Good afternoon, ladies and gentlemen. This morning in my role as Acting Director-General, I addressed the first regular meeting of the Eye Board of Governors since the untimely death of Director-General Lamano. This has been a testing time for the agency. And I believe we demonstrate the strength and resilience in continuing to fulfill our responsibilities, despite the many challenges we face. I did highlight some interesting developments in the assistance we provide to countries and the peaceful uses of nuclear technology, including the use of a new combination of techniques in China to suppress mosquito-despread diseases. I hope that you all as well will be attending next week's scientific forum, which starts on Tuesday. And the topic is a decade of action on constant control and the way forward. And I would say that this is a topic where interaction and engagement from the media may benefit our member states as well. You are also aware that yesterday I visited Tehran for discussions with senior Iranian officials, and we discussed the eye verification and monitoring under the joint Comprehensive Plan of Action, the JCPOA, as well as SEVGAT's implementation under the SEVGAT's agreement and the additional protocol. Regarding the JCPOA, the agency was informed about the latest activities decided by Iran related to centrifuge research and development. And as you know, the agency continues to verify and monitor Iran's nuclear-related commitments under the JCPOA. Any further relevant developments will be brought to the attention of the board. The agency also continues to verify the non-diversion of nuclear material declared by Iran under the SEVGAT's agreement, and evaluations regarding the absence of anti-nuclear material and activities in Iran continue. Regarding the implementation of Iran's SEVGAT's agreement and additional protocol, during my discussions in Tehran, I emphasized the importance of full and timely cooperation by Iran. It is important to advance our interactions, and therefore I also stressed the need for Iran to respond promptly to agency questions related to the completeness of Iran's SEVGAT's declarations. We will continue our efforts, and we will remain actively engaged. I also highlighted in the Board of Governors that time is of the essence. That's also a good occasion for me to remind you that the agency's work related to nuclear verification is always consistent with our mandate and established SEVGAT's practice. It is an independent, impartial, factual, and professional. And as far as we are concerned, we will continue to work in the same manner. And this is, from my point of view, essential in maintaining the agency's credibility, not only now, but also in the future. And finally, the agency continues to monitor the nuclear program of North Korea using open-source information and satellite imagery. And we remain ready to play an essential role in verifying the DPRK's nuclear program if a political agreement is reached among the country's concerned. I will now be happy to take your questions. Thank you. Question, please. Identify yourself. I should press. Thank you. Lauren Snorlin at the Wall Street Journal. Thanks for the time. I have a couple of questions, and I might come round for a second round afterwards if you allow me. You said in your statement today that on Iran and the SEVGAT, the times of the essence. I'd noted it's been a year since the public revelation of the Turkish Abad site. Did the Iranian officials that you saw at the weekend promise to follow up and clarify the questions you've asked on the material we understand have been found at the site? How much time will you give Iran to respond? And if they fail to respond, what would you be prepared to do? What consequences would there be? I have a second question for you. That was just one question. That was one cluster of questions. If I may, a second cluster of questions. Please. Can we just take this for a second? No, no, please. Maybe we can... As you like. No, please, go ahead. Okay. DJ, you know the argument is better than I do, Turkish Abad, and the archive some people say suggests Iran is trying to keep it open. It's nuclear weapons options in future. How do you respond to the charge that the agency needs to be more activist in following up on people and places that have been identified as part of Iran's past nuclear work, including in the archives, and that the agency has been too cautious and slow up till now? And was today's warning about timing of the essence and your visit to Tehran a sign that the agency is becoming more focused on these concerns about Iran's past work? Thanks. I hope I got them right. First of all, as you know very well, we don't refer in our conversation with member states or with the media on the specifics of safeguards implementation. Saviour guards work and agency verification work, I think, is the result of a very rigorous technical process. There is nothing improvised in our safeguards work. Everything builds on a very solid technical and legal analysis. And I think we owe it to our safeguards inspectors. So for this reason, I will not be able to, I hope you understand to comment on the specifics of your question, but I could tell you that in general, you're asking about how much time we give to Iran in the context of our statements. Against safeguards implementation as well, there is no one size fits all. Every situation is different than another. You have to analyze technical elements, legal aspects, the different activities that are involved, and the timelines are defined at the end a very thorough process and judgment that is meant to satisfy to the best of our abilities the technical requirements under the safeguards obligations. So when I highlighted today the need for timely and full cooperation and also the need for saying that time is of the essence, it is meant as an indication that our ongoing interactions need to advance even further and it's part of the process and I think we made it very clear from the agency side, we continue to stay very much engaged in exploring all the options and making sure that we address all the remaining, all the available options. Now, I also heard the number of adjectives, you know, agency being cautious or slow. I will have to, with your indulgence, to dispute that notion. Simply because I think we are very proud of the work that the agency is doing. The credibility is very important and I think the international community couldn't have a better defender of the international peace and security in this area. What I can assure you of is that we are doing our work based on the very solid infrastructure of legally binding obligations but also practices that we have developed over the decades. And well, one other point, what we are following now and the discussions that we have with Iran, this is no different than what we are pursuing with in our efforts in other parts. So the expression of my comments in the statement to the board show indeed the need to advance further these ongoing interactions and I would not agree that we are cautious or we are slow. We are very, let's say, rigorous, meticulous and we are faithful to our mandate. It couldn't be differently, simply because you also have to understand the director general acting or not of the agency operates and fulfill its mandate under the authority of the board of governors. So there is no, let's say, notion that could encourage an artificial progress or process. If the board in any particular situation is not convinced that a savory agreement or an additional protocol or the pass that we have chosen is not the one that serves our mandate, of course the board will react to that. So we are very mindful of all these arrangements and we take our job very seriously, I have to say. Jonathan Tyrone with Bloomberg, Mr. Faruta, you referred to the specific word of completeness in your introductory statement. As you know, completeness has specific safeguards, relevant usage. That is, countries are required to provide correct and complete information about their fissile material inventories. Were you trying to suggest something specific to Iran by using that word completeness in your statement? Once Iran completes its provision of information, how long will the IAE require to make sure that it is correct? And then I have a second, just a very brief question about how you are pursuing South Korea's request to assess the safety risk of Japan's Fukushima water release into the ocean. Thank you very much. You are inviting me to go beyond what I have been saying in the Board of Governors. And again, I cannot go into specifics, but I think you mentioned yourself, completeness refers to declared activities. And this is a concept that we operate with in our safeguards implementation. Starting a debate on hypothetical scenarios, how long or what may happen, I'm not very much inclined to do that, simply because it will mean I presume or assume a certain course of action. We are now in a process. It's ongoing. It's not the end of it. We've been having conversations, and we are ready to continue. That's the sense of my statement. And of course, from this point of view, I will not speculate on how long this could take, but it is obvious we identified, we spelled out the needs for a timely cooperation to advance these ongoing interactions, and in a way that's what it means. Taking the question on the communication from, you mentioned the communication from the Republic of Korea, we do not provide details of our bilateral communications with member states, but the specific issue that you mentioned is very well known to the agency because we've been involved and provided a number of, we deployed a number of expert missions to Japan at the request of the Japanese authorities related to the commissioning efforts for the Fukushima Daiichi nuclear power plant, including water treatment. The last mission took place in November 2018. A report is already public. It has been published in January, I think, this year. And that also contains advice to the Japanese authorities on how to treat this path of discharge. I hope this addresses your question. Sorry, are you planning to follow up the last mission with a new mission? Are you in conversation about that? Well, as you know, issues related to safety and security are very much triggered by requests from member states, and these are national responsibilities. If there is an interest, if there is a request, we will engage with our member states at any point in time. We have a number of peer review services and technical advice that we could provide in such areas. François Murphy from Reuters. Digi, if you can't go into specifics on Iran, perhaps you could provide us with a general sense of how your meeting went, because all we've really heard is what you said to the Iranians, and it's almost as if they weren't there. How did the meeting go? What did they tell you? What sense did you get from the Iranians? And secondly, your update to the board on the centrifuges that are being installed and the modifications that are being made, the lines at Natanz. Even the nerdies among us is struggling to sort of bottom line what that means in terms of outputs. Could you give us a sign? Realize that going into specifics again is difficult, but perhaps you could give us some sense of how, if Iran does everything it has told you it is going to do, what that does to its potential output, roughly, relative to now. Thank you. OK, thank you. And I appreciate because you helped me correcting a show coming in my comments here. Indeed, we did have very substantial discussions with Iranian senior officials. I was grateful to Vice President Salehid, to Foreign Minister Zarif. I was grateful to other senior officials in the Atomic Energy Organization of Iran and the Foreign Ministry for the very substantial exchanges covering a full range of issues in our cooperation. And I was pleased with the tone and the input that we received in those conversations. That shows, as a matter of fact, that the relationship between the agency and Iran is a very mature relationship where we can discuss all issues. And sometimes, of course, we need to express the need for more and to pace up, probably. But I think that was the message very well understood back in Tehran. And as I say, the visit was very timely to have the chance to go through a number of issues with the Iranian authorities. So thank you for allowing me to make this correction. The report that we provided last night reflects in a very clear, let's say, way, at least technically, the developments and the decisions that Iran took as part of the JCPOA. It's not about our, let's say, hesitation to comment on hypothetical, but it's simply that the output is not a simple matter that you calculate the figure, and that's the output. And at the same time, the output that we'll be having in, let's say, a few weeks is probably less important than the output that we have now or the arrangements that exist now in place. Not only that we don't work with apothecals, but I think the notion and the concept that we are working with in our work, looking both at the issues that we have to handle, are not that much linked to the issue that you are alluding to. We are making sure that we can detect timely any effort or any activity that may favor a course of action that we don't foresee. I'm really sorry, but again, can you give any sense of an order of magnitude in terms of how much further this brings Iran in terms of being able to accelerate its output, its in return output? Well, I think, again, the role of the agency is not to judge what these actions will bring. I think at some point, if there was some public comments on what is the expected impact of those measures, not from the agency. So you will understand that going into this direction, I think, oversteps our mandate and our role in the monitoring and verification of the JCPOA. As you know, we made it very clear throughout the last almost more than three years, I would say. We made it very clear that the role of the agency is to provide the facts to allow members of the JCPOA, but also to the board, journalists as well, the reports at some point become public, to comment in the way they wish to and to pass the necessary judgment. So I hope you understand that. Albert Auti, German Press Agency, DPA. I have one more follow up to your statement that time is of the essence. I don't quite understand why in the past the IEA said when asked about following up on certain things in Iran that it would take its own time. This late DiGi Amano stressed again and again and again that it's the IEA's own prerogative. The IEA will not be pressured into doing anything. Now all of a sudden time is of the essence. Why is time of the essence now? And it wasn't before. Well, we probably see it simply strictly from our safeguards angle and verification angle. There may be a temptation for you, of course, to see it in the context of other developments. Why now? It's simple because that's where the safeguards effort, that's when the safeguards effort became, let's say, mature enough to try to clarify potential aspects that are linked to the implementation of the safeguards agreement. But again, you're also linking to issues that I'm not linking them. Saga's implementation in general, as I explain, is a very complex, technical, but rigorous process. And what is timely for us may not be timely for others, but that's the reason, let's say, that for which member states trust the IEA's work. And we heard these expressions in the Board of Governors in the past as well. And this is the time when, of course, we also prepare a report to the Board of Governors, which was issued some week ago, and then the statement that you see today. So the Board is going to look at all these issues, and we will see how they develop. Hello, Homaleski from Press TV. You have in your report the sentence, Iran should cooperate full and timely, full and timely cooperation by Iran. And this has been interpreted by some media as meaning that Iran should have some kind of better cooperation with the agency, because on the face of it, it looks like Iran is giving all the necessary access or information that the agency requires. So when you use the sentence, what are you actually referring to? Do you think that Iran should be cooperating better? Do you think that the cooperation now is not enough? Can you just elaborate on that, please? Thank you. Well, I have to remind you that in Iran, we have probably the most robust verification mechanism that we have developed anywhere in the world. JCPOA activities, measures, but also the Comprehensive Saviors Agreement and the additional protocol make what is probably the most robust. Timely and proactive cooperation means exactly what it says in implementing the Saviors Agreement in Iran. We always have to be mindful of the obligations that derive from that agreement. And we also need to make sure that certain matters, certain aspects that derive from those obligations are addressed in a timely manner. And that full cooperation is of the essence from this point of view. They've not been in a timely manner, are you saying? I didn't say that. I only said that full and timely cooperation is needed. That's Goyinaki from Nepal television. Hello. I just have two questions on two different topics. So shall I just give you one? And then, after the first answer, the second one? No, I think you can address the two of them. OK, OK. So the first one is a bit of a clarifications about the report which just came out. Without going into the details, because it sort of mentions that the new assembled one has not been tested. And that came as a confusion to my reading that is that means that on the third measures are Iranians actually adding on top of what you had reported on August 30. Are the Iranians adding additional those numbers, which is like 52, in addition to what you had reported in August 30? Just because of the technicality that I read, the one in August, some of them has been tested. And in a new one, none of them has been tested. So it is for me to very simple to assume that those are new ones. And I don't want any confusions in my understanding. And then also that sort of gives quite a difference because that's a big number. So I think for that, just without going into details, I just want a simple answer to whether it's on top or no, it's included. The second question is a follow up from Jonathan's question regarding the ROK's request. You had already answered very clearly, but I just wanted to make sure that are you saying that if ROK requests some cooperation or some active involvement of IAEA on this issue, that IAEA will pick up the request and act upon it. Thank you. Yeah, I have to remember the new and senior question. The report and the communication also issued today on the centrifuges reflects the new developments. So it's on top. The new developments and the numbers that our inspectors monitored. Max, maybe could correct me if. Max, can you correct me? The new request for the new figures that we included in the text this morning, last night. The only update. The set that also covered in the regular report. Sure. The new development, the third step, include the additional centrifuge that were being installed or already installed with respect to what we have reported in the previous report. So it's in addition. In addition. Thank you. In addition, there is also additional US6, additional testing with uranium being performed. So yeah, that report was meant to cover new developments. And you mentioned that some of them were not tested. So I think this is work in progress. And as we monitor the developments, and as I was also communicating, relevant developments will be brought to the attention of the board of governors. Regarding the second question, my reference to the national responsibility is linked to the request from the respective member states to utilize peer review services or missions in its own territory. So country X could request missions or peer review missions in its own territory because it's a national responsibility and confines the decision to the national authorities that are supposed to take the decision. I hope this answers. So that means that then what happens that because the ROK in this case is requesting IAEA's involvement in the area which is nobody's territory. It's an open sea. So what is the procedure then? Because they are concerned about the radiation, and then they want IAEA to involve in the monitoring, not just Fukushima, you're doing it already, but more on a broader scale, which is sort of not ROK's territory, nor the Japanese territory. I think the question may be based on information that I don't have, but as I said, communication that we have member states on any matter, whether it's on safety security or safeguards, is part of our ongoing activities, and we don't expose those communications to third parties. But I have to say that the agency will remain faithful to its own role in those areas. Nuclear safety and issues related to nuclear safety will be treated exactly in the same way as before at the request of a member state for peer review mission. On the territory of the respective member state, of course we'll do it. It's based on decision on a voluntary basis, let's say, making use of those efforts. We'll continue to do so. For the rest, if that opens a new territory for us, I think you may have a different information on that matter. Naif Nofir from Ichbari News. An American security advisor mentioned two days ago that IAEA has informed the Council about the possibility of hiding nuclear materials. How would you comment on this? May I ask you to be a bit more specific so I understand nuclear material where? And hiding nuclear material from the inspectors of the IAEA. John Bolton has mentioned that on his content Twitter two days ago that IAEA informed the Council about the possibility of being hiding nuclear material in Iran. Is that true? The comment that I could make is that evaluations regarding the absence of anti-clinical material and activities in Iran remain ongoing. As I was saying today as well in the Board, and that's part of our message that we send to member states in the Board of Governors. The Board of Governors, I apologize, but the Board of Governors already started at 3 o'clock. So thank you so much for coming. Thank you. In general term, in a report, we provide the total number of centrifuge that are installed. At the moment, we perform the verification. If you compare this total number of centrifuge, a different type of centrifuge that are presently installed, we expect of what has been provided before, you will see that for certain type of centrifuge, there is no increase. While for other type of centrifuge, there is an increase. In addition, what is also changed is that the number of centrifuges being tested with UF6 is in general increase. It's a clear.


Let's start the last session of this today's program. We will have Bengt Holmström from Boston joining us. Bengt is the Paul Samuelsson Professor of Economics Emeritus at MIT. He is best known for his theoretical research on contracts. He has made fundamental contributions to the theory of the firm, to corporate governance and to liquidity problems in financial crisis. In 2016 Holmström was awarded the prize in economic sciences in memory of Alfred Nobel together with Oliver Hart. Holmström has served also in many non-academic roles. I want to mention his less known role in providing independent advice to the Finnish government. That work has started in 1992 when he was with Seppo Honkapohja, the key members in an expert group that prepared economic policy strategy for Finland after a deep recession in the early 90s. His last contribution for policy was in the context of the COVID-19 pandemic when he was part of an expert group that prepared a policy strategy for the economic policy strategy under the pandemic. Holmström's results are often surprising, the research results. However they are readily understandable and they have a sort of clear intuition and they are also based on realistic assumptions. I think we can wait also this time something surprising, something interesting, something exciting from Professor Holmström. Holmström, welcome to this workshop. This is last session of the first day of this. We are delighted to have you present from Boston in this workshop. Please, the floor is yours. Thank you, Marty. Thank you for inviting me to this conference. I'm very pleased. I would have been even more pleased to be in person there but this is the reality today. I want to talk about the topic that I have studied since the great financial crisis 2007-2009. It was work that I started in those days. Some of you probably have heard some version of this or something very similar. I apologize but I still think that for this audience I checked. For this audience this may be containing new ideas. That's what I'm presenting. Basically I'm going to lay out the reasons for the financial crisis and then finally come to the end to talk a little bit about the effects it has through digitalization on emergency economies, how this perspective is affecting it. I just have to, I don't know why it's not changing the page here. I'm a little bit unfamiliar with these themes. We use tools. Can anybody there in the technical side say what I should be doing? It worked just fine but we tested it yesterday but now it's not moving. Now I have to break it up. Thank you. Let me start by the crisis itself in 2008 when it broke out. That was a shock because we had that 70 years without a crisis so nobody even expected that in a developed world like US and then subsequently in Europe that there could be a crisis. The instant reaction to the causes of the crisis were many but by and large it was the criticism fell on Wall Street. Wall Street greed and wrong incentives and securitization created complex opaque asset backed securities that nobody really understood what was in the bags of chopped up small pieces of mortgages. And then the ratings agencies got an air full and for having been careless. I often mentioned Michael Lewis, the big short some of you have seen the movie. He asked what I think is the key question and that is that how could Wall Street trade without knowing really anything or so very little. In his movie and his book he lays down the fact that nobody kept trading on Wall Street but very few people seem to know what these different very big sized trades were worth. And so the first instinct was to call for more transparency and so as to avoid this crisis. I want to present an alternative view. I think that's the question is right. Why didn't Wall Street know anything but basically going to put forward an explanation why they didn't. And that is that the money markets as these markets are that is very short on debt. They are repo markets. They are they are short overnight treasuries and treasury bills and so on. They are these very short on debts that get rolled over frequently. Huge by the way size of this market is many times larger in terms of dollars than say in the stock market. So stock market gets all the attention but these money markets are gigantic and global. And so I'm putting forward the notion that no questions asked is liquidity money markets that is they were very liquid and the only way they were liquid was that one did have to ask any questions. And the bad that this was astute observer of banks. It was a banking expert. He said already in the middle of the 19th century that every banker knows that if he has to prove his worthy of credit that is if he has to become transparent in fact his credit is gone. So another way of putting it is that ignorance ignorance that people don't know they just don't have to ask questions is almost bliss in money markets. And that's that's the opposite. So it's not as parents is not going to solve the problem in a way that people imagine and. And the problem here underlying this sort of view has to do with the fact that the stock market is very dominant in this in this in people's minds because the stock markets are exciting all the all sorts of things happen in money markets when they are working well nothing really happens. And people are very unaware of what what's going on. So so I'm going to make the thesis of one of the key thesis I want to say is that that you know stock markets and money markets are very different almost each other's opposites. And therefore I should draw lessons from stock markets to deal with the problems in the money markets. That's one of the main lessons. Let me just say that why isn't transparency important. So there is this sort of common common but false influence that is that that that somehow transparency will make us believe the same things when in fact very often it's just the opposite. So symmetric information about payoffs. That is the payoffs from the instruments. That's that's important for liquidity. That's everybody agrees on that but transparency does not imply symmetric information. In fact in fact it may be an often is the case that if we make something transparent then parties that watch that same information actually start to believe something very different. So imagine that you put that up.  So these are typical forms of bidding. Then if you know that the mechanic has seen the service book and looked at the hood and driven the car then you don't want to bid against him because he knows a lot more. He understands what this means. But if you look at it from this long distance which they usually do that is they sometimes they just flash the car and then you have to bid. That makes the uninformed person about cars put him on the same in the same position as the mechanic. So actually hiding information in cases of expertise, varying expertise is very important. We process information so differently because we have different experiences. So there are two ways to symmetric information. Investors know everything of relevance for instance the stock prices or something like that. That's what the stock market does in terms of getting symmetric information but symmetric for ignorance that you are going to get through over collateralized debt as I will show. That's a much more common way of actually getting to symmetric information especially money markets. So these are the main thesis. So why debt? It's a good question because we get always in trouble. All financial crisis has to do with short-term debt sort of breaking down. So why are we at all playing with debt? And the short answer is debt is cheap. It's a cheap way of lending. And so this goes back all the way to pawning which is thousands of years old. All these documents of pawning are from China in the 600s and so on. So why is pawning so efficient? And that is because it doesn't require very much information and it especially doesn't require that we agree on the value of the port. That is the item that's being poured. So handling over price if I try to sell something when I have a liquidity problem then maybe I value it more than Marty or anybody else, the pawn shop. But all we have very different views about what this is. Maybe it's my grandfather's watch or something that has emotional value. So the solution to this problem of costly selling and handling over the sales price is this very clever solution. That the pawn broker buys the pawn and he literally buys the pawn at a safe price for him. So if I think it's $500 the pawn broker may offer $50 or $100 or whatever. On one condition I accept this trade and that is a tongue given the right to buy back the pawn. So if you only offer me $100 then in a month I will want to be able to buy it at $105 or whatever the added interest rate is there. And the key point here is that this is all designed to avoid price discovery. This is the key. This is what makes debt so cheap and quick is that there is no price discovery. The repo market is the world's biggest most liquid market in a money market. And I'm talking about the US but repo markets elsewhere also. It is actually almost the same as the thousands of years old pony. It's a little different in that it may be the pawn shop that wants to park money with somebody. But otherwise it's a modern day version of pawning and the basic project is very similar. So let me say a few words looking at it a little differently. The design of the debt is designed to be informations insensitive. It's not just to overcome this problem of having to buy it or having different information or valuation of a pawn. It's also the fact that when you look at broader areas, the market for debt, especially the short-term market, then it's designed to be so that you don't have to ask any questions. And this is a picture for some it means a lot or it's simple. The red line is the payoff from the collateral is placed to support the value of debt. So there is a face value of debt, say 100. And there is collateral that is both more than 100 in order to secure the debt. And the more you have collateral, the more you go to the right and the red line goes to the right. That is the value of debt as a function of this collateral value at the time of expiration of this loan. So the red line is the market value of debt at expiration. And then the thin black line is market value of debt looking towards the end. That is if it's one month left to go, then it's below this red line because it's an option. It may go into default. And eventually the more collateral you have, the more valuable the collateral is, then eventually it stands out with the red line. So it's 100 if it's the case that there's a lot of collateral underneath it. Plenty more than the face value of debt. And that's the information in sensitive region. But if something happens and we get into closer, you know, the collateral value falls as we will see shortly, then we get into the information in sensitive region. So that's the basic idea. Let me just mention that one of these things, there's purposeful opacity. If you actually start thinking about this, you see that the bear sells diamonds by basically putting them in a bag. And you are not allowed to look into the bag. So it makes it more liquid. Credit raises are coarse and money market funds have delayed information release and so on and so forth. So let me say what the problem with debt is. I don't have that much time, so I can't elaborate on these things. These are very dark side of debt. And that is that relying on debt, on securitization, coarse ratings, mechanical rules for valuing this. The rating agents use very mechanical rules for valuing these securitized products, the ABS's and MBS's and so on. That all makes good sense in good times. But there is one concern about it. You don't remove any risk by making it more collateralized. The fundamental risk underlying is it pushes risk into the tail. I should have not said that more collateral will reduce the risk. But it will push the risk into the tail when you make a debt contract. So you make it very safe in the flat region when, as we say, the debt is in the money. But if it ever goes out of the money, that is it goes into the red region, in the information sensitive region, then the risk gets bigger. So the social trade-off in some sense is everything that enhances liquidity increases, increases also the severity of tail risk. So you can get more of it. For instance, you can shorten the duration of the contract. That's going to make it more the region, the red region or the information insensitive region factor. But if it ever goes into a crisis, then it's going to cost you a lot more. So one way of, I'm going to have to jump over this thing. One important thing if one asks what happened in the financial crisis is that it was assumed that diversifying in debt markets is a good thing. That's one borrows from the stock market the idea that fully diversification really makes this safe. So here is an example that if you have ten identical banks, each holding say one-tenth of the total portfolio of the debt portfolio of the country. So everybody has identical portfolios. They are fully diversified just the way stock markets are the stock market advices. Then you realize that if every bank has exactly the same portfolio, a slice of the same portfolio, if one banks go down or its portfolio breaks the buck so to speak, that is it isn't fully valued, then everybody does it at the same time. So the banks are perfectly correlated in this case. So this is an example how the logic from stock market has absolutely the opposite consequence. And pre-crisis people believe that even though debt levels kept increasing, they said well it's very well diversified. Actually that's a disastrous thing on the whole if it goes to a very extreme case. And this has been proven, exposed empirically that actually this was a big reason. Things were correlated too much. So I jump over this shift when the distribution shifts from information sensitive to information sensitive. Here you see one illustration of what it looks like. Let me just say that this is actual trading data from money markets. But it shows the left line is very stable and these trades are just clustered around. That is they are all made roughly at the same price with small variations. But then when the bear fund collapsed in July 2007, so it was a year before the Lehman or more than a year before the Lehman, you can see how there was total confusion in the market and the prices just spread. Different parties bought at different prices. They were not at all uniform the prices. So this is an example what happens when you end up in that tail where the money, when debt is believed to not be anymore worth 100. It's something less. But because they never was a price discovery of the tail of the actual collateral value, people are totally confused about it. Here's another picture that you see. This is 2008. You see how steeply they kept issuing more and more debt, structural products and more debt. These are different varieties. You just see that home equity loan is actually the biggest. So this talk about the subprime loans, they played basically no role in this whole story. But this whole market dried up. Nothing was issued. And it's interesting to note that in money markets you see because there is no price discovery, it's always quantities that adjust. Haircuts or in this case, we don't issue anything more and so on. So again, this is very different than in the stock market. So people were really puzzled that nothing traded for a while after the Lehman crisis. But how could we not find some price that we can trade? And the answer is the adverse election was so severe that people had such different views about prices. And they were afraid that others knew more than they did. So the summary of this view that I presented is that money markets and stock markets are two polar systems of liquidity provision. They are both liquid, but in very different ways liquid. In money markets they are urgent, trillions of dollars of people roll over every day in those days especially. Everything is information insensitive in the sense that there's no price discovery. Nobody knows anything expert like really that is of value for trading. And there's just a shared understanding and it's trust based. So it's a no questions asked environment. And that explains that's the answer to Michael Lewis' question. Why didn't anybody ask any questions? The answer was because the market was working well. And that's the sign of a market working well. If somebody asked questions in money markets, we are already in trouble just like Badgett suggested. Stock markets are very different. You can wait for trade. Money markets you have to trade. You have to roll over these debts every day. So if somebody stops trading like J.P. Morgan did in the case of Lehman. It's just a heart attack. And because you are thrown into the situation where you have to try to find out prices or start a market where there never was one price discovery market. It's information sensitive. So every piece of information matters. There's very accurate and continuous price discovery. And it drives in some sense what drives this market is that there is all the time information coming in and people have somewhat heterogeneous beliefs. So there is people that can make money on these trades. You don't make money on money markets because everybody believes the same. But when you have different beliefs then you can make for short periods of time you can make money. So this is what the stock market is and here transparency is critical. Here every even today we are talking about nanoseconds mattering. And so it's a very intense, very expensive market relative to money markets. Money markets cost very little to run. But loans are made. Trillions of loans are made in Snapchat in very short periods of time without any information to stock market in order to get started. For instance, it really requires a lot of if you want to do an IPO, you have to build a book. It takes months sometimes to do it and so on. So it's an entirely different. Let me emphasize money markets are very liquid because they are two leg. There is this pawn shop logic. So it's what we call a two leg market. And it's a primary market. Secondary market then bonds, for instance, I issue. Then you have to find the price because if you are trading bonds, that's a price discovery. You need to know exactly the price because it doesn't have that second leg. And those markets are highly liquid. And in fact most bonds are not traded at all. So this is all to say that we need to understand. So this insight from the information view that I described is that it answers the question. Why didn't people ask questions in good times? Because that's the way it's supposed to work. Why ratings were caused because that helps us have the same beliefs. If you start to provide detailed information, then experts become better than other experts. So you're hiding information. It also explains why it was so chaotic when eventually the money market funds broke the buck. The role of government in crisis, it has a very simple implication. Even at this level, you're right away when you understand it. You understand that the key is to get back to the no questions our state. Trying to buy up toxic assets as the US plan to do initially. With the $700 billion that they got from Congress, it would have been a disaster. Because you would never have known whether all the toxic assets or sufficiently many toxic assets had been bought up. So they abandoned that plan that they initially had and went into the idea of just recapitalise the core of the 19 banks, big banks, 80% of the banking system, recapitalise those banks. And there they've been transparent for a while by showing that if we pour in this, I think it was less than $100 billion that eventually they put in. They said that's enough to get us back into the no questions asked region. After that it became more or less non-transparent again. So we have stress test, regulatory considerations are. We have got higher capital ratios. We got liquidity ratios, which I think are very questionable and partly a course of the troubles we are seeing right now. So I'm not in favour. I won't go into it now. You can ask questions about it. But stress test I'm very big in favour of. But I'm not sure these stress test should be as explicitly revealing as they are. That is I think they should look like elevator tests. It should be people coming repairing something but they shouldn't put on the wall that last time we repaired it. These cables were almost broken and it could have fallen down and so on. You don't reveal that. You just said it's fixed and it's good. So then the third thing to keep in mind is that transparency. If you want to reduce liquidity in money markets, then you can put in information.  We saw it actually in the money market funds nowadays. They became more revealing after the dot-rank transformation. Just like this theory predicted, half of the money markets actually cease to exist as money markets. They became just trading markets of different kinds. So their sort of moniness disappeared. So let me say a few words about the big data because I know both your people who are working in the area of emerging economies. So I'm very excited about the big data. It's an entirely new form of inclusive financing or financing. And it goes against the idea of just putting collateral in. It's as I put it, information is becoming the new collateral. So it's reversing the idea that information is expensive and collateral is cheap. In the cases where we are trading on big platforms and getting data for free in some sense, then we can do some very different things. So the leader in this area I think is clear and that's China. But many other developing markets have also Africa's hat. But China is really in terms of volume and sophistication. It really leads the world. And the reason they are the leaders I have to do with having been behind. They never used checks. They didn't have PCs, for instance, the computers. They went to mobile internet almost directly for most people. They went from cash to actually paying the mobile phones directly. And so this being behind has allowed them to leave for business societies. So they are by far the most advanced in terms of payment systems. So these payment systems we saw brought from the platforms of Alibaba and WeChat. Through there Alibaba and WeChat Pay are the payment, basically the main payment systems available in China. You can't go there with cash. You can't pay with cash anywhere. Even betas use Alibaba and WeChat Pay. So the payment systems, everything gets recorded. And there's massive amounts of data and upending the traditional substitution. That information is expensive. It's very cheap. It comes for free almost. So as I said, information is the new collateral. And mobile credit is superior version of credit cards. So Alibaba, for instance, they have also a credit line. It's not that you apply for credit. So that's an interesting feature. You just get a message into your phone and asking, do you want to increase your credit line, so to speak. We have evaluated you basically and we have found that you are good credit. So here is an offer to get credit. So it's similar to the Western world, but you can't apply at all. And also everything happens electronically and without any human interaction at all. So it's called the 310 system because it takes three minutes to deal with this message. It takes one second to get the money into your bank. And there's zero human involvement. And one of the things Alibaba uses as a slogan, they know you in the sense that they have to know you in order to give you credit. But they don't know who you are. So it's based on partly at least on the pseudominium, which is a future that the best has started to be explored. The idea that we have a second identity on the net, that is say a number or social security type number or something, but very few know how the mapping from that number goes to our actual personal information. So this addresses partly the concern about privacy. The enforcement mechanism is very sophisticated and it's by the exclusion and continuous monitoring of fraud. That's one thing. But exclusion is very important because there are only two payment systems. So if you somehow get included from the trading platforms, a lot is taken away from you. So there's very little fraud in principle and people behave. And these algorithms that evaluate people based on how they purchase things and what they are doing on the platform and how they are trading with each other. All the information is in some way used. Who are you? Who are your friends? Who are you dealing with and so on? Sounds horrible, but actually it's very informative. And they just mentioned that even if you just tell that do you have an iPhone versus an Android phone, that already is informative in forecasting whether you will pay back your loan. So that has been tested in America. It's a little scary and Android people are poorer credit than iPhone and it has just to do with the prices. So these are dramatically lower costs and what I find most exciting is this has had a dramatic impact on inclusive financing in China. I mean the 200 million or 300 million people that have brought out of poverty. This has played a role. This mobile internet has played a big role. And if I may just say Finland. Nokia has done a lot in this time. It's not talked about much in Finland, but actually they were by far the leading network provider and mobile phone provider in the early days and had over 50% of market share in many of the developing countries Africa and India and even 40% in China. So this is I think an enormously valuable thing. Let me mention and I could talk about it a lot because I've been involved with law and academy in China studying this. I would just want to make mention of B-cash in Bangladesh because Bangladesh was very poor and this B-cash was partly the help of well B-cash was subsequently helped by investors like Alibaba, Softbank, Bill Gates, IFC and so on. So major investors have become excited about it. But it was established in 2011. So it's only 10 years roughly old. And it now has close to half of the Bangladeshian sort of addressable public customers and of them about half is active users. Active users means they use at least once a month these accounts. So it's not just that they can buy things and so on. They also get banking services more generally. They get the bank account. Most people absolutely the majority have no bank accounts because they lived in villages and so on. So now they have with their mobile phones, they have a bank account and they are using it and they can buy products from far away and again I say China is far away the most sophisticated and most developed market. But Bangladesh, you look at these numbers daily volume 11 million transactions and yearly transfers 40 to 50 billion inside Bangladesh. That's a lot of money for a relatively poor country. Bangladesh, I think partly thanks to this, has recently surpassed India in GDP per cattle. That's remarkable considering how poor it was just 23 years ago. So big cash is something that you should be aware of. Let me say that the key point here is that I think there are enormous opportunities ahead with this microfinance based behaviour credit scoring that I have described that you just watch what people do on these platforms but various kinds of platforms. What kind of insurance they buy or whatever they do everything is followed. The point is that this is very reliable first of all in terms of forecasting how their credit scores are and secondly it's very scalable. This is the remarkable thing. You can go the numbers in China way over half of Chinese population using mobile phones or have at least access to mobile phones. Bangladesh is coming behind as you saw and nothing like this has happened. If you look at the traditional microcredit where you have these communities that you lend to villages and they monitor each other and therefore they are more reliable it requires a lot of work to get it set up and obviously a lot of human work. It's just not very scalable and it's also very spotty to results because you need to have skills. Under this author some of you may have his idea of creating new property rights for these poor people. That's just massively difficult to get registrations to do that. I think by far the best way, the future for eliminating poverty or reducing poverty and also getting these unbanked people in the developing countries into the periphery of finance which will bring the amount of poverty is this system that I described here is this behavioral credit scoring system. Blockchain technology is going to make things a lot more secure as well. It's used a lot. There's a lot of discussion about that but I think I stop here in terms of telling. I wanted to flag this. This shows you that collateral can be reduced. Let me make one more point. Collateral is still very important. This sort of mobile finance mobile lending is not that big a share of it. It's a very big share of the poor people's purchases. It's coming actually to the US also just because it's a lot more convenient than credit cards. The last point I think I had to make is that J-PAL there is something that is part of my department at MIT and it was started in early 2000 and they have hundreds of these evaluations of these behavioral credit scoring efficiencies and I think they are pretty excited about this. Thank you very much. And now questions from the works of participators. There's really two paths. Yes, please. Two paths. There's this general thing about information sensitivity and so on and then there's this part of innovation or inclusive innovation, innovative finance. Please. Thank you very much. It was a very enlightening experience for us. I have two questions. This one is that like say in the in your diagram there is a different default zone and there is a non-default zone depending on the value of the collateral, right? So now so if you kind of in the pawn shop example suppose if I give some watch watch is kind of a tangible object it is verifiable but when actually in the actual transactions in the modern days, shadow banking and etc. So when the kind of instead of the tangible collateral it became kind of other financial assets, right? So which must become a back done another real asset, right? So isn't that kind of a doesn't that create an adverse election? Sorry, I could be wrong. I mean if I could understand you that is in that zone no non-information I mean in that default zone or what do you call kind of a information sensitive zone, right? In the collateral wouldn't that be a possibility of adverse election in exchange? That's my first question and my second question is that how do you kind of relate to mobile banking in kind of reducing the risk of transaction to enable them enable lots of poorer people make an entry so that part is kind of a little bit not clear to me. Yes, please. So yes, thank you for giving me the opportunity to clarify the picture so exactly right. There is an underlying value of collateral is on the horizontal axis and initially we are far in the right side so that it is information insensitive because the collateral value is substantially over the obligation to pay back debt that if debt is 100 you know the collateral value may be 150 or so. One key point is we don't have to have to say we know there is enough collateral that's the big sort of reduction in information but if we are asked you know what do you think the collateral is worth or are somebody else we have very different valuations of the collateral but none of that matters because variations in the collateral value and as it changes over the days and months perhaps in this case mostly days because these are short on debt nothing happens to the it's still 100 it's still well above the 100 so that's the point that's why this information is sensitive to the region it's not sensitive to changes or shocks to the value of collateral or even the people's valuations of collateral so we don't have we are sort of in disagreement if you ask us about the value of the collateral but it doesn't matter for the value of the debt or the repayment probability and therefore the value of the debt so that's in the information in sensitive information in sensitive region then collateral in rare cases but as we saw it has happened the collateral value start dropping and that's because that causes us to move to the left in the picture of debt and we are coming then the thin black line eventually will disconnect from the red line so it's no longer 100 but you know the let's call it the market value though there's no market value on it conceptually it's less it's not worth any more 100 in the minds of people and that's a moment that usually I do it smoothly but usually you take a jump something unexpected happens such as the beer stones default or somebody breaks the buck elsewhere in the money market fund or something those are very shocking events and then you are right so getting to the adverse election then suddenly it matters that some people know different we all know different things so this massive we are going from a state of no questions asked we are all on the same page we are thinking about the same way in terms of the value of the debt we are suddenly thrown into chaos because we are we are we now realize that it's not 100 but what is it and we have very different views and there's adverse election I'm not going to touch it because somebody knows more than I am I'm not going to trade with anybody and that's actually what happened in the United States so they had no idea of what the value was suddenly so did that answer your first questions on the mobile banking I think I will have to just default that question to some other discussion but thank you because I understood that is from the horizontal line whereas information is insensitive there actually doesn't really matter what is the value because already the loan is covered right so but it is that actually you answered my query kind of very well because when it becomes like the black zone you know the black art zone that is information sensitive zone there could be probably the market could be the market participant might invest in some information to information acquisition or something like that could happen probably in that zone probably some more action could be happening where the information sensitive zone I'm talking about yeah that's but I'm telling you just the empirical fact it is chaos most of the time if it happens in a little place you know it takes I mean if you look at what happened in the 2007-2009 the crisis really actually started 2007 already so it was a year sort of simmering but it was mostly in the over the counter market and therefore nobody saw it so it was still hidden but those in the market they actually saw that something was happening and they got increasing numbers and bear stones the firm had to be rescued by the Fed in March 2008 and so on so there were kind of shocks some of them rather significant but as we saw the government came in and rescued so people people felt comforted by that but so it doesn't have to completely collapsed but they will substantially reduced in value initially in the OTC market the collapse paradoxily came in the safest supposed the safest market which was the tri-party market because their adjustments to hear cuts and such that took place in the OTC market they didn't take place in the same way in the the tri-party market because that was overseen that was more transparent and it was overseen by these banks JP Morgan and Boney as it's called Bank of New York and so it was less abrupt but then the Lehman collapse was a big enough event to get everybody thrown into caves and after that nobody really knew at all what the values would be because they couldn't see what consequences it could have and it was immediately the money market that was contagion so they basically the Fed had to come in and back up everything it's a very chaotic time I lived through it because I was actually involved with the New York Fed at the time and the first days they didn't know whether the whole world would collapse and this is a concern by the way today I think the same situation it's more transparent in some ways through the stress test and so on but these discontinuities are in some sense always there because once the system starts collapsing everything feeds on everything else and it tends to be very chaotic so I hope nothing will happen but I worry that central banks have used up their sort of gunpowder to defend against this crisis in several steps already so they don't have as much left certainly some countries won't have much left to protect their currencies and prevent crisis Can you explain this sort of I know that you have explained this what happened in the sovereign debt market in Europe how was the information sensitivity removed from the market during the euro crisis it may be yeah that's a fun case to see this sort of logic information logic at work the EU situation in Euro crisis was it 2010 2012 so that spread from the US to Europe that you saw that the spreads went up between the sovereign bonds had differential spreads Greece Greece was the main object of concern at the time and the spreads kept growing and the response by the EU was to tell people that now we have 300 billion set aside to defend against this which by the way is much more than the US had they had only used 100 billion but then they said well actually we have just increased it to 500 billion and eventually people started calculating that if we take all our sort of all our weapons in use then we will have actually a whole trillion nothing of this really affected the spreads this sort of explicit mention of how much more they had it didn't do much good and one reason being that when we collapsed there is almost no amount of money enough to cover everything so a trillion is a lot of money but that's not enough to save all the European potential bankruptcy then eventually they did stress test also and they did but they did stress test they took the first half of what the US did and they sort of explained what the bank they studied the banks and and they came up with a ridiculous number like you know oh we need two billions to save this system or I don't remember what the number was but I made it just very small and so people asked well what do you mean did you test the Greece and the answer was no Greece we couldn't test because we don't know what is in the Greece Greek banks and everybody said oh my god that's the only thing we are worried about is really Greece and so then they opened up their books and showed all the banks including the Greek banks what they knew about it and opened the books so to speak and of course that was in this theory that I have propounded that's the last thing you should be doing when you approach a crisis opening the books because then you are really opening the door to adverse election and so things got just much worse by that by that moment and it was eventually druggy that resolved this whole thing by saying you know he only said that we will do whatever it takes and you better believe us and the spreads came down and this was a very a fake statement the assumption in the minds of people was it took all the experts experts can't put the sentence whatever it takes into a spreadsheet and start calculating so it brought sort of it took away the experts expertise to some extent and also it assured people that probably they have been talking with Germany and they were but it was the opaqueness of the statement that we are behind everything was ultimately what resolved that crisis unfortunately Europe hasn't used the time to really fix their banking system and it's been 10 years since druggy said that and now we are again in sort of uncertain waters thank you are there other questions yeah Kunal please first time it's Kunal Sen from Univider I wanted to focus on the second part of your presentation I completely agree with you absolutely right the microfinance the Grubbin Bank the back experience has simply not been replicable other parts of the developing world exactly as you said because of scalable problems and I totally agree also that this new approach to microfinance the big data approach might well be the way forward but I wanted to ask you that what can one learn from a Chinese experience with VP and Alipay and the Bangladesh experience with big gas for other low income countries what can governments do to try and do what exactly happened in China and also happens in Bangladesh that I think is important policy and I think I think I think what you learn is that this work on the whole pretty well I mean they are not working perfectly and that's why this J-PAL this institute that's this randomized control trials that have become so popular they are trying to study exactly what the effects are from these systems but but they work well enough Indonesia is going there Indonesia has just started started moving there India is already having its own I'm not that familiar with India but India is having its own version of big gas and I'm sure so learning what they can learn from it is basically see Alipay has shared with Bangladesh its information with big gas its information about they have invested there and they have sort of described what they are doing I'm not private to knowing what other parties have shared information but it's not like you can sort of these are automated systems these are computer systems I mean they are as I said very scalable also in the sense of transportable whereas we know that microfinance for instance of the old variety that Mohammed Yunus was using and that was very valuable and still plays a valuable role but it's just small scale because it takes so it's very spotty some communities it works well some communities it doesn't work well it go to another nation it doesn't work at all well so you don't know how it works whereas it seems like this this computerized systems which are based not on interviewing people or anything like that you just look at what how people are behaving on this and by the way my colleagues Abidit Panagy and Esther Duflo who won the Nobel Prize in 2012 19 for this work on the JPL and you know these randomized control trials they they they are enthusiastic also about this and agree that you know it's sort of much more robust than much more transportable than and they one of the point I don't know if you have read poor economics is that poor people are very astute we westerners and you know people in rich countries think the poor people are just lying in the streets and they can't calculate anything they are actually if you go a little bit about that that total misery you see that people who are really economists in this world or behaving like economically sophisticated people are the poor people you see it for instance that they are paying you know for mobile phones even everybody has mobile phones in America even the homeless here there's nobody anymore without the mobile phone because it's so valuable and with that base you know as the tool of connecting is in your pocket all the time that makes an enormous difference and the Bangladeshians incidentally learn to read people didn't understand who are they going to call and how are they going to call when they can't even read and write it turns out that it worked in the reverse when they got these phones originally in Bangladesh which also was involved this career family was involved in that that was an enormous impulse to learning to read so there are other effects coming from this that have been very beneficial for in my understand I'm speaking to people who know a lot more about poverty than I do so I'm a little hesitant but I have followed this particular this mobile phone arm both as when I was on the Nokia board and then then later with the law and academy in China thank you all right if there's no other questions thank you very much for this very informative presentation and discussion and thank you for those questions and the session is closed and I suppose dinner is at 7 so thank you very much yeah


disruptive leadership breaking good for great is an idea I want to bring around the world in this seminar because disruptive leadership of all kinds whether it be for good or bad causes disruptive leadership however has always been the game-changing difference-making kind of leadership throughout history I guess the greatest lesson of history is that we don't learn from history and so we still have most organizations that are that are resistant to disruptive progressive kinds of leadership styles and cultures they may use a language of disruption they may be aware of disruptive organizations that are even a threat to their livelihood and their future and longevity but still stay married to a playing it safe short-minded temporary minded game rather than think long-term longevity game which disruptive leadership thinks of legacy disruptive leadership thinks of generational contribution and comes into the business as usual status call leadership mindsets which are common around the world with with a brand new idea about how to do something much more efficiently and to deliver it to a much wider base of people rather than over-specialize which traditional non disruptive leadership styles do over-specialize and over-serve an elite group of people who we feel obliged to and get locked into the needs of a maintenance of which stops has been progressive and creative and innovative because existing customers don't require that from us in the same way that new people are looking for so I think that's why I said we need to break good for better because who does that we don't break things deliberately to find out how they can work better we fix things if they break and I'm advocating disruptive leadership advocates know if it's not broken break it and find out how it could be done better and I want you to come to this seminar this teaching and bring your full attention bring an open heart open mind because the future belongs to disruptive leaders disruptive thinkers and I want you to be one of them or your organization to benefit from that in you disruptive leadership is here to stay it's not going to go away don't get stuck in a blockbuster mindset when Netflix is battling down the road towards us all kind of thing all right hope to see you at the disruptive leadership seminar coming always soon thank you


Live from the Julia Morgan ballroom in San Francisco, extracting the signal from the noise, it's theCUBE, covering Structure 2015. Now your host, George Gilbert. This is George Gilbert. We're at the Iconic Structure 2015 conference, downtown San Francisco. We are privileged to have with us Derek Collison, founder and CEO of AppSera, and with quite an illustrious past at VMware, Google, and Tibco. Derek, good to have you. Yeah, thank you. I always love coming on here. So let's start at the very, very big picture level. The state of the industry right now, in terms of analytic platforms, is Hadoop 2.0, you know, where we have HCFS and Yarn. But there are, you know, beyond like Goldman Sachs and Twitter and LinkedIn, a lot of other people are sort of having trouble sort of swallowing the complexity, both at the admin side and the development side. What might that begin to look like as we go to the next generation? And I don't mean to constrain that by saying it has to be 22 Apache projects. What are some of the alternatives that we might see? Yeah, I mean, so it's a great question and I was fortunate enough that at the time I got to spend at Google, see a lot of what is now manifesting itself out in the enterprise ecosystem, which was, you know, the initial map reduce and doing logs and let's do everything else. Then let's slap SQL on front of it. Now let's put it more in memory and you see all of these parallels in the industry. And eventually Google said we're going to kind of do a do over. What I think right now where we are, there's this notion of whatever Hadoop 3.0 becomes, you know, the evolution of Spark. The automation of setting these things up. One click, you spin this thing up, maybe using containers, orchestration, whatever that is very simply and you tear it down 10 minutes later. I think what's even more interesting though is that as we still struggle with figuring out how to get the data into it, making sense of the data, spinning up the backend systems, I think there's something coming up in our rear view mirror very quickly that's going to pass us before anyone knows what's going on, which is machine learning is eventually going to get so good so fast. And I mean literally in less than 24 months that no one's going to be talking about big data in two years. They're going to be talking about force feeding data straight in like a fire hose into this thing, which can reason about it, understand it and then spit out, you know, patterns, predictions, correlation, causation that we could have never even understood. And I think because these technology cycles are compressing so hard, and our brains are built linearly, we can't see this, I do believe that the notion of Hadoop 3.0 will just simply be, we're not even going to bother with that, right? We're just simply going to plug our data into the Google Brain project or you know, thing coming out of Amazon or IBM's or Watson or whatever that is, we don't have to operate it, worry about it, you know, we just simply pump data into it and we get amazing amounts of value out of it. And I truly believe that's going to happen faster than people think. That's a rather profound insight and profoundly unsettling. Well, I mean, look, a lot of people who know me know I love Tesla cars. I've been a big Tesla fan ever since day one. And the amazing thing about where they are with, you know, autopilot is all of the stories that came out and said, oh, it's doing the wrong thing. And all of the same people coming back two days later say it's already learned not to do that. They're doing that already. They're already doing that. The car is learning not to dive off on the exit or slow down around a curve. And if you look at the amount of sophistication and investments that like Google's making, they open source TensorFlow because they want that to continue, it's all about the data. And so if they run a service, the service is amazingly powerful, but until you put data into it, as a consumer, right, as an enterprise, and that for me, if that's proven out, sounds a lot easier than asking the IT department to set up a Hadoop 3.0 cluster, get it up and running, figure out how to pump all the data into it. It's like, no, just point it over there. Okay, so let me, then if that's either 3.0 or 4.0, let me relate like an example that I heard that's sort of on that path. So I talked to Tom Riley from Cloudera the other day and he said, we're not gonna wanna repeat the secret sauce in terms of machine learning that we or our partners provide to a communication service provider. For instance, we'll give them the recipe and the ingredients to do fraud prediction, but the prevention part, they get to keep what they build with us, they keep the recipe and the data. And I guess what you're saying is, it's almost like there's not a lot of hand tooling to build that last part. Is that, would that be a fair way of saying it? I think the interesting thing is, is that there's still tooling opportunities, there's still capital investment opportunities for companies that have invested in big data. But I think we can be honest, fraud detection is, it's, we can't have false positive. I get called all the time, blocked, blocked, blocked, you have to call and okay something. And that's just not a good customer experience. And so they already have the algorithms. It's, they need better understanding of patterns causation, correlation to say, no, it's okay, when you swipe your credit card, when you got off the plane in London, it's okay, we know it's you, we know you're there. And where do we think that's going to come from? Okay, so along those lines, my impression is that we will always be adding additional data feeds or analytic data feeds to improve the context of those decisions. And that's a manual process. I mean, you can't tell Watson, look at all the data feeds that are out in the world and figure out which ones are relevant for improving the false positive ratio. Yeah, absolutely. And right now the big problem is, is how do you model the data correctly to put into these systems? Whether it's big data or some of the machine learning stuff. What I'm saying, and I probably am wrong, but the ability for them to auto figure that stuff out is coming faster than we think. And so- Auto figure out like the new data streams to- What to do with them? Automatically. So, again, very constrained problem, just hinting at what's going on, but the Google Brain project around identifying cats all on its own, that should be a light bulb moment for people to say, well, wait a minute, I didn't have to teach it what a cat looked like. 98% of our learning, even as children, is not supervised. It's not us going to school and being taught, no, two plus two is four, not five. It's literally all unsupervised. And so, again, it might sound outlandish, and I probably am wrong, but my gut tells me this wave of computing and where we're going is coming up so fast that nobody's going to predict how fast it blows by us. Okay, so now let's bump that up a layer. How does that change applications that get built? I mean, do applications get built by machines, or do people now use those predictions as a sort of a composable gallery to build the applications? I think it's the latter. So it's the applications become a composable gallery, and we've seen that even without machine learning, just if you want to build something faster, build less, and assemble the pieces, right? So all the services that Amazon does, that's amazingly powerful to an enterprise who's trying to go to the cloud because they don't have to build and stand up a database, key value store, storage, whatever that is. I think that trend continues. I think there is value in the applications and the business value to the developers, but I agree, it's just composable services. And one of the big, you know, I think the cloud wars are being waged on a services ecosystem front, and it's data services, including big data, human machine learning, you know, and then human machine interfacing. And whoever comes up with the best class of services, I think is going to win a lot of the- The elaborate on the human machine interfacing? Cortana, Alexa, Siri, things like that. Got it, got it. And so where's AppSera's role? Is that in pulling these together and putting the rules around how to deploy them and consume them within the guidelines of a particular organization? Yeah, exactly. So as everything becomes more and more complex, the notion of how do you trust all of these pieces that are moving around? Obviously, let's say we do get in two, three, four years this notion of pumping data into a machine learning algorithm and getting amazing amounts of insight for our business back. Who's allowed to access that? Who's allowed to write new applications to actually consume this and make better decisions? This world of microservices where, you know, Docker and others on the orchestration side are driving the decomposition of software systems. That's great. That increases complexity, increases risk. Who wants to take on that risk, right, of what a workload's made up of?  Those need to be driven into the platform in this new landscape in even a more impressive fashion, in my opinion. Okay. All right, Derek, we have to stop there, but it was, as always, profoundly insightful. It's good to see you again. So this is George Gilbert. We are at Structure 2015. Another amazing guest, Derek Collison of Epsara, and we'll be back in a couple of minutes.


What's going on guys got Kyle here with Layton sports cards, and we are ripping now. This is 2022 Goodwin champions 4 box break number 15 random letter We did a random before the break and check it here on our website had Chris s with s down to Robert R With A&Z now I check the results guys at the bottom of our website results tab Good luck. Let's see what we got box one I feel like I have to know right when I open it if it's in there.  I don't think I'm ready guys. Good luck. This is random letter style So Bobby So you're in here. What's going on, sir? How we doing? There's a splash of color Brandon. My yeah, Brady house and Alisa Lou I think it's a Random split oh, that's a biggie It is world travelers luck now India Luck now India on the world travelers map relics that should go to L L on the luck now India World travelers on map relic. It's a cool one there the L spot A&Z. Let's do it Bobby there's a Playing card there Alan Iverson. There's an A spot Nice and Daniels a spin lad And those ones are interesting. I saw one that had it was like four LeBron, but it was a like the LA Map relic There's a Diego Jota de spot good when champions rainbow red not numbered For don't mo It was Alex Alcala. I want his a spot. There's a splash of color refractor or virtual Ortiz V playing card there Alyssa Lou Cardo peppy this from last night. I'm guessing right now. This is like today right now. Oh, is it playing now? Yeah, isn't it all star weekend? Or is that next? I thought it was this weekend There's a filler. Well, based in that pack. There's a goodie Brandon my yeah insert Hey, I there's a playing card Sam Meyer s Will zalatoris splash of color Diego Jota D but filler pretty house Alex Alcala splash of color is Ricardo peppy are Orange Kim Griffey nice one there orange prism That is a 499 K. I think it's actually It's no base ship is the manufactured bug. This one is the wolf spider Ew numbered. Uh, that's the W wolf spider there on the manufactured bug relic. W. There's Alex Alcala a Zalatoris those things are gigantic Wolf spiders. No, thank you. Got a goody Armando cruise for a Wolf spiders and banana spiders That was seven right in the middle of a path to Henry Davis H. They ain't scared of nothing Catch you in my web There's a goody insert Ricardo peppy Hey, Watson various garland Trading card there Natalia going to the end spot Marcelo and Steven Berge fine. I think there was a it was like a piece of a Fuzz, let me see that spider again Think it was a piece of fuzz. It is a little Think it's like a piece of Like something hanging off of it, but I'll send a box of the two for the W spot. You're right there So we'll send a box back Don't give me a Give him a penini wrapper. They probably willy-tea rinse W Like I don't think this is the original All right guys box to good one really want to see one of these bugs man, I don't know why but I think it's for science I need to see one We've got to put it up for science man Donnie's here later as well so we can uh put that on his desk or something Not sure either shame, but we'll definitely send a replacement. Here's an auto got a splash of color LeBron their L And auto is Sam Meyer going to the S spot there on the Goodwin champs auto And one is not numbered for the S spot. This is orange prism Kennedy Chandler. See Grizzly's rookie to 499 Yeti cappy Bryce young Yeah, I try to get a video if I did that Think Donnie might make it in here before we end though So there's Marcello in spot. There's refractor Brady house B. How you doing today Shane?  It was a Goody Alex Alcala. I'm still on there But top five two weeks in a row There's a Steven Burgevine Sam was lucky he was in Vermont man. He got up. He got away from it. You avoid the list completely. I Guess Sean couldn't put on a list if he didn't see him the whole week. That makes sense There's a blue LeBron there on the rainbow blue splash of color not numbered Ronnie Goody LeBron insert a little LeBron for L. Goody answers Sam Meyer Racer wonder what he was doing Lisa Lou a splash of color Nicola Yovic and He gave me that trash list. I got you Shane the bottom one. I can show it to you right here Shane Jamali Jamani Swanson That is this week's trash list right there. Jayden made it on number three. Dang a Jane doodal Sean this week got Donnie when we got Shane at two Jane was at three illegal at four yours truly at five Chris at six Cortes had seven Jake had eight Steve had nine and Anthony with ten Brady house Can't get out of that top five man I'm entrenched in the top five Splash of color Kate Bokkay, you don't have to you know, it's going to annoy him or something There's a mojo pink this one is Diogo Jota for the d-spot the 299 pink tracks Yeah, he got off altogether Shane. He was in Vermont all week Sean literally did not see him all week. So you got off a list There's a I'll say our Thompson a he didn't he didn't see him once this week. So He's lucky. I guarantee you Sam will be back up there next week though I'd say top three or better. There's a lenticular Virgil Ortiz for V Kitten slovis. Yeah, he's got to be careful putting Cortes on there too much man There's a Adam Iverson a Trading card Armando Cruz for a back and shrink out. Oh Yeah, Shane that one that one will get him on there quick Shawnee got no time for Kodak black There's a Kate Bok there on the K playing card a nice Travis. I need to get one You know water jerseys the only razors I got is still a Evan Longoria And I got a Carlos Pena that doesn't fit Kate Bokkay My cardio and house I got them both the same time world series jerseys in there The one Gori I got not my size the bigger size of my mom's call good one there And then the Carlos Pena was when I was a kid So I got the kid size and does not fit anymore. It's a good call mom on the Longoria. There's a Brady house B Zalatoris and Sharapova ready guys box number three Goodwin champions This is break number 15 random letter style. We got number 16 coming up after I Always forget about upper deck putting the sticker on the boxes keep them sealed I always forget Try to open it with the sticker Power through All right, good luck box three splash of color Sharapova and auto It is Amber Mercario. There is a Hey on the auto that is from a survivor. I just recognized that our Mariano Amber Mariano that is from survivor Boston Robin Amber That one was a I don't know why I even recognized that but nice one there for Who had I'm a Bobby? Amber Mariano Change sharp that is an interesting auto in there the survivor auto didn't recognize her name. I recognize her I was like wait a minute. I think I know who that is and sketch We got a virtual Ortiz on the manufactured sketch. So when it's for the V spot Virgil Ortiz LeBron James Yeah, I'm a fan of that one Bobby. I like survivor especially the old survivor back in the day. I was always watching it There's a hex H there on the playing card. We call a duty player optic optic gaming CEO Splash of color Jordan face their M Yeah, I got a little got a little out of hand Bobby with all the hidden immunity idols and all the Exile islands and all the all the nonsense kind of like just the base where it was Like more actually like trying to survive. There's a I'll say Thompson a splash of color Seems like they put that in the backburners after a while It wasn't actually like the the survival part wasn't really at any part of it. There's a goodie Refractor there Alan Iverson a there's a goodie. Roger Arias are Macario Brady house and show them to Sam. I know he likes survivor See if he knows this There's a amen Thompson a playing card Yeah, there's been a couple good seasons since like the beginning but I haven't really Kept up at all. It's a yeti cappy. Why? Especially show like that where there's 30 seasons like they have not stopped since they started here's a goodie Maria share popa M I should have a dot auditioned at some point for survivor, but I probably got on Wouldn't want to say how would not win zero chance. I went zero chance They splashed of color Joe Felix J First couple challenges, and do you feel like yeah first challenge There's an episode of parks and rec where he's like I had a I was doing survivor audition tapes Yeah, and it was him like starting a fire or something and it was a dealer. No deal audition tape instead He's like, this is my audition for dealer. No deal Michael Jordan that one is orange prism 499 Perdomo and swan the people who view those videos are probably seen some interesting stuff in the past like the past 30 years or so Who view the submission videos? Sposter color Dyson Daniels D. I do wonder how they actually pick like Just like one guy like I don't do all right. I think they'll be all right Like I can't know who the person is like Like how profitable?  Yeah, like how profitable can we make this series? Yeah, these people. Yeah, the splash of color Steven Burgevine lenticular Yeah, I guess it would have to be like Okay, we're looking for 10 guys 10 girls From there we're looking for like some athletic ones and not so athletic ones like some older some younger get like the whole mix It's maybe they have like a criteria. Honestly, like there's a red that is rainbow red that one is Kate Bach. Okay She's sharp brice young splash of color Burgevine s Mike I'll Sarah Thompson Here's Virgil V Michael Foster Playing Card is Roger Arias are Beauty insert Dyson Daniels D Playing card Michael Foster now when it is going to M 8 Bop Alrighty guys one box left 2022 Goodwin champions box number four Good luck guys. We'll have number 16 coming up next another four boxer Then we got some Chronicles draft picks to end the daytime More breaks with Sam tonight splash of color DJ ukulele D and auto this one is Olga Karlan She is from fencing. There's oh spot there Olga Karlan Fencing on over there Steven Burgevine Sup Randy afternoon sir. How we doing? How we doing? Playing card of Brandon my a a B John Peck Trink out got a summer league today Randy first look at a B in a and Jeff Howard for the Henry Davis H insert Tiger Woods Yovitch Side to see some summer league magic. There's a sketch. This one is for a Alex Alcala. That is the manufactured sketch I'm not actually sketched on the card there. I believe there's probably a one-of-one that is actually sketched These are the manufactured Marcelo Meyer red. There's Ken Griffey on the red rainbow not numbered. Okay Yeah, pull one of those um pull one of those the last time we opened this Bobby I was surprised that he was even in here. He's a 2021 one as well That's not a bad spot to get the J spot Justin Fields rookie They splash a color Danny way the spot duty insert per Doma playing card to yoga Jota Sharapova see her Playing card Danny way you kind of hope they had autos on the playing cards But that would kind of be the purpose of the playing card I don't know if anybody's actually like playing cards with it, but pretty easy set. I would think to make Goody there DJ Uwe Leigh the Cardo peppy make a whole deck of cars. Yes. Yeah, you kind of cool I'll be down Marcelo Meyer splash a color M. I don't have parallels on that. So Wouldn't be too too hard to make Splash a color Bryce young B There's a orange prism this one is Marcelo Meyer a nice one M spot Red Sox top prospect to 499. He's probably next year, right? I think he's coming up at any point this year I feel like he could but How the red sox D Dyson Danny's turn a place if I say how it's going I'm like what's that's not a place where it's like And they're really have to call now. Yeah, we're immediately There's a lenticular this one is Ricardo peppy Team USA soccer player there are Get him doing the floss Arms moving this out tourist Brandon. My yeah Yeah, we'll be there Bobby. Uh me Sam and Matt won't we'll be breaking here, but forest um forest Sean Lane Um Halley the rich they'll all be up there at the national got a goody insert Michael Jordan M Uh typically we break from there, but I don't think we are this year. I think we're just um Just kind of hanging out kind of promoting everything. We'll have um We'll have group breaks here with a national promo a big national promo uh d spot dj um typically have like I don't even know exactly what it's going to be. I don't want to say for us, but um Typically we'll have a pretty big promo with every spot that we do buy during the week Um, you'll get a one spot in the promo. There's a bright young b Tiger woods can griffy two packs left Yeah, we'll definitely be there Bobby look for uh definitely look for forest Sean uh lane will be out there Rich will probably be very busy, but uh you can see rich as well There's a playing card there. I'll ser Thompson a price young Oh nice Bobby. Nice. Yeah, I went two years ago when it was in Chicago very nice venue Very nice out there in rosemont. There's a shading sharp s All righty guys in that we'll do it for goodwin champions. Um four box break number 15 random letter style Do a quick recap here a couple autos couple uh manufactured patches. We had the wolf spider for w Um, we had uh luck now india on the maps. That's going to the l spot We had an auto Olga carlin. Oh How to auto amber marcia mariano? That's uh m or a and we had sam mire s Alrighty guys that will do it for goodwin champions number 15 random letter style We'll get number 16 going here in just a moment