In this special edition, we are going to review what the Singularity Index is and why we care about it.
To start with, you should not use this tool and we are not responsible if you do. By listening or reviewing the transcript, you agree that it’s your fault…
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”.
More than just an intellectual curiosity, the S.I. is a useful tool for those interested in helping the companies that are moving us towards Singularity.
Let’s start by defining a common set of taxonomy we can use to talk intelligently about it. Here is our starting point:
Index: (in terms of a “market” index, for example, the NASDAQ, or NYSE): is a statistical measure of change in an economy of a given 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 or fiat amount such as the US Dollar for the NASDAQ.
The term Singularity normally is 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.” 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.
Next let us ask the question:
Why do we need a Singularity Index?
The S.I. is about measuring relative motion which helps in setting corporate strategy and market position, as well as to track innovation towards Singularity.
With that in mind, there are NO GUARANTEES!
It is a tool we share with others that you might find useful; but if you go and invest 50 million in some market element and it crashes, that is on you.
We are not stock brokers or market experts; but technologists using Machine Intelligence to better do our jobs. Any use you find for this information is at your own risk.
So to be clear the purposes for us 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 S.I. (Singularity Index) where we (not you) might invest in that segment of the S.I. 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.
So 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 these details which you can find online.
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 touch on 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 we felt that, for now, we will gloss over those elements in favor of the SI overview.
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; where these are all factors. Additionally, a company like D-Wave, 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 Google, such as Microsoft, 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 theoretically show on the SI before it would spike , for instance, an index like the NASDAQ.
Besides this, the main uses for us then is 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.
With that, feel free to send us questions but we reserve the right to ignore the ones we don’t think are important and a special thanks to our sponsors.
Looking forward to seeing you on the next episode of ‘The Technocracy’.
1. http://www.investopedia.com/terms/i/index.asp (i) investopedia; “Definition of ‘index'” 10/1/2014
2. http://en.wikipedia.org/wiki/Technological_singularity Wikipedia – the free encyclopedia; “Technological Singularity” 10/1/2014
3. http://www.nasdaq.com/ NASDAQ QMX; “NASDAQ” 10/1/2014
4. http://en.wikipedia.org/wiki/NASDAQ Wikipedia – the free encyclopedia; “NASDAQ”
5. microsoft.com and www.nasdaq.com/symbol/msft off the NASDAQ 10/2/2014 Microsoft Corporation
6. google.com and www.nasdaq.com/symbol/googl off the NASDAQ on 10/2/2014; Google Corporation
7. 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
8. NYSE (New York Stock Exchange) https://www.nyse.com/index (10/2/14)
9. David J Kelley, CTO, MS MVP – linked in professional resume: https://www.linkedin.com/in/davidjameskelley 10/2/2014