YouSaid · the spoken record

Jeremiah Lowin

lines on the record: 80
first: 2017-01-17
most recent: 2017-01-17
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Somewhat RD driven, it's somewhat fanciful, it's just evolved in strange ways. And part of how my career has gotten to those points is because people have put trust in me, but also encouraged me in surprising ways. I have left jobs on great terms, on wonderful terms, and maintained relationships. I have come to jobs simply because we mutually agreed that there was something interesting to do. And those are small forms of kindness. I could point to momentous examples of kindness in my career. I'm going to choose to keep them private. And instead, I'll just characterize the whole thing as being very fortunate to work with people who cared about development, both personal and professional, in equal measure with the sort of basic profit maximizing objective that we all take on on a daily basis.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it was such a momentous, yeah. I In my career? I'll stick to my career so I don't embarrass anybody. I have benefited enormously from people's kindness throughout my career. I've had a strange career in the sense that I've never had a job that I could interview for. Well, I've interviewed for jobs, but the requirements of my job have always evolved in ways that I could never have anticipated, and had I tried to interview for the job I later held, I'd probably be left out of the room simply because it's”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“And there have been a couple of incidents, that being one, which have really informed my view of the risk manager's role and why I care about it. And in a lot of ways, it sounds like one of these things where, well, you really better love this or you're really going to hate it kind of thing. No one goes into this job and it's like, eh, all right, I'll do the risk thing. What a good day job. Yeah, exactly. You really gotta care for one reason or another. And one of the reasons that I've come to care is because I've seen in a number of instances what can happen.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“New on the job at that point, but I was certainly still learning and I was very fortunate to work with an incredible team and have an incredible mentor for a boss who really understood both the gravity of the situation but also the very pragmatic reality that we had to deal with. And I remember being there Sunday. We're churning through everything. We're getting the trades on. We're recording them by hand in many cases, just checking things off. I mean, the portfolio was extraordinary. And as it happened, as we all know, they did not file by midnight. The trades all disappeared. And I remember sitting there and we waited and we waited and early Monday morning the call came and they were filing. It was maybe, I don't know, three in the morning, four in the morning, something like that. And all of a sudden, this whole other contingency set of plans got kicked into action.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“That would have to be the day Lehman went bankrupt, especially as a risk manager. It was kind of extraordinary. There was a special trading day. It was a Sunday when Firms could trade to try and offset their credit exposure, and I believe the terms were that if Lehman filed for bankruptcy before midnight, the trades would stand. But if they didn't, the trades were all, you know, they'd all go away. And I remember there was just this enormous logistical operational challenge of we essentially were going to try and run two sets of books, one with a trade standing and one without the trades because we wanted to know our exposure in both events. There's also just the challenge of mapping out what trades we chose to make or would choose to make, how they would impact our portfolio. It was just as sort of an extraordinary undertaking. And I was”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“That could actually be an asset in helping practitioners avoid overfitting, which to me is the greatest danger today as folks go out into this quantitative world. Overfitting can come from two places. It can come from the model itself, and it can come from a belief of the person who implemented the model. I get a great backtest or even a great forward test. And I choose to believe that that is meaningful as opposed to random.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Scrambler. Yeah, it's a drop dead easy way to try and build a robust model. And sometimes it works. In fact, most of the time it works. We spent a lot of time doing that. One easy way to regularize your model is to use a simple model. Just don't let the model make a lot of choices. So linear regression, it's a close form model, so it only has one outcome, but we could set up a model that effectively looks a lot like a linear regression, but we don't let it use the clone form solution. We force it like any other machine learning model to iteratively approach that optimal solution. Well, that model is hamstrung a little bit by the fact that it's a very simple model. It only has as many parameters as we have regressors.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, there's a very dangerous consequence of what you just described, which is this machine learning models can have millions, even billions, let's just say, of parameters. They can fit any data you choose to show them, and they have become very accessible, since that I type two lines of code and I'm running a seven layer deep neural network, and guess what? It's perfect. The backtest is amazing. The danger of overfitting is high. In many ways, sticking to the more traditional, let's call them algorithms, the linear regressions of the world, the simple classifiers, it regularizes the model. And that's really important. That's really important in machine learning. We spend a lot of time thinking about how do we prevent overfitting. I mentioned a technique called dropout earlier, which is just a”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“But the activity of finding them can be difficult and can be increasingly difficult as this becomes an industry that is increasingly broad and splintered. I don't have an answer to that. Challenge. I'm no longer on that side of the equation, and I haven't frankly spent a lot of time thinking about that. But this is It's certainly an evolving industry. I have the luxury of being able to throw up my hands and wait and not have to make a decision, which I think is more of a luxury than it sounds, to be honest.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Because they're taking advantage of low cost platforms, quantitative access to markets. There's a lot more to sift through. That's not to say that there's still as much quality out there, but you got to wade through quite a bit to find it. And that effort has some cost in addition to what you'll pay to the hedge fund itself. I go back to this sort of fallback attitude of skepticism. I don't need to go out and find the greatest investment. I can sit here happily and assume the world is random and noise and there's nothing to do. But I want to be convinced, right? I want to believe. And I'm happy to say that there are many, many wonderful investment managers out there who deliver real returns in attractive and appropriately risk measured strategies.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that from the perspective of a US taxpaying investor, you're no longer the prime target of a hedge fund manager, whereas you were ten years ago, twenty years ago. The incentives have shifted such that the marginal buyer of a hedge fund is now a pension fund, a sovereign fund, folks who have different aftertax, after fees, after liquidity requirements than an individual or a wealthy individual or a family office, for example. I think that's led to behavior shifts in how hedge fund managers run their own operations. They want to cater to this investor who ultimately drives flows at this time. So at a very high level, I observe some behavioral consequences. At a much lower level, it's also much easier to start a hedge fund, right? So there's a lot more of them.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“But to me, it's not the cyclical indicator that, oh, indexes have done well, therefore we should all index. In fact, it's the opportunity to leverage these relatively new tools to implement a strategy that would have been much harder for people to implement in the past and would have incurred much more of a cost except in the last few years.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Certain factor exposures, or perhaps not factors, but tilts that you'd like to have in your portfolio. And what I think that they do is allow anyone Set up the portfolio that they believe to be most appropriate for them. Now, the goal of that portfolio may not be to outperform, because we're kidding ourselves if we think we can all have an above-average return, right? Chances are through action we're going to have a below average return. That's how a small number of people are able to accrue. Wealth in this model.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a great question. It would be very dangerous for me to start espousing an opinion that was short-term driven, especially as you've pointed out, because the cycle is pointing one way and not the other at this moment. It means it's probably actually the exact wrong time to do what I've just described. But to me, one of the interesting things is the rise of the robo advisor. Passive investing, I'm making air quotes. I just realized no one can see that, but air quotes, passive investing until recently basically meant index and forget, right? Set it, forget it, go back to your business. Rebalancing, too bad. You didn't think about it in time and you only thought about it because the market crashed and now you want to come back to it. But the rise of the robo advisor means that there's this very interesting middle ground, which again, I think is far from truly passive because within all these robo advisors, you're going to dial in your level of risk. In some of them you can choose.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Little bit that's semantics, but it really was all talking about whether or not stepping away was the same thing as not being active. And where that conversation ended up going was to say that we often pay people to be active when in fact they're adding no value, which is not to say that the opposite of that is to be passive. It's simply to be active at a much lesser rate. And I come out increasingly, even in the last year or two, much more on what we would call the passive side or the less active side of things, simply because I don't see on average the returns to active investing. There will always be active investors and some of them will be quite good. But if you ask me on average, I don't think simply going out and trading and expressing an edge and having a view means that profits accrued to you on average.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“We got into a little bit of a debate about whether there is such a thing as passive investing and whether what we call passive investing today is in fact expressing a relatively active view in that you have to go out and choose how you want to index. Do you want equity exposure? Are you basically taking on equity risk premium and just sort of absolving yourself of the need to rebalance and choose stocks? That's an active view. It's active in that it has an absence of some actions that other strategies do. But by that definition we'd say that some of the largest hedge funds in the world are passive because they're not high frequency. They haven't met some minimum threshold of activity to be considered active.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“I had a very interesting conversation a few weeks ago. I taught a class at the Booth School at the University of Chicago, and we got into a little bit of a debate along these lines.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. We don't know what stuck into this portfolio, and even if we did, we wouldn't necessarily know what to comp it to. But that's why doing this on a constant basis and reviewing it, even when you think you understand it, to me it's just critical.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“The evolution of the portfolio turned out to be Just as meaningful as its current position, because sometimes you meant to change it, and sometimes it changes as a consequence of external events. And that may have been sort of a frog-boiling situation where it just was slow and you didn't notice. And that may have been something that just happened overnight and snuck in because it's not a principal risk that you believe you're exposed to. You wouldn't go out and measure it every day.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, what's our exposure? And look at it. If we were going to do this with a more statistical approach, then we'd go out and we'd say, well, we have no prior belief about what we're exposed to. Let's just let the system go out and find correlates and plot them. The important thing here, ironically, is not to deliver necessarily useful quantitative information, but rather to build something that someone can look at and intuitively have some understanding of not what their portfolio looks like at any moment, but how it's evolving. That's an important point I don't think I mentioned a moment ago. The key thing here wasn't that you would know where you were today. It was that you would see how you were evolving over time. Now, I didn't know at the outset of this that that would be the important thing that's what I learned. That's something that I took away from building these things is that”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so if we were going to choose some, we would probably just go out and say, well, what do we think is representative? Well, this portfolio is highly exposed to oil and credit. So let's make a graph of oil exposure, credit exposure.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, sometimes, you know, the challenge of visualizing something is that, of course, these portfolios existed many, many dimensions in very high dimensional space. So visualizing it can be a challenge. So sometimes we do it statistically. We choose, for example, you could use principal components and just say, what are the two drivers of returns in this portfolio?”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Taken this information and make decisions based on it. And I'd like to think that throughout my career there have been many, many times when through the use of these tools and by demonstrating possibilities to people and by trying to present the behavior of their portfolio, I've had some meaningful impact, if not on the course of the investment, than on the decision to pursue it.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Tools that I've put together has, though it's been driven by numbers in the back, has had no numbers at all in terms of its presentation. And that's been a graph of exposures, a 3D graph of exposures. By having many conversations with this chart next to me and seeing it evolve through time, we got to a place where the folks I was working with could look at this chart and intuitively understand how they were positioned. You could look at this thing and you could say, oh, I've got tail hedges in place or I'm very exposed to such and such an event. It's a little bit difficult to describe this thing without actually showing you, but through this graphical techniques, we were able to communicate what was really driven by a thousand different numbers, but no one can look at a thousand different numbers and actually understand what they are, but we're very good at looking at pictures. So we turn those numbers into a picture, and then anyone can glance at it and visually.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd love to tell you it's just constantly like that. But of course, that's not the case. There have been times when my involvement has clearly directed the course of something. I won't go into specifics now. But more broadly than that, I think my contribution has been building tools that help turn these very qualitative ideas we've been talking about into something tangible. One of the most effective”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“I always try to imagine that I am going to have to communicate this to yet another third party. Am I able to adequately do that in a way that doesn't simply refer them to a tear sheet of monthly returns? Can I explain what is happening? I also have to believe that what I'm explaining is not some sham perpetrated just for me, right? That I legitimately am having some window into this strategy and how it works. And that's my objective. So if asking tough questions about uncomfortable situations is how we get there, then so be it. That's how we get there. And if we have just a very nice conversation about the philosophy of the investment strategy, that's another way to get there. And I'm happy to say I've had as many conversations of that type.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“But again, we go back to that metaphor of shining the flashlight in the dark room. We're just trying to get flashes of an idea. We'll never know for sure. Again, this is very much art rather than science. It's very qualitative as opposed to quantitative. We're trying to gather evidence. And this is not a gotcha game, right? We're not trying to make someone uncomfortable. We're not trying to push them out of their comfort zone. It's not like if they take a step too far and the whole sham will be revealed to us because in many cases these are not just legitimate but extraordinary strategies that are being put into place and that you would absolutely like to be an investor in. The goal instead is to understand them. Now if in the process you reveal the whole thing to be a sham, then more power to you. You've dodged a bullet.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“So it's live. So, our job now is to understand the distribution that gave rise to those returns. So we understand that those returns are draws from a distribution. What is that distribution? What do the tails of that distribution look like? Is it a very, very peak distribution with a very tight center, but then it has this enormous left tail, because you've been, I don't know, selling puts all day. Is it very well behaved? Does it change frequently? Is it stationary? We're trying to get answers to these questions. Now, nobody knows the answer to these questions, which makes it very difficult to answer them.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“So we have to get away from the monthly returns as quickly as possible for the simplest reason that especially if they come from a back test. Let's say it's”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“How do you get. How do you get information out of such a closed system? And again, all we can do is poke it. And we're just looking for reactions that are a little bit odd, that lead us to question the claims that this person, that this investor is making, or conversely, lead us to abandon our own null hypothesis that the world is random and you have nothing to offer me.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Then you're much more honest than many of your peers. Because I'm the writing them. Well, there you go. Yeah, my backtests are always terrible. Somehow they're just never as good as what I'm trying to match up to, right?”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's now very hard to go back to the world of skepticism, and everything is noise, and I don't take on blind faith that things work. Good example is when you talk to a quant manager. So a quant manager will never tell you how their algorithm works, obviously. That's everything, right? That's their IP. Also, even if they did, you might not understand, right? It could be a machine learning algorithm that they've chosen to implement in a very specific way. And you know what? Maybe it's not machine learning algorithm. Maybe it's an evolutionary algorithm. And even they aren't sure exactly how they came to this answer, right? They can't trace the math exactly. They've wound up with a very powerful model that seems to pick stocks amazingly, and their returns in their back test are wonderful. Now, I've never seen a bad backtest. I don't think you've ever seen a bad backtest. I've seen plenty of bad backtest.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“There's an element of that. I mean, listen, at the end of the day, the secret to knowing the difference between signal and noise is just to assume everything is noise. That's where the skepticism comes into play. It's not that I have some magical toolkit or deep insight, and I can say, oh, well, this has meaning and this doesn't. It's that I literally sit here and I just assume everything is random, everything is noise. And if you want me to believe otherwise, you have to prove it to me. But until you do that, I'm going to sit here and I'm going to build models of what I think the world looks like. And to the extent that we deviate from that, I will be aware of that. I will know that perhaps its information, perhaps it's not. But that null hypothesis, if you will, is a powerful one, and it's a very, very easy one to deviate from because the second you take one step into believing that your edge is both real and manifests in the data in noticeable ways”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“So instead, we want that person whose remains the best pattern recognition system I'm aware of to be able to take this new information and actually come up with an intelligent answer. We don't want this to be the first time they've considered this outcome. So we walk through it. We do fire drills. We talk about it. We say, what could happen? And I think that approach has been for me personally phenomenally valuable. There are enough people doing enough different things that there's no one size fits all here. But if I had to choose one thing and if I were in a firm where it were something that makes sense, I would have conversations all day”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Risk measurement is much easier with quantitative tools because risk measurement tends to be backwards looking, it tends to be data driven, it tends to be empirical. But management Short of purely quantitative portfolios, which of course would faint if I said, no, no, no, go talk to the algorithm, go have a conversation and figure things out. To me, that's the most valuable thing that I can do is trying to communicate qualitatively what these outcomes might be. Because this is a little bit experience driven for me, but I worked with human traders, which meant they had to make decisions about how to allocate their portfolio. So if something surprising happens”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“I would have lots of conversations. I think that, going back to our intelligence conversation, I think that our brains are remarkable pattern recognizers. They integrate experience and information in really wonderful ways. And when you're dealing with people who have had a lot of success, especially in finance where so much of the information you see is purely random and restraint plays a big role, right? Not getting fooled by some spurious correlation or random outlier observation into thinking that that was a signal. That was just noise. That was an outlier. We can disregard it. You sit down with someone like that and you talk about outcomes. And you're trying to sort of prime the pump. You're trying to get that person, that portfolio, that... Asset, that algorithm ready for whatever may come. And”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a wonderful question. I don't think I agree with you. I don't think you need a quantitative model, though I have yet to meet someone who would actually put that into practice, and I certainly wouldn't. I think it's a remarkably helpful tool. I couldn't do my job well without it. But if I had to do one thing Implement a good risk management program.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Of a risk manager as truly understanding in and out how a portfolio behaves and how external forces and internal decisions will change that behavior.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Manager who ran in when all the sirens were going off and saved the day because he slammed his hand on the red button and the firm was saved. That doesn't happen. And it's a myth and no one should expect it. Being a risk manager can be a very thankless job. You either get it right and are never heard from, or you get it very wrong and everyone knows your name. How do we reconcile that? Why would anyone choose to do that? Well, if risk becomes an information function where understanding all possible outcomes, not just the bad ones, but the good ones, the average ones, the simple questions of, well, the Fed's going to raise rates. What does that mean for our portfolio? Might mean a good thing, right? Might mean a gain in value, might mean significant loss. Those are risk questions to me. Wrapped up often with a return kind of answer, but I view the job.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Of energy stock or a certain sub industry, subsector that we want to allocate towards. Well, that's great. So we're going to take all this information and we're going to build some portfolios. And now we're going to try to understand how do those portfolios behave. What is the distribution look like? Sometimes we can quantify that with publicly traded portfolios. It's relatively easy to quantify that if the metric we choose is observable, like historical volatility, for example, with some portfolios, especially as we get into derivatives, illiquid assets, private assets, quantifying risk becomes a lot harder. But discussing risk remains just as important. So we come up with some way of identifying what we think is risky after we've layered in all these edges and our objective. Then the risk management starts. And risk management, in a simplest sense, is just keeping up on that portfolio, knowing where it is, knowing how it's behaving. I have yet to hear of the risk.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Broadly be split into risk measurement and then risk management. Risk measurement is somewhat easier. It's also where a lot of folks will just stop because I want to measure my risk. Well, we have this even more philosophical question of what is risk in the first place, right? And of course, my answer there is a lot like my answer for what is intelligence. Well, I don't really know, but it has something to do with behavior and how things move over time and evolve. Okay, so how am I going to measure that? Well, let's say for argument's sake that I think risk is volatility. And I want to minimize that. Well, that's very easy. I just go to cash and I have no volatility, right? So now we layer in the edge that we think we have. And we think that our edge is an energy stocks. Okay, so we want a portfolio that's not quite cash, but looks a lot like an energy portfolio. But maybe it's not just energy stocks. Maybe it's a certain type.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Replace it, we can offset it, but it's not going to vanish. It's going to mutate. And we want to make sure that when it mutates, we know where it goes, and we are still quantifying it elsewhere in that portfolio. So risk”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Thinking about it absolutely. I think one of the important sort of tenets of risk management is that we can't, or rather in 99% of situations, we can't just get rid of risk. We can't wish it away. If we imagine the most simple example, we just have a bell curve and risk. We're going to just say that risk exists in the left tail of that curve. I can't just wish that tail away. I can pay somebody to take it away. I can allocate my portfolio such that it looks a little bit different. In other words, I can shift the mass from that tail elsewhere in my portfolio. But I can't just get rid of it. It doesn't work like that. At least not without some cost. And a big part of risk management, therefore, is understanding how to shift the distribution around. Okay, so you tell me you don't like your exposure to energy stocks. Well, that's fine. We can move that exposure wherever we want. We can pay someone to get rid of it.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Moves such an amount. What happens when the market moves such an amount? It's not always about loss. It's not always about what happens when the market crashes. Those questions tend to come up in a risk context simply because they represent the absence of return, which we always view as sort of the yin and the yang, risk and return, right? So when there's no return, we must be dealing with risk. But to me, risk is a much more negulous idea. And return is the draw from the distribution that risk is trying to model. So ultimately it comes down to understanding and defining the behavior of, in this case, assets and portfolios in all ways, up and down.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Many of the descriptions that you were able to pull up, I think all of them have some truth and none of them capture the whole of it. And I don't have one that does. As a risk manager, the analogy that I would use is trying to identify a sculpture in a dark room. And all I can do is I have this flashlight and I can shine the flashlight on it, but I can't look at the sculpture. I can just look at its shadow, these projections on the wall. And I'm trying in my head to build this model of what that sculpture looks like because ultimately the questions in this context about a portfolio presumably are what happens when”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. So being a risk manager to me basically means being a professional skeptic. That's how I sum it up. My job as a risk manager is to understand how things behave. To me, there's a very clear parallel between building and talking about machine learning and building and talking about risk management models. At the end of the day, I want to know how things really behave, not how they behave historically, which especially in finance we can view as just one draw out of many. And I do agree with many of the”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“I had passion and no real outlet to explore it, short of going out and learning what problems people had and trying to apply these brand new technologies to them.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“One to the other. And I remember reading this paper. It must have been in. 2009, 2010, and just falling in love with this idea that here is a machine that could dream. Now, at the time, I was convinced that was intelligence, but very much in keeping with our conversation today, I now no longer think that at all. I think that's a very deterministic outcome of the way that model was constructed. And today we have models that go significantly beyond what that model was and is capable of doing. But that for me was this sort of aha moment of, wow, there is this remarkable thing happening. I don't even know that if I said machine learning at the time, six people on Earth would know what that meant. Now, of course, everyone seems to have some opinion on it, but it was very early days. It was very exciting, and that was when I said I need to go learn more about this. And Lo and Data didn't start because I had a product or a business or a customers. Lo and data started because”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“Unfortunately, they are not. We don't need to go into the details here, but one of the interesting things about these machines is that they could dream. Today we'd call that a generative model in the machine learning literature. But at the time, there wasn't a good name for it. So they said the machines would dream. And what that meant is these algorithms were trained on handwriting. And by prompting the machine with a little bit of random noise, you could get it to essentially hallucinate all the things it had learned. So upon the screen would come a seven, and then the seven would morph into a handwritten nine, and then that would morph into a one, and the one would change into a two. And the interesting thing was these smooth transitions between the numbers where the machine had never seen these transitions before, in some cases never seen the number written exactly like that before. But somewhere deep encoded in its memory or its parameters were these representations of these numbers and how to move from one.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll tell you the thing that led me to start low in data, which was I read a paper by Jeff Hinton, who is mentioned many times in the New York Times article and is in many ways considered a father figure of the machine learning movement for decades. He for many years wrote about a class of machines called restricted Boltzmann machines. And the details aren't so interesting. Sounds simple.”
2017-01-17 · Invest Like the Best · Jeremiah Lowin – Machine Intelligence and Risk Management - [Invest Like the Best, EP.20] · IDENTIFIED FROM THE TRANSCRIPT · source