Intermezzo: Intelligence Work

I’ve had some interesting conversations lately, one, in particular, was with the man who rewrote the Pentagon’s hardware and software acquisition guidelines. After his time in the US Airforce, he became the CEO of a defense contractor. In our family and among my friends we call this man “The General,” because, well, he was a general. For several years The General has been a close advisor of mine, so it was only natural for me to ask him for advice about the application of certain technologies I’ve developed in the ULISSES Project. As I showed The General the applications that we’d tested with data from some of the world’s top hedge funds, rather than congratulate me on how great the technology was for AI/ML applications in finance, he said, “This has intelligence implications. That’s where you should go with this.”

From Russia with Love

At the time I rebuffed The General’s suggestion because I had occasion in my life to work with the “intelligence community,” specifically in cases around Russia.  I grew up around Russians, and as a result, I have always felt comfortable around Russians and the richness and complexity of their culture.  You see, my godparents and “second parents” were Alex and Vera Kulakoff, two amazing Russian Americans, so I understood the complications related to Russians and Russian culture from an early age.  Alex was a diplomat’s son in the Tzarist regime, who worked against the Nazis behind enemy lines and then continued his work as he spearheaded U.S. military intelligence out of Vienna during the Cold War.  Here’s his obituary. Alex met and fell in love with Vera, one of the top students out of Leningrad Conservatory, as she gave a concert in Vienna.  He subsequently helped her to defect to the West and then eventually joined his true love in the California Bay Area.  The Kulakoff’s had as much influence on me as my own parents. In a very real way, I lived as a side character in a John le Carre novel when I was a kid.  

My life started off like a John Le Carre novel, but it’s proceeded like a Vin Diesel movie ever since. The funny thing is I not only love the soundtrack, but one of my good buddy’s call sign in the Air Force was “XXX”

Because of the early influence of the Kulakoffs, I’ve not only got along with Russians but really felt most comfortable with them.  My best friend when I was a kid was Zach Katz, a recent Russian immigrant.  At university, a great mentor was a Russian professor who now works at the World Bank.  Related to this, I helped coordinate a Russian scientist integration effort by BYU, looking to take great Russian scientists and give them MBAs so they could integrate into Western society.  Likewise, some of my best friends are former Russian scientists who came to the West to work in business, great assets to the United States.  For example, it was a good friend and Russian scientist I worked with at Barclays to build the first empirical fixed income model, it was a Russian scientist who developed their high-frequency trading algorithms, and it was a Russian scientist (actually Ukrainian) who I worked with to merge high-frequency trading and longer-term signals in the first case in finance of “multi-period” optimization.  I only mention this because I speak from experience on the matter of Russians.

Intelligence Work often an Oxymoron

Years ago I had occasion to get to know and work with the FBI’s lead in prosecuting Russian organized crime.  He was a Columbia University law graduate who was a fast-rising individual in the FBI.  While he was well-intentioned, I was immediately amazed at his lack of knowledge of the Russian people and how the FBI and other agencies used complex information in incredibly simple ways, making exactly the wrong decisions.  In effect, he was simple in his thinking so he assumed that the information was simple and he could draw simple conclusions from it. He did not know how to reason, which led him to believe that his allies were his enemies, and his enemies were his friends.  I eventually grew weary of his improper conclusions from complex information and I recused myself from further discussions.  He eventually went on to a large bank to handle anti-money laundering investigations with the same sophistication that he handled his FBI investigations. It was during these discussions with the so-called “Russian expert” that I came to start referring to “the Squirrel Principle” when dealing with complex, non-linear information.

The Squirrel Principle and Complex Information

During the time that I interacted with the FBI’s “Russian expert,” I also was close friends with a man who worked at Pixar, a company that I greatly admire.  Long before it hit theatres, my friend told me of a movie with an old man and a young boy who’d fly off to a distant land in a house propelled by balloons.  I hated the idea and said he needed to make another “Incredibles,” but he said, “Just watch it James, I know you’ll love it!”  That movie was of course “UP” and I did love it.  So as I watched this much-anticipated movie (by me), I came to love the character of “Doug,” the loveable and intelligent dog that is often distracted by squirrels when discussing complex matters. 

We as human beings are often distracted by irrelevant or ancillary facts in the pursuit of truth, just like Doug the Dog was distracted by squirrels.  It was the same with my man at the FBI, forever chasing squirrels rather than pursuing the complex truth.  In his defense, Russia and Russians are complicated.  They both have in essence became a metaphor for complexity. It’s only logical that rather simple politicians decried “the Russian menace,” in the face of the rising power and animosity of the Chinese.  Again, having a step-father who was one of the foremost Sinologists in the West, who trained senior people in the intelligence community on both sides (U.S. and China), I understand the complexity and danger there.  It is truly amazing how we Americans, relatively uncomplicated people, always seem to be distracted by squirrels.

Complex Information Processing

Human beings simply cannot process complex information or engage in complex systems thinking.  We can understand the principles, but only very well-trained or unique minds can do this.  Even then we have our limitations.  I see the tipping point having been reached when the legendary chess champion Garry Kasparov (yes, a Russian) lost to Big Blue.  While the game was fixed by IBM, the fact remains, and Kasparov conceded, that machines had arrived at a crucial point in human history.  Kasparov didn’t fully concede to machines because he started hybrid tournaments and found that humans who learned to work with machines could beat the best machines or the best humans alone.  This is logical, human intelligence when aided by artificial intelligence becomes much better than either alone.

My hope for our intelligence community is that we can infuse a bit of (artificial) intelligence into our intelligence work…helping to make the world a safer place in the process.