How Google’s Deep learning AI is making music

15

October

2017

5/5 (1)

People are often arguing that artificial intelligence will be capable of nearly everything humans can do. Specifically, it’s not about dumb machines programmed to do very specific tasks —it’s about AIs that learn and get better by watching us and parsing our data for patterns. It will certainly replace a lot of jobs, but often you also hear that creative jobs will be spared, as AIs lack emotional intelligence and proactivity which are essential human characteristics.

But can computers be creative? – This can be a very philosophical question, but looking at what Google is doing right now, you will be very surprised. Last year, they launched an open-source research project called Magenta, which aims to explore the limits of what artificial intelligence can do with machine learning in arts. Google uses a different approach of learning compared to how classical AIs work and builds intelligence.
They developed an algorithm, which uses neural networks — a complex mathematical system that can learn tasks by analyzing large amounts of data. In recent years, it has been proven to be a very effective way of recognizing objects and faces in photos and identifying commands spoken into smartphones. Today they are using it to teach machines to synthesize new sounds, on notes generated by different instruments. So far, the experiment has yielded classical piano compositions that are actually hard to distinguish from human-composed music.

Magenta will not only produce music but will also provide musicians with a completely new range of tools to make music. One great example is the infinite drum machine, which organizes thousands of everyday sounds through machine learning and you can generate beats with it. These tools are all part of a number of initiatives Google launched, including Magenta and Creative Lab, to introduce free-to-use AI tools to the greater mass. They hope that everyday users can provide them with helpful insights on how they should build and improve it, as well as to help independent developers and musicians to create new experiences. There is definitely more to come and I’m very excited to see where these projects are heading. If you want to try out the infinite drum check out this website: https://experiments.withgoogle.com/ai/drum-machine

Hutson, M. (2017, August 08). How Google is making music with artificial intelligence. Retrieved October 14, 2017, from http://www.sciencemag.org/news/2017/08/how-google-making-music-artificial-intelligence

Metz, C. (2017, June 03). Finally, Neural Networks That Actually Work. Retrieved October 14, 2017, from https://www.wired.com/2015/04/jeff-dean/

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Data is King – How Alternative Data and Machine Learning will change the investment landscape

15

October

2017

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One of the hottest areas in the finance industry these days is quantitative investing, which is using AI (artificial intelligence) to scan through huge amounts of data identifying signals that are not visible to human beings. This change will be profound. More and more investors and funds adopt the aspect of analyzing alternative datasets to get an edge against market participants, the market will react much faster and can anticipate what traditional data sources may convey (e.g. quarterly corporate earnings, macroeconomic data, etc.). At some point, traditional data sources will lose their predictive value.

But what is actually meant with alternative data?

Alternative data includes data which can be generated by individuals (social media posts, product reviews, search trends, wifi data etc.), data that is generated by business processes (company energy consumption, credit card data, commercial transaction, etc.) and data which is generated by sensors such as satellite image data, foot and car traffic and ship locations, etc.). However, this type of data is often larger in volume, velocity and variability and therefore requires a deep level of analysis before it can be used for trading.

Using alternative data gives an advantage to those willing to adapt and learn about it. New types of datasets that capture ‘Big Data’ will increasingly become standardized in the near future. It will be an ongoing battle to uncover new higher frequency datasets with even greater granularity. Together with Machine Learning techniques, it will become a standard tool for quantitative investors. More and more traditional strategies such as risk premia, trend followers, equity long-short will need to follow to stay competitive. Already today, there are big data ecosystems which involve firms specialized in collecting, aggregating and selling these new datasets. Especially data which is generated by sensors is in high demand.

This type of data can be categorized into three groups: satellite data, geolocation data, and data generated by other sensors. One of the most popular alternative data offerings is satellite imagery. 20 years ago, launching a traditional satellite cost about millions of dollars and years of preparation. Nowadays, companies (such as Planet Labs) are able to launch a fleet of nano-satellites (the size of a shoe-box) into low-earth orbits. These nano-satellites have significantly brought down the cost of satellite imagery. Image recognition is also standardized and comes with Deep Learning architectures.

The second category of sensor-generated data is geolocation data. By tracking the location of smartphones through either GPS, Wifi or mobile phone signals, these firms can determine foot traffic in and around store locations. Blix Traffic is one of those companies and collects anonymous smartphone data from customers to understand the walk-by traffic beyond the front door of retail stores and walk by conversion rates.

One example illustrates how alternative data was used to be ahead of the market. When JCPenney reported results for the second quarter, the news came as a surprise — for most investors. Hedge funds however were analyzing satellite images and could tell that traffic into the stores was rising in April and May and they traded on it. JCPenney’s shares jumped more than 10% in mid-August.

Many companies in this segment are currently focusing on tracking foot traffic in retail stores; for the future, we can definitely expect real-time data from business processes. At JPMorgan’s macro quantitative and derivatives conference on May 19, the bank surveyed 237 investors, and asked them about Big Data and Machine Learning. It found that 70% thought that the importance of these tools will gradually grow for all investors. A further 23% said they expected a revolution, with rapid changes to the investment landscape.

Sources:

Kammel (2016), Alternative Data – The Developing Trend in Financial Data. Retrieved October 10, 2017, from https://blog.quandl.com/alternative-data

Kolanovic (2017), Big Data and AI strategies – Machine Learning and Alternative Data Approach to learning – JP Morgan.

Turner (2015), This is the future of investing, and you probably can’t afford it. Retrieved October 10, 2017, http://www.businessinsider.com/hedge-funds-are-analysing-data-to-get-an-edge-2015-8?international=true&r=US&IR=T

 

 

 

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Technology of the Week | Equity Crowdfunding disrupting Traditional Venture Capital [Group 56]

6

October

2017

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The Basics

We are all familiar with equity investing. Even crowdfunding is becoming a ubiquitous term with today’s increased digitalization. But “equity crowdfunding” is a relatively new phenomenon creating waves in the investment world. Accredited organizations provide an online platform for a group of individuals (the ‘crowd’) to invest in an early-stage unlisted company, in exchange for shares of that company.

Previously only wealthy individuals, venture capitalists, and business angels could invest in startups. Equity crowdfunding platforms have helped democratize the investment process by opening the door to a larger pool of potential investors contributing lower and more affordable individual amounts.

History

The first known equity-based crowdfunding platform for startups was launched by Grow VC Group in 2010 (Butcher, 2010). Arguably the most important growth driver for equity crowdfunding was the introduction of the JOBS Act in USA in 2012. It was one of the first widespread regulations designed to encourage small business and startup funding by easing federal regulations and allowing individuals to become investors.

The market expanded rapidly as more equity crowdfunding platforms became compliant with regulations. In 2015, the total equity crowdfunding volume worldwide was $2.56 billion, according to the annual Massolution Crowdfunding Industry Report. That number has been roughly doubling each year since 2012.

Pros & Cons

Both entrepreneurs and investors stand to gain from the equity crowdfunding phenomenon. Most importantly, startups that could not raise capital from traditional sources find the opportunity to do so on these platforms. On the other hand, unaccredited investors with low funds can now participate in equity funding.
Another major benefit is that it does not require entrepreneurs to give up a large amount of equity in their company, allowing them to retain significant ownership (Gaynor et al, 2015).
The proliferation of more startups as a result of increased financing also results in an improved economy for the country, higher employment, and more options for consumers.

Although there are numerous benefits that can be experienced by using equity crowdfunding as a method to raise capital, there are also a few drawbacks. The most obvious problem with equity crowdfunding is the lack of a secondary market to buy and sell shares (Gaynor et al, 2015).
Moreover, since investing in business startups via equity crowdfunding is not limited to accredited investors, less sophisticated investors can be taken advantage of due to their lack of knowledge regarding investing, exposing them to fraud and financial losses.
Critics are also concerned with regulatory authorities’ ability to police fraudulent securities offerings made by smaller companies that take the crowdfunding route.

The Future

The most important aspects to make equity crowdfunding a success have to do with investor due diligence and strict regulations. Investors must make sure they carry out enough research on the company they are interested in before investing, and regulatory authorities have the responsibility of ensuring laws protect investors from fraud.

Equity crowdfunding has the potential to completely disrupt the investment industry along with other forms of crowdfunding, as long as its growth is carefully tracked and managed.

In order to learn more about equity crowdfunding, please check out the video below.

 

References

  1. Butcher, M. (2010, Feb 15). Grow VC launches, aiming to become the Kiva for tech startups. TechCrunch: https://techcrunch.com/2010/02/15/grow-vc-launches-aiming-to-become-the-kiva-for-tech-startups/
  2. Gaynor, G.Morse, J. and Pevzner, M. (2015, Oct 1). The Crowd-Funding Effect34-39

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