Category Archives: Science

Evolving systems of life and electronics

We marvel at the power and potential of digital computing, mechanical tools, and computer interfaces, but is it any wonder compared to the analogous systems that have evolved naturally with biological rather than electronic mechanisms? Each of us is an independent system–with our own processor, frame, muscle structures for output, and sensory organs for input. Humans thankfully evolve because each of us is different, and different from the bodies that came before us. Further, our likelihood for passing on characteristics to future generations is related to our viability and the functions of our biological systems. We are biological machines.

But biology as we know it is limited by physical constraints on our senses, memory, and life-spans. It may even be the case that biological imagination and creativity are limited by the inherent constraints of neurological chemistry, however, I don’t imagine this is the case 🙂 I cannot see 3000 miles away without a camera and transmission, and I cannot remember the URL of the 473rd web page I ever viewed without electronic logs.

It seems clear that humans are developing electronic and mechanical tools to move beyond the constraints of our biological selves. We use electronics to extend our senses, empower our expressiveness, assist our memory, automate our processing, and improve our life-span. It seems inevitable that the evolutions of biological and electronic systems will begin to merge in order to take advantage of the best characteristics of each. To reach such a state, the interface between these systems needs to be improved. We are working on it already, and it is a ways off, but simply a matter of time. We are truly fortunate that the basic input and output signals of our biological nervous system are electrical.

Cointegration improvements

Cointegration typically uses the price information for two related securities, and provides relative value signals. As with traditional technical trading strategies, changes to the fundamentals create a risk of bad relative value signals. With 2-security cointegration, this risk is doubled because changes to the fundamentals of either company can skew the relative value signal. However, this problem can be cut in half by creating baskets (portfolios) of securities and running the cointegration analysis with each security against the basket. This effectively generates signals which are skewed only by changes to the fundamentals of the individual security. Additionally, the required correlation matrix for the permuted set of security combinations can be replaced by a single vector of correlations – greatly improving calculation efficiency and extending the analysis processing potential.

To improve upon normalizing data to % changes, factors typically associated with beta may also provide better signalling data. For example, as the size of a company grows over the course of a few years, its price volitility may fall. Similarly, as market cap grows, the price change correlations may increase relative to larger cap baskets and decrease relative to smaller cap baskets.

By backtesting, optimal trigger strengths and bet sizes can be measured, however, given the correlation coefficients, volitilities, number of positions, and risk preferences, probabalistically optimal bet sizes may provide better results.

Invest in Biotech and Information Sciences

If we invest heavily in biotechnology and information services companies (especially genomics, networked centralized computing, neurology, neural network predictive applications, and nerve regeneration) in the next 50 years, many currently living people may have an opportunity to achieve substantially improved and lengthened quality of life and indefinitely extended sentience.

It’s more than a financial return, but it can still be evaluated financially. The return on these investments should be calculated as the return on the securities themselves, plus the return on your other investments over the period of time that your life and investment horizon are extended. It is possible, then, that the net return on biotech and information science investments may be substancially higher than the direct value change for those investment securities.

SOAP, .net, and the ubiquitous internet cloud

Microsoft’s recent major push to develop the .net platform is an attempt to aggregate and brand all internet services into the Windows operating system. And it just might work. SOAP and .net are sometimes referred to as a “cloud” because of the distributed nature of the processing; your machine accesses a server which renders your display based on stored interface components and applications that are potentially stored on different machines anywhere else, controlled by anyone else. I think that it is a key new technology and that it will play an important role in the development of communications technology in the next few years.

What is this technology? And where does it take us?

SOAP and .net use techniques that enable distributed computing and webserving. In other words, they allow web applications to run on independent computers and independent of the look and feel of the web site. Applications developers will want to adopt this technology because it means that they can focus on the application and spend less time on the user interface. Portals will want to adopt this technology because it means that they can integrate many external services and make them available to their users. Microsoft, I believe, is in the process of building this technology into their Windows operating system in order to enable any internet application to be run without leaving the Microsoft-controlled environment.

There is a programming design heuristic that is based on the separation of model, content, controller, and view. SOAP is analogous as it enables the separation of the model. The dominance of this design for programming was very strong, and similarly, the dominance that SOAP enables will likely be very strong. Effectively, The potential of XML is captured through the definition of protocols for the distributed exchange of applications.

What is the risk?

If .net is successful in becoming the dominant channel for web services, then there is a strong likelihood that Windows will combine the operating system and portal functionality to provide the complete computing experience. Microsoft will have the ability to target services, advertising, applications, communications, and other information to each individual. Further, web services will be conveniently available through integrated Windows applications, reducing the need for browser-based web access. Specifically, it will mean that the internet will be able to be re-faced with a Microsoft-branded front-end, and a selection of web services defined by Microsoft.

What is the potential?

In order for .net to become only one of many popular web service aggregators, the SOAP protocol must never give advantage to Microsoft over other aggregators. If SOAP (which stands for simple object access protocol) remains open in such a way that any portal can aggregate any SOAP enabled web service, then the result will be wonderful. Specifically, it will mean that the entire internet will be able to be re-faced with a customizable front-end, and your selection of web services will be personalized and context dependent based on specifications you select.

Centralized Computing Platform

The world needs a platform for centralized computing that enables anyone to commercially publish their intellectual properties through any networked device using their own interface. This platform could be supplemented with advanced and semantic search accross all IP, as well as access to any distributed web service through SOAP.