July 2023

  • Economic Allies and Economic Enemies

    Last week, I brought up the concept of Economic Freedom. It reminded me of an idea I last shared in 2008, during the housing crisis. 

    I noticed how correlated and coordinated worldwide actions were during the housing crisis. During the pandemic, while there was a lot of dissent, there was also a remarkable amount of coordination. 

    Why Do We Shake Hands? | Mind Fuel Daily | Life & Journey

    The concept of economic allies presupposes that we also have economic enemies. It’s easy to construct a theory that countries like Russia and China use financial markets to exert leverage in a nascent form of economic warfare.

    It's easy to come up with a theory that suggests we are our own worst enemies. Our innate fear and greed instincts (and how we react to them) tend to lead us down a path of horrifying consequences. This has been evident in recent years, not just in society, but also in the world of business. I am confident that this pattern will persist in the context of Artificial Intelligence, with both its potential benefits and risks.

    The butterfly effect theorizes that a butterfly flapping its wings in Beijing on one day can create or impact a rainstorm over Chicago a few days later. Similarly, in a world with extensive global communication and where automated trading programs (and even toasters) can interact with each other from anywhere across the globe, it is not surprising that market movements are becoming larger, faster, and more volatile.

    Perhaps governments cooperate and collaborate because they collectively recognize the need for a new form of protection to mitigate the increasing speed, size, and leverage behind market movements.

    And we can also extend this idea to other entities beyond governments. It doesn’t have to be limited to traditional markets either; it can include cryptocurrencies or other emerging technologies as well.

    It’s worth understanding the currents, but we must also consider the undercurrents and countercurrents. 

    Conspiracy theories are rarely healthy or helpful, but maintaining a healthy skepticism is a great survival mechanism.

    Hope that helps.

  • The AI Hacking Paradox

    Fear is a natural response to change or the unknown, serving as an evolutionary mechanism designed to safeguard us. However, it’s also worth noting that many of our fears turn out to be unjustified.

    Sometimes, however, fear is a much-needed early warning system. 

    In the context of AI hacking, you should be afraid. Given the exponential growth in technology and artificial intelligence, concerns about security breaches and intentional misinformation campaigns have become common.

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    In 2016, DARPA created the Cyber Grand Challenge to illustrate the need for automated, scalable, machine-speed vulnerability detection as more and more systems—from household appliances to major military platforms—got connected to each other and the internet. During this event, AI systems competed against each other to autonomously hack and exploit vulnerabilities in computer programs. The competition revealed the unprecedented speed, scope, scale, and sophistication with which AI systems can find and exploit vulnerabilities.

    And that was seven years ago. 

    AI hackers operate at superhuman speeds and can analyze massive amounts of data, enabling them to uncover vulnerabilities that might elude human hackers. Their ability to think differently, free from human constraints, allows AI systems to devise novel hacks that humans would never consider. This creates an asymmetrical advantage for AI hackers, making them formidable at infiltrating and compromising systems.

    We expect people to use AI for malicious purposes intentionally, but unintentional AI hacking arises when an AI autonomously discovers a solution or workaround that its creators did not intend. This type of hack can remain undetected for extended periods, amplifying the potential damage caused. 

    So, how do we stop it?

    Ironically, or perhaps, exactly as you would expect it, AI itself holds the key to defending against future attacks. Just as hacking can drive progress by exposing vulnerabilities and prompting improvements, AI hackers could potentially identify and rectify weaknesses in software, regulations, and other systems. By proactively searching for vulnerabilities, they can contribute to making these systems more hack-resistant. This is the paradox of AI hacking. 

    It’s the same concept as I mentioned in the article on potentially halting the creation of generative AI.  

    Unfortunately, when you invent the car, you also invent the potential for car crashes … when you ‘invent’ nuclear energy, you create the potential for atomic bombs. That’s not a reason to stop innovation – it’s a call to action for innovators to respond faster and counteract the bad actors. 

    We can’t stop bad actors from existing – but we can get better at preventing harm due to them. This is a helpful framework for innovation. If you want to stop the bad actors from misusing a technology, the good actors "simply" have to get better at using the technology faster. 

    The best way to stop negative motion is with positive motion. But, we can also make moves in the background to counteract bad actors and bad actions.

    For example: 

    1. Regulation and Transparency: Regulatory frameworks can be established for AI technologies that demand transparency regarding how they function and how they’re secured.
    2. Ethical Guidelines: Implementing ethical guidelines for AI development can help prevent misuse.
    3. Cybersecurity Measures: Enhancing cybersecurity protocols and utilizing state-of-the-art encryption methods could make AI systems more resilient against hacking attempts.
    4. Education: Increasing public understanding of AI technologies would spread awareness of their benefits alongside potential risks.

    While these measures won’t eliminate the potential risk of AI hacking, they could significantly mitigate it and provide reassurances about employing such technologies.

  • Understanding Economic Freedom

    We often think about the U.S. as the "land of the free." That is good marketing … but is it true?  In large part, it depends on the contexts and frameworks you choose to evaluate what constitutes freedom. 

    For example, Strategic Coach breaks "entrepreneurial freedom" into four categories: time, money, relationships, and purpose.

    Meanwhile, if you look at the First Amendment of the U.S. Constitution, you've got freedom of speech, press, assembly, and the right to petition the government … and we've since instituted a litany of other freedoms and liberties. 

    In this post, we will examine the concept of economic freedom.  Economic freedom represents more than just freedom to make money, it pertains to the decisions and liberties one has in that pursuit. 

    The Heritage Foundation releases a yearly Economic Freedom Index. 

     

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    According to VisualCapitalist, the ranking uses four broad categories, each with three key indicators to measure economic freedom.

    1. Rule of law: property rights, judicial effectiveness, government integrity
    2. Size of government: tax burdens, fiscal health, government spending
    3. Regulatory efficiency: labor freedom, monetary freedom, business freedom
    4. Open markets: financial freedom, trade freedom, investment freedom

    The 12 indicators are weighted equally and scored from 0-100.  The overall score is the average score among those indicators. 

    Based on these metrics, the U.S. doesn't even enter the top 10. 

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    Surprisingly, the U.S. ranks 25th overall – and only 3rd in the Americas. 

    Now, freedom means a lot of different things, and economic freedom is only one of many modalities … but it's an important factor. 

    If you were in control, what change would you make to increase the United States' economic freedom?  If you're not from the U.S., where does your country rank, and why?