Ten interesting things we read this week

Published: Oct 19, 2017

g_100415_reading_280x210.jpgImage: Shutterstock (For Illustrative Purposes Only)

At Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, including investment analysis, psychology, science, technology, philosophy, etc. We have been sharing our favourite reads with clients under our weekly ‘Ten Interesting Things’ product. Some of the most interesting topics covered in this week’s iteration are related to ‘CEO’s role in workplace dysfunction’, ‘passive momentum tilt in active investing’ and ‘quest to finally figure out the brain’.

Here are the ten most interesting pieces that we read this week, ended October 18, 2017:

1) First evidence that online dating is changing the nature of society [Source: MIT]
Online dating is a relatively recent phenomenon. Match.com went live in 1995. A new wave of dating websites, such as OKCupid, emerged in the early 2000s. And in 2012, the arrival of Tinder changed dating even further. Today, more than one-third of marriages start online. Clearly, these sites have had a huge impact on dating behaviour. But now the first evidence is emerging that their effect is much more profound. For more than 50 years, researchers have studied the nature of the networks that link people to each other. These social networks turn out to have a peculiar property. One obvious type of network links each node with its nearest neighbours, in a pattern like a chess board or chicken wire. Another obvious kind of network links nodes at random. But real social networks are not like either of these. Instead, people are strongly connected to a relatively small group of neighbours and loosely connected to much more distant people.

These loose connections turn out to be extremely important. Loose ties have traditionally played a key role in meeting partners. While most people were unlikely to date one of their best friends, they were highly likely to date people who were linked with their group of friends; a friend of a friend, for example. In the language of network theory, dating partners were embedded in each other’s networks. Indeed, this has long been reflected in surveys of the way people meet their partners: through mutual friends, in bars, at work, in educational institutions, at church, through their families, and so on. Online dating has changed that. Today, online dating is the second-most common way for heterosexual couples to meet. For homosexual couples, it is far and away the most popular.

That has significant implications. People who meet online tend to be complete strangers. And when people meet in this way, it sets up social links that were previously non-existent. The question that researchers investigated is how this changes the racial diversity of society. They start by simulating what happens when extra links are introduced into a social network. Their network consists of men and women from different races who are randomly distributed. In this model, everyone wants to marry a person of the opposite sex but can only marry someone with whom a connection exists. This leads to a society with a relatively low level of interracial marriage. But if the researchers add random links between people from different ethnic groups, the level of interracial marriage changes dramatically. The model predicts nearly complete racial integration upon the emergence of online dating, even if the number of partners that individuals meet from newly formed ties is small. It also predicts that marriages created in a society with online dating tend to be stronger.

The researchers compare the results of their models to the observed rates of interracial marriage in the U.S. The rate of increase changed at about the time that online dating become popular especially steepening the 2000s, when online dating became even more popular. Then, in 2014, the proportion of interracial marriages jumped again shortly after the introduction of Tinder, the dating app. Meanwhile, research into the strength of marriage has found some evidence that married couples who meet online have lower rates of marital break-up than those who meet traditionally. Of course, there are other factors that could contribute to the increase in interracial marriage. One is that the trend is the result of a reduction in the percentage of Americans who are white. If marriages were random, this should increase the number of interracial marriages, but not by the observed amount. That leaves online dating as the main driver of this change. And if that’s the case, the model implies that this change is ongoing.

2) Memo to the CEO: Are you the source of workplace dysfunction? [Source: McKinsey]
As per Robert Sutton, professor of management science and engineering at the Stanford School of Engineering, the reasons for the persistence and spread of bad behaviour in workplace are legion: a global economy, with its demands for rapid decisions and around-the-clock interactions, overburdened leaders, employees, suppliers, and customers. In this world, where email, texting, and social media replace face-to-face conversation and the compassion triggered by eye contact, too many people feel unfettered by empathy, guilt, and old-fashioned civility. Meanwhile, some rising executives believe that treating people badly is a path to personal success—a conclusion bolstered by journalists and a few academics, who celebrate demeaning and disrespectful leaders. However, bullying bosses impose costs on people and organisations that are manifold—and often hidden. Research shows that encounters with rude, insulting, and demeaning people undermine others’ performance, including their decision-making skills, productivity, creativity, and willingness to work harder and help coworkers.

The risks of turning insensitive and unkind to others increase as you become more senior. Much research shows that being and feeling powerful provokes people to focus more on their own needs and wants, and to become oblivious to others’ needs and feelings. Being a respectful, civilised leader is a personal philosophy that can shape how you view life, the actions you take, and how you judge yourself—and provide a framework for leading your team and organisation. If you want to be part of the solution rather than part of the problem, it helps to keep a few lessons in mind about how to live this philosophy despite the hubbub and hassles of executive life and in light of our all-too-human flaws and biases. We human beings have a penchant for denial and delusion. We’re often clueless about our flaws, and when we do admit shortcomings, we underestimate their severity and negative impact. Nobel Prize winner Daniel Kahneman believes the curse of overconfidence is the most destructive of human biases. The bigger the gap between how we see ourselves and how others see us, the worse our relationships tend to get, so there is a big payoff for coming to grips with how others perceive us. To get there, however, you need people who know you and who won’t sugarcoat the truth, and to seek and accept candid feedback from them.

He shares five tips for CEOs and other top executives who strive to treat others with dignity and respect: 1) Beware of contagion: If you are around a-holes, you are likely to catch the disease because bad behaviour is so contagious. Research shows that subjects who encountered even one rude partner in simulated negotiations were prone to become carriers and to be rude during their next negotiation, even with a different partner; 2) Watch how you use your influence: Wielding power over others increases the risk you’ll start treating others like dirt. Regardless of how kindly, cooperatively, and empathetically you’ve acted in the past, power can cause you to have less empathy, to exploit others more, to focus on your own needs, to be rude and disrespectful, and to act like the rules don’t apply to you; 3) Understand the risks of overload and technology addiction: Being in a rush, having too much to do, and having too many distractions can turn even the most civilised person into a j**k—a CEO’s workload makes him or her especially susceptible to this malady. According to research, half of those who say they have engaged in uncivilised behaviour at work also say they are overloaded and have no time to be nice; 4) When you behave like a jerk, apologise: A well-crafted apology can help reduce your target’s pain, repair your relationships, improve your reputation, and provoke soul-searching that enables you to learn from your transgressions; 5) Do a little time travel: This mind trick entails deciding what to do today based on how you want to feel about yourself when you look back from the future.

As a case in point, he shares his conversation with Pixar’s founder and president, Ed Catmull, about how a bully can change for the better. It’s often thought that Steve Jobs succeeded, in part, because he was overbearing, temperamental, and insensitive. Catmull worked closely with Steve Jobs for 25 years. He agreed that Jobs had a well-earned reputation “for poor behaviour early in his career.” Catmull emphasised, however, that many writers, biographers, and filmmakers miss a crucial part of the story: that Jobs changed for the better after he was “kicked out” of Apple and suffered a slew of setbacks at his high-end computer company, NeXT, and at Pixar in the early years. He said “Jobs wandered in the wilderness for a decade. In the course of working through and understanding these failures, and then succeeding at Pixar, Jobs changed. He became more empathetic, a better listener, a better leader, a better partner.” Catmull says that the more thoughtful and caring Steve Jobs was the one who created the incredibly successful Apple. Jobs’s greatest successes came only after he abandoned the notorious mistreatment of others that plagued his early years.

3) Harvey Weinstein is Hollywood’s monster [Source: Financial Times]
The recent case of Harvey Weinstein highlights the apathy of board members of The Weinstein Company towards allegations of sexual harassment against him. It may have come as a surprise to them that Mr. Weinstein had reached private settlements with women who chronicled his alleged harassment in hotel suites over three decades. But it cannot have been news that a man who propped a baseball bat in his office as his personal style signifier was prone to volcanic fits of temper and used intimidation as a management technique. This is Hollywood, where the “casting couch”- the sordid tradition of film executives abusing their power to make female performers have sex with them, reaches back to studio bosses in the 1940s, such as Darryl F Zanuck. “I’ve slept with producers, I’d be a liar if I said I didn’t,” Marilyn Monroe once said. “If you didn’t go along, there were 25 girls who would.” The sexual side of Hollywood exploitation occurs behind closed doors. But display of male dominance are treated not as a regrettable side-effect of creativity but as a routine part of how business gets done.

The difference with Mr. Weinstein is that he took the opportunity for abuse to horrifying extremes. The author, FT columnist John Gapper, recollects how Mr. Weinstein wanted to meet him to apparently discuss fresh material in the business world for a movie. However, at his suite it soon became clear that the director had no idea who John was, or what he was doing there. Thinking of John as another journalist, he lay on a sofa and talked while recumbent. According to John, it was an amusing experience in the end. But it was an example of how the film business works: the agents and enablers who initially spread word of interest; the distant summons to a hotel room; a kinglike director who assumes that the world is one big casting call. Mr. Weinstein’s rise illustrates the point made by Jeffrey Pfeffer, a Stanford professor, in an article titled “Why the assholes are winning”. As Prof Pfeffer wrote, leaders who create “toxic and hellish work environments” are often admired nonetheless: “It seemingly doesn’t matter what an individual or a company does. . . as long as they are sufficiently rich and successful.”

This does not just describe Hollywood: the powerful and capricious chief executive with broad freedom to act as he or she chooses is a feature of much of the media industry. There is good reason: one US study found that companies gain from having strong leaders when they are in unstable industries in which decisions must be made rapidly and there is a threat of new entrants. A CEO can draw more authority from also being a founder, and from the “soft power” of having close ties to other board members. In Mr. Weinstein’s case, his brother and co-founder Bob Weinstein sits on the board that finally dismissed him this week.

But power has a dark side if it is unrestrained. In “Down and Dirty Pictures”, his book about Miramax, Peter Biskind described the Weinstein brothers’ reputation “for brilliance but also for malice and brutality”. Another study of the traits of dominant people noted that greater power triggers “disinhibited behaviour”. In other words, leaders who are allowed to do whatever they want can end up behaving very badly. The powerful “more frequently act on their desires in a socially inappropriate way”, the authors concluded. Over-eating, over-aggression and predatory sexual behaviour were among syndromes they described for “high status, powerful individuals” whose moods swing from irritability into mania.

4) Active Fund Managers Face A Major Dilemma: Momentum [Source: Valuewalk]
Active equity fund managers are staging a comeback. After years of underperformance, during which active managers lost tens of billions of dollars in assets to passive funds, during the first half of this year, over half of all US equity mutual funds outperformed their benchmarks. Equity hedge funds are also doing well, gaining an average of 8.6% this year to the end of September. This is the strongest performance in four years from the equity hedge fund group. Falling equity correlations have been blamed for this strong showing from active equity managers. As the Federal Reserve has embarked on its mission to try and normalize monetary policy, equity correlations have fallen, helping active stock pickers.

Equity correlations have slumped across the board this year. The realised correlation of the US equity benchmark’s constituents is about 18%, down from roughly 60% just a year ago and one of the lowest readings since 2001. The “Great Correlation Collapse” is helping active equity fund managers profit from individual equity themes such as rate rises, which would have been difficult to plan this time last year. Experts say that the rate sensitive equities, such as Financials, Utilities, and Telcos have seen correlations to interest rates rise substantially in recent months. For example, the correlation between the 10 year bond yields and US Financials has risen from around -0.55 over the past two years to -0.75 in the last three months.

Alongside falling correlations, the equity dispersion - the gap between the strongest performers versus the weakest - has gradually dropped and is now at a level not seen in the past 20 years. The analysis of 47 key country markets and the gap between the 10th and 90th percentiles over five-year rolling periods shows that the range of outcomes is only 13% today versus as high as 40% in 1998. The results suggest that while active equity fund managers now have the opportunity to deploy their skill and experience stock picking, the chances of picking a stock that goes on to achieve market-beating returns is slim. 2017 has been a good year for active equity fund managers with the outperformance likely being driven by high exposure to momentum. Funds this year have “passively gained” large momentum tilts because, given low turnover, the overweight stocks in the fund become high-momentum stocks that are continuously held for an extended period of time. By the end of 2016, the asset-weighted turnover ratio of large-cap funds was below 40% and the simple average turnover ratio was around 60%- the lowest levels recorded since 2001.

So far, the momentum tilt has helped active equity fund managers outperform as they've been able to stick with the market's biggest winners, Amazon, Facebook, Apple and Netflix. However, the dilemma is that this success can breed its own "risk of underperformance due to momentum exposure." Once momentum collapses, funds severely underperform, as happened in March - April 2014. It’s a hardly enviable position to be in. Fund managers today are motivated to cut expenses and minimise turnover. But low turnover leads to the risk of an unintended—“passively gained”— momentum tilt developing in the portfolio, which, given infrequent rebalancing, sets the stage for funds to underperform.

5) New gene variants reveal the evolution of human skin colour [Source: Science Magazine]
Most people associate Africans with dark skin. But different groups of people in Africa have almost every skin colour on the planet, from deepest black in the Dinka of South Sudan to beige in the San of South Africa. Now, researchers have discovered a handful of new gene variants responsible for this palette of tones. The study, published online this week in Science, traces the evolution of these genes and how they travelled around the world. While the dark skin of some Pacific Islanders can be traced to Africa, gene variants from Eurasia also seem to have made their way back to Africa. And surprisingly, some of the mutations responsible for lighter skin in Europeans turn out to have an ancient African origin.

Researchers agree that our early australopithecine ancestors in Africa probably had light skin beneath hairy pelts. “If you shave a chimpanzee, its skin is light,” says evolutionary geneticist Sarah Tishkoff of the University of Pennsylvania, the lead author of the new study. “If you have body hair, you don’t need dark skin to protect you from ultraviolet [UV] radiation.” Until recently, researchers assumed that after human ancestors shed most body hair, sometime before 2 million years ago, they quickly evolved dark skin for protection from skin cancer and other harmful effects of UV radiation. Then, when humans migrated out of Africa and headed to the far north, they evolved lighter skin as an adaptation to limited sunlight. Previous research on skin-colour genes fit that picture. For example, a “depigmentation gene” called SLC24A5 linked to pale skin swept through European populations in the past 6000 years. But Tishkoff’s team found that the story of skin colour evolution isn’t so black and white. Her team found the darkest skin in the Nilo-Saharan pastoralist populations of eastern Africa, such as the Mursi and Surma, and the lightest skin in the San of southern Africa, as well as many shades in between, as in the Agaw people of Ethiopia.

Results of gene sequencing of African blood samples showed four key areas of the genome where specific points correlate with skin colour. The first surprise was that SLC24A5, which swept Europe, is also common in East Africa—found in as many as half the members of some Ethiopian groups. This variant arose 30,000 years ago and was probably brought to eastern Africa by people migrating from the Middle East, Tishkoff says. But, though many East Africans have this gene, they don’t have white skin, probably because it is just one of several genes that shape their skin colour. The team also found variants of two neighbouring genes, HERC2 and OCA2, which are associated with light skin, eyes, and hair in Europeans but arose in Africa; these variants are ancient and common in the light-skinned San people. The team proposes that the variants arose in Africa as early as 1 million years ago and spread later to Europeans and Asians. “Many of the gene variants that cause light skin in Europe have origins in Africa,” Tishkoff says.

The most dramatic discovery concerned a gene known as MFSD12. Two mutations that decrease expression of this gene were found in high frequencies in people with the darkest skin. These variants arose about a half-million years ago, suggesting that human ancestors before that time may have had moderately dark skin, rather than the deep black hue created today by these mutations. These same two variants are found in Melanesians, Australian Aborigines, and some Indians. These people may have inherited the variants from ancient migrants from Africa who followed a “southern route” out of East Africa, along the southern coast of India to Melanesia and Australia, Tishkoff says. That idea, however, counters three genetic studies that concluded last year that Australians, Melanesians, and Eurasians all descend from a single migration out of Africa. Alternatively, this great migration may have included people carrying variants for both light and dark skin, but the dark variants later were lost in Eurasians.

6) Your biggest cyber threat? It’s not who you think it is [Image: Financial Times]
At a recent online poker tournament which was under cyber-attack, the attacker had made contact on the site’s live chat section, where someone had asked: “Why don’t you just go get a job?” “I have a job,” the attacker replied. “Another site pays me to attack you.” It would be one thing if this were a one-off incident that only affected poker sites and others you might not admit to visiting in a job interview, but it is not, say those at the front line of the cyber security industry, and the companies affected. The attacker in this case used the ploy known as a “distributed denial of service”, or DDoS attack, where websites are bombarded by a crippling barrage of fake traffic. The ability to go out and disrupt your competition can be done for less than the price of a cup of coffee. There is nothing new about DDoS attacks. They have been blamed for derailing the sites of everything from global banking groups to government ministries for years. Culprits are typically described as cyber criminals out for political gain or a chunky ransom in return for ending the attack. But businesses now have another suspect: each other. Company victims of a DDoS attack think a competitor was more likely to have been the perpetrator than a standard cyber criminal, a survey of more than 4,000 company representatives in 25 countries revealed this year. One reason: launching a DDoS attack has never been so easy or cheap.

Gaming sites were not the only victims. A screen shot, taken about 12 months ago, of a chat forum shows a ransomware attacker claimed to have been hired by an unnamed Fortune 500 company “to cyber disrupt day-to-day business of their competition”. Another speaker, John Graham-Cumming, said rival florists had DDoS-ed each other on Valentine’s Day. Mr. Graham-Cumming, chief technology officer at the Cloudflare web security group, said this showed how vulnerable companies can be, especially if they do a lot of business at certain times of the year. Cloudflare says a new DDoS attack is launched every three minutes against one of its 6mn customers. It is tempting to think that cyber security companies would say this. Yet they are not the only ones insisting businesses need to take cyber attacks more seriously. The level of under-reporting is “alarming”, says Paul Hoare, a senior manager at the UK’s national cyber crime unit. Authorities received just 178 reports of a DDoS attack in the three months between May and June this year. Mr. Hoare says that looks like “snowflakes on the tip of the iceberg” considering the scale of the problem, and makes it much harder to catch or deter perpetrators. The reluctance of companies to admit vulnerability is understandable. But if companies continue to be guarded about the extent of this problem, they should not be surprised if it continues to grow.

7) The dangers of “mandatory fun” [Source: HBR]
The author of this piece, Adam Waytz, recollects how a few years ago upper management at his workplace decided that employees did not connect enough socially. Recognising that loneliness and a lack of connection are serious workplace issues, they arranged a weekly gourmet lunch, creating a comfortable, relaxed venue where people had time to bond. It was a simple and, on its face, noble idea. But within three weeks Adam stopped going to the lunches and the idea too collapsed soon. His decision had nothing to do with his colleagues. He stopped going because the conversation always turned to work. The personal downtime that he’d previously spent doing his own things got absorbed into his workday. While the leaders in his organisation had correctly identified the problem, they missed the mark on a solution. They are not alone; companies routinely hold mandatory social activities that are awkward at best and alienating at worst. As the typical work-life balance shifts ever more toward the office, companies need to consider a new approach that encourages connections outside the office to help employees recharge, re-energise, and re-engage.

The ability of such events to establish genuine social ties often fails because of several basic psychological tendencies. 1) Common ground: At those workplace lunches, Adam and his colleagues succumbed to one of the tendencies- what psychologists call the common information effect. This is the inclination of people with different expertise, interests, and experiences to immediately gravitate to topics they have in common, which is work in most cases. For forming new bonds, this trait is hardly useful; 2) Birds of a feather: Homophily, a related phenomenon, is the tendency of people to seek out others like themselves. While it helps break ice, several studies show that homophily has a downside, preventing us from reaching out to people who aren’t like us, especially when it comes to race. Research shows that participating in work-related social events generates social connections among coworkers only if they are of the same race; 3) Muddling relationship types: In 1979, the psychologists Margaret Clark and Judson Mills identified two types of human relationships: communal and exchange. In communal relationships we provide to others on the basis of their needs, as with friends and family. In exchange relationships, a person gives in anticipation of receiving something in return- like at work. Mixing communal behaviours with exchange relationships like at work-driven social gatherings can be discomfiting. When one person in an exchange relationship adopts communal behaviours, by disclosing vulnerabilities, asking for emotional support, or, worse, making romantic overtures, the other person may want to run for the exit.

Despite the abysmal track record of many if not most attempts to engineer social connections at work, companies continue to promote all manner of activities and events. This causes a broader problem: the creeping intrusion of the workplace into every facet of our lives. Many organisations today expect employees to be constantly available for work and to prioritise work over other important aspects of life, including parenting. In such cultures, employers increasingly blur the line between work and social lives. Stroll through the headquarters of any well-funded tech company, and you’ll see “perks” ranging from well-stocked kitchens to gyms, meditation spaces, physical therapists, and play spaces (foosball, Ping-Pong, and similar activities), all designed to encourage employees to bring elements of their outside life into the organisation. The goal may be to reduce loneliness by building social connections among employees, but it’s possible that by keeping us away from genuine communal relationships, this encroachment of work into our personal lives is driving much of our isolation.

In Andy Merrifield’s The Amateur, he talks about the corporatisation of social life. He relates how leisure activities, including gardening, working on one’s car, and sculpting have become increasingly professionalised. Merrifield describes this trend as a societal pressure to turn things we enjoy doing into lines on our CVs. When hobbies become jobs, he writes, “The job, in simple terms, transforms a labour of love into a loathing of labour.” The same is true of our social lives: Even for people who are naturally extroverted, being forced to be friendly in a work context may sap the intrinsic joy of affiliating with others. Merrifield, like Livingston and Anderson, is an academic in the humanities. Unlike humanities where this knowledge is more commonplace, business world is abuzz with phrases like “engagement” and “disruption.” Countless companies and organisational scholars preach the importance of motivating employees and making them feel more connected and less lonely. But as the epidemic of loneliness in and out of the workplace has spread, Adam has decided to try something different: disengagement. Let people go home, let them spend time with their families, let them head to the bar and check out Tinder, let them play in a band and record an album. Rather than mandating “fun,” give them a day off, and watch their social lives flourish and their loneliness fade away.

8) Nobel Prize – Thaler’s win is a triumph for common sense [Source: timharford.com]
Tim Harford, the British economist, talks about the implications of Richard Thaler, a behavioural economist winning the Nobel memorial prize in economics. One trivial behavioural insight that Mr. Thaler is fond of mentioning concerns a large bowl of cashew nuts he once served to dinner guests over drinks. Observing his guests hoovering up the contents of the bowl, he removed it to the kitchen so as not to spoil everyone’s appetite. The guests could in principle have stopped of their own accord; nevertheless they were pleased to see temptation removed. Early in his career, he started making a list of “Dumb Stuff People Do” on the blackboard in his office. The cashew nut example was on the list, and it is a classic piece of Thaler thinking: obvious, trivial, fun and yet completely beyond the scope of traditional economics to model. Mr. Thaler’s insight is that such trivia might lead to important analytical and policy insights.

Mr. Thaler advanced the field of behavioural economics in two important ways. He campaigned for behavioural economics to be taken seriously within the economics profession. He also brought it into the policy environment with his book Nudge (co-authored with Cass Sunstein) and his support for behavioural policy units in the White House and 10 Downing Street. Within the profession, Mr. Thaler found a pulpit in the Journal of Economic Perspectives, an academic journal supplied to all members of the American Economic Association. His Anomalies column was witty and sharply reasoned, highlighting strange features of the economic and financial world that standard economic theory could not explain, and rigorously debunking unconvincing attempts at rationalisation. His evangelism for behavioural economics has been successful, at least in microeconomics: it is commonplace to see economic models incorporate psychological realism, and Mr. Thaler himself was president of the American Economic Association in 2015.

In the policy world, Mr. Thaler’s most famous idea was to use behavioural insights in pensions policy — for example, by enrolling people in a pension scheme by default, while giving them the choice to opt out. Default enrolment has, according to the UK pensions regulator, increased participation in private-sector pension schemes from 42% to 73% between 2012 and 2016. Rational economic man does not care or even notice whether a pension is opt-in or opt-out. He simply calculates (instantly) whether it pays to participate and chooses accordingly. Mr. Thaler’s insight is not only that people are not perfectly rational (that much is obvious, even to the most traditional of economists) but that apparently small departures from rationality can have outsized impacts. His catch-all advice: whether you’re a business or a government, if you want people to do something, make it easy.

9) Inside the moonshot effort to finally figure out the brain [Source: MIT
While the AI today has gotten astonishingly good, from near-perfect facial recognition to driverless cars and world-champion Go-playing machines, there is still something clumsy and brute-force about it. David Cox, a neuroscientist at Harvard says “To build a dog detector, you need to show the program thousands of things that are dogs and thousands that aren’t dogs,” he says. “My daughter only had to see one dog”—and has happily pointed out puppies ever since. Add some artful static to an image—noise that a human wouldn’t even notice—and the computer might just mistake a dog for a dumpster.” To overcome such limitations, Cox and dozens of other neuroscientists and machine-learning experts joined forces last year for the Machine Intelligence from Cortical Networks (MICrONS) initiative: a $100 million effort to reverse-engineer the brain. MICrONS researchers are attempting to chart the function and structure of every detail in a small piece of rodent cortex. This tiny piece of cortex, a cube measuring one millimeter on a side—the size of a coarse grain of sand - is thousands of times bigger than any chunk of brain anyone has tried to detail. It will contain roughly 100,000 neurons and something like a billion synapses, the junctions that allow nerve impulses to leap from one neuron to the next.

The ultimate payoff from the project will be the neural secrets mined from the project’s data—principles that should form “the computational building blocks for the next generation of AI.” Today’s neural networks are based on a decades-old architecture and a fairly simplistic notion of how the brain works. Essentially, these systems spread knowledge across thousands of densely interconnected “nodes,” analogous to the brain’s neurons. The systems improve their performance by adjusting the strength of the connections. But in most computer neural networks the signals always cascade forward, from one set of nodes to the next. The real brain is full of feedback: for every bundle of nerve fibers conveying signals from one region to the next, there is an equal or greater number of fibers coming back the other way. But why? Are those feedback fibers the secret to one-shot learning and so many other aspects of the brain’s immense power? Is something else going on? MICrONS should provide at least some of the answers. The project aims to reconstruct all the cells in a cubic millimeter of a rat’s brain, plus a wiring diagram—a “connectome”—showing how every cell is connected to every other cell, and collect data showing exactly which situations make neurons fire and influence other neurons.

The first step is to look into the rats’ brains and figure out what neurons in that cubic millimeter are actually doing. When the animal is given a specific visual stimulus, such as a line oriented a certain way, which neurons suddenly start firing off impulses, and which neighbors respond? As recently as a decade ago, capturing that kind of data ranged from difficult to impossible. What broke that impasse was the development of techniques for making neurons light up when they fire in a living brain. To do it, scientists typically seed the neurons with fluorescent proteins that glow in the presence of calcium ions, which surge in abundance whenever a cell fires. By mapping a cubic millimeter as MICrONS is doing, researchers can follow most of neural connections from beginning to end and thus see a complete neural circuit.

Many of today’s AI applications don’t use feedback. Electronic signals in most neural networks cascade from one layer of nodes to the next, but generally not backward. The ones that do also don’t do it on anything like the brain’s scale. In one well-studied part of the visual cortex, says Tai Sing Lee at Carnegie Mellon, “only 5 to 10 percent of the synapses are listening to input from the eyes.” The rest are listening to feedback from higher levels in the brain. There are two broad theories about what the feedback is for, says Cox, and “one is the notion that the brain is constantly trying to predict its own inputs.” While the sensory cortex is processing a frame of the movie, so to speak, the higher levels of the brain are trying to anticipate the next frame, and passing their best guesses back down through the feedback fibers. This the only way the brain can deal with a fast-moving environment. The second major theory says that the brain’s feedback connections are there to guide learning. Indeed, computer simulations show that a struggle for improvement forces any system to build better and better models of the world. For example, Cox says, “you have to figure out how a face will appear if it turns.” And that, he says, may turn out to be a critical piece of the one-shot-learning puzzle.

If these ideas about the brain’s feedback are correct, they could show up in MICrONS’s detailed map of a brain’s form and function. The map could demonstrate what tricks the neural circuitry uses to implement prediction and learning. Eventually, new AI applications could mimic that process. However, knowing neural circuitry won’t teach us everything. There are forms of cell-to-cell communication that don’t go through the synapses, including some performed by hormones and neurotransmitters floating in the spaces between the neurons. There is also the issue of scale. As big a leap as MICrONS may be, it is still just looking at a tiny piece of cortex for clues about what’s relevant to computation. And the cortex is just the thin outer layer of the brain. Critical command-and-control functions are also carried out by deep-brain structures such as the thalamus and the basal ganglia. The good news is that MICrONS is already paving the way for future projects that map larger sections of the brain.

10) A new front in Asia’s water war [Source: Project Syndicate]
For decades, China has been dragging its neighbours into high-stake games of geopolitical poker over water-related issues. Thanks to its forcible annexation of Tibet and other non-Han Chinese ethnic homelands – territories that comprise some 60% of its landmass – China is the world’s unrivaled hydro-hegemon. It is the source of cross-border riparian flows to more countries than any other state. In recent years, China has worked hard to exploit that status to increase its leverage over its neighbours, relentlessly building upstream dams on international rivers. China is now home to more dams than the rest of the world combined, and the construction continues, leaving downstream neighbours – especially the vulnerable lower Mekong basin states, Nepal, and Kazakhstan – essentially at China’s mercy. So far, China has refused to enter into a water-sharing treaty with a single country. It does, however, share some hydrological and meteorological data – essential to enable downstream countries to foresee and plan for floods, thereby protecting lives and reducing material losses. Yet, this year, China decided to withhold such data from India, undermining the efficacy of India’s flood early-warning systems. As a result, despite below-normal monsoon rains this year in India’s northeast, through which the Brahmaputra River flows after leaving Tibet, the region faced unprecedented flooding.

China’s decision to withhold crucial data is not only cruel, but it also breaches the country’s international obligations. China is one of just three countries that voted against the 1997 United Nations Watercourse Convention, which called for the regular exchange of hydrological and other data between co-basin states. But China did enter into a five-year bilateral accord, which expires next year, requiring it to transfer to India hydrological and meteorological data daily from three Brahmaputra-monitoring stations in Tibet during the risky flood season, from May 15 to October 15. A similar agreement, reached in 2015, covers the Sutlej, another flood-prone river. Both accords arose after flash floods linked to suspected discharges from Chinese projects in Tibet repeatedly ravaged India’s Arunachal and Himachal states. Unlike some other countries, which offer hydrological data to their downstream counterparts for free, China does so only for a price. But it was a price India was willing to pay. And this year, as always, India sent the agreed amount. Yet it received no data, with the Chinese foreign ministry claiming after almost four months that upstream stations were being “upgraded” or “renovated.” That claim was spurious: China did supply data on the Brahmaputra to Bangladesh.

Three weeks earlier, the state-controlled newspaper Global Times offered a more plausible explanation for China’s failure to deliver the promised data to India: the data transfer had been intentionally halted, owing to India’s supposed infringement on Chinese territorial sovereignty in a dispute over the remote Himalayan region of Doklam. For much of the summer, that dispute took the form of a border standoff where Bhutan, Tibet, and the Indian state of Sikkim meet. But even before the dispute flared in mid-June, China was seething over India’s boycott of its May 14-15 summit promoting the much-vaunted “Belt and Road” initiative. The denial of data apparently began as an attempt to punish India for condemning China’s massive, cross-border infrastructure agenda as an opaque, neocolonial enterprise. China’s desire to punish India was then reinforced by the Doklam standoff.

For China, it seems, international agreements stop being binding when they are no longer politically convenient. This reading is reinforced by China’s violations of its 1984 pact with the United Kingdom, under which China gained sovereignty over Hong Kong in 1997. China claims that the agreement, based on the formula “one country, two systems,” had lost “practical significance” over the last 20 years. Were the roles reversed, a downstream China would have stridently accused an upstream India of exacerbating flood-related death and destruction by breaching its international obligations. But just as China has unilaterally and aggressively asserted its territorial and maritime claims in Asia, it is using the reengineering of cross-border riparian flows and denial of hydrological data to deepen its regional power. China’s cutoff of water data, despite the likely impact on vulnerable civilian communities, sets a dangerous precedent of indifference to humanitarian considerations. It also highlights how China is fashioning unconventional tools of coercive diplomacy, whose instruments already range from informally boycotting goods from a targeted country to halting strategic exports (such as of rare-earth minerals) and suspending Chinese tourist travel. Now, by seizing control over water – a resource vital to millions of lives and livelihoods – China can hold another country hostage without firing a single shot.

- Saurabh Mukherjea is CEO (Institutional Equities) and Prashant Mittal is Analyst (Strategy and Derivatives) at Ambit Capital Pvt Ltd. Views expressed are personal. 

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