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A Downturn for the Better
Thursday, January 7, 2010 by Holly Bailey
Honoring a time-honored tradition for the turn of the year, I've been looking back over the year
just past to do a little retrospective trend-spotting. Here's one that took me by surprise: in spite
of the downturn in the economy, there was also a downturn in online fraud. It's counterintuitive-historically, hard times are correlated with rising crime--but apparently true.
Late last year, DigitalTransactions, an online publication catering to businesses engaged in the
"electronic exchange of value," reported that the results of a survey of principals in these
businesses showed an overall decline in fraud of about 1 percent.
The survey, sponsored and carried out annually by a California risk management company, is the
first in its eleven-year history to show a fraud rate this low. In 2009 North American merchants
were expected to lose (a mere) $3.3 billion, in contrast to their loss of $4.0 billion in 2008.
What's behind this good-news downturn? Probably not increased honesty. There was no data on
attempted fraud, and the assumption is that the increased use of automated fraud detection tools
cut the merchant's losses. The level of sophistication of these tools has ratcheted up to the level
where neural network classification, risk analysis, and statistical analysis of correlated data can
take place in real time during the processing of a transaction. Furthermore, the combination of
operational risk software with device identification of the purchaser's computer now make it
difficult for a single computer to mob an online merchant with multiple bogus orders.
So the good news is not about improvements in human nature. It's about improving the defenses
of this booming sector of the economy.
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Digital Eyes on Alien Life
Wednesday, December 9, 2009 by Holly Bailey
University of Chicago geoscientist Patrick McGuire has big plans for Mars. Previously he
worked on an imager for a Mars orbiter that could identify different types of soil and rock by
detecting infrared and other wavelengths, and now he is drawing on that experience to develop a
space suit with digital "eyes" and a neural network that rides on the hips of the spacesuit and can
sort out living biological material from other matter.
The digital eyes will detect and plot colors, and the neural net, which is known as a Hopfield
neural network, will compare these color patterns to a database of information previously
gathered from that area of planet in order to make an animal-vegetable-mineral determination.
This complex AI system has already been tested at the Mars Desert Research Station in Utah,
and McGuire and his colleagues were satisfied that the Hopfield algorithm could learn colors
from just a few images and could recognize units that had been observed earlier.
McGuire's concept is that a human wearing this neural network could simply walk around the red
planet and record every nearby object, rapidly gathering information.
Obviously, such a clothing item awaits a manned Mars mission. But in the meantime, why not
have the next Rover suit up?
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The Cat is Out of the Bag
Thursday, December 3, 2009 by Holly Bailey
At November's supercomputing conference in Portland, Oregon, IBM announced that its
researchers working with a team from Stanford University had succeeded in developing an
accurate simulation of human brain function. The simulation will be capable of emulating
sensation, perception, action, interaction and cognition.
This algorithm simulating a living neural network, called BlueMatter (spelled as one word like
everything else in computerese these days) is an important milestone in IBM's mission to build a
cognitive computing chip because it begins to advance large-scale simulation of a cortical neural
network and it synthesizes neurological data. BlueMatter is built with Blue Gene (two words for
this pun in the singular) architecture, which, in combination with specialized MRI images,
allowed the team to create a wiring diagram of the human brain. This map of the brain is,
according to IBM's press release "crucial to untangling its vast communication network and
understanding how it represents and processes information."
To be more accurate, what BlueMatter has thus far demonstrated is the potential to achieve
neural network technology that operates on the scale of complexity of the human brain. The
algorithm's current simulation approximates the cortical system of a cat. Hence, the title of the
paper announcing IBM's accomplishments: "The Cat Is Out of the Bag." Even so, this is an
operations research accomplishment that dwarfs such mundane analytical tasks as option
valuation, value-at-risk, or reserve estimation.
One of the goals of the company's cognitive computing program is to create a chip that operates
with the energy efficiency of the human brain (20 watts). But in order to emulate the brain
activity of a cat, the research team had to bring out one of the largest supercomputers in the
world, the IBM Dawn Blue Gene/P--which comprises about 150 thousand processors and
contains 144 terrabytes of main memory.
This cat came out of a pretty big bag.
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New Approaches to Risk & Decision Analysis at the 2010
Conference in London
Friday, November 13, 2009 by DMUU Training Team
Following on from the resounding success of the last Palisade Risk Conference in London,
which attracted over 110 attendees from industry and academia, the 2010 Palisade Risk
Conference will be taking place on April 14th-15th. The location for this event will again be the
Institute of Directors on Pall Mall, London, and already there are a number of exciting
presentations confirmed from the likes of Unilever, Pricewaterhouse Coopers and Halcrow.
The 2010 Palisade Risk Conference will be a two-day forum which will cover a wide variety of
innovative approaches to risk and decision analysis. Featuring real-world case studies from
industry experts, best practices in risk and decision analysis, risk analysis software training, and
sneak previews of new software in the pipeline, the event is also an excellent opportunity to
network with other professionals and find out how they’re using Palisade risk analysis solutions
to make better decisions.
Call for Papers
If you have an unusual or interesting application of Palisade software which you would like to
present, please send a short abstract to [email protected]. The closing date for abstracts to be
submitted is Friday, 11th December, 2009.
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A Random Walk
Friday, October 23, 2009 by Holly Bailey
It has struck me often that the target of statistical analysis writ large is randomness. Because it is
the fundamental concern of all the techniques for decision making under uncertainty that I try to
track--risk analysis, genetic algorithm optimization, and neural network prediction--I assumed I
understood the term randomness pretty well.
But it turns out that what you think randomness is depends upon what line of work you're in. If
you are a statistician, randomness occurs in a repeating process the results of which follow no
discernible pattern. If you are a geneticist, randomness applies to genetic mutations that are not
controlled by genes. If you are a financier, randomness is blamed for controlling stock prices,
which respond instantaneously changes changes in available information.
In all these fields, randomness is closely allied with chance and probability, and the human
struggle against chance is epic. We resort to sharper and sharper tools to pare down what appears
to be random, and just when we think we have the magic tool--say, Monte Carlo software--or the
magic idea--the random walk hypothesis, for example--the definition of randomness changes.