Will your next Best Friend be a BOT?

With 5G phones on the horizon, state-of-the-art voice technology is being positioned to become the next wave of AI-driven devices that will significantly change every aspect of our personal and professional lives. These disruptive devices will provide us on-demand, relevant suggestions and viable step-by-step pathways to solving complex problems. In fact the changes in store both technologically and behaviorally at home and the workplace will be so extreme that the laptop or mobile phone you are using to read this article are destined to become another glorified door stopper. Here’s what you can expect.

Googling as we know it today will change from a one line entry to an instantaneous voice exchange between you and a Bot. Rather than delivering a list of links, the output your Bot fires back will be specific to your questions. Downloading Apps on to your smartphone will no longer be necessary because your Bots AI will scour every major App available and connect you with the one that will best meet your needs. Not only will your Bot deliver optimal answers but also ask you insightful questions for you to consider. Username and Password requirements will no longer be necessary. Instead, the voice print you use to speak into a device will vet you seamlessly. HTML-driven web page searching will soon appear primitive and inefficient. Even the ‘water cooler’ chat among peers for pollenating ideas will become a distant memory.

Due to the FOMO effect, (Fear of Missing Out) I decided to attend the Conversational Interaction Conference in San Jose, California this year. The two-day, annual event held in early February provided me with valuable industry insights, updates on working applications, future blue prints, new industry buzz words, plus a list of key hurdles confronting voice technology developers today. Below is a brief synopsis of what I saw and heard at the conference. I have included links and capitalized key industry buzz words for easy identification. After reading this article and accessing the links provided, you should have gained sufficient intel/understanding to ask better questions on the current state and future of voice technology.

Voice Controlled Devices

Let us start with some familiar Voice Controlled Devices that are already in the marketplace such as Amazon’s Alexa, Apple’s Siri, Microsoft’s Cortana or Google’s Home. These ubiquitous smart devices have allowed us to seamlessly use our natural voice to make on-demand requests, such as to play a song, the news, the weather, or a lot more. For the most part these devices do a decent job of what is referred to in the industry as “Command and Control” applications. On the backend a user’s command such as “Alexa! What is the weather?” is converted from speech to text using Speech Recognition (SR) then passed on to a Natural Language Processor or (NLP), which invokes Deep Learning (DL) and Neural Network (NN) algorithms to analyze and prioritize keywords. Backed by powerful cloud-based computing power, multiple algorithms use these keyword inputs to generate a text response. This text is then converted to speech using Text-To-Speech (TTS) and delivered back to the device. This entire process takes less than half of a second, which is within the tolerance levels of a normal, two-way conversation between two humans.

Every time an individual wakes up a Voice Assistant Smart Device with their voice (i.e. Alexa! or Siri!), the commands uttered after are stored and scored. These unsuspecting devices automatically deliver your data to a Cloud-based, voice service platform, which appends your data to a Machine Learning training data set used to increase the algorithm’s overall accuracy. Ultimately these devices will mimic human-to-human conversational interactions similar to that of two friends chatting casually in the same room. A good visual of this concept is depicted in a movie trailer for 2001: A Space Odyssey where a talking Voice Assistant called HAL 9000 converses seamlessly with the protagonist.

To get a glimpse of how close we have come to HAL 9000, Aigo, a California-based startup, produced a video comparing its breakthrough technology with that of Alexa’s. (Be sure to view the entire video.) It reveals what one can expect from these devices, going forward. Also on a similar game-changing trajectory is BMW‘s Intelligent Personal Assistant, an advanced voice activated driving experience technology. With this voice package, BMW aims to eliminate dashboard touch-screens, …the outcome of which could inspire radically different auto interior designs, in particular, for autonomous vehicles.

These Voice Assistant Smart devices are part of a larger category called Voice User Interface or VUI’s. VUI’s include any smart device or app that relies on a user’s voice for input commands. These VUI’s could be life-size human-like Robots, Chatbots, Holographs, and more. Let’s take a closer look at who is doing what in this space with the following VUI’s.

Robots, Chatbots, Holographs

SoftBank Robotics created a friendly-looking robot called ‘Pepper’ that companies such as HSBC and Carrefour use to greet their customers. Like a dispatcher, “Pepper’ directs customers to the appropriate employee or department using the language of choice. In the event of a communication error, ‘Pepper’ has an integrated, iPad-size screen for optional click inputs. ‘Pepper’s’ disarming, child-like interactions dazzle audiences, especially when it successfully greets a customer by name. Similar to its Brethren, ‘Pepper’ becomes smarter by matching images of its visitors with their corresponding Contextual Utterances. ‘Pepper’ has also shown promise with young medical patients who tend to feel more comfortable chatting about their symptoms with a robot than with an adult.

What ‘Pepper’ does offline, Avatars do online and more. Avatars interact with individuals from a web page or App using voice, text, or both. Just as ringtones gave mobile phones their customized personality, Avatars can help set the tone for interactions by mimicking a celebrity’s voice/image or simply project a voice with an engaging accent. Sapientx, a San Francisco-based firm specializes in creative Avatar designs. Their creations help humanize the Chatbot experience blending both entertainment with genuine, positive interactions. They can also inject a visual/voice branding experience that consumers can identify with personally. The firm’s white paper expands upon how their interactive branding power can transcend generations in many positive ways.

A typical Chatbot experience requires either a click or utterance from the user. Depending upon the App, a Chatbot will reply via voice or text. Users communicate directly with the activated device (via voice or text) and receive near instantaneous responses, …just as though they were interacting directly with a department head.

Bank of America’s Chatbot or Virtual Financial Assistant is called Erica. With Erica, users can learn about their personal spending habits, receive suggestions on driving financial improvements, and learn about ancillary services available at the bank. This solution is ideal for up-selling and cross-selling sales campaigns that can leverage a client’s changing needs.

Workday.com, a cloud-based business service entity offers a Chatbot to help their employees stay connected. Their Chatbot improves efficiency, knowledge sharing, and collaboration. By integrating this platform in the workplace, Workday.com employees are regularly reminded of their fundamental core values, which in turn helps promote management’s engaging culture internally.

Another interesting example came from Murphy Oil, an oil and gas company located in Arkansas. Management hired Alan AI, Inc, a Texas-based enterprise mobile development firm, to design a conversational voice Chatbot for their field engineers to deploy while checking and maintaining the company’s equipment. This ‘supercharged’ Voice Assistant gives their engineers the ability to trigger required workflows and monitor equipment progress in real-time. Other Chatbot enterprise developers at the conference included Rulai and Grid Dynamics, which is pending an IPO.

So far the industries leveraging Chatbots include Entertainment, Healthcare, Financial Services, Cable/Telecommunications and Utilities. The bulk of applications, however, are for specific internal use such as HR, expense reports, employee directory assistance, etc. Essentially they address all the little nagging items employees endure on a day-to-day basis, (i.e. recording travel receipts). Internal applications enjoy greater success because they can leverage a company’s industry jargon and finite database to achieve higher levels of speech recognition accuracy.

If you are looking for some winner applications for internal use, consider reaching out to Oracle’s Conversational Design Team. They are the group behind Oracle’s Virtual Assistant. What caught my attention at the event was that Oracle’s deliberately focuses its resources to develop internal applications that deliver 95% or higher levels of voice response accuracy. This ‘high bar’ approach has given their team the bandwidth to address more challenging issues such as multiple requests in the same ‘Utterance’, …also referred to in the industry as ‘Intent Handling’.

Finally, Microsoft delivered an impressive keynote, which included a speech to text demo from the very same PowerPoint used to deliver the presentation. As the keynote speaker, Xuedong Huang, Technical Fellow and Chief Speech Scientist for Microsoft addressed the audience in his Scottish accent English, a Spanish text version of his words appeared in real-time below his slides. Being fluent in Spanish, I could personally verify that the sub-title translation was impressively authentic. This near-flawless, application could be easily paired up with any two languages from a list of 50 available; hence, a French spoken presentation could display Chinese sub titles or vice versa. This service is currently imbedded in Office 365 and costs about $1 per hour of speech.

As though this feat was yesterday’s achievement, Mr. Huang felt obligated to awe the audience with yet another example of achieving ‘Human Parity’. This time he used his own voice print and intonations to display an image of himself conversing natively in Japanese. According to a Japanese-speaking member in the audience, the Japanese delivery also sounded authentic.

In a successful attempt to leave a lasting impression with the audience, Mr. Huang played a video of Julie White, an actress and global motivational speaker. She used a life-size hologram of herself to deliver a speech in native Japanese to a Japanese audience in Japan, …all the while she remained at her home in San Diego, California. The implications from the potential uses of this breakthrough technology both good and devious were equally startling and open for ongoing debate.

Creating Your Own Chatbot? – Key Design Issues to Consider

Before you decide on launching your own Chatbot, it would be wise to align your lofty expectations with a dosage of reality. Voice technology is much harder than it may appear. It is its own worse enemy because incremental successes tend to propagate the need for more backend technology, which in turn unleashes more complexity, often at a geometric progression. Fortunately and as testimony to the recent Conversational Interactions Conference, the industry has met and exceeded many impressive breakthroughs. However, the battle to achieve ‘human parity’ across all platforms and applications on a sustainable basis continues. Here is what keeps developers up at night.

Hardware issues… Noisy Environments can pose serious issues for Ambient Voice Exchanges. Amazon’s Echo units currently include 5 unidirectional mics that can pick up surrounding voice commands from multiple angles. More may be needed… For Chatbot apps, however, the key issue is just the opposite. Back ground noises, such as traffic or machinery need to be eliminated. UmeVoice, Inc, a headset manufacturer, offers military grade, noise cancelation headsets and ear buds that help drown out surrounding noises, allowing users to provide voice inputs in practically any situation with excellent clarity including audible whispers.

Software challenges… The backend engines that seamlessly support Voice Controlled Devices from the Cloud depend upon the ongoing advancements in Natural Language Processing (NLP), Deep Learning (DL), Neural Learning (NL), Speech Recognition (SR), Text To Speech (TTS), and a slew more acronyms yet to be named, …plus all of their respective ancillary development tools! The process is never ending…

UI/UX Design protocols… Humanizing Bots requires a deep understanding of acceptable human behavior. UI/UX (User Interface / Use eXperience) designers deliberately include facial expressions to invite positive emotions from the user, especially in the event a voice exchange fails to meet expectations. In the industry this soft yet crucial issue is known as ‘Failing Gracefully’. To appreciate the importance of “Failing Gracefully”, imagine the mounting frustrations that one would experience if the other person not only delayed their response but also repeated the same question multiple times. Natural voice exchange tolerance hinges on less than half of a second per response. Any longer and a simple dialogue between two individuals risks appearing like two separate conversations, …the likes of which would harbor irreparable frustration, distrust, and confusion.

Even with the best hardware available, voice applications can fail due to poor conversational interaction protocols. For example, the gender voice or accent used to interact with a user may come across unappealing or unfriendly. In the case of Chatbots, replies may be too long, not relevant, potentially insulting, or even ‘creepy’, especially if the Bot were to divulge into any personal details unintentionally. Even a user can fill the feedback loop with poor data by inadvertently gaming the system, either by speaking unnaturally slow or using specific terms out of context.

Conversational interactions should be fun, entertaining, terse, non-invasive, and to the point. Bots should engage with users to learn more about them without appearing overburdening. Each exchange should build upon the previous one to help profile the user. The more the Bot knows about the user, the more likely its suggestions will resonate and the all encompassing trust factor increases. In short the key challenge with designing an application is to find the balance where the Bot can gracefully and gradually extract more intel from a user, while simultaneously integrating the aggregate data to help it provide the user with more relevant and timely suggestions. This fine line of being helpful while remaining invisible and accurate is an ongoing industry challenge, …and even more so, when a growing list of backend technology issues are considered simultaneously. It is at this very tenuous and yet exciting juncture where the industry stands today.

Some of the Industry’s Greatest Challenges

Perhaps the greatest challenge for Bots is the handling of instructions that change midstream. This event occurs when a user who asks for one thing suddenly changes his or her mind in the same utterance for something else. On the receiving end, the undoing of one for command for another can cause processing algorithms to breakdown. A reset routine to handle the new request is a possible work around, however the additional processing time could create an extended delay that would exceed the half of a second conversational interaction requirement.

…and if all of these challenges were not enough, developers rightfully complain about the need to code and maintain the same voice applications for each platform, IOS, Android, Siri, etc. Often than not, these platforms will modify their API’s (Application Programming Interface) without warnings, sending developers into a mad rush to fix each application!

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Tom Kadala is a technology innovator and freelance writer on topics related to artificial intelligence and machine learning. He is also the founder of RagingFX.com, a first-of-its-kind Autonomous Company.

© 2020 Tom Kadala

An FX Parity Play post Brexit

Could Brexit push EURUSD, GBPUSD, and EURGBP to Parity in 2020 …or sooner?

The tea leaves in the UK are wilting fast as the Brexit deadline is fast approaching. While goblins and ghosts will be meandering the streets in the US on Halloween night (October 31), the UK will be bracing for the scare of the century, namely, a possible departure from the EU. Leading the charge are two factors: Boris Johnson’s ego and the fear of Labor Leader Jeremy Corbyn becoming the next PM. Both outcomes are down right scary!

Mired within the cross hairs of British politics lies the uncertain future of Sterling and the Euro. Both currencies stand to lose value against the USD and other safe haven currencies, i.e. CHF and JPY). At the very least traders can expect lows to be tested once again. Here’s why…

Since Trump took office, investors have been living a new economic normal that has yet to be fully reflected in global currency values. As a result, central bank reactions have varied widely.

As of late… Mario Draghi has renewed QE efforts creating more ‘easy money’. Jerome Powell is patching up a US short term liquidity issue with a QE-like repeat performance. GDP numbers are dropping due to unresolved US-China talks on trade tariffs. Major European banks and pension funds are choking up against EU’s negative interest rates. Worse of all, global monetary policy tools that central banks once relied on to maintain economic stability are no longer effective. These and other factors are pushing economic leaders to compete on the basis of their devalued currency rather than optimal resource allocations and coordinated globalization.

This relentless ‘race-to-the-bottom’ syndrome among central bankers has investors worried and will very likely be the root cause for a potential parity FX play against the USD in the months ahead.

Comments?

© 2019 Tom Kadala

How to FX Brexit…

From the RagingFX Trading Desk…

The jury is finally out. Parliament has for the second time voted down Theresa May’s tentative Brexit agreement. Despite recently acquired legal assurances from Brussels of a limited back stop with Ireland, a major sticking point, the British Parliament would have nothing more to do with May’s two years of haggling with EU negotiators. What lies ahead is most certainly the growing uncertainty of the British economy.

Just as most FX traders have been baffled by the recent strength in the dollar, they have also shaken their heads in disbelief at Sterling’s rise. On the dollar, some argue that the dovish outlook from Powell and the disappointing 20,000 NFP numbers from last Friday hide the fact that the USD is fairing out better than its peers, …hence the show of strength is really ‘relative’ strength from an overall decline.

To some degree, could the same be said about Sterling’s recent strength? The UK economy is firing on all pistons fueled by historically low unemployment numbers and an increase in tax revenues from earlier this year. But, here is where the difference lies. Sterling’s ‘relative strength’ comes from an artificial demand founded upon frenzy, stockpiling efforts from both consumers and government buyers living in fear of a ‘no deal’ Brexit.

After March 29 when Article 50 is to be invoked, the British economy will return to a lower equilibrium point. The irony is that it no longer matters if Brexit is approved or not; nor if there’s a ‘no deal’ Brexit, a second referendum, or new elections. The damage to the UK economy has already been done, because it will take months to work through the artificially bloated inventory of goods, especially among soon-to-be tight fisted consumers living in fear of losing their jobs to a forthcoming recession. Add unprecedented political uncertainty of the likes not seen for decades and Sterling strength will undoubtedly be short lived.

On the near term, we expect Cable to trade with high levels of volatility within a 1.30 to 1.35 range to start. Over the mid term… look for eventual spikes to give way to a predominant downtrend where it will potentially test a 1.14 low.

Comments?

© 2019 Tom Kadala

Hanging in the Balance for FX Traders… Brexit, Trump’s Tariff Threats, and the EU’s unprecedented Plea

From the RagingFX Trading Desk…

Dominating headlines for this week include Brexit, China, and Germany. Here’s is our take for the weeks ahead…

On the Brexit front we anticipate an extension to the March 29, 2019 hard deadline for at least another year. The EU will be holding their elections in May, which will hamper a second referendum attempt. Keeping the status quo, at this juncture, we believe is what is best for both sides, which will most likely secure Theresa May’s role as PM for the near future.

This past weekend Germany caved after witnessing Theresa May’s historic Parliamentary loss of support for the current Brexit proposal. Merkel’s supposed successor, Karrenbauer, issued an unprecedented, emotional plea from the CDU asking the UK to reconsider reentry. The $120b investments and more than twice that in trade exchange value between both countries are weighing heavily on the minds of German leaders.

If you agree that Germany holds the purse strings for the EU, this gesture has significant ramifications politically. If cooler heads prevail, both sides will seek remedies behind closed doors that should buy more time for negotiations.

What does all this mean for FX traders?

Going forward, we see a global recession triggered by the tariff war between the US and China. This morning the latest IMF global predictions concur. China’s debt levels will continue to rise as the government continues to release more funds into the economy. The resulting inflation will depreciate the Renminbi against the US Dollar. In addition, the slowing Chinese economy will dampen commodity demand, which in turn, will hurt emerging markets, all of which will eventually lead to urgent bail outs of their respective dollar denominated liabilities. Those governments saddled with Chinese loans may have little recourse, since the IMF will not recognize Beijing’s competing alternative, the Asian Infrastructure Investment Bank.

In this economically declining scenario, the USD will remain strong at least for a few more quarters due to the current economic momentum. On the mid to long term, we would not be surprised to see the Euro reach parity with the USD as the EU seeks to rebalance its tariff-stricken industries.

© 2018 Tom Kadala

A FOREX Perspective on the US-China Tariff War

When the White House launched its first round of global tariffs to protect the steel and aluminum industries, they realized quickly that they had missed their intended target, China. After issuing a list of exemptions, they unleashed a second round of tariffs for $50b, this time aiming straight at China’s economy. The response from China came as expected in the form of a tit for tat. Trump then doubled down with a $100b tariff threat at China, where a similar response is expected soon.

What is happening behind the scenes?

Let’s start with a closer look at the import and export numbers between both countries. In 2017 China imported $130b of American goods, while the US imported over $506b in Chinese goods. The trade deficit of $376b no doubt can be viewed as a cause for concern. However, more revealing is the $130b figure because it represents the maximum the Chinese can retaliate against US imposed tariffs. Already with $150b on the line, the Chinese will have a net of $20b more in US tariffs to match. In essence the tariff war chess game between the US and China has reached a maximum ante even before negotiations have begun.

Two questions remain… What else can the Chinese do to match the US tariff burden? …and how exposed is the US economy if the Chinese tariffs are imposed?

Some have suggested that China could stop buying US debt. Such a move is unlikely because the dollar is expected to strengthen for two key reasons. First, US interest rates are on the rise in response to historically low US unemployments levels and, more so, from a broadened US economic recovery. Secondly, and perhaps least talked about is the repatriation of corporate funds overseas. Portions of a 3.5 trillion dollar corporate earnings kitty are being readied to return to US shores beginning in Q2, As this unprecedented flow of funds are transferred into US bank vaults, the impact from the increased demand for USD currency will be felt globally.

For now, China has no reason to sell its dollar denominated investments. The potential combination between increasing interest rates and currency appreciation is a formidable investment with low risk. As for US companies that will be impacted by Chinese tariffs, the net effect from having to pay a higher price for Chinese goods will be partially offset by their stronger USD earnings.

In light of this scenario, we expect the next wave of Chinese tariff retaliations may come in the form of a weakening of the Renminbi, hence, reviving the appeal for Chinese exports, while also maintaining the status quo with weakened non-USD currencies. A stronger US dollar against a weaker Renminbi could potentially be devastating for net exporting countries such as Germany. We expect the economic set backs could temporarily drive the euro below parity with the USD, while their economies adjust accordingly.

With the US corporate tax at a very competitive 21% rate, one could expect net exporters such as Germany to migrate their manufacturing bases and corresponding supply chains to the US. This trend has already begun and is expected to accelerate, especially if the US-Chinese tariff war continues unchecked.

© 2018 Tom Kadala

Powell’s Debut Rattles FOREX Currency Markets

Powell’s first news conference was definitely a switch from the scripted presentations given by his predecessor, Janet Yellen. Despite the difference in style, the message was clear: interest rates are on the rise, unemployment is at historic lows, and what remains to be seen are wage increases followed by an increase in productivity, otherwise, we can expect another recessionary pull back.

What does that mean for Forex traders?

Today we saw the dollar weaken against most currencies. At first it may seem counterintuitive for a currency with a rate increase to fall favor with traders, however, this anomaly is actually a repeat performance from previous USD rate rises. There are numerous academic arguments to support the pull back, however, our favorite is what we have heard from top traders at Goldman Sachs, “it’s just what happens.”.

From a more academic perspective, the 10-year T-Bills at 2.9% are teetering upon a psychological level of 3% where traders and investors believe the US stock markets may stall the longest bull market on record or even reverse it. Their argument is largely supported by the increasing default exposure from emerging countries such as Turkey, which have funded their long term projects with US Dollar denominated short term debt. As rates increase, their dollar denominated interest payments increase accordingly and become harder to pay back. The same is true with US credit card holders. In addition, as US consumer debt levels continue to surge, default levels may reach new levels at home, which could potentially stall the consumer retail engine that represents 70% of the US GDP.

With this unsettling USD backdrop, the GBP (British Sterling) is gaining unexpected strength against both the Euro and the USD. Recent developments between the two Brexit negotiators, Davis and Barnier, arrived yesterday with the usual British pomp and circumstance but in reality only delivered an extension of one year to the status quo. Some progress may have been made on some fronts, but the number of unresolved issues hasn’t changed significantly. Only the final Brexit date was moved to 2020. All of these shenanigans may be negotiating tactics of sorts, but at the end of the day, the feeling one can get from the very strained discussions between Westminster and Brussels is that eventually a referendum will be reintroduced in favor of the ‘Remains’.

Brussels’ negotiating tactics involve a high level of tolerance with little meaningful progress. They are letting this inevitable scenario play itself out. Unfortunately for Britain, when their leaders finally do choose to rejoin the EU (in whatever capacity), they will have gained less for their economy than what they had in place prior to triggering Brexit.

© 2018 Tom Kadala

Have Trump Tariff Threats become a Bargaining Chip for Unilateral Trade Agreements?

Market reactions to Gary Cohn’s resignation as the White House chief economic advisor were swift and uncanny. One can only guess that every Goldman Sachs trader, Cohn’s former firm, were tipped off well in advance of his final decision to resign. The warning probably gave the firm’s traders enough time to prepare a severe sell off once the markets closed. Border line to insider trading, such a move might trigger an SEC investigation, but it’s unlikely. Like the NRA, Goldman Sachs ‘walks on many swamps’ in Washington, …and has for decades.

It’s not the first time that Goldman Sachs comes to Washington for a brief stay and leaves significantly wealthier. Henry Paulson was a classic example of a ‘wolf-in-sheep’s clothing’ during the financial crisis of 2009. One thing for sure, like the well trained traders that they are, Goldman Sachs alum know when to leave Washington just as they know when to exit a trade. Hence, Cohn’s resignation was just another timely departure. In December he achieved a key objective. namely, passing the Tax Reform bill. …and now that all that is done, it was time for him to leave.

Post Cohn, what next?

Intended or not, Cohn’s departure may be part of a much larger Trump/Navarro scheme.

Consider this possibility… What if the steel and aluminum tariff threats were actually a foil to coerce affected nations, which there are many, to request/beg for a unilateral trade agreement with the US? A prime example of this relatively ruthless negotiating strategy is the upcoming NAFTA renewal agreement involving both Mexico and Canada.

Surely politicians are expected to respond with counter protectionist measures and tough talk, but at the end of the day, the underlying message that will continue to resonate the most will be the implementation of a solution that will remove the tariffs completely, such as one that is conveniently wrapped into a unilateral trade agreement.

In essence, Trump/Navarro created the threat that would drive the outcomes they sought.

You may recall that early on during his first year in office, Trump bowed out of the Trans Pacific Partnership (TPP) agreement due to its multilateral structure. He accused it of being opaque and prone to unfair practices. Now with the stroke of one threat, he may very well have achieved his goal of undoing multilateral agreements altogether and replacing them with more transparent and comprehensive deals.

© 2018 Tom Kadala