Introducing the Singularity Index. The Singularity Index (also referred to as the SI) is part of a statistical approach to looking at market trends, as it relates to relative motion in the market, towards or away from ‘Singularity’.
As the CTO (Chief Technology Officer) for one of the fastest growing companies in America (according to Fortune 500 Magazine), a big part of my job is following trends and predicting industry trends up to about 5 years out9. To help me do my job, for well over the past 10 years, I’ve worked out a process that has helped predict trends such as the emergence of the high end slates; which, in part, has been through statistical analysis and this has been a great tool for me in being fairly accurate. As the technology around the components that go into making the ‘Singularity’ (as defined later on in this article) real become more and more important to business, it has become an interesting tool, if nothing else, for looking at where we are going.
Since I consider myself a diehard Transhumanist, and this particular tool is more or less focused on that interest, I thought I would go ahead and share this tool in a hope that it is not just an intellectual curiosity but a useful tool for those interested in helping the companies that are moving us towards Singularity.
What is an Index – Measuring market motion
Let’s start be defining this Market Index by defining a common set of taxonomy we can use to talk intelligently about it. So, with that, here is our starting point:
Index (in terms of a ‘market’ index for example the NASDAQ3, 4 or NYSE8): “a statistical measure of change in an economy of a securities market. In the case of financial markets, an index is an imaginary portfolio of securities representing a particular market or portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from base value”1 or dollar amount such as the NASDAQ.
Note: I’ll use the NASDAQ as an example since it’s related to technology heavily and, as a point of comparison, I normally look at the NASDAQ vs. the SI values; since the SI or (Singularity Index) is heavily tech related, as you might imagine.
Singularity: normally a reference to the less ambiguous term ‘technological singularity’ which is a “hypothesis that accelerating progress in technologies will cause a runaway effect wherein artificial intelligence will exceed human intellectual capacity and control, thus radically changing or even ending civilization; an event called the singularity.”2 and for the purposes of this article I will define it as the point in which AI is greater than human intellect.
I realize that others may define ‘Singularity’ a number of different ways but by using this definition we have a narrower scope that we felt would be easier to quantify for the probability of a specific outcome and thus more easily measured.
Why do we need a Singularity Index? – Measuring relative motion
To be perfectly honest we don’t really ‘need’ a ‘Singularity Index’; but, as someone who is setting corporate strategy on where we are going and market position, it helps me do my job better. As a Transhumanist philanthropist, it helps me know where I might add value to drive innovation towards Singularity. With that in mind, there are NO GUARANTEES! Further, it is a tool I use personally that I’m sharing hoping others might find it useful; but if you go and invest 50 million in some market element and it crashes, it’s on you. I’m not a stock broker or market expert. I am a technologist and a technology strategist and this helps me with my strategy.
To be clear the purposes for me are:
First, to identify relative motion in the market or industry towards or away from Singularity,
Second, to identify key market leaders in this very specific segment to watch; and to watch for innovation from these key corporate players,
And third, to identify key areas in terms of the SI (Singularity Index) where I might invest in that segment of the SI to help drive not just success but a balanced approach to Singularity by driving success in the weak segments; to turn them around or at least contribute towards that end.
How is it calculated?
Explaining how this is calculated should really be broken down into its constituent parts, as it can seem somewhat complex; but even if you get the basic math down there are additional formulas for generating the factors that affect the index. If you don’t like math it’s a good plan to skip the rest of this section…
So basically the computational index is as follows:
As you can see, it’s fairly straight forward. In terms of execution, we have a list of stock prices where we recursively weight them, based on a predefined set of weights, to develop a composite score or value that can be expressed in dollars where weights deal with things like market cap so that we are comparing ‘apples to apples’ metaphorically, as well as, weighting for importance. For example, in a segment where there is only one supplier for critical components that all companies developing AI have to work with then this particular stock value is going to affect the market much more then say if there are 5 sources; making the stability of that company or firm much more important.
So to walk you through the math another way, we first get a list of stock prices based on a certain logical map that determines the kinds of sectors that affect singularity. This could be anything from quantum processors or rare earth minerals to companies actually doing research in AI or building critical AI infrastructure. Then, based on a number of factors, we also get a list of composite weights for each stock price. These are then recursively multiplied (price times weight) and added together to get a sum value that is the final computed index at any given time.
So what is the secret sauce?
Ok, so you caught me, there is a secret sauce…
And that is the selection criteria matrix used to determine when a company is included in the index and how the weight is computed for any given segment. This really is a complicated process on its own and I felt that, for now, I’ll gloss over those elements in favor of the SI overview (this article) and tools for using the SI that will subsequently be released; including a cloud based API end point so anyone can get the value at any given time.
At a high level, we are basically breaking down the technology groups needed to achieve AI in terms of market segments; from companies funding research into the human mind to ones focused on Artificial intelligence or Related Technologies. For example Google is on the index, it is weighted a percentage based on market cap, size, R&D budgets, innovation consistency and segment size; these are all factors. Additionally, a company like D-Wave7, that is the only commercially viable quantum processor, is on the index and currently they are the only ones really that are competitive in that segment; as opposed to Google where there are other companies that are going directly against Google6, such as Microsoft5, which is also on the Index.
The weights are evaluated each quarter to determine the formula template for that company, for that quarter and for the overall weights applied to each given stock on the index; to compute the final index value. It is this index value over time that then is useful in addressing relative movement and looking for the relative spike that would precede a theoretical ‘Singularity’; which would show on the SI before it would spike, for instance, an index like the NASDAQ.
Besides this, the main uses for me then are trend analysis and understanding where we can help drive balance across all key segments; to help use the market system to foster motion towards singularity. Through the partnership with the Foundation (www.Pratoriate.org) and www.Transhumanity.net , we will be publishing additional resources and articles and providing a free API for getting computed SI numbers.
References:
- http://www.investopedia.com/terms/i/index.asp (i)investopedia; “Definition of ‘index’” 10/1/2014
- http://en.wikipedia.org/wiki/Technological_singularity Wikipedia – the free encyclopedia; “Technological Singularity” 10/1/2014
- http://www.nasdaq.com/ NASDAQ QMX; “NASDAQ” 10/1/2014
- http://en.wikipedia.org/wiki/NASDAQ Wikipedia – the free encyclopedia; “NASDAQ”
- microsoft.com and www.nasdaq.com/symbol/msft off the NASDAQ 10/2/2014 Microsoft Corporation
- google.com and www.nasdaq.com/symbol/googl off the NASDAQ on 10/2/2014; Google Corporation
- D-Wave Corporation (privately held) dwavesys.com and for financials see investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=763109 on 10/2/2014
- NYSE (New York Stock Exchange) https://www.nyse.com/index (10/2/14)
- David J Kelley, CTO, MS MVP – linked in professional resume: https://www.linkedin.com/in/davidjameskelley 10/2/2014
* hero image used from http://transplanted.net/?p=57
October 6, 2014 at 11:20 am
This is very interesting work. You introduce the Index in great theoretical detail, but not the actual Index. Should we wait for the forthcoming resources and API that you mention to see the thing itself?
Thanks
October 6, 2014 at 3:42 pm
Yes, so there are a number of elements, such as an historical analysis that I’m having put together in cluding the API which should all get post over the coming weeks.
October 6, 2014 at 12:34 pm
Well done David – very interesting –
I particularly appreciate your assertion that this knowledge enables transhumanists “to help use the market system to foster motion towards singularity.”
I am looking forward to future articles on this topic
October 6, 2014 at 4:37 pm
Thanks, I’m looking forward to what’s next 🙂
October 7, 2014 at 6:29 am
Nice. Clearly done by a software guy rather than a financial guy… who else would announce a product… without actually showing the product? A software guy!
Rich.
I look forward to the index. Have you entered discussions with an ETF sponsor to make it tradable?
October 7, 2014 at 6:40 am
lol, ok well that’s true, I’m a software guy albeit business operations and strategy but still at heart a software guy. I dont’ look at this as a product and I’m not trying to make money, its about statistical analysis etc. I thought I would break it down by a What it is, then historical analysis, the API and public tools etc. not actually looking to sell or make money persay. all of the stocks on the index are tradable but not in the same markets. for example some in Japan, some on the NASDAQ, NYSE or London etc. We are looking at potentially a fund based on it, but that will be next year based on the budget constraints that the Foundation has. mid fy15 to Q4 fy15 we should have resources to spin up such a fund. That’s a goal in any case.
October 7, 2014 at 6:55 am
yea the more I think about it the more I realize I don’t think of it as a product at all in the since my cfo probably does. The ‘product’ for me is really the formula listed above and the select criteria and its statistical value.
October 17, 2014 at 8:11 pm
see this related article http://transhumanity.net/introduction-to-the-companies-of-the-si-singularity-index/