Financial technology in the living room. Generated by Stable Diffusion XL Beta FinTech — Financial Innovation and the Internet 2023 Fall Lecture 12 : Cyber-Physical Society and Future of Finance Kenji Saito, Graduate School of Business and Finance, Waseda University Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.1/28

This class is recorded Using Zoom The recordings could be used for research on (online) learning Transcribed for use and anonymized Will let you know when the necessity arises Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.2/28

The lecture slides can be found at : https://speakerdeck.com/ks91/collections/fintech-2023-fall Trial automatic transcription for lectures will be posted at Discord Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.3/28

Schedule (no longer provisional) Lecture 1 10/6 Overview of FinTech (1) • Lecture 2 10/13 Overview of FinTech (2) • Lecture 3 10/20 Internet Technology and Governance (1) • Lecture 4 10/27 Internet Technology and Governance (2) on-demand • Lecture 5 11/10 The World of Apps (1) • Lecture 6 11/17 The World of Apps (2) • Lecture 7 11/24 Basics of Cryptography and Blockchain • Lecture 8 12/1 Blockchain • Lecture 9 12/8 Blockchain Continued • Lecture 10 12/15 Blockchain and Smart Contracts • Lecture 11 12/22 Smart Contracts (w/ Demo) • Lecture 12 1/12 Cyber-Physical Society and Future of Finance • Lecture 13 1/19 FinTech Ideathon Lecture 14 1/26 Presentations and Conclusions Online presence is possible but not recommended for non-online lectures for interactivity reasons Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.4/28

Last Week, We Did . . . Smart Contracts and Ethereum Ethereum — Beaker/Newspaper/Machine Model Smart Contract Programming Demonstration How do we purchase digital rights to a real estate with digital currency? Assignment Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.5/28

Today’s Topics Assignment Review Cyber-physical Society and Future of Finance Q & A Assignment Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.6/28

Assignment Review Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.7/28

Assignment 5. “Artificial General Intelligence” AGI (Artificial General Intelligence) is capable of performing all the intellectual activities possible for humans at a level equal to or better than that of humans This will mean the replacement of intellectual labor, and will also accelerate the replacement of physical labor because of the precise control of robots, as well as any other major changes in society Suppose that AGI will appear in 2025 Please briefly describe the changes that could occur in the area of finance by 2030 Deadline and how to submit January 9, 2023 at 17:59 JST From Moodle (mandatory) (Q&A forum) So that your classmates can read your report, refer to it, and comment on it Optionally, you can also post to #assignments channel at Discord Just plain text, and be concise, please Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.8/28

Trends and Measures Trends . . . of your reports Measures . . . how to improve the class 19 out of 26 students submitted (always better late than never) Trends : No drastic change will occur (17) Drastic change will occur (2) Drastic here means changes of patterns or paradigms (like capitalistic thinking altogether) Where do you look? Do financial markets, as such, float independently in a vacuum? What do I mean? Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.9/28

B-san’s View [snip] I think we will also see a huge increase in the value of robotics industries We have an AI that can make split second decisions equal to (or better than) that of a human Robotics will have to evolve to be able to keep up with these requirements Adapting to last (milli/nano) second changes in commands, being more precise, . . . will be some of the problems they will have to tackle Investment in this sector will increase, to keep up with the advancement ⇒ An example of looking outside the financial markets Shouldn’t we do this for all outside industries and then consider financial changes? Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.10/28

V-san’s View One change could be that finance becomes an obsolete field and it disappears This would be the case if AGI advances the human race so much in five years that scarcity disappears and there is no need for a mechanism that distributes funds from one place/person/institution to the other ⇒ Radical thinking, and I do not know if this will happen by 2030, But it would be good to keep this view in the back of your mind We will have time to discuss this assignment further at the end of today’s class Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.11/28

Cyber-physical Society and Future of Finance Key concepts : Cyber-physical, Cognitive, Generative and Digital twins Aim for future — like passing the ball to a moving teammate Life with Earth-Scale OS (Operating System) and Meta-Nature Changes of Economy Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.12/28

Cyber-physical Cyber ← Cybernetics Focus on communication and control, so that animals, machines and other systems can be uniformly understood Reference to our nervous system → sensing and actuation (physical to begin with) Cyber-physical Apply cybernetics, physical to begin with, to the physical society Specific space, or the whole society functions by sensing and actuation Social infrastructures that support human lives and computer networks will be tightly connected through a variety of (AI-assisted) sensors, actuators, mobile devices such as smart phones, or even laws Today, we are always connected with information environments through smart phones and such, and therefore we are already at the entrance of the cyber-physical age Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.13/28

Cognitive Not towards AGI (not replacement of human) No need to have “consciousness” → no need to be ASTROBOY ( ) Does “learn” and “infer” → can be like GIGANTOR (Tetsujin 28-Go; 28 ) or GUNDAM Extension of human abilities of recognition and intellectual processing It really is off-the-shelf technology today Demonstration of hand-written number recognition (http://cs.stanford.edu/people/karpathy/convnetjs/) Perhaps, children’s work-place experience at a post office should start with something like above? It is not a question of machines taking people’s jobs It is a question of people sticking to jobs machines or machine-assisted users are better at ⇒ There is going to be an inevitable social shifts Cognitive everywhere already (e.g., handling of photo subjects in iOS) Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.14/28

Generative Automatic generation of text, images, video, sound, music, program code, etc. Often generated in response to (tasks indicated by) text prompts How does it work? → What Is ChatGPT Doing . . . and Why Does It Work? ⇒ Towards prompt engineering (New “Programming by Example”) More agile intellectual production (GPTs seem to be its early prototype) Individuals and interactions Interactive development While exploring what you want Production and construction = Searching (using a search engine) ⇒ Generative everywhere Divergence of worldviews between those who imagine so and those who do not is ongoing Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.15/28

Digital Twins The data world as a mirror image (or rather an extracted image) of the physical world If deployed in a virtual space, it looks like a kind of metaverse Real-time monitoring of plants, factories, traffic systems, etc. Can simulate operating conditions before building or making changes Digital Twins Everywhere — SIEMENS The digital twin is at home, in the office, and in schools Cybernetically, we have a digital(?) twin in our heads to begin with Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.16/28

Aim for Future What’s the trends of the changes from today → 30 years later? Even to aim a little ahead, we must be sure of the direction, because things are moving If you see things too closely to present, the business will be short-lived if social changes are rapid e.g. × Business assuming that self-driving cars are personally owned Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.17/28

Earth-Scale OS (Operating System) (2007) This is cyber-physical, applying cybernetics to the physical world “Centers” are going to be automated → Rise of DeFi (Decentralized Finance) Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.18/28

Earth-Scale OS and Meta-Nature Anthropology Informatics Environmental Studies Sociology Business Administration Politics Today Hardware Applications User OS Human Business Financial System Human Business Earth-Scale OS Automation System Earth Earth Near Future (as of 2007) Human Meta-Nature (Highly-automated decentralized social environment) Earth Near Future (as of 2021) To the left is just an excerpt of the typical studies involved Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.19/28

Amazon Go Shoppers are insensible of money → money will soon be invisible Variety of monetary media, coupons and points can work underneath the visible shopping environments Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.20/28

World with a Variety of Digital Currencies Global currencies such as bitcoin Digitization of national currencies (“digital JPY” in Japan) MUFG coin, J-coin, S-coin (digital coins by banks and alike) Trials by communities (e.g. DCJPY by banks and other industries) Trials by central banks (CBDC : Central Bank Digital Currency) Local currencies, “cause-oriented economy” Making an entry to the world where a variety of digital currencies are in use We will be insensible of its complexity, and we will just clarify our policies We will not even care whether the mechanism underneath is monetary or not Agents (e.g. smart phone apps) will start suggesting actions according to the policies Sharing economy will join, too ⇒ Decline of Monetary Economy! cf. “Maneki Neko” by BRUCE STERLING Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.21/28

Tetrad of Monetary Economy Exchange, Consumption, Saving, Investment Specialization Agricultural / Industrial Society Economic Gaps, Exploitation, Bankruptcy Bullshit jobs Digital Currency, FinTech → Meta-Nature ENH REV RET OBS Domination and Obedience Hierarchy Profit Maximization (Money-less) Trust System, Gift Economy Omnipotence Hunting and Gathering Society New media revive what have been once made obsolete, but will “gift economy” and “omnipotence” be revived? Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.22/28

Trends of the Changes Radicalization of money and finance leads to stagnation of exchanges and consumptions → Rise of sharing economy Life style of running economy without specialization (also boosted by AI or digital fabrication) → Degeneration of taxable economic activities Changes in how public works are carried out ← opportunities for us → At that point, we have already seen decline of money, have we not? By pushing the principles of monetary economy forward, money would rather retreat from the front stage of our lives, because accommodation without needing money are preferred → Destroys “employments” and “separation of selling and buying” Distinction between “ruler and ruled” or “producers and consumers” will melt away Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.23/28

Discussion : Changes in Economy and Labor How will economy be like after 30 years from now? How are we going to live through the path leading to that economy? Like, what will happen in the next 6 years? How do we begin? Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.24/28

Q & A Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.25/28

Assignment This is to prepare for the Ideathon, where you will bring your ideas to further nurture them Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.26/28

Assignment 6. “Generative AI in Finance” Devise and briefly describe a financial application using generative AI that will be valid through year 2030 (1) What is the problem? (2) Why is the problem important? (3) What is your surprising way to solve it using generative AI? Deadline and how to submit January 16, 2024 at 17:59 JST From Moodle (mandatory) (Q&A forum) So that your classmates can read your report, refer to it, and comment on it Optionally, you can also post to #assignments channel at Discord Just plain text, and be concise, please Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.27/28

See You Next Week Bring a computer (can be a tablet) to access Miro next week You can access it with a web browser Have a nice weekend! Lecture 12 : Cyber-Physical Society and Future of Finance — FinTech — Financial Innovation and the Internet 2023 Fall — 2024-01-12 – p.28/28