The Future of the Digital Economy

早上好
Melanie Swan
Philosophy, Purdue University
Zhejiang Strategic Outlook melanie@BlockchainStudies.org
Hangzhou, June 7, 2018
Slides: http://slideshare.net/LaBlogga
 Melanie Swan, Technology Theorist
 Founder, Institute for Blockchain Studies
 Philosophy Department, Purdue University,
Indiana, USA
 Singularity University Instructor; Institute for Ethics and
Emerging Technology Affiliate Scholar; EDGE invited
contributor; FQXi Advisor
Economics and Financial
Traditional Markets Background Theory Leadership

New Economies research group

https://www.facebook.com/groups/NewEconomies

Source: http://www.melanieswan.com, http://blockchainstudies.org

7 Jun 2018
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 Agenda
 Digital Economy
 Blockchain Technology
 Deep Learning Algorithms
 Future of the Digital Economy

7 Jun 2018
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 What is the Digital Economy?
 Economy based on digital computing technologies

 Internet sector
(specifically)
 6% GDP

 Digital computing
technologies
(generally)
 33% GDP

Source: https://www.forbes.com/sites/koshagada/2016/06/16/what-is-the-digital-economy/
7 Jun 2018
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 Digital Economy: Consumer
 $2.9 trillion global market

 Devices 37%
 eCommerce 34%
 Search 17%
 Social Media 12%

Source: https://www.forbes.com/sites/koshagada/2016/06/16/what-is-the-digital-economy/
7 Jun 2018
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 Digital Economy: Enterprise
 $3.86 trillion global IT spend 2018 (Gartner)
 Digital transformation: Blockchain, IoT, AI, Cloud
 $1.3 trillion Digital Transformation Technologies (IDC)

Digital Transformation:
 Business process re-
engineering with digital
technologies
 Technology used to make
existing work more
efficient, now technology is
transforming the work itself
 Example: single shared item
lookup process in blockchain
supply chain

Source: https://www.zdnet.com/article/gartner-sees-it-spending-hitting-3-7-trillion-in-2018-led-by-blockchain-ai-iot/,
7 Jun 2018 https://www.idc.com/getdoc.jsp?containerId=prUS43381817 5
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 Future of the Digital Economy
Traditional Digital Economy
Economy
Phase 1 Phase 2
Digitization Intelligence
Physical Infrastructure Digital Infrastructure Smart Infrastructure
• Natural Resources • Data • Blockchain
• Electricity • Communications • Deep Learning

Transportation Digital Intelligent

Networks Networks Networks

1700-1970 1970-2015 2015-2050

7 Jun 2018 Now 6

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 Longer-term Economic Futures
Traditional Digital Biological Space
Economy Economy Economy Economy

Phase 1 Phase 2
Digitization Intelligence
Natural resources Social Networks Blockchain CRISPR Mining
Electricity Apps Deep Learning Bioprinting Settlement
Manufacturing Payments Cellular Therapies Exploration

1700-1970 1970-2015 2015-2050 2020-2080 2025-2100

Atoms Bits Value Cells Energy

7 Jun 2018 Now 7

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 Digital Economy: Development Phases
Phase 1 Phase 2
Digitizing existing Orchestrating new
patterns of
Digitization Intelligence ways of interacting
interaction and doing business

Social Networks Blockchain

Apps

Deep Learning

Payments

7 Jun 2018 Now 8

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 What is Intelligence?
 Intelligence = “whatever we can’t do yet”
 Creeping frontier of Technology
 Achievements are quickly forgotten

Innovation Frontier

Source: https://www.britannica.com/technology/artificial-intelligence
7 Jun 2018
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 Technological Unemployment
 Challenge: facilitate an orderly transition to
Automation Economy
 Half (47%) of employment is at risk of automation in the next
two decades – Carl Frey, Oxford, 2015
 China leads in industrial robotics (615,000 units 2018e)

Source: Swan, M. (2017). Is Technological Unemployment Real? Abundance Economics. In Surviving the Machine Age: Intelligent
7 Jun 2018 Technology and the Transformation of Human Work. Hughes & LaGrandeur, Eds. London: Palgrave Macmillan. 19-33.
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Blockchain https://newint.org/features/2017/11/01/industrial-robots-china
 Routine Tasks (physical and cognitive)
outsourced to Machines

Source: The Economist (2016) US Population Survey, Federal Reserve Bank of St. Louis,
7 Jun 2018 https://www.ft.com/content/1dbd8c60-0cc6-11e6-ad80-67655613c2d6 11
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 Global Robotics Spending: $67 billion 2025e

Source: https://www.siemens.com/innovation/en/home/pictures-of-the-future/digitalization-and-software/autonomous-systems-facts-
7 Jun 2018 and-forecasts.html
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 Top disruptors: Deep Learning & Blockchain

Source: https://www.ipe.com/reports/special-reports/securities-services/securities-services-blockchain-a-beginners-
7 Jun 2018 guide/10014058.article
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 Job Growth Skills in Demand
1. Robotics/automation/data science/deep learning
2. Blockchain/Bitcoin

Source: https://www.computerworld.com/article/3235972/financial-it/blockchains-explosive-growth-pushes-job-
7 Jun 2018 skills-demand-to-no-2-spot.html
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 Future of the Digital Economy

Blockchain Deep Learning

7 Jun 2018
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 Agenda
 Digital Economy
 Blockchain Technology
 Deep Learning Algorithms
 Future of the Digital Economy

7 Jun 2018
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 Blockchain
 To inspire us to
build this world

Free educational materials:

Disclaimer: no substantial
cryptocurrency, ICO, or smart
contract ownership or advising

Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
7 Jun 2018
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 information.
email.
voice.
video.
money.
internet content.
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 What is Blockchain/Distributed Ledger Tech?

Conceptual Definition:
Blockchain is a software protocol;
just as SMTP is a protocol for
sending email, blockchain is a
protocol for sending money

Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
7 Jun 2018
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 Blockchain Technology: What is it?
 Blockchain technology is the secure distributed ledger
software that underlies cryptocurrencies like Bitcoin
 “Internet of Money” leapfrog technology; Skype is an app allowing
phone calls via Internet without POTS; Bitcoin is an app allowing
money transfer via Internet without banks; ‘decentralized Paypal’
OSI Protocol Stack:

Application Phone
Layer
Email Bitcoin
calls

Protocol
SMTP VoIP Blockchain
Layer

Infrastructure Internet
Layer (decentralized network)

Source: http://www.amazon.com/Bitcoin-Blueprint-New-World-Currency/dp/1491920491
7 Jun 2018
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 software.
secure cryptographic transfer.
internet.

blockchain.
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 secure transfer of value, of…

money & securities.

property.
contracts.
identity credentials.

killer apps.
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public chains. private chains.
trustless. mined. trusted. not-mined.
p2p software. enterprise software.

7 Jun 2018
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 sample apps.
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 When to use Blockchain Technology
 Blockchain is enterprise
software
 Solid business use case
 How does a decentralized
solution improve over a
centralized one?
 Ideal use case:
 Many parties in the value
chain
 Intensity of information and
monetary exchange
adoption: hype vs. value-creation.
7 Jun 2018
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Use Case Example:
Factom: Health insurance
claims billing
• Automated claims
billing, validation,
payment, and settlement
• Multi-party value chain:
patient, service provider,
billing agent, insurance
company, payor,
government, collections
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 financial services.
quantified risk: 2.5 yr payback (securities
clearing 3-days to d-days).

7 Jun 2018
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 supply chain asset tracking.
 Private views and controlled-use credentials issued to
multiple parties in the value chain using single shared
blockchain

7 Jun 2018
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 Agenda
 Digital Economy
 Blockchain Technology
 Deep Learning Algorithms
 Future of the Digital Economy

7 Jun 2018
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 Big Data ≠ Smart Data
 Global Data Volume: 40 EB 2020e
 Scientific, governmental, corporate, and personal

Only 42% companies say

they know how to extract
meaningful insights from
the data available to them
(Oxford Economics Workforce 2020)

7 Jun 2018 Source: http://www.oyster-ims.com/media/resources/dealing-information-growth-dark-data-six-practical-steps/

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 Big Data requires Deep Learning
 Older algorithms cannot keep up with the growth in
data, need new data science methods

Source: http://blog.algorithmia.com/introduction-to-deep-learning-2016
7 Jun 2018
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 Global AI-specific Spending: $36 billion 2025e
 Artificial Intelligence market analysis by Technology
 Deep Learning, Machine Learning, Natural Language
Processing, Machine Vision

Source: https://www.grandviewresearch.com/industry-analysis/artificial-intelligence-ai-market
7 Jun 2018
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 Broader Computer Science Context
 Within the Computer Science discipline, in the field of
Artificial Intelligence, Deep Learning is a class of
Machine Learning algorithms, that are in the form of a
Neural Network

Source: Machine Learning Guide, 9. Deep Learning

7 Jun 2018
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 What is Deep Learning?

Conceptual Definition:
Deep learning is a computer program that can
identify what something is

Technical Definition:
Deep learning is a class of machine learning
algorithms in the form of a neural network that
uses a cascade of layers (tiers) of processing
units to extract features from data and make
predictive guesses about new data

Source: Swan, M., (2017)., Philosophy of Deep Learning, https://www.slideshare.net/lablogga/deep-learning-explained

7 Jun 2018
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 Deep Learning & AI
 System is “dumb” (i.e. mechanical)
 “Learns” with big data (lots of input examples) and trial-and-error
guesses to adjust weights and bias to identify key features
 Creates a predictive system to identity new examples
 AI argument: big enough data is what makes a
difference (“simple” algorithms run over large data sets)

Input: Big Data (e.g.; Method: Trial-and-error Output: system identifies

many examples) guesses to adjust node weights new examples

7 Jun 2018
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 Sample task: is that a Car?
 Create an image recognition system that determines
which features are relevant (at increasingly higher levels
of abstraction) and correctly identifies new examples

Source: Jann LeCun, http://www.pamitc.org/cvpr15/files/lecun-20150610-cvpr-keynote.pdf

7 Jun 2018
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 Supervised and Unsupervised Learning
 Supervised (classify
labeled data)

 Unsupervised (find
patterns in unlabeled
data)

Source: https://www.slideshare.net/ThomasDaSilvaPaula/an-introduction-to-machine-learning-and-a-little-bit-of-deep-learning
7 Jun 2018
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 Early success in Supervised Learning (2011)
 YouTube: user-classified data
perfect for Supervised Learning

Source: Google Brain: Le, QV, Dean, Jeff, Ng, Andrew, et al. 2012. Building high-level features using large scale unsupervised
7 Jun 2018 learning. https://arxiv.org/abs/1112.6209
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 Machine learning: human threshold
 All apps voice-activated and conversational?

Source: Mary Meeker, Internet Trends, 2017, http://www.kpcb.com/internet-trends

7 Jun 2018
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 2 main kinds of Deep Learning neural nets
 Convolutional Neural Nets
 Image recognition
 Convolve: roll up to higher
levels of abstraction in feature
sets
 Recurrent Neural Nets
 Speech, text, audio recognition
 Recur: iterate over sequential
inputs with a memory function
 LSTM (Long Short-Term
Memory) remembers
sequences and avoids
gradient vanishing

Source: Yann LeCun, CVPR 2015 keynote (Computer Vision ), "What's wrong with Deep Learning" http://t.co/nPFlPZzMEJ
7 Jun 2018
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 3 Key Technical Principles of Deep Learning
Sigmoid Function Perceptron Structure Loss Function

Squash values into Core computational unit Reduce combinatoric

Sigmoidal S-curve (input-processing-output) dimensionality
What -Binary values (Y/N, 0/1) Levers: weights and bias
-Probability values (0 to 1)
-Tanh values 9(-1) to 1)

Non-linear formulation “Dumb” system learns by Loss function

Why as a logistic regression adjusting parameters and optimizes efficiency
problem means checking against outcome of solution
greater mathematical
manipulation

7 Jun 2018
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 How does the neural net actually learn?
 Structural system based on cascading layers of
neurons with variable parameters: weight and bias
 System varies the
weights and biases
to see if a better
outcome is obtained
 Repeat until the net
correctly classifies
the data

Source: http://neuralnetworksanddeeplearning.com/chap2.html
7 Jun 2018
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 Backpropagation
 Problem: Inefficient to test the combinatorial
explosion of all possible parameter variations

 Solution: Backpropagation (1986 Nature paper)

 Backpropagation of errors and gradient descent are
an optimization method used to calculate the error
contribution of each neuron after a batch of data is
processed

Source: http://neuralnetworksanddeeplearning.com/chap2.html
7 Jun 2018
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 Agenda
 Digital Economy
 Blockchain Technology
 Deep Learning Algorithms
 Future of the Digital Economy

7 Jun 2018
43
Blockchain
 Digital Economy: Development Phases
Phase 1 Phase 2
Digitizing existing Orchestrating new
patterns of
Digitization Intelligence ways of interacting
interaction and doing business

Social Networks Blockchain

Apps

Deep Learning

Payments

7 Jun 2018 Now 44

Blockchain
 intelligence technologies:
blockchain: secure automation.
deep learning: identify objects.

digital economy.
7 Jun 2018
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 secure automated
fleet management.
7 Jun 2018
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 big health data.

Population:

scale.
7.5 bn people worldwide

Source: https://www.illumina.com/science/technology/next-generation-sequencing.html
7 Jun 2018
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 technological unemployment.
ownership in means of production.

automation economy.
7 Jun 2018
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 banking & credit.
land registry.
identity.
electricity.
Digital health wallet vaccines & medicine.
inclusion.
Source: https://www.unicef.org.au/blog/unicef-in-action/april-2017/photos-vaccines-reach-most-remote-places-earth
7 Jun 2018
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 Digital Economy Opportunities for China
 Productivity gains
 Capital investment in technology
 Data centers
 Blockchain as a Service, Deep Learning nets
 Skilled work force development
 Train 1000 software developers
 Hyperledger, Ethereum, Corda
 Machine Learning, AI, Deep Learning

 Scale efficiencies
 Natural resources, regional strength, large companies
 Manage global trade supply chain with
blockchain/deep learning

7 Jun 2018
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 The Future of the Digital Economy
謝謝
Melanie Swan
Philosophy, Purdue University
Zhejiang Strategic Outlook melanie@BlockchainStudies.org
Hangzhou, June 7, 2018
Slides: http://slideshare.net/LaBlogga