According to current estimates investment in AI in 2025 will exceed one trillion dollars and might possibly top two trillion dollars in 2026. Market capitalization of the largest 65 AI firms exceeds 20 trillion dollars. These are big numbers. AI is responsible for one of the largest build-up of capital in history. Investments in AI were motivated by the expectation that AI would generate huge profit. The expectation of profit, in turn, has produced a great increase in market

In this post I discuss how AI even the current generation of Generative AI, follows the framework of modern science. The framework of modern science developed over a period of several centuries. It is useful to resume the scientific framework in the following points. First , scientific explanation follows the Deductive Nomological – DN – principle of Carl Hempel and Paul Oppenheim. The DN principle (Hempel and Oppenheim, Studies in the logic of explanation, 1948) states that

It is fair to say that technology is greatly indebted to science. In fact, most technological achievements depend on basic scientific knowledge acquired without having in mind any specific application. For example, modern electronics is greatly indebted to the development of quantum mechanics. In a number of cases, technological needs originated important scientific discovery. In general, however, technology exploits some basic scientific knowledge. Most technological devices

Most people think they perfectly understand causality and, if asked, probably would say that scientific explanation is causal. Psychologically this is understandable, because we leave in a world full of instances of causality. From cars to planes, from home appliances to gardening equipment we are surrounded by artefacts that can be controlled. But reality is much more complicated; people with decision making responsibility should learn to distinguish sharply what can be obse

Artificial Intelligence is not so new. Expert systems exist since the Sixties. Expert systems have never really captured the imagination of people. Internet was the first really surprising artificial intelligence that captured the imagination. The ability to write a query in a natural language and receiving data, papers photos from Internet was something really impressive. The main change happened with Large Language Models and Generative AI. Applications such as ChatGPT are

In 1992 I was attending the Annual Conference on Supercomputing in Minneapolis, Minnesota. One of the keynote speakers was Larry Smarr, a leading pioneer in supercomputing. Behind him there were two screens: one showed a true tornado the other showed the simulation of a tornado made with a supercomputer. It was hard to distinguish the real from the simulated one. Larry commented that the computer image was obtained performing billions of elementary mathematical operations but

In many posts and articles, I claimed that causal models applied to firms and to finance are components of a global process that includes the creation of a new descriptive framework creating a true paradigm shift. The title of the last paper coauthored by Fabozzi, Focardi, and Simonian, forthcoming in the 50 th  Anniversary Issue of the Journal of Portfolio Management is “Paradigm Shift: Embracing Holism in Causal Modeling for Investment Applications” to reinforces the notion

If you are an engineer and you want to predict what happens if you heat a slab of steel, you use a computer program to solve the heat parabolic partial differential equation. It took hundreds of years to understand that we can represent our physical world with numerical variables that obey differential equations. In the 17 th  century Gottfried Leibnitz dreamed of automating human thinking. At the turn of twentieth century the work of Giuseppe Peano, Gottlob Frege, and, above

Science explains. Modern fundamental science is embodied in a small number of fundamental laws. The behavior of specific systems is logically inferred from basic laws. This is scientific explanation. For instance, we can logically infer the trajectory of a projectile from basic laws of dynamics and gravitation plus initial conditions. Explanation is observational: basic laws are empirical hypotheses. Two variables X and Y are said to be correlated if they move together. Corre

I am happy to announce that a free video tutorial on causal inference frameworks and causal modelling is available at the following address: https://www.sergiofocardi.net/tutorial-causal-models The slides of the tutorial are available at the address: https://www.sergiofocardi.net/tutorial-causal-models-ppt In this tutorial I present the basic notions needed to understand the Potential Outcomes framework as well as the modern development of causal models. I first discuss the f

I read posts and articles on how AI will reshape society. Nihil sub sole novi, nothing new under the sun. Since the invention of Watt’s parallelogram in 1782 automation has reshaped society many times. From 1800 the employment in agriculture in industrialized countries dropped from 50-60% to the actual value generally below 5%. Industrial processes have been completely reshaped by automation. Employment in manufacturing dropped from 30-35% in 1900 to less than 10 % today. Eng

Most people think they perfectly understand causality and, if asked, probably would say that scientific explanation is causal. Psychologically this is understandable, because we leave in a world full of instances of causality. From cars to planes, from home appliances to gardening equipment we are surrounded by artefacts that can be controlled. But reality is much more complicated; people with decision making responsibility should learn to distinguish sharply what can be obse

Complessità Economica, Qualità, Circolarità, Sviluppo sostenibile IT Complexity, Quality, Circularity, Sustainable Development EN Questi...

English version In recent months, there has been a lot of talk about Artificial Intelligence. In a nice Linkedin post that I strongly...

The theory of qualitative growth is based on five intuitive observations: The quantity produced by modern economies increases...

Giovedì 19 ottobre, presso la sede dell’Ordine dei Geometri di Mantova, terrò il seguente seminario/webinar in presenza e online:...

Thursday 12 October I will give a webinar to the CFA Societies of France, Italy, Spain, Switzerland. This webinar is about qualitative...

Economics is not a law of nature, but it is a theory that describes human artefacts, the economies. As a consequence, economic theories...

Wrong theories can produce serious damage. For example, the De Havilland Comet aircraft was the first commercial jet aircraft. The Comet...

Teorie inadeguate possono produrre gravi danni. Ad esempio, l’aereo De Havilland Comet fu il primo aereo a reazione commerciale. Il Comet...