EveryWare on Everything Everywhere?

The spotlight of the Nov-14 issue of the HBR Magazine is the "Internet of Everything".

No, I do not want to know everything, nor do I want to be absolutely wise (and I do not want to live infinitely long either).

My world view is speculative realism in the sense of Quentin Meillassoux. In short, if we do not know more properties of a real behavior than represented in our models, our models ARE reality.

I want to explore and experiment...

What can vampires teach us?

Remember, they live infinitely long and are wise… But they need one rare thing: blood and everything they do is finding optimal strategies to get it…this is inspired by this Freaconomics blog post

Jim Jarmusch made a great film about vampires: Only Lovers Left Alive. A quiet and dark film with a feeling of timelessness…giving the impression that any world is important. The two immortal lovers give an impression of absolute wisdom, high culture, connectedness…of vampires. 

How wise they are, they are caught to live at night, buy (at dark markets) or steal blood…

Freakonomics asks: what if there was a free blood market? The film gives the answer...

Program everything?

We strive for knowing and understanding everything. You can only program at universal systems. Universal in the sense that they are solid enough to store and fluid enough to allow "signal" transformations. If we want to program everything we need to connect everything.

The phrase "internet of things" has arisen to highlight new opportunities exploiting new smart, connected products transforming data into computational knowledge.

To program everything  you need languages (and interpreters) that represent things in the same way - as symbol. A symbol can describe a mathematical expression, graph, movie…even a program. Symbolic means, they are all pieces of data.

Are data the blood of the new high culture of the "internet of everything"?

Co-evolution in the program grid

Think of weather forecasts and energy optimization. If you have sensors in a high resolution grid you can provide better weather forecasts and if you have better local weather forecast you can optimize energy consumption via sensing. A perfect co-evolution.

Isn't this great? Let's drive progress through this kind of co-evolution?!

When uncertainty is good

Remember, we only learn from turbulences and gain from disorder.

Even if we have everything connected and have clever computational knowledge engines...What truth do our information sets represent? Are we able to distinguish noise from content? Do our perfect knowledge engines generalize? Are their unified best practices for our decision?

Back to philosophy…it's even more complex

Life happens...

only at the small border between chaos and order. And with "life" we mean biological, physical, economic, cultural, social…

There are no equilibriums and optima in the large. We ride the waves and when we ride them we change them.

If we "know everything", we stand still?

The faster we approach the horizon the faster it fades away

So, don't let us forget the modeling, parameter identification, simulation, speculation, validation…  Don't let us forget that there are ill posed problems, undecidability, uncertainty… note that big data may also be a big joke and that tightly coupled complex systems may cause a horrible operational risk.

EveryWare can create great opportunities, but it needs individual assessment to which extent it should be exploited. Don't just adopt it fast and blindly...

Is The Future Becoming Old Like The Rest Of Us (Entrepreneurs)?

With inexpensive technologies and tools, wide communication networks, skill sharing…it has never been easier to start your own company, but entrepreneurship is in the decline.

Before I read about the Entrepreneurship Paradox at Pieria, I'd said: I don't believe…too many publishers praised the entrepreneurial society, the age of the makers, the Do It Yourself movement…

But, I should have known it better: NN Taleb said: a system that is old will become much older (I paraphrased).

It seams that the future is becoming old, like the rest of us (entrepreneurs)? Why is this so? Does it need (too much) time to become antifragile?

OK, entrepreneurship at the high-tech sector started declining after the dot-com crash. But the dot-com boom triggered a broadband emergence that helps entrepreneurship?

If we want a vibrant, growing economy, what to do?

Do factory and lab work simultaneously

There's one important thing: old and new firms should fight the worst enemy - "be happy with the achieved"- together. Collaborate!

For entrepreneurs it's not so easy to collaborate with old firms under clear rules and old firms fear entrepreneurs may disrupt their working principles.

At the lab we strive for finding a breakthrough, new ways to solve new problems and do new things. In labs we accept to get insight from failure. A lab does not think too much about exploiting, but creating.

The factory is made for reliability and productivity. It works automated and precise. It does what it did yesterday tomorrow, but  maybe faster or cheaper. 

Working with entrepreneurs, large, old firms can set a stage of solving complex problems, build new skills, leverage technology and conserve capital.

Entrepreneurs may absorb quantitative management techniques, rationalization, ways of brand promises…

To bring them together was one of my most challenging activities over 25 years.

Olè - The Insight Rain In Spain

11 years ago, a managing partner of an independent financial group in Barcelona, Spain, came to us. He wanted to check whether we would be the right technology partners supporting their Financial Consulting Division.

I recalled my first time in Barcelona (must have been in the 70s?). I watched a Barcelona versus Inter Milano soccer game. Young and wild, I felt like in a "Rolling Stones" concert...in a stadium packed with 135.000 enthusiasts.

Barcelona, much more than home of soccer champions

Later, I recognized Barcelona's progressive development in so many layers, from (beyond-Gaudi) architecture to business.

Listening to the visitor we understood immediately that their services were (and are!) highly specialized and eminent practical. Their team was (and is!) made up of economists, mathematicians, engineers and computer experts. They had (and have!) an impressive client base ...

What a dream partner. 

At the end of the workshop, he decided to utilize UnRisk technologies in a network set-up. 

What a short sales cycle.

Turning on the innovative spiral

Was it just a mere license-set up-training project? 

No. Intuitively, I offered him a featured client status with an open information policy. We roughly sketched an arrangement based on workshops, workouts in Barcelona and here...online info exchange...

On a higher-level understanding we agreed to jointly fight the worst enemy...be happy with the achieved. 

And we got to work.

Enabling them to acquire new clients and offer new services we developed new deal types for their market specifics swiftly...created the Value at Risk Universe… They transformed computational knowledge into individual reports for each client.

Hidden in plain sight

When we took the UnRisk FACTORY to the first financial institutions they ran already a robust pre-realease and exploited its highly automated portfolio across scenario simulations. First, they used its web front-end for internal convenience…

Once, I took a few days off and went to the Costa Brava (100 km north of Barcelona) for a short vacation. I spontaneously offered to visit them in their office. At a half day workshop we came to the conclusion that their UnRisk technologies need only a few "handles" to make them a System as a Service (SaaS) builder.

We outlined a plan at the workshop and and got to work. A new business model came to light.

A Barcelona cloud that rains insight

First we linked the UnRisk Financial Programming Engines to the FACTORY...then we extended UnRisk to webUnRisk. 

The core - the UnRisk FACTORY - produces massive valuable information...risk data... To transform this information with their specific knowledge into individual insight for their clients online they use webUnRisk.

Their Barcelona based cloud assesses now over 6000 financial instruments, derivatives and structured products of different complexity and underlying assets, valued over EUR 100 Billion on a daily base for several financial institutions, calculates risk of hundreds of investment funds, 

End of this year we will provide them with the capabilities to support the new central counter party regime…a regime that requires fundamentally new valuation methodologies for simple derivatives.

Beyond the development partnership

Some of their clients wanted to run their own "cloud". So, we extended our development partnership agreements with a re-marketing option.

It began with their agreement to use our technologies as tools for their financial consulting division… years later this division has re-invented itself…they became consulters and providers of online risk management services. Cloud aided financial advisors. 

And we? We've decided to unleash the programming power behind UnRisk…to organize UnRisk technologies and products orthogonally…to deliver know-how packages…to even offer marketing support…

With amazing success. I call it co-evolution. It can be copied…with care.

Where I Turned To Learn How To Market

When I was responsible for factory automation software at Austria's largest industry enterprise, marketing was dependent. Factory automation software is not a product it is a technology stack. It needs a partner who makes / contracts the factory. It was the Factory Engineering and Contracting Division of our enterprise … They did the total-solution marketing.

To sharpen your tools sell them individually

But I knew from the beginning that I need a clever make and buy mix. After I have decided to make high level Computer Aided Manufacturing technologies, I learned swiftly that I need to market them independently from the total solutions. Only if this tools are good for any factory they're good for "our" factories. We outlicensed our innovations.

We inlicensed Computer Aided Engineering and Design tools as well as resource and production planning systems. And again, I decided to offer them independently on the market of discrete manufacturers.

So, I became a system integrator, solution marketer, own-innovation marketer and re-marketer. Without forgetting:: I'm here to serve our factory providers with the best possible technology stack.

About 25 yeas ago I started my own business and decided to build it based on symbolic computation.

Inlicense and outlicense

And I decided it shall utilize Wolfram Technologies (Mathematica). Uni software plus became a Wolfram partner and consequently sold in the Wolfram business development framework. But we refined it for our selected market segments.

Out of "nothing", we sold the fist unlimited site license to a university world-wide. At a time when the symbolic computation market was in its infancy - not a bad start 23 years ago.

But, we still were rather project than product people and conducted quite a lot industry projects atop Wolfram technologies. For process and manufacturing industries, energy suppliers...even music industries… Based on our special solution marketing.

A short story of being lucky

About 18 years ago, partnering with…UnRisk makers and owners...MathConsult, we were lucky to be asked to develop some convertible bond valuation tools for a London based trading desk (of an American bank).

This was the start point of the UnRiskVerse. Over the years UnRisk has built a comprehensive technology stack for derivative and risk analytics products. About 13 years ago, the first UnRisk has been taken to a financial institution. We enjoy now 100+ clients…

Where I learned to market the all new product?

Just about everywhere I could. What I did before did not really help. There is no history of the new.

I knew that UnRiskers, known as coal faced mathematicians, are not only exotic makers, but suffer also from the provenance paradox: quant finance tools are from NY or London, not Linz - the steel town, right?

No, this is the differential advantage, I was sure: cross-sectoral numerics, symbolic computation, simulation, parameter identification… steeled in complex industrial systems will enable us to make finical technologies swifter and with less effort...

I talked to seasoned experts, Paul Wilmott, … and quickly learned: you may have the technology that fits to the purpose, but quants, traders, capital managers, risk managers, auditors … think differently about the same thing.

Would they all think, we stand on their side?

Risk management is about knowing how to manage risk

Maybe not, we thought and decided to establish the UnRisk Academy. It packages know how and provides the views behind the curtain.

Who ever is interested, quants, risk managers, capital managers, traders, auditors, … competitors or users of competitive systems…we welcome them in our courses, workouts…where the Academy advisors expose methodological and technological risk and traps and explain how to avoid them.

Insight selling

From the marketing standpoint we turned solution selling into insight selling and we are not afraid to push potential clients out of their comfort zones.

Understanding is one thing. Doing it well another. There is no systematized marketing of innovation, but if you teach you get into the discussion about reasons keeping financial experts awake at night.

It's not the mathematics, data, use patterns … that makes UnRisk compelling. It's the trust that it is made by people who are highly committed to make the black box white.

The four-P marketing, product-people-price-promotion, turned into solution-access-value-education marketing.

Understand the rules so you can break them 

Business is about innovation and marketing. For success you need to optimize your market risk. That is often counter-intuitive.

I've run through the processes and know the autodidact's dilemma. I offer a process. It's often about understanding the rules in order to break them ...

We can start discussions via email  - if I believe in you and your innovation, we can enter into a profit sharing relation…or anything else that fits to your business. Anything.

To Tree or Not To Tree - That's the Question

Whenever you build a system that involves modeling, I recommend to organize objects, models and methods orthogonally.

A simple example: a cube is modeled by a^3, but it can be represented by wire frames, bounded geometry, solids. It depends on the purpose of you actions related to the cube - look inside, map textures on it, calculate its volume, ...

In UnRisk we have financial instruments, models and methods. Equities are usually modeled in the PDE world, starting with the Black-Scholes PDE with local volatility extensions (Dupire), stochastic volatility (Heston) and Jumps (Bates). See A short first view on equity models. How nasty things can get, when you naively use solvers can be seen here. But this is another story.

In option valuation tree based methods are still used. In To Tree or Not To Tree it is explained, how horrible the naive usage of trees can become. Since we, Andreas Binder, have published this, Dan Tudball, the editor of the Wilmott Magazine calls us lumberjacks (I have pointedly said: trees are good as firewood. but not for quant finance)

But, since I looked into real options I found that the trees are a good choice for the valuation of certain types. See To Tree Is The Answer, Provided …. It's about insight vs. computational quality.

I even think there is a trade off between both. If you model is too complex the additional information (dimension) gets lost in the numerical jungle.