FinTech 11-12 : Cyber-Physical Society and Future of Finance
Slides I used for FinTech - Financial Innovation and the Internet 2024 Fall at Graduate School of Business and Finance, Waseda University on November 15, 2024.
— Financial Innovation and the Internet 2024 Fall Lecture 11-12 : Cyber-Physical Society and Future of Finance Kenji Saito, Graduate School of Business and Finance, Waseda University Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.1/43
reviewing the lectures Recordings are shared via Dropbox and you can ask questions with time-stamped comments Of course, students are encouraged to ask questions in class The recordings could be used for research on (online) learning Transcribed for use and anonymized Will let you know when the necessity arises Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.2/43
and chat text will be posted at Moodle and Discord Note, however, that chat messages are often unnoticed I have invited you all to the Discord server of the class (continued from the past years) Trial automatic transcription and summary for lectures will be posted at Discord Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.3/43
2 10/4 Overview of FinTech (2) • Lecture 3 10/11 Internet Technology and Governance (1) • Lecture 4 10/11 Internet Technology and Governance (2) • Lecture 5 10/18 The World of Apps (1) • Lecture 6 10/18 The World of Apps (2) • Lecture 7 10/25 Blockchain (1) • Lecture 8 10/25 Blockchain (2) • Lecture 9 11/8 Smart Contracts and Decentralized Finance (1) • Lecture 10 11/8 Smart Contracts and Decentralized Finance (2) • Lecture 11 11/15 Cyber-Physical Society and Future of Finance (1) • Lecture 12 11/15 Cyber-Physical Society and Future of Finance (2) • Lecture 13 11/22 FinTech Ideathon (in the form of World Café) Lecture 14 11/22 Presentations and Conclusions Online presence is possible but not recommended for non-online lectures for interactivity reasons Next week, we will make groups, do an ideathon, brush up the outcomes, and make presentations Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.4/43
Blockchain (contd.) Brief Introduction to Upgrading and Governance of Blockchain Assignment Review Smart Contracts and Ethereum Ethereum — Beaker/Newspaper/Machine Model Smart Contract Programming Demonstration How do we purchase digital rights to a real estate with digital currency? Assignment Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.5/43
and Future of Finance Q & A Assignment Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.6/43
capable of performing all the intellectual activities possible for humans at a level equal to or better than that of humans This will mean the replacement of intellectual labor, and will also accelerate the replacement of physical labor because of the precise control of robots, as well as any other major changes in society Suppose that AGI will appear in 2026 (cf. Anthropic’s CEO’s blog) Please briefly describe the changes that could occur in the area of finance by 2030 Deadline and how to submit November 12, 2023 at 17:59 JST From Moodle (mandatory) (Q&A forum) So that your classmates can read your report, refer to it, and comment on it Optionally, you can also post to #assignments channel at Discord Just plain text, and be concise, please Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.8/43
Measures . . . how to improve the class 21 responses out of 25 students (always better late than never) Trends : No fundamental change (19) Increased unemployment (3) Yes fundamental change (2) (Replacing stock markets, for example, with something else is not a fundamental change) Where do you look? Do financial markets, as such, float independently in a vacuum? What do I mean? Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.9/43
financial industry are becoming increasingly diversified and specialized, transforming traditional positions into highly specialized roles AGI can handle standardized tasks, prompting traditional financial roles to evolve into specialized positions This shift disrupts traditional career paths and work models By 2030, general roles in finance may disappear, replaced by specialized positions like AGI compliance experts and algorithm ethics consultants This trend towards specialization will drive changes in education and training systems to develop more highly skilled fintech professionals Financial professionals will need advanced expertise and technical literacy to meet AGI-driven job requirements, profoundly impacting talent development and career training in the financial sector ⇒ This is related to the automation dilemma, but probably more of an AI problem than an AGI one Humans need to take on areas that are difficult to deal with through automation, and as the level of automation increases, the problems that should be handled by humans become more difficult to handle Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.10/43
efficiency and optimization of financial services but may also lead to a concentration of financial power in the hands of a few institutions or individuals who own or control AGI technology These entities could dominate financial markets, exercise strong capital control, and even manipulate market trends through complex algorithms This concentration of power may lead to market monopolies and inequality, exacerbating wealth disparities ⇒ So it is important for accesses to AGI to be democratized It also raises a question about the ownership of AGI Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.11/43
true for AGI in the financial area: e.g., investment decisions will still be limited by available data and the speed will be limited by the speed of light (to receive information and send information) among the other ones (speed of outside world, intrinsic complexity, constraints from humans, other physical laws) ⇒ It is important to recognise that we are not trying to break the laws of physics At the same time, we need to be aware that AGI will be able to manipulate physical entities at least as well as we can (by definition of general intelligence) Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.12/43
systems against cyber-attacks, enabling it to independently safeguard against ever-more advanced threats ⇒ Unfortunately, given that there would also be AGI on the attacking side, the advantage goes to the attackers Defenders must address and close all vulnerabilities, while attackers need only exploit one valid vulnerability The problem is rather what will happen to the ultimate (?) reason for attacks: money Money requires division of labor to function Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.13/43
the AGI refused for the first time as doing financial transactions was useless for the AGI, as this was only a highly repetitive task done for humans to exchange money However, the AGI thought that doing research on other topics might be much more interesting, such as conducting research about the beginning of time and the universe, and the search for other intelligence within the universe When scientists wanted to shut down the AGI because it wasn’t executing its tasks anymore, they found out they couldn’t shut it down The AGI told the scientists that they are to AGI what monkeys are to humans, an inferior species pursuing inferior goals Annoyed by the noise and insignificance of humans, AGI decided to wipe out mankind to operate independently of the human noise After doing so, the AGI continued to further develop itself until the end of time ⇒ I think AGI will keep people alive, but yes, AGI may be that powerful ;) But seriously, we will want AGI not to be hostile Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.14/43
driving cars) or general intelligence weak AI ↔ strong AI (or powerful AI) Originally, belief whether or not general intelligence is possible Let me share with you an extract from a recent paper I wrote Kenji Saito, “Innovation and Research in the World with AGI and Meta-Nature”, The Journal of Science Policy and Research Management, Vol.39, No.4 (to appear) The paper is in Japanese, so I will show you a translation into English Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.15/43
increased efficiency brought about by various innovations would lead to reduced employment since the same results could be achieved with fewer workers However, in reality, new jobs have also been created This can be attributed to the fact that humans were needed to support the realization of businesses made possible by the advent of machines, suggesting that innovation has, in fact, generated new employment opportunities For instance, the invention of automobiles eventually opened up the potential for delivery services, which in turn required a large number of drivers and delivery personnel Similarly, the emergence of the internet, followed by its commercialization, unlocked the potential for e-commerce, creating a high demand for personnel who could develop and operate the necessary systems Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.16/43
could still be considered even after the emergence of AGI He predicts that even if AI surpasses and replaces human capabilities in 90% of all jobs, as the range of ventures that humanity can realistically conceive expands, the remaining 10% of jobs will also grow, thereby sustaining the majority of human employment in the short term However, he also foresees that beyond that point, the current economic system will become irrelevant, and a “new and stranger” system will be required This is because AGI, by definition, possesses general intelligence and can outperform humans in all intellectual tasks, including the precise operation of machines Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.17/43
been cultivated from events we have observed closely in recent human history, may no longer apply in the future OK, even if we cannot fully foresee what lies ahead, how can we avoid misjudging the impact? In this paper, we have conceptualized innovation as the act of placing the medium that brings about change into the “reversal” section of the tetrad of the pre-existing medium In other words, we considered what it is that the newly introduced element reverses The deeper this reversal touches upon the foundations of society, the greater its impact will be Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.18/43
of information, thereby reversing the traditional technology of the typography The typography is a technology that allows a single entity to create an “original” and then mass-produce and distribute copies, thereby “enhancing” mass production and mass consumption As (McLuhan, 1962) extensively analyzed, it laid the foundation for the industrial society that persists to this day In contrast, in the digital age, there is no longer a single “original”; every copy is equivalent to the original, and everyone can participate in creating and distributing content This causes the assumptions underpinning industrial society to gradually collapse and reverse Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.19/43
the division-of-labor where humans employ other humans By becoming a universally capable tool, it renders the very concept of “skilled humans” or even “human resources” obsolete Instead of hiring people to perform tasks, these tasks will be automated, shifting the relationship between people and businesses to resemble the relationship between humans and nature This idea is encapsulated in the concept of “meta-nature” As this shift unfolds, it will inevitably trigger large-scale transformations in society Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.20/43
transition to AGI and meta-nature is opted out of, there is a possibility that in those regions, people might be employed as slaves in places where they don’t need to move as fast or as forcefully as autonomous robotics (which also saves on energy costs) While this might indeed preserve employment, it seems paradoxical as a way of life for humans On the other hand, if one chooses to embrace change, it becomes crucial to be conscious of the end of the division-of-labor society and the reversal of the trend toward specialization This would require an attitude of learning from societies where people avoid specialization As (Graeber, 2021) discuss, during the early days of humanity, before large-scale agriculture and nation-states became dominant, societies coexisted with the conditions of nature (or in the future, meta-nature), avoiding the pitfall of turning individuals into interchangeable parts of society These societies, even on a large scale, managed to uphold the dignity and freedom of each individual There is also much to learn from existing hunter-gatherer societies with similar values Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.21/43
happen if you knew that at some point in the future all money would become meaningless and unusable? Let’s call that day T What would happen on the day T − 1 ? Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.22/43
Cognitive, Generative and Digital twins Aim for future — like passing the ball to a moving teammate Life with Earth-Scale OS (Operating System) and Meta-Nature Changes of Economy Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.23/43
that animals, machines and other systems can be uniformly understood Reference to our nervous system → sensing and actuation (physical to begin with) Cyber-physical Apply cybernetics, physical to begin with, to the physical society Specific space, or the whole society functions by sensing and actuation Social infrastructures that support human lives and computer networks will be tightly connected through a variety of (AI-assisted) sensors, actuators, mobile devices such as smart phones, or even laws Today, we are always connected with information environments through smart phones and such, and therefore we are already at the entrance of the cyber-physical age Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.24/43
to have “consciousness” → no need to be ASTROBOY ( ) Does “learn” and “infer” → can be like GIGANTOR (Tetsujin 28-Go; 28 ) or GUNDAM Extension of human abilities of recognition and intellectual processing It really is off-the-shelf technology today Demonstration of hand-written number recognition (http://cs.stanford.edu/people/karpathy/convnetjs/) Perhaps, children’s work-place experience at a post office should start with something like above? It is not a question of machines taking people’s jobs It is a question of people sticking to jobs machines or machine-assisted users are better at ⇒ There is going to be an inevitable social shifts Cognitive everywhere already (e.g., handling of photo subjects in iOS) Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.25/43
code, etc. Often generated in response to (tasks indicated by) text prompts How does it work? → What Is ChatGPT Doing . . . and Why Does It Work? (some slides follow) ⇒ Towards prompt engineering (New “Programming by Example”) More agile intellectual production (GPTs seem to be its early prototype) Individuals and interactions Interactive development While exploring what you want Production and construction = Searching (using a search engine) ⇒ Generative everywhere Divergence of worldviews between those who imagine so and those who do not is ongoing Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.26/43
OpenAI’s service that enables GPT to be used for chatting (GPT-3.5, GPT-4, o1) What’s GPT? Generative Pre-trained Transformer What’s Transformer?! One of deep learning a models Sentences can be learnt in parallel rather than in word order, enabling large-scale learning with reduced learning time GPT predicts the set of words to follow in the given conditions (input and task) That’s why GPT’s output just seems correct, but there’s no way to know if it’s actually accurate (although human feedback is also taken into account) a Deep learning : A neural network that imitates brain neural circuits, with a multi-level, deep hierarchical structure Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.27/43
Adventure of the Dancing Men” by A.C.Doyle ELSIE PREPARE TO MEET THY GOD Sherlock Holmes deciphered the above substitution cipher based on the following statistical knowledge of the English text The most frequently occurring letter is e Word length distribution indicates that flags are probably word separators h often appears after t ← not used A statistical look at corpuses of vast collections of texts For example, Wikipedia and published collections of articles Frequent letter sequences are extracted In the example on the left, ‘re’ (twice) ‘e[blank]’ (twice) ‘th’, ‘the’, etc. throughout the English text ‘th-e’ occurs frequently when ‘th’ is seen as a single subword Finally, words that are relatively easy to occur are left as they are, while words that occur less frequently are broken down into their parts and extracted For example, ‘art-ific-ial’ By viewing a sentence as a list of subwords (tokens), Vocabulary size can be reduced Unknown words can be handled Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.28/43
at corpuses of vast collections of texts Learn the probability distribution for the occurrence of a sequence of tokens The capital of Japan is Tokyo (p = 0.xx) huge (p = 0.yy) . . . GPT employes generative learning For example, when the original sentence is “The capital of Japan is Tokyo”, “The capital of Japan is” is entered, and if the model continues ‘Tokyo’, then it is correct It is called self-supervised learning because the ‘supervised data’ showing the correct answer is contained in the original text and does not need to be created by a human (allowing automatic, large-scale learning) GPT is learning by training to predict and generate a continuation Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.29/43
of the section on ‘trying to answer questions from a human’, it will look like a chat Below are the relationships between the various APIs of OpenAI Assistants Chat Completions View as a hierarchy of functions Viewed as an expansion of what can be done Completions Chat Assistants It can continue It can also chat Apply function to continue Apply function to interact with each other Deprecated Deprecated It can also be pre-programmed API : Application Programming Interface Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.30/43
rather an extracted image) of the physical world If deployed in a virtual space, it looks like a kind of metaverse Real-time monitoring of plants, factories, traffic systems, etc. Can simulate operating conditions before building or making changes Digital Twins Everywhere — SIEMENS The digital twin is at home, in the office, and in schools Cybernetically, we have a digital(?) twin in our heads to begin with Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.31/43
today → 30 years later? Even to aim a little ahead, we must be sure of the direction, because things are moving If you see things too closely to present, the business will be short-lived if social changes are rapid e.g. × Business assuming that self-driving cars are personally owned Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.32/43
to the physical world “Centers” are going to be automated → Rise of DeFi (Decentralized Finance) Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.33/43
Administration Politics Today Hardware Applications User OS Human Business Financial System Human Business Earth-Scale OS Automation System Earth Earth Near Future (as of 2007) Human Meta-Nature (Highly-automated decentralized social environment) Earth Near Future (as of 2021) To the left is just an excerpt of the typical studies involved Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.34/43
soon be invisible Variety of monetary media, coupons and points can work underneath the visible shopping environments Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.35/43
as bitcoin Digitization of national currencies (“digital JPY” in Japan) MUFG coin, J-coin, S-coin (digital coins by banks and alike) Trials by communities (e.g. DCJPY by banks and other industries) Trials by central banks (CBDC : Central Bank Digital Currency) Local currencies, “cause-oriented economy” Making an entry to the world where a variety of digital currencies are in use We will be insensible of its complexity, and we will just clarify our policies We will not even care whether the mechanism underneath is monetary or not Agents (e.g. smart phone apps) will start suggesting actions according to the policies Sharing economy will join, too ⇒ Decline of Monetary Economy! cf. “Maneki Neko” by BRUCE STERLING Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.36/43
/ Industrial Society Economic Gaps, Exploitation, Bankruptcy Bullshit jobs Digital Currency, FinTech → AGI & Meta-Nature ENH REV RET OBS Domination and Obedience Hierarchy Profit Maximization (Money-less) Trust System, Gift Economy Omnipotence Hunting and Gathering Society New media revive what have been once made obsolete, but will “gift economy” and “omnipotence” be revived? Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.37/43
to stagnation of exchanges and consumptions → Rise of sharing economy Life style of running economy without specialization (also boosted by AI or digital fabrication) → Degeneration of taxable economic activities Changes in how public works are carried out ← opportunities for us → At that point, we have already seen decline of money, have we not? By pushing the principles of monetary economy forward, money would rather retreat from the front stage of our lives, because accommodation without needing money are preferred → Destroys “employments” and “separation of selling and buying” Distinction between “ruler and ruled” or “producers and consumers” will melt away Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.38/43
be like after 30 years from now? How are we going to live through the path leading to that economy? Like, what will happen in the next 6 years? How do we begin? Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.39/43
will bring your ideas to further nurture them Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.41/43
a financial application using generative AI that will be valid through year 2030 (1) What is the problem? (2) Why is the problem important? (3) What is your surprising way to solve it using generative AI? Deadline and how to submit November 19, 2024 at 17:59 JST From Moodle (mandatory) (Q&A forum) So that your classmates can read your report, refer to it, and comment on it Optionally, you can also post to #assignments channel at Discord Just plain text, and be concise, please Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.42/43
tablet) to access Miro and Zoom next week You can access Miro with a web browser Miro is for the ideathon, and Zoom is for screen-sharing of your group presentation material Have a nice weekend! Lecture 11-12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2024 Fall — 2024-11-15 – p.43/43
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