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Monday, April 7, 2025

AI: Rule-Based Systems and Deep Learning Compared

Deep Learning is a subfield of machine learning utilizing multi-layered neural networks for complex tasks like image and speech recognition, achieving human-level performance in some areas. This episode of Deep Dive outlines its historical progression, key architectures such as CNNs and RNNs, and diverse applications across various sectors including healthcare, finance, and materials science. It also addresses challenges like overfitting and computational cost, alongside criticisms regarding theoretical understanding and potential vulnerabilities. In contrast to Deep Learning, Rule-based Systems, employ logical rules like Horn clauses for knowledge representation and problem-solving. Our reference list also includes an article which provides a broad historical view of AI, tracing its evolution from rule-based algorithms to the more recent advancements in generative models, positioning deep learning within this wider trajectory

To listen to this episode of the Deep Dive audio blog click on the link below.

AI: Rule-Based Systems and Deep Learning Compared

References:

  • “Are Rule-Based Systems Still Relevant Today?” - blog post excerpt from Rangarajan Krishnamoorthy's website discusses the continued relevance of rule-based systems in artificial intelligence, particularly in contrast to the rise of machine learning

  • “Balancing Transparency and Accuracy: A Comparative Analysis of Rule-Based and Deep Learning Models in Political Bias Classification” by Manuel Nunez Martinez , Sonja Schmer-Galunder , Zoey Liu , Sangpil Youm , Chathuri Jayaweera , Bonnie J. Dorr University of Florida, FL,USA {manuel.nunez, s.schmergalunder, liu.ying, youms, chathuri. jayawee, bonniejdorr}@ufl.edu

  • “Deep Learning” - Wikipedia page on deep learning serves as a comprehensive introduction to the field, outlining its fundamental concepts, historical evolution, and diverse applications.

  • “Hybrid Approach Combining Machine Learning and a Rule-Based Expert System for Text Categorization” – by Julio Villena-Román, Sonia Collada-Pérez, Sara Lana-Serrano and José C. González-Cristóbal

  • “RULE-BASED EXPERT SYSTEMS AND BEYOND: AN OVERVIEW” by John Kingston (AIAI-TR-25)

  • “Rule-Based System or Machine/Deep Learning for My Board Game AI?” - Reddit post from the gamedev community captures a game developer's dilemma in choosing an AI approach for a complex board game.The core question revolves around whether to implement a conventional rule-based system or a more advanced machine/deep learning strategy.

  • “Rule-based system” - Wikipedia article defines a rule-based system in computer science as a system where knowledge is represented as rules, enabling general reasoning to solve problems. The article further explores the construction of production systems, detailing components like the rule base, inference engine with its match-resolve-act cycle, and working memory.

  • “Rules-based vs. Deep Learning: A Powerful Synergy in Modern AI” - blog post from ClearObject discusses the power of combining two fundamental approaches in artificial intelligence: rules-based systems, which rely on predefined logic and expert knowledge for transparent decision-making, and deep learning, which uses neural networks to learn complex patterns from vast amounts of data for adaptability and high accuracy.

  • “Self-learning Symbolic AI: A critical appraisal” – this article argues that while Deep Learning currently dominates the field of Artificial Intelligence, it faces significant limitations. The author contends that the earlier approach of Symbolic AI, which focuses on manipulating symbols and structured knowledge, offers viable solutions to these limitations and has been unfairly overlooked due to the hype surrounding Deep Learning. [Hans Peter Willems MIND|CONSTRUCT March 2021]

  • The History of AI: From Rules-based Algorithms to Generative Models” [Jeff Johnston, Last updated on November 12, 2024] - blog post from Lantern, provides a concise overview of the evolution of artificial intelligence. It systematically traces AI's development through key stages: the initial rules-based systems, the emergence of machine learning with its various paradigms, the transformative deep learning revolution, and the recent rise of generative AI and large language models.

Saturday, April 5, 2025

The Upcoming Finacial Markets - AI and Algorithmic Trading: Risks and Opportunities

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Explore the increasing role of artificial intelligence in financial markets, highlighting both its potential benefits and significant risks. Experts warn about AI's capacity to enhance market manipulation and create systemic vulnerabilities, leading to a technological arms race between manipulators and regulators. Regulatory bodies are grappling with how to adapt existing frameworks to address the unique challenges posed by AI-driven trading, particularly concerning transparency and market abuse detection. Simultaneously, discussions on platforms like Reddit reveal a wide range of perspectives on the real-world effectiveness and profitability of AI trading bots, with many users expressing skepticism and attributing successes to luck or the superior resources of large institutions.

Listen to the Deep Dive audio podcast discussion at the link below:

AI and Algorithmic Trading: Risks and Opportunities

  

Timeline of main events related to this article

  • By December 2022: Syllabub_Nervous (on Reddit) made a bottom call for Tesla stock, predicting an upward pop followed by a drop to $100.
  • End of January 2023: Following Syllabub_Nervous's prediction of a rally, Tesla stock hits $215.
  • Fiscal Year 2023: The U.S. Department of the Treasury used an enhanced AI-driven fraud detection process, recovering $375 million.
  • June 2023: The FBI reported on the $50 billion scam of Business Email Compromise.
  • June 2023: Verizon released its 2023 Data Breach Investigations Report.
  • July 2023: The Federal Reserve issued "Payments Fraud Insights" on mitigating synthetic identity fraud.
  • September 5, 2023 (as mentioned in Reddit post): A Reddit user, MoneyFalcon, reports their Octobits AI trading bot on Telegram has generated a significant return since July 4th.
  • November 2023: The Financial Stability Board (FSB) released a report on the financial stability implications of artificial intelligence.
  • December 2023: NIST released its Digital Identity Guidelines (800-63-4 IDP).
  • December 2023: Northeastern Global News published an article explaining AI chatbot "hallucinations."
  • December 2023: The Draft NIST EU-US TTC WG-1 Digital Identity Mapping Exercise Report was released.
  • February 2024: The Financial Services Information Sharing and Analysis Center (FS-ISAC) published a report on "Financial Services and AI: Leveraging the Advantages, Managing the Risks."
  • February 2024: The U.S. Department of the Treasury announced its enhanced fraud detection process using AI, which recovered $375 million in Fiscal Year 2023.
  • May 2024 (Anticipated): The OECD will host an international workshop on AI jointly with the FSB.
  • End of 2024 (Anticipated): The FSB will deliver an updated assessment of financial stability risks of AI to the Group of 20 (G20).
  • February 18, 2025: The SEC reduced the capacity of the Consolidated Audit Trail (CAT) to collect information on investors, affecting its funding model case with Citadel.
  • March 11, 2025:A consortium of major European exchanges remains the only formal contender to provide Europe's consolidated tape for equities.
  • Executives from Jump Trading, JP Morgan, Goldman Sachs, and the DTCC stated that 24/7 trading is "inevitable," but technological and data challenges persist.
  • Several US and UK companies are considering participating in a UK program to build a private stock market with separate trading platforms.
  • 2025 (Ongoing): Discussions and developments surrounding AI in financial markets continue, including its use in trading, fraud detection, and cybersecurity, along with considerations of regulation and international coordination.


Friday, April 4, 2025

AI Alignment: Principal-Agent Models and Challenges

Explore the multifaceted challenges of aligning artificial intelligence with human values and objectives, drawing parallels and distinctions with established economic theories like the principal-agent problem. Weigh out the difficulties in specifying complete and accurate goals for AI, leading to potential misalignment where AI agents optimize for incomplete or misinterpreted proxies. Investigate methods for mitigating these risks, including conservative optimization, dynamic incentive protocols, and incorporating uncertainty about human preferences into AI decision-making. Examine how AI, as an increasingly capable agent, can create and understand information in ways that differ fundamentally from humans, raising critical questions about trust, control, and the future of human-AI coexistence. Learn about empirical studies using large language models that are used to investigate the emergence of principal-agent conflicts in AI and the implications for alignment strategies.

Listen to the Deep Dive audio podcast discussion on the subject matter:

Principal-Agent Models and Challenges 

click on image to enlarge details

References: 

  • Dae-Hyun Yoo, Caterina Giannetti "A Principal-Agent Model for Ethical AI: Optimal Contracts and Incentives for Ethical Alignment"
  • Reddit thread, found on the "transhumanism forum", engages in a discussion sparked by the question of whether AI alignment is a non-problem or an unsolvable one. 
  • Article from Lawfare discusses the emerging challenges of governing AI agents 
  • "Challenges of AI systems: A new kind of principal–agent problem," featured on the website of the Institute of Mathematical Statistic 
  • "Incentive Compatibility for AI Alignment in Sociotechnical Systems: Positions and Prospects" by Zhaowei Zhang, Fengshuo Bai Mingzhi, Wang Haoyang, Ye Chengdong, Ma Yaodong Yang 
  • "Principal-Agent Problems" – subscriber discussion written by Jim Babcocklast updated 9th Nov 2020
  • “principal-agent alignment problem within artificial intelligence” by Dylan Hadfield-Menell - Electrical Engineering and Computer Sciences University of California, Berkeley - Technical Report No. UCB/EECS-2021-207
  • “What can the principal-agent literature tell us about AI risk?” by apc8th Feb 2020AI Alignment Forum
  • “How the principal-agent literature relates to AI risk” by Rohin Shah 27th Feb 2020 Alignment NewsletterAI Alignment Forum
  • “OF MODELS AND TIN MEN- A BEHAVIOURAL ECONOMICS STUDY OF PRINCIPAL-AGENT PROBLEMS IN AI ALIGNMENT USING LARGE-LANGUAGE MODELS” by Steve Phelps and Rebecca Ranson
  • Yuval Noah Harari: ‘How Do We Share the Planet With This New Superintelligence?’ - Wired magazine, April 1 2025