Invest Like The Best
Episode 20 Machine Intelligence and Risk Management
Invest Like The Best

Episode 20: Machine Intelligence and Risk Management

Machine Intelligence and Risk Management

Jeremiah is an expert in the fields of statistics, artificial intelligence, and is currently the Director of Risk Management for a private investment firm. We cover machine learning models, AI and intelligent machines, and defining risk in a portfolio and how it can be managed.

This episode is brought to you by:

CFA Institute. CFA Institute the global association of investment professionals whose mission is to lead the investment profession by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. CFA Institute serves a global community of investment professionals working to build an investment industry where investors' interests come first, financial markets function at their best, and economies grow. The Chartered Financial Analyst credential is the most respected and recognized investment management designation in the world.

[00:02:19] – (first question) – Looking at Jeremiah’s background and how he got started in a place where he could work in artificial intelligence

[00:04:43] – The first exposure to necessary approximations and how that led to building models

[00:06:10] – His time at Amaranth and how that led him to getting an advanced degree

[00:08:35] – How does machine learning relates back to the simplest of models and where it goes from there.

[00:10:50] – How does machine learning help break down data sets more quickly

[00:13:35] – Explaining this concept with the example of google’s exploration of machine learning in translation.

[00:16:30] – Google has had a huge leap in accuracy as they had time into their models and a recurring neural network

[00:18:01] – The creation of the Lowin Data Company, what they do, and what has worked for them

[00:21:01] – The Chinese Room Argument (John Searle)

[00:22:19] – The Turing Test

[00:22:55] – What will all this machine learning mean in terms of replacing jobs in society

[00:26:27] – What are the jobs that will tough to replace with a machine

[00:28:02] – Cultivating relationships and the movie Her

[00:29:46] – Why AI machines aren’t intelligent

[00:32:39] – Defining intelligence in machines as possible decision making or leaps of intuition

[00:33:30] – Could discovery by a machine be the sign of intelligence in machines

[00:35:55] – What can we learn from the findings of Lowin Data Company that can be applied to our own ability to learn and improve ourselves

[00:38:35] – What led Jeremiah to start Lowin Data

[00:41:17] – Jeremiah’s working definition of risk

[00:44:34] – The tenements of risk management

[00:46:22] – A big part of risk management is shifting the distribution around

[00:49:59] – How much of this is quantitative vs qualitative

[00:53:14] – Why one of the most important skills in risk management is uncovering unknown unknowns and how Jeremiah applies this in his day-to-day job

[00:56:58] – Getting information out of a closed system

[00:59:59] – How often did Jeremiah’s involvement in a portfolio have a major impact on the decisions that were made

[01:02:13] – What are the dimensions that Jeremiah plots out in his 3D graph that he uses to analyze a portfolio

[01:05:15] – Where does Jeremiah fall when it comes to a simple index portfolio verse a more active portfolio

[01:08:23] – What has driven the change that has led people away from active managed funds

[01:11:01] – Has anything changed internally among hedge fund managers that could lead to a shift towards more passively managed funds

[01:14:11] – Will artificial intelligence based tools become a bigger part of the investing process going forward?

[01:17:52] – Looking at Jeremiah’s most memorable day

[01:20:36] – Kindest thing anyone has ever done for Jeremiah

Machine Intelligence and Risk Management

Introduction

Patrick
My guest this week is Jeremiah Lowin. Jeremiah is a childhood friend of mine who has been a sounding board for me throughout my career. We have conversations like the one you are about to hear about once a month, and in all those conversations, just like this one, you can hear me just trying to keep up. Jeremiah is one of those perfect SAT score guys, literally, who talks about topics like artificial intelligence like he's placing a lunch order. His career has been in risk management and he is currently the head of risk management at a private family office in the New York area.

The conversation is in two halves. In the first, we discuss models, machine learning, and artificial intelligence. In the second, we talk about what risk means in a portfolio and how it can be managed or at least redistributed. You'll have to listen pretty closely to this one, but if these topics interest you, it's a chance to see one of the leading minds in the fields of data science, machine learning, and risk management at work. Please enjoy our conversation.

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