IBM Debuts Tools to Help Prevent Bias In Artificial Intelligence

IBM wants to help companies mitigate the chances that their artificial intelligence technologies unintentionally discriminate against certain groups like women and minorities.

The technology giant’s tool, announced on Wednesday, can inspect AI-powered software for unintentional bias when it makes decisions, like when a loan might be denied to a particular person, explained Ruchir Puri, the chief technology officer and chief architect of IBM Watson.

The technology industry is increasingly combating the problem of bias in machine learning systems, used to power software that can automatically recognize images in pictures or translate languages. A number of companies have suffered a public relations black eye when their technologies failed to work as well for minority groups as for white users.

For instance, researchers discovered that Microsoft and IBM’s facial-recognition technology could more accurately identify the faces of lighter-skin males than darker-skin females. Both companies said they have since improved their technologies and have reduced error rates.

Researchers have pointed out that some of the problems may be related to the use of datasets that contain a lack of diverse images. Joy Buolamwini, the MIT researcher who probed Microsoft and IBM’s facial-recognition tech (along with China’s Megvii), recently told Fortune‘s Aaron Pressman that a lack of diversity within development teams could also contribute to bias because more diverse teams could be more aware of bias slipping into the algorithms.

In addition to IBM, a number of companies have introduced or plan to debut tools for vetting AI technologies. Google, for instance, revealed a similar tool last week while Microsoft said in May that it planned to release similar technology in the future.

Data crunching startup Diveplan said at Fortune’s recent Brainstorm Tech conference that it would release an AI-auditing tool later this year while consulting firm Accenture unveiled its own AI “fairness tool” over the summer.

Read More for an In-Depth Look: Unmasking A.I.’s Bias Problem

It’s unclear how each of these AI bias tools compare with one another because no outside organization has done a formal review.

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Puri said IBM’s tool built on the company’s cloud computing service is differentiated partly because it was created for business people and is easier to work with than similar tools from others that are intended only for developers.

Despite the flood of new AI-auditing tools, the problem of AI and bias will likely continue to persist because rooting out bias from AI is still in its infancy.

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SpaceX's first private passenger is Japanese fashion magnate Maezawa

HAWTHORNE, Calif. (Reuters) – SpaceX, Elon Musk’s space transportation company, on Monday named its first private passenger as Japanese businessman Yusaku Maezawa, the founder and chief executive of online fashion retailer Zozo.

FILE PHOTO: Yusaku Maezawa, the chief executive of Zozo, which operates Japan’s popular fashion shopping site Zozotown and is officially called Start Today Co, speaks at an event launching the debut of its formal apparel items, in Tokyo, Japan, July 3, 2018. REUTERS/Kim Kyung-Hoon/File Photo

A former drummer in a punk band, billionaire Maezawa will take a trip around the moon aboard its forthcoming Big Falcon Rocket spaceship, taking the race to commercialize space travel to new heights.

The first passenger to travel to the moon since the United States’ Apollo missions ended in 1972, Maezawa’s identity was revealed at an event Monday evening at the company’s headquarters and rocket factory in the Los Angeles suburb of Hawthorne.

In moves typical of his publicity-seeking style, Musk, who is also the billionaire chief executive of electric car maker Tesla Inc, had previously teased a few tantalizing details about the trip and the passenger’s identity, but left major questions unanswered.

On Thursday, Musk tweeted a picture of a Japanese flag. He followed that up on Sunday with tweets showing new artist renderings of the Big Falcon Rocket, or BFR, the super heavy-lift launch vehicle that Musk promises will shuttle the passenger to the moon and eventually fly humans and cargo to Mars, using the hashtag #OccupyMars.

While the BFR has not been built yet, Musk has said he wants the rocket to be ready for an unpiloted trip to Mars in 2022, with a crewed flight in 2024, though his ambitious production targets have been known to slip.

FILE PHOTO: A SpaceX Falcon Heavy rocket lifts off from historic launch pad 39-A at the Kennedy Space Center in Cape Canaveral, Florida, U.S., February 6, 2018. REUTERS/Thom Baur/File Photo

SpaceX plans a lunar orbit mission. It was not clear how much Maezawa paid for the trip.

Maezawa made his fortune by founding the wildly popular shopping site Zozotown. His company Zozo, officially called Start Today Co Ltd, also offers a made-to-measure service using a polka dot bodysuit, the Zozosuit..

With SpaceX, Amazon.com founder Jeff Bezos’ Blue Origin and entrepreneur Richard Branson’s Virgin Galactic battling it out to launch private-sector spacecraft, the SpaceX passenger will join a growing list of celebrities and the ultra-rich who have secured seats on flights offered on the under-development vessels.

Those who have signed up to fly on Virgin Galactic sub-orbital missions include actor Leonardo DiCaprio and pop star Justin Bieber. A 90-minute flight costs $250,000.

Short sightseeing trips to space aboard Blue Origin’s New Shepard rocket are likely to cost around $200,000 to $300,000, at least to start, Reuters reported in July.

SpaceX has already upended the space industry with its relatively low-cost reusable Falcon 9 rockets. The company has completed more than 50 successful Falcon launches and snagged billions of dollars’ worth of contracts, including deals with NASA and the U.S. Department of Defense.

SpaceX in February transfixed a global audience with the successful test launch of its Falcon Heavy, the most powerful operational rocket in the world.

SpaceX previously announced plans to eventually use Falcon Heavy to launch paying space tourists on a trip around the moon, but Musk said in February he was inclined to reserve that mission for the BFR.

Reporting by Eric M. Johnson in Los Angeles; Additonal reporting by Sam Nussey in Tokyo; Editing by Leslie Adler and Richard Pullin

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Here's Why Valuation Determines Total Dividend Payments For Overvalued Stocks: Johnson & Johnson

Introduction

In my most recent article, found here, a reader made a comment where a question was asked that I believe deserved a good answer. The following excerpt of the comment really reached out to me because this person claims to have been asking this question for 5 years without receiving a good answer. Here is the excerpt:

“Again, someone please explain to me how valuation determines the future direction for dividend growth and total dividend payments for overvalued stocks. I’ve been asking this question for five years here on SA w/o a good answer. Nothing theoretical please – I want to see actual data.”

Consequently, I felt compelled to write this article because this question is highly representative of what I consider my current life’s work. I have been in the investment business since 1970, and over those many decades, I have always followed a strict valuation investment strategy. However, when I was younger, I applied valuation to growth stocks because my objective was to build as much wealth as possible. As I have matured, my objective has become more focused on protecting my wealth while simultaneously letting my money that I worked so hard for to start working for me. In simple terms, I evolved from a growth investor into a more conservative dividend growth investor.

Examining the Theoretical In Real-World Conditions

The comment cited above asked to see actual data and nothing theoretical. Personally, I think that is a fair request because for theoretical to have any real value, it must apply under real-world circumstances. On the other hand, for a hypothesis (theory) to be proven, it must first be clearly articulated and laid out. Therefore, what follows is the theory, or perhaps more appropriately, the rationale as to why valuation has a material impact on total dividend payments.

The first and most important point about dividends are that they are paid on the number of shares owned. Consequently, regardless of what happens to the share price of the dividend stock once it’s purchased, the dividend amount is calculated based on the number of shares owned. Therefore, even if the stock price falls dramatically, your dividend income will remain the same and vice versa.

Consistent with this first point is the reality that lower valuation is simultaneously associated with lower stock prices – ceteris paribus. Therefore, when you buy a given stock at a lower valuation, you are initially purchasing more shares than had you bought it at a higher valuation. In this regard, price and valuation are related, but they are not the same. To be clear, a higher price earnings ratio related to a given level of earnings results in a higher price than a lower price earnings ratio related to the same level of earnings.

Moreover, it is true that the specific growth rate of the dividend itself (the rate of change of growth from one year to the next) will be identical regardless of valuation. However, the starting yield, which is often referred to as yield on cost, will be higher at a lower valuation than at a higher valuation. Consequently, your future yield will be higher, but more importantly so will your future level of cumulative dividends received.

The comment referenced in my introduction was presented and asked in two different yet similar ways. Here is a second excerpt, which was originally stated in the first two paragraphs of the comment:

“*** re: NEE “…there are some who think they can redeploy the net $12,000 into a better investment that will grow even more over the next 5 years. ***

In order to define “better”, the question that needs to be answered is what is the goal of the investment? If the goal is dividend growth and total dividend payments over a defined time period, someone needs to explain how the “elevated” valuation will affect future dividend growth and total dividend payments.”

I offer this second excerpt in order to establish a clarification. If the question relates to the current investment, the “elevated valuation” will not change the future dividend growth nor the total payments of that investment. However, if the “$12,000” is invested into a lower valued company that offers a higher current yield than the original investment is currently offering, then the future dividend payments will be significantly higher. On the other hand, the dividend growth of either the original or the new investment will be directly proportionate to the amount of operating growth and subsequently dividend growth rate that each individual investment would achieve.

The following screenshots cover purchasing Johnson & Johnson (NYSE:JNJ) over two historical 10-year time frames. With the first, Johnson & Johnson is purchased when valuation was excessive, and the second when Johnson & Johnson was purchased when valuation makes sense. Both historical earnings and price correlated graphs, as well as the associated performance graphs, tell the story. However, to really receive a clear explanation of how and why this works, I suggest the reader watch the analyze out loud video covering the same time frames that follows.

Johnson & Johnson: Purchased on December 31, 1998 Overvalued P/E ratio 38.4

Johnson & Johnson Purchased December 31, 2008 Undervalued P/E Ratio 13.1

FAST Graphs Analyze out Loud Video: Johnson & Johnson 10 Yr Results Overvalued Versus Undervalued

In the following analyze out loud video, I’m going to clearly illustrate how valuation does have a material impact on the dividend income. As an aside, valuation not only has a material impact on dividend income, it also has a major impact on total return. As a clue to what you will see in the video, when Johnson & Johnson was purchased when it was overvalued was also during a time when its earnings growth was over 13%. In contrast, when Johnson & Johnson was purchased when it was undervalued was during a time when its earnings growth rate was only 6% or half as fast. Nevertheless, Johnson & Johnson delivered more dividend income and a higher total return thanks to attractive valuation even though its growth rate was much lower.

Summary and Conclusions

In summary, and with all things remaining equal, you can increase your income and your total return by selling an overvalued dividend growth stock and reinvesting into a similar quality undervalued dividend growth stock. It’s important to remember that in both cases, the forecast of future growth is equally as tenuous. In other words, this will not work out if the original investment continues to grow while the new investment falters. Therefore, the concept of similar quality is essential, as well as the predictability of future growth.

Consequently, I do not suggest that investors act impetuously or frivolously when making buy and sell decisions on their portfolio. I’m a fervent believer in the old adage that “a portfolio is like a bar soap, the more you handle it the smaller it gets.” Therefore, and to be clear, this kind of strategy only works over a complete business cycle. Investors need to recognize that out-of-favor stocks tend to stay out of favor for a period of time and in favor stocks likewise. In other words, these decisions make sense as long-term decisions and not as short-term trading decisions.

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Disclosure: I am/we are long JNJ.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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