Ep. 192 – Alexander Fleiss, Rebellion Research founder on the Corona Virus, AI, & Robo Trading

Ep. 192 – Alexander Fleiss, Rebellion Research founder on the Corona Virus, AI, & Robo Trading

On this week’s episode of Inside Outside Innovation, we sit down with Alexander Fleiss. Alex is the founder of Rebellion Research, which is a research advisory firm, and also an artificial intelligence expert (AI) and robotrader. Alexander and I talk about the Corona virus and its impact on the market, how artificial intelligent traders are faring in this, and some of the differences between what’s going on in Europe, China, and the United States when it comes to artificial intelligence. Let’s get started.

Alexander Fleiss of Rebellion Research, AI Robo TraderInside Outside Innovation is the podcast that brings you the best and the brightest in the world of startups and innovation. I’m your host, Brian Ardinger, founder of InsideOutside.IO, a provider of research, events, and consulting services that help innovators and entrepreneurs build better products, launch new ideas, and compete in a world of change and disruption. Each week we’ll give you a front row seat for the latest thinking tools, tactics, and trends, in collaborative innovation. Let’s get started.

Interview Transcript

Brian Ardinger:  Welcome to another episode of Inside Outside Innovation. I’m your host Brian Ardinger, and with me today is Alexander Fleiss. He is the founder of Rebellion Research. Welcome to the show.

Alexander Fleiss: Thank you so much, Brian, pleasure for having me on.

Brian Ardinger: Hey, Alex, I am excited to have you on. For those who may not be familiar with Rebellion Research, why don’t you tell us a little bit about the AI platform that you’ve got built.

Alexander Fleiss: RebellonResearch.com offers managed brokerage accounts in 40 plus countries. Whether it’s a small $5,000 account or a gigantic pension fund, we deal with everybody, every type of institution out there. We also are a think tank, I teach at a number of schools, constantly working on artificial intelligence and applying artificial intelligence to our strategy and the movement of the economy. We publish research on AI, machine learning, automation.  We’ve published a lot on the Corona virus, and in January we actually had 100,000 readers. We tried to just be all things AI. We develop AI and we write about AI. It’s definitely my life’s passion.

Brian Ardinger: We are recording this on March 20th as most folks know, markets are down 30%.  I thought it would be interesting to have a conversation with you to not only talk about the markets, but some of the things that you’re seeing when it comes to… This trend of AI has permeated the financial services market. You have all these new robotraders or things along those lines, different ways to try to take a look at data and manage it. What are you seeing out there when it comes to trends around this?

Alexander Fleiss: Everybody is rushing to get all the data they possibly can to be as first as possible in understanding where the economy is going and where the markets are going. Clearly, we just experienced a terrible market crash. The American mid cap index is down 40% as of yesterday. So everybody loves to throw out the S and P, which is Facebook, Apple, Netflix, Google, but the other 2000 stocks that are, the overall U S markets, those are down 42% you know, we’ve had a significant crash.

We’ve never had a virus related sell off. In the last 30-40-50-60 years. I can’t think of even the last time, I’d probably guess 1918-1919 Spanish flu, last time the markets got hit. Everyone pointed to H1N1 / Swine flu and when this came out, nobody thought much of it.  Seemed like a Chinese thing or some type of bad soup disease. Turned out to be a bad virus because the city of Wuhan was not locked down.

Brian Ardinger: These black Swan events, we can’t always predict, and that’s why they’re black swans. From the perspective of artificial intelligence, were there any signals or how did the artificial intelligent robotraders react to something like this versus what you’ve traditionally seen in the marketplaces?

Alexander Fleiss: Bridgewater apparently got annihilated down between 5%-10% for their various funds, and they are a no exposure hedge fund. Rebellion research, we have a multi-asset strategy, and we have an equity index. The equity index has done better than the market. We’re an economic based system, and so we feel that during times of recession…

But so far the U S economy is still very strong. Most of the economies, employee default rates are low, people have money, can pay for things, and also the risk-free rate is very low. When you have a 0% money, it’s hard for risk to not start to bubble up again. And Covid-19 is obviously a great excuse to make money very cheap, not an excuse. It’s what they should do. They’re doing all the right things. The great depression happened because we made money expensive, and the federal reserve made a huge error, and they stymied the financial supply.

Brian Ardinger: From a technology perspective, did you see anything different versus the way we traditionally look at markets and that?  Does AI give us any insight into are these technologies getting better, worse. It is what it is an in an environment where nothing can be predicted.

Alexander Fleiss: Our AI is getting better. Our AI has been learning. Our AI makes like 11,000 predictions a day. Stock market when 80%-90% of managed funds lose. The house always wins, and so we never have too much conviction in one stock if it’s really done through the aggregate.  But…Well, I’ll tell you, it’s become a very tough environment where you have a lot of fear, but the fact is, you know, the economy is strong, so we should have a gigantic rebound. The stock market should soar, and you know, things should get a lot better. But in terms of seeing this ahead of time, no, there’s only so much.

I mean AI and machine learning is a lot like Dustin Hoffman from the movie Rain man. It’s great at counting toothpicks, and great at counting cards, but it really can’t do a whole lot else.  It’s got no social cognition, no idea really what’s going on.  AI is great at its specific tasks, but you move it from the task just one or two degrees and it’s useless. Right? So what we have at Rebellion Research is an economic forecaster, and so we’re really good at calling the economy, and that’s what we first got pressed for in 08′ and it was the financial crisis, and then in 2010 was the Greek debt crisis. Those were economic situations.

This is not an economic situation. This is a classic black swan. It’s not like looking for gold or smelling for gunpowder. What is there to smell for, that a weird virus strain will spread to the U S and infect tens of thousands of people. It’s truly the manifestation of a black swan, and it’s interesting, obviously it’s no fun now, but I mean very educational.

Brian Ardinger:  Let’s talk a little bit about some of the trends that you’re seeing in different markets, U.S. Versus China. Not necessarily even from a financial market perspective, but when it comes to technology and who’s winning, who’s losing, what are some of the trends that you’re seeing out there?

Alexander Fleiss: I think that’s a great question. And a really awesome topic because as a teacher in AI, I have to admit that by far most of my students are Chinese. The native Chinese-born Chinese speakers. Because for whatever reason, AI intrigues China and the Chinese people more than any other country. I don’t know why. It is the fact that teach us five different schools and it’s just what I come across. In terms of the AI – China versus the U.S. There’s not going to be a competition because every great Chinese engineer wants to get out of there and move to America. But in terms of Europe, Europe’s nowhere near us.

America’s dominating AI. We’re dominating AI because we have a lot going on. We have a lot of universities working on it, but we also, most Chinese want to come to America, not Europe. Let’s look at the biggest tech companies they’re all American. In the U.S, the most capital in technology and we are more attractive. A lot of my friends are Eastern Europeans. One of my best friends, this guy named Dean McCorliv is a Ukrainian AI engineer. He’s one of the first actual members of Google Brain, super brilliant guy actually. His company Mit Friendly Data was bought by Apple, I think. And he loves Ukrainian and his Mom and Dad, but he’s in the U.S. as much as possible. Engineers typically want to live in the U.S. You’ve got some in Amsterdam, but very, very, very, very few. U.S. dominates.

Brian Ardinger: It seems to be two camps on the AI front, some that believe that AI is summoning the demon, as Elon Musk talks about, and very negative towards the possibilities of what AI can eventually be done. And there’s another camp, more along the lines of there are things that it can do, but we’re definitely not where all the apocalyptic thoughts are. Where do you fit in that range?

Alexander Fleiss: AI is a tool. Yeah it will be used as a tool is used. For good, when in the hands of good and for evil when in the hands of evil. Will an AI system be used for evil purposes? Everything is used for evil purposes when in the hands of evil. Will companies screw up their AI system?  Everybody screws up every system. Am I as apocalyptic as Elon Musk? No. Will I take notice of the fact that the most optimistic man on the freaking planet is like a doomsday naysayer, about AI. Yeah. I’ll take notice about it. Is he right in that?

Will there be some despot, some awful warlord who entrusts his nuclear weapon systems to an AI and screws up applying the AI, because AI is very hard to apply. And if he screws up he launches his nuclear weapons, but at the same time a despot could do other things. But yeah, no, this is a very good chance that crazy dictator screws up using his AI and it can cause a nuke to launch one day.

Brian Ardinger: A lot of our listeners are probably not technologists, but they’re always trying to figure out the next thing that they need to do to either protect their company or make their company better. For our listeners out there that want to find out more about artificial intelligence, what are some of the sources that you go to or some of the things that they should be paying attention to.

Alexander Fleiss: Really remarkable how few sources there still are. It’s very hard.  Google keyword searches for a lot of keywords. You know, Bayesian, machine learning, artificial intelligence, no great source yet. I’m going to plug my own rebellionresearch.com as a significant source. AI is our concentration, but. No, there still isn’t a good AI source. So my buddy Dan Faggella started something called Tech Emergence. It’s another AI research and contract company. I think It’s still a very, very, very highly fragmented industry, but already you have the dominant players, which are Google, Facebook, and Amazon, because data is what fuels AI at the end of the day. And whoever has the best data has the best AI performance.

You build an amazing AI system, but if your data’s not great, its going to be hard for it to do much. And so, since Google, Facebook, and Amazon and Apple, those four guys just have so much more data than everybody else… Tesla’s great value is that they have all this driverless data. They’re really far ahead there. I don’t know if it’ll monetize. I don’t know if that’ll work out. I’ve..I’m a terrible stock picker. I keep all my money in the AI Research Strategy Fund. If I get inheritance, if I get money, I win the lottery, I just put it into the market. I don’t ask. I don’t try to time the stock market.

Brian Ardinger: Well Alexander, if people want to learn more about your research what’s the best way to do that?

Alexander Fleiss: Go to RebellionResearch.com and you can sign up for our research for free, or you can open an account there. They’re very easy steps. At the same time if you have a question for me, Alex@RebellionResearch.com. We’re very friendly and I have so many students asking me so many questions all the time, I am a machine when it comes to answering questions. Happy to field anything.

Brian Ardinger: I appreciate you being on Inside Outside Innovation. Look forward to continuing the conversation.

Alexander Fleiss: Awesome.

Brian Ardinger: That’s it for another episode of Inside Outside Innovation. If you want to learn more about our team, our content, our services, check out InsideOutside.io or follow us on Twitter @theIOpodcast or @Ardinger. Until next time, go out and innovate.

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Ep. 192 – Alexander Flei...