what content is viewed, accounting for a large percentage of rental decisions, which raises questions about human agency in cultural choices.

What are the implications of competing algorithms in automated systems?

Competing algorithms can lead to confusion and inefficiency in automated systems, as seen with cleaning robots and elevators. This highlights the need for clear interfaces and human oversight to prevent panic and ensure effective operation.

Why is speed crucial for algorithmic trading, and how does it affect infrastructure?

Speed is essential in algorithmic trading because even microsecond delays can result in significant financial losses. This necessity has driven the construction of dedicated infrastructure, such as fiber-optic cables and server farms, to facilitate ultra-fast transactions.

What does the speaker mean by saying algorithms are a co-evolutionary force?

The speaker posits that algorithms act as a third force, alongside nature and human activity, that shapes our environment. They influence economic, cultural, and societal landscapes, fundamentally altering how we interact with the world.

How does the transcript suggest that algorithms render financial markets illegible?

The transcript suggests that as algorithms operate autonomously, they create a system that becomes increasingly difficult for humans to interpret. This leads to a loss of understanding of market dynamics, as evidenced by the flash crash and other market phenomena.

What future implications does the speaker foresee regarding the influence of algorithms?

The speaker foresees that algorithms will continue to exert significant influence over various aspects of life, potentially reshaping not just economic systems but also cultural norms and environmental interactions. Recognizing and understanding this impact will be crucial as we move forward.