Jeremiah Lowin – Machine Intelligence and Risk Management

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:59)
Patrick O'Shaughnessy is a principal and portfolio manager at O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:21)
My guest this week is Jeremiah Lowin. Jeremiah is a childhood friend of mine who has been a sounding board for me throughout my career. We have conversations like the one you're about to hear about once a month and in all those conversations, just like this one, you can hear me just trying to keep up. Jeremiah is one of those perfect SAT score guys, literally, who talks about topics like artificial intelligence like he's placing a lunch order.
His career has been in risk management and he is currently the head of risk management at a private family office in the New York area. The conversation is in two halves. In the first, we discuss models, machine learning, and artificial intelligence. In the second, we talk about what risk means in a portfolio and how it can be managed or at least redistributed. You'll have to listen pretty closely to this one, but if these topics interest you, it's a chance to see one of the leading minds in the fields of data science, machine learning, and risk management at work. Please enjoy our conversation.
So, Jeremiah, starting 16 years ago, you were teaching me how to do geometry proofs, and I've been learning from you ever since. And so I figured, like all the lunches we have over the years, that this podcast is basically an excuse to have conversations like we tend to have in a more public forum. So thanks for joining me.

**Jeremiah Lowin** (2:40)
Thanks for having me.

**Patrick O'Shaughnessy** (2:41)
The place that we'll start and the two major themes that we'll talk about today are learning, very broadly speaking, more specifically in the areas of machine learning and artificial intelligence, but also risk management in the investment process. So we'll start with learning. And I always have to remind myself when thinking about these more complicated topics that there is no conscious machine intelligence yet, at least not that we know of.
And so there are still very bright people behind the systems that are doing all of these things. And so it would be fun to hear kind of your own story. And we'll use building blocks just like a child learns through orienting themselves in the world and tinkering around.
We'll try to use some building blocks to get up from more simple to more complicated topics. So maybe just give me a quick bit of background about how you got started in, I guess, the foundational elements that allow you to explore things like artificial intelligence. Sure.

**Jeremiah Lowin** (3:36)
So for me, that actually goes back to stats 100 We were given the sort of canonical example of a normal distribution being the stock market, stock returns. And I happened to be reading the misbehavior of markets at the time and, of course, read that the stock market is anything but normally distributed. And it was the first time that I recall that I had this very academic dissonance where one pseudo professor through a book was telling me one thing and my real-life professor was telling me something very different.
And the light bulb went off and I said, well, I've been given the tools to actually go out and answer this question. So, of course, I did and it took some time. And, of course, I learned what you and I know well, which is that the stock market is anything but normally distributed. And I went to my professor and I said, listen, I don't understand. You said one thing and I've demonstrated another.