26 Mar 2013

Who's In-charge: Man or Machine?

The answer is more or less clear: The machines are increasingly in-charge of the most important facets of human society!

In a world of Big Data, number-crunching machines have a "natural" advantage. Automation is slowly, but surely, replacing many sensitive human activities for political, economic and practical reasons. (Read this.)

But in the economy, algorithm-based HFT (high frequency trading) supercomputers literally control the flow of trillions of dollars in the world's largest stock markets, forex markets and commodities exchanges. Essentially, machines control (or distort) the basic "price discovery" mechanism of the markets. Since HFTs make money on price movements, they both cause and profit from market volatility. (See this.)

Speaking of "money"... Less than 10% of the "currency" in circulation is printed physical cash and coins. More than 90% of what we call money (about 97% in places like Sweden) is just digital ones and zeros - created, transacted and tracked by banking software. In a "cashless society", we'll have a 100% machine-generated medium-of-exchange! (See this.)

That's not all... The ruling powers in most nations are using vast digital dragnets to troll for electronic pre-crime evidence. Algorithms that sift through "yottabytes" of data to analyse and identify the potential "bad guys" (and their sympathisers) among us. And it's not easy to hide or escape because your smartphone works for "them"! (See this.)

Most alarmingly, militaries in countries (developed and emerging) around the world are plunging blindly into an era of fully-automated robotic weapons. These can be in the form of autonomous drones using algorithms to track, target - and yes, kill humans - without the oversight of other human beings! (See this.)

Skynet doesn't really need to become "self-aware" and send out the Terminator... A rouge 'algo' could simply delete an economic database - or misinterpret a military one... In the resultant chaos, human beings will probably fight each other to extinction! (Sorry to ruin your day.)

16 Mar 2013

How bankers and Big Brother make great bedfellows

A few weeks ago, my bank sent me the following by email.

Apparently, the Government of India has "declared" that henceforth citizen services like subsidies, welfare payments, pensions, etc. will be routed through aadhaar-enabled bank accounts.

I am certain that the official reasoning is to help the Indian banking and "national security" apparatus keep an eye on transactions by the "bad guys". Of course the corollary is that all customers / citizens are guilty until proven otherwise by a government database.

But the government babus and the banks are innocent angels -- except when they are caught with their pants around their ankles!

For example... In October 2012, ICICI Bank (a foreign-owned "Indian" bank) was fined Rs5,500,000 by the RBI for unspecified money-laundering activities. What is interesting about the paltry amount is that the MAXIMUM penalty for violation of guidelines is only Rs 500,000. But the RBI can chose to REPEAT the fine for REPEATED violations. Thus, ICICI was fined 500,000 ...11 times!

Surely, ICICI has learnt a bitter lesson.

This week - just 5 months later - ICICI has merrily presented India's ever-diligent banking regulator with yet another opportunity fine them in multiples of Rs500,000!

Cobrapost.com, a small investigative team, did a undercover journalistic "sting" which show bankers eager to help them evade regulatory guidelines - ON VIDEO!

Of course, Nanadan Nilekeni would gallantly tell us that none of this would have happened if the bank accounts were in aadhaar's biometrically-sealed database. And Captain Raghu Raman would volunteer that India's other Orwellian project, NATGRID which links 11 government agencies and 21 databases, would certainly have prevented such situations.

Of course, both of them would be lying through their teeth.

Because, as Aniruddha Bahal, Editor-in-Chief of Cobrapost says, KYC guidelines, IDs (biometric or otherwise) and banking laws amount to squat if bankers KNOWINGLY wish to circumvent them... Especially, if they are certain that laundering millions or billions would land at best a feeble wrist-slap and chump-change in fines.

The Indians are just learning the ropes from the master at the game:
- In December 2012, HSBC pays a world-record $1.9 billion fine after being caught money-laundering for drug cartels... with ZERO legal implications.
- In February 2013, it is revealed that HSBC's CEO is awarded more than $3 million as bonus for his "strong leadership" in 2012.

The Indians still have a long way to go... but with the government and regulator's help, they'll get there eventually.