JPMorgan, Data-Rich Analyses, and the Public Good

I recently received an invitation to the JPMorgan Chase event below.

Reaction 1: JPMC should stick to its business, which is business, working to maximize the shareholder wealth with which it is entrusted, leaving to others (like me) the "provision of data-rich analyses and expert insights for promotion of the public good."

Reaction 2: JPMC is sticking to business, maximizing shareholder wealth, but not in appropriate ways.  Seriously, is it just me, or does this absolutely reek of Wall Street financiers working to capture Pennsylvania Avenue regulators? (I love that the event is actually on Pennsylvania Avenue.) By the way, I was wondering what Tony Blair knows about "provision of data-rich analyses." I still have no idea, but a quick Googling of "Tony Blair JPMorgan Chase" reveals that he's now very prominently on the JPMC payroll.

The silver lining:  After this blog, I doubt I'll ever again be invited.

Jamie Dimon Chairman and CEO of JPMorgan Chase & Co. and Diana Farrell Founding President and CEO of the JPMorgan Chase Institute  Invite you to the launch of the JPMorgan Chase Institute – a global think tank dedicated to delivering data-rich analyses and expert insights for the public good. Discussion A preview of the JPMorgan Chase Institute's consumer data asset and groundbreaking first research report on individual income and consumption volatility Speakers Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. Diana Farrell, Founding President and CEO of the JPMorgan Chase Institute Tony Blair, Quartet Representative and Former Prime Minister of Great Britain and Northern Ireland Panel David Wessel, Senior Fellow at the Brookings Institution, Former Economics Editor at The Wall Street Journal Zoë Baird, CEO and President of the Markle Foundation Heather Boushey, Executive Director of Washington Center for Equitable Growth Robert Groves, Provost of Georgetown University, Former Director of US Census Bureau Location The Newseum Knight Conference Center 555 Pennsylvania Ave NW Washington, DC 20001 This invitation is non-transferrable.

JPMorgan Chase seeks to comply with applicable rules concerning meals, gifts and entertainment offered to public officials and employees, including related disclosure requirements. We estimate the cost of hospitality to be provided at JPMorgan Chase & Co. Institute Launch to be $27.00 per person. To the extent you wish to pay the cost of , or to decline, the hospitality to be provided at this event please contact Kathryn Kulp at kathryn.kulp@jpmchase.com to make the necessary arrangements. ©JPMorgan Chase & Co. All Rights Reserved. JPMorgan Chase Bank, N.A. Member FDIC. All services are subject to applicable laws and regulations and service terms. Not all products and services are available in all geographic areas. Eligibility for particular products and services is subject to final determination by J.P. Morgan and/or its affiliates/subsidiaries. Please note that you may not be able to complete this registration on your mobile device or tablet. For best results, please use a laptop or desktop computer.

Bi-Weekly Complex Systems Seminar

For those near the University of Pennsylvania, the Complex Systems Seminar Series is sponsored by the Bassett Lab and is held on the 1st and 3rd Friday of each month at noon in 337 Towne Hall.

The seminar series seeks to bring speakers from a variety of disciplines who engage in complex systems research to share their work in a interdisciplinary environment.  I suspect that most of the seminars will be in biological/physical systems, but the point for readers of this blog, of course, is that there's plenty of room for importing their good ideas into economics and finance.

Even if you're not near Penn, you still might want the abstracts emailed to you; contact SarahMuldoon to be added to the list.

Quantum Computing and Annealing

My head is spinning. The quantum computing thing is really happening. Or not. Or most likely it's happening in small but significant part and continuing to advance slowly but surely. The Slate piece from last May still seems about right (but read on). 

Optimization by simulated annealing cum quantum computing is amazing. It turns out that the large and important class of problems that map into global optimization by simulated annealing is marvelously well-suited to quantum computing, so much so that the D-Wave machine is explicitly and almost exclusively designed for solving "quantum annealing" problems. We're used to doing simulated annealing on deterministic "classical" computers, where the simulation is done in software, and it's fake (done with deterministic pseudo-random deviates). In quantum annealing the randomization is in the hardware, and it's real. 

From the D-Wave site:

Quantum computing uses an entirely different approach than classical computing. A useful analogy is to think of a landscape with mountains and valleys. Solving optimization problems can be thought of as trying to find the lowest point on this landscape. Every possible solution is mapped to coordinates on the landscape, and the altitude of the landscape is the “energy’” or “cost” of the solution at that point. The aim is to find the lowest point on the map and read the coordinates, as this gives the lowest energy, or optimal solution to the problem. Classical computers running classical algorithms can only "walk over this landscape". Quantum computers can tunnel through the landscape making it faster to find the lowest point.

Remember the old days of "math co-processors"? Soon you may have a "quantum co-processor" for those really tough optimization problems! And you thought you were cool if you had a GPU or two.

Except that your quantum co-processor may not work. Or it may not work well. Or at any rate today's version (the D-Wave machine; never mind that it occupies a large room) may not work, or work well. And it's annoyingly hard to tell. In any event, even if it works, the workings are subtle and still poorly understood -- the D-Wave tunneling description above is not only simplistic, but also potentially incorrect.

Here's the latest, an abstract of a lecture to be given at Penn on 4 December 2014 by one of the world's leading quantum computing researchers, Umesh Vazirani of UC Berkeley, titled "How 'Quantum' is the D-Wave Machine?":

A special purpose "quantum computer" manufactured by the Canadian company D-Wave has led to intense excitement in the mainstream media (including a Time magazine cover dubbing it "the infinity machine") and the computer industry, and a lively debate in the academic community. Scientifically it leads to the interesting question of whether it is possible to obtain quantum effects on a large scale with qubits that are not individually well protected from decoherence.

We propose a simple and natural classical model for the D-Wave  machine - replacing their superconducting qubits with classical magnets, coupled with nearest neighbor interactions whose strength is taken from D-Wave's specifications. The behavior of this classical model agrees remarkably well with posted experimental data about the input-output behavior of the D-Wave machine.

Further investigation of our classical model shows that despite its simplicity, it exhibits novel algorithmic properties. Its behavior is fundamentally different from that of its close cousin, classical heuristic simulated annealing. In particular, the major motivation behind the D-Wave machine was the hope that it would tunnel through local minima in the energy landscape, minima that simulated annealing got stuck in. The reproduction of D-Wave's behavior by our classical model demonstrates that tunneling on a large scale may be a more subtle phenomenon than was previously understood...

Wow. I'm there.

All this raises the issue of how to test untrusted quantum devices, which brings us to the very latest, Vizrani's second lecture on 5 December, "Science in the Limit of Exponential Complexity." Here's the abstract:

One of the remarkable discoveries of the last quarter century is that quantum many-body systems violate the extended Church-Turing thesis and exhibit exponential complexity -- describing the state of such a system of even a few hundred particles would require a classical memory larger than the size of the Universe. This means that a test of quantum mechanics in the limit of high complexity would require scientists to experimentally study systems that are inherently exponentially more powerful than human thought itself! 

A little reflection shows that the standard scientific method of "predict and verify" is no longer viable in this regime, since a calculation of the theory's prediction is rendered computationally infeasible. Does this mean that it is impossible to do science in this regime? A remarkable connection with the theory of interactive proof systems (the crown jewel of computational complexity theory) suggests a potential way around this impasse: interactive experiments. Rather than carry out a single experiment, the experimentalist performs a sequence of experiments, and rather than predicting the outcome of each experiment, the experimentalist checks a posteriori that the outcomes of the experiments are consistent with each other and the theory to be tested. Whether this approach will formally work is intimately related to the power of a certain kind of interactive proof system; a question that is currently wide open. Two natural variants of this question have been recently answered in the affirmative, and have resulted in a breakthrough in the closely related area of testing untrusted quantum devices. 

Wow. Now my head is really spinning.  I'm there too, for sure.

Quantitative Tools for Macro Policy Analysis

Penn's First Annual PIER Workshop on Quantitative Tools for Macroeconomic Policy Analysis will take place in May 2015.  The poster appears below (and here if the one below is a bit too small), and the website is here. We are interested in contacting anyone who might benefit from attending. Research staff at central banks and related organizations are an obvious focal point, but all are welcome. Please help spread the word, and of course, please consider attending. We hope to see you there!

Penn Econometrics Reading Group Materials Online

Locals who come to the Friday research/reading group will obviously be interested in this post, but others may also be interested in following and influencing the group's path.

The schedule has been online here for a while. Starting now, it will contain not only paper titles but also links to papers when available. (Five are there now.) We'll leave the titles and papers up, instead of deleting them as was the earlier custom. We'll also try to post presenters' slides as we move forward.

Don't hesitate to suggest new papers that would be good for the Group.