In the world of stock market trading you might have heard of High Frequency Trading (HFT) or Dark Pools. Run by mega computers, these programs are buying and selling stocks by the microsecond. It’s a mysterious and shady world of programmers mixed together with traders and brokers.
But believe it or not, as much as you may despise the way HFT dominates global stock markets there is a truly bright side to the story behind this technology.
For instance, I can find the complete history of Seinfeld episodes, a video of the world record solution of a Rubik’s cube and archival images of a Thylacine faster than I can type this sentence. You may have also noticed the mysterious occurrence of having your Google search completed before you finish typing your question.
How is that possible?
There are other curious instances of the same type of thing happening. You may have noticed them yourself. For example, every website you go to, every YouTube clip you watch, and every online shop you visit usually ‘suggests’ something else you may like.
Now how on earth does the internet know what you like? And how is this linked to HFT and the history of Seinfeld episodes?
I’ll get to the answer shortly. But first you need to consider two motivating factors at play when we talk about why technology exists and why it seems to be advancing so quickly. One is information, the other is speed.
Why I Wish the Internet Was a Stock
Inherently we’re an impatient lot. Remember the old 56K Modem? (To reminisce, listen here.) At the time, it was amazing how fast we could see web pages. And that Netscape browser…wow! If I wanted to get some information, I would pop my Microsoft Encarta CD into the CD-ROM drive and encyclopedia searching I would go.
But then we got bored, because the guy down the road had broadband internet. It was like warp-speed compared to our crumby speed. Then in 1998 some crazy kids out of Stanford University came up with a search ‘engine’ and founded Google. If you wanted to know about stuff, you’d either ‘Google it’, or by 2001 ‘Wikipedia it’.
This boredom also meant we progressed in internet speeds from 2.4Kb/s to 56Kb/s, 128Kb/s, 1.9Mb/s and now to over 100Mbit/s. In percentage terms that’s a speed increase of about 4,166,700%. And it’s only going to get faster, as we demand it and the technology allows for it.
If internet speed was a stock, it would surely be one of the most successful stocks of all time.
These days if my Google search takes longer than half a second (not that it ever does), I’m shocked. When was the last time your Google search ever took more than half a second, and returned less than 1 Million results? Try it. I just Googled, ‘What Google search takes the longest to find?’ and had a 3,670,000 results in 0.27 seconds. Obviously that’s not it…and good luck trying to find out.
In fact it’s so impossible to achieve anything slower than a half a second because when you search for something, thanks to ‘Google Instant’ it predicts what you are going to search for. Now that’s speed. And a little bit of mind reading…but beneath it all is the answer to our initial question. How is that possible?
The Mysterious World of Mathematics
Algorithms help to make us more fluid as a society and enhance our ability to relate with technology and our environment. They improve our quality of life.
More than you realise, algorithms have a huge say in your digital behaviours. They also have a huge say in how our technology helps us advance.
Literally, an algorithm affects everything you do online. Google spawned from an algorithm. Facebook, Twitter, the operating system on your smartphone, your car, even catching a lift; algorithms control them all. Even the person you might spend the rest of your life with, if you successfully use an online dating site. That too is built with an algorithm at its heart.
The algorithm is the lifeblood of today’s internet and technological advancement. And it’s deeply rooted in good old mathematics. What an algorithm does is turn a question into an answer. It’s a mathematical process that figures out what you want to do and then does it for you. Like magic!
The online and digital experience wouldn’t exist without algorithms. Without algorithms, we’d still be asking the operator to put us through to our connection on the phone. And you’d be reading this article on a piece of paper.
That’s why places like Wall Street and Palo Alto are full of scientists and physicists. And it’s because they’re the only ones smart enough to create complex algorithms.
So why are algorithms so important to the world?
Because many algorithms are designed to use your information, behavioural patterns, site visits and clicks to figure out stuff. By ‘figure out stuff,’ I mean they turn your information into predications, answers and solutions to problems.
It also helps companies to sell you their goods, or have you view their advertising. But the heart of it is about making your digital experience faster, and getting you to what you want better and more efficiently.
When you watch TV, do you flick channels during the advertisements? Imagine if your viewing experience was specifically tailored to your hobbies, interests and shopping patterns? You probably wouldn’t mind something that was helpful to you in some way. Well, that’s what an algorithm does when you browse online.
Every time you’re online, your information is used and run through a mathematical formula and sent back to you. If you have a fondness for Michael Jordan YouTube clips, an algorithm has figured out the new Air Jordan’s from Nike might be of interest to you. An advertisement pops up from Nike.
Similarly, if enough people in your neighbourhood watch a trailer for the next Ironman movie a sufficient number of times, the nearest cinema will likely add more session times when it’s released.
You might ‘Web MD’ causes of a sore throat and a Chemist Warehouse Shop Online button appears from nowhere on the side of your screen.
These are just basic examples of the power of algorithms to influence, in a good way, your patterns and behaviours.
How Complexity is Essential for Advancement
With more information than ever at our fingertips we start to ask harder questions and demand our answers be more instant. For example, if you wanted to know how the political system in Australia works, you’d have to search for it. Then search another site for it and read a few different texts to get a complete solution.
With more complex algorithms, the same question will be answered immediately by combining and collating texts and information from various sources to provide you with a complete explanation. It’s complex information, provided to you instantaneously. We’re not exactly at that stage yet. But we’re not far away.
In order to reach this level of complexity algorithms need to become ‘smarter’. In order to do this they need to develop. A good way to look at it is to think of an algorithm as a living organism. As they grow, they become more complex and adapt to their surrounding environment. Otherwise they die.
For now we are the ones that design and make them, and add to them and help them grow. Some are capable of machine learning, where they correct themselves from data results, but none yet can replicate the human brain for creativity.
The complexity of this all becomes exponential. As we look for more information, we also create more information, more data. It quickly become an endless tidal wave of streaming data flowing into servers and storage systems, all networked and connected online.
As such, without algorithms to compute and dissect the masses of data it would be as if all the books in the library were jumbled together in one huge pile and you had no way to find what you were really looking for.
An algorithm becomes your teleporter, which takes you straight from your starting point, directly to your answer, measured in milliseconds.
Converging of the Digital World and the Natural World
Our thirst for information and speed results in technological advances to bring us information faster, and more in-tune with our immediate environment. The digital world and the natural world are quickly converging. And although it’s humans that invent the technologies that bring the two together, it’s the work of algorithms that bring it to reality.
The iPhone is one of the clearest examples demonstrating our need for information on the go. Add the likes of Facebook and Twitter and you have a whole shift in social interaction. All run by algorithms.
Have you ever seen a group of kids, with smartphones in hand communicating with each other in silence? They don’t speak to each other, they ‘facetime’, ‘tweet’ and ‘poke’ each other. But this is just the beginning.
Devices now coming to market like Google Glass wouldn’t have got off the shelf if it didn’t mean we were able to get information faster and immerse it in our immediate environments.
These and other devices to hit the market this year such as the purported iWatch and Samsung Watch take our relationship with our immediate environment and our digital world to a whole new level.
We are now getting a more complete experience, and there is a blurring between the lines of what is physical and what is digital.
And there’s nothing wrong with that. It’s a form of evolution. The digital environment is incorporating itself into our daily life. Slowly it’s becoming a part of everything we do. Instead of being something that you go to, computing is becoming a part of you.
Wearable computing is the catch phrase at the moment and it’s certainly where we’re heading in the next 12 months. This will develop over the next few years to become more complex, faster, and more instantaneous. You’ll soon see second and third generation Google Glasses and iWatches.
And what from there…? Well to be honest. I don’t know for certain. But I’ve got a fair idea about how technology develops, advances and how trends work.
Algorithms will churn away online and in your devices, wearable and carried, acting as a kind of translator or interpreter between you and the vast world of digital information. Innovators will continue to develop faster, better, smaller technologies. We will become tech-alive as our digital and physical worlds combine.
Before you know it you’ll find yourself a part of what I like to call the Integrated Technology Revolution. That is not technology you wear but technology integrated with you.
I like to think of it as Life Tech, technology that is not just something you use, but something that is an essential part of your life, a part of your physical form.
Now before you get all, ‘Whoa that’s like cyborgs and terminator stuff!’ It’s not.
Integrated Technology is technology being in symbiotic harmony with humans. Integrated Technology is about advancing and enhancing technology to assist us in being faster, more knowledgeable and having information instantaneously available.
There are already some primitive examples of this, although you wouldn’t think of them that way. Think of eyeglasses (the technology of grinding lenses to improve vision) or hearing aids (Cochlear implants) or pacemakers. All of these are medical technologies that are integrated with your existing biological abilities to improve your quality of life.
The only difference between now and the future is that the integration is going to happen at a smaller but incredibly powerful level. And instead of enhancing senses like sight or hearing, or regulating your heartbeat, this integration will vastly improve the ability of your brain to directly store and process raw information.
Remember, some of the most powerful algorithms lie inside your brain. It’s just that we don’t notice the immense computations that occur to make us breathe, sense, feel and create.
The future will be a world of co-operative technologies used to advance us forward. This is why the future is so exciting. If we’re on the verge of immense breakthroughs in technology — applied to fields like DNA, medicine, energy, and transportation — there is no telling what new products will come from it. But we can be sure that when they come, they will change the world and make investors in the emerging technologies incredibly wealthy.
for The Daily Reckoning Australia
Ed Note: Sam Volkering is assistant editor and analyst for a new breakthrough technology investment service to be launched by Money Morning editor Kris Sayce. The breakthrough technology service will introduce cutting edge investment ideas from the technologies of the future, including medicine, science, energy, mining, and more.