Thursday, May 24, 2018

A Look at the Architecture Diagram for IBM's Data Science Experience Local

One of the developments in the world of Data Science is the emergence of the Enterprise Grade Data Science Platforms.

Who Needs this?

For an individual researcher working alone, a simple Jupyter notebook with a few open source packages may be sufficient to begin extracting value from a data source.  Large enterprises, however,  have very different needs.  There are numerous people involved, with different skill sets, hundreds of data sources, existing access control schemes, security requirements, compliance regulations, high availability needs, source code control etc.  It doesn't make sense for a large organization to try to build all that from scratch before getting to the real work of data science.  Hence the need for the enterprise grade data science platform.  

On the other hand, what happens if an enterprise ignores the above issues and allows data scientist to build whatever and wherever they want?  It gets really messy!   Also, Data Scientists change jobs so quickly, much knowledge is lost when an employee leaves and especially if their work was lost on a laptop somewhere.   So, to answer the question: "Who Needs This?"  EVERY large organization doing Data Science needs this.  Let's say you had to manage 120 data scientist in your organization, what would you choose?

What Is It?

IBM's Data Science Experience Local (DSXL)  is a relatively new offering (Initial General Availability 2017).  DSXL is built using the latest in modern scalable containerized micro-service cloud architecture.  I know that sounds like a mouthful, but that actually is the truth.  All code is built into Docker containers and is managed by Kubernetes. The low level details of Docker and Kubernetes are beyond the scope of this post, so if you are not familiar with these technologies, I encourage you do further reading here:

All these pieces come together to provide an overall computing environment which is self monitoring and easily scalable for enterprise grade workloads. At the same time enables agile development and rapid delivery of new features plus rollbacks in case of problems. 

Truly a remarkable improvement over traditional monolithic software delivery methods.  This Architecture gives DSXL the power and flexibility never seen before.

Where Does it Run?

Data Science Experience Local can be run in your on-premise data center, behind your firewall, or on your organization's favorite private cloud, including IBM Softlayer, Microsoft Azure and Amazon AWS.

Let's See it Already!

Although the base configurations are described as 5-node and 8-node, I am depicting an 11-node configuration to highlight the various services, their placement within the system and to emphasize the idea that these can easily be scaled and customized based on your needs.

Click to Enlarge...Note: The yellow boxes are optional components

As you can see, the light blue box represents the DSXL platform.  The cluster of nodes are broken down into
  1. Control Nodes (or Master) used for cluster management, monitoring of resource usage (RAM, CPU and Network) plus administrative dashboards.
  2. Compute Nodes used for running actual data science work loads.
  3. Storage Nodes used for internal information about users, projects, access control, logging, code control, etc.  Although you are able to save small data sets to your local workspace, it is generally not recommended for enterprise work.  Instead, database connections to external databases is the way to go.  In this case the connection information and credentials are stored locally and can be used to access data warehouses and/or hadoop clusters in the enterprise. 
  4. Deployment Nodes - Used for deploying machine learning models into production (the subject of an entirely different blog posting).  Depicted here are two deployment services which are needed high availability environments.
So, DSXL has a fairly large footprint and is designed to provide a common working platform for large teams of data scientist within organizations.  The code base consists of both open source packages/systems along with much proprietary code.  In general, the open source code that you are familiar with is available in DSXL already.  Plus, the installed open source packages are all warranted and tested to work together.  So if you like Python and SKLearn, it is in there.  If you like working in R with Spark, that too is in there. 

The field of Data Science is progressing rapidly.  The industry has moved beyond "What is data science and and why do we need it?" to "How can we be faster and more effective at delivering data science value?".  This is an amazing time and I am glad to be a part of it.   I hope you are enjoying the journey as well.   

Comments or questions?   You can contact me @anlytcs on Twitter, through LinkedIn or by phone. 

Friday, May 18, 2018

The Modern Open-Office - The Best Layout for Agile Teams !

The modern open office design provides a space which promotes…flexible team arrangements.  …Depicted below, small, co-located, agile development teams significantly outperform remote distributed development teams.…

Tuesday, May 31, 2016

Excellent YouTube Channel for Machine Learning Videos

A little story. Recently in a job interview, I was asked to explain how
to derive the Principal Components from the Eigenvectors of a matrix.
Although, PCA can be useful for certain types of data, there are many
standard libraries which do the calculations. That is how I do it. The
last time I actually calculated eigenvectors directly was 1981. That
was my answer. Well, since this answer was less than satisfactory, I
did not get the job offer.

As a side note, after that interview, the company changed the job
description from "Machine learning Engineer" to "Machine Learning
Research Scientist". They decided they wanted someone to do research
instead of build production quality ML systems. They were apparently
following my "Machine Learning Skills Pyramid" from 2014.

Anyway, back to the point. Upon arriving home, a quick search on
YouTube uncovered an awesome resource for Machine Learning. The
fellow's name is Victor Lavrenko. His page is here:

The specific playlist for the EigenVectors question is here:
Be sure to watch all twelve videos in order for the full rundown on PCA
(about an 1.5 hours total)


Thursday, May 26, 2016

How To Work For Free - The Phony Job Interview Scam

I just returned home from a job interview in Boston.  It wasn't until I sat in the Logan airport gate area for four hours thinking about how frustrating and annoying the interviews went, that I suddenly realized that I had been scammed.   (I won't mention the company name for fear of a lawsuit). 

When searching for a new job opportunity beware of this 'Phony' job interview scam. 

It goes like this: 
  1. A recruiter calls with a  job opportunity for an unusually high dollar amount and really great perks like working remote etc.  The story is told that they have had a really hard time finding qualified candidates with the specific skills you possess and they think you are a great fit. 
  2. You go through a few steps in the process, phone interview, skype etc and then they bring you in for a series of face to face interviews with other members of the team.  In my case, they shelled out money for an airline ticket, so I figured, not only were they serious, but that my chances were really good.  
  3. When you arrive, there is a group of people waiting for you, all are extremely friendly (You think to yourself, this seems like a nice place to work!).
  4. They show you the problem they are having and pump you for ideas on how you would solve the problem.  
  5. Feeling pressured to show your creative and technical abilities, you dig deep to pull out every idea that you can to help solve their problem.
  6. Each time you explain an idea, they respond with, "But how would you solve it?"  They never acknowledge that any of your ideas are good.  In fact, they act as if it is not good enough.   You feel compelled to try harder and dig deeper.
  7. After three or so hours of this continual 'pumping' for ideas, they abruptly end the meeting, thank you for your time and hustle you out the door.
Clues that they were not serious:
  1. No one had seen or read my resume
  2. They show you the problem they are having have and pump you for ideas on how you would solve the problem.  Your ideas are never good enough and they pump you for more.
  3. Thinking you need to prove your value, you deliver more and more ideas for their problem solving.
  4. There is apparently no shortage of the required skills.  In this case, all were knowledgeable about python, algorithms, machine learning, etc.
  5. There is no discussion about the job terms, working conditions, team,  equipment, logistics etc.

So for the cost of a one day travel ticket (under $300 total), they received a wealth of information and ideas about how to solve their problem.  For me, I got $0 pay for my free consulting, plus I sat for four hours on a plane and over six hours in the waiting area at Boston's Logan Airport (flight delays etc). 

Have you had a similar experience?  Does anyone have ways to combat this dirty trick?

All comments are welcome.  Comment below or on twitter @anlytcs

Monday, May 16, 2016

Comparing Daily Stock Market Returns to a Coin Flip

In this post, we examine the Random Walk Hypothesis as applied to daily stock market returns.   Background information on this can be found here: .

So I applied my skills to this problem and came up with a bit of code which attempts to use some feature engineering to predict a coin flip then use the same approach on daily S&P 500  (where 1 is a up day and 0 is a down day).   The next day's outcome is the classification label for the current day.

Program Setup and Feature Generation

You can find my code and data file on GitHub, where you can read it, download it and tweak it until you feel satisfied with the results.

The features designed for this experiment consisted of:
1. Previous, i.e. was yesterday up or down.
2. A count of Heads while in a Heads streak.
3. A count of Tails while in a Tails streak.
4. A count of Heads and Tails in a set of lookback periods.  That is in the last 5, 10,20,30, etc days how many heads and how many tails were there.  This to capture any observable trends.  (not necessarily valid for coin flips, but believed to be a valuable tool in stock trading.  Here is a bit of code where I identify the feature labels:

LOOKBACKS = [5,10,20,30,40,50,100]
HEADER_LINE = ['label','previous','heads_streak','tails_streak']
for i in LOOKBACKS:
for i in LOOKBACKS:

The experiment consisted of three runs:
1. 100,000 pseudo random number coin flips. 
2. 4600 daily observations, going back to 1995, of the S&P 500 index transformed into coin-flips.  That is the up_or_down column in the data file.
Data Source: Yahoo finance.
3. 4600 pseudo random number coin flips.

Each run used a 5-fold cross validation, then plotted the AUC curve for the various runs and averages the AUCs for a final 'score'.  Here are the results:

Output of Run


Start:  Fri May 13 16:18:50 2016
Do 100000 Coin Flips
Counts: Counter({1: 50053, 0: 49947})
Heads: 50.05300 percent
Tails: 49.94700 percent
Build Features:  Fri May 13 16:18:50 2016
Build Model:  Fri May 13 16:19:45 2016
Train and Do Cross Validation:  Fri May 13 16:19:45 2016
[ 0.49705482  0.496599    0.50169547  0.49761318  0.49758308]
Average:  0.498109110082
Accuracy: 0.4981 (+/- 0.003664)


Do SP500 (4600 days)
Build Features:  Fri May 13 16:20:09 2016
Build Model:  Fri May 13 16:20:10 2016
Train and Do Cross Validation:  Fri May 13 16:20:10 2016
[ 0.53477333  0.54759786  0.53681652  0.55128712  0.53932995]
Average:  0.54196095771
Accuracy: 0.5420 (+/- 0.012769)


Do 4600 Coin Flips
Counts: Counter({1: 2322, 0: 2278})
Heads: 50.47826 percent
Tails: 49.52174 percent
Build Features:  Fri May 13 16:20:33 2016
Build Model:  Fri May 13 16:20:34 2016
Train and Do Cross Validation:  Fri May 13 16:20:34 2016
[ 0.48760588  0.52287443  0.52944808  0.5124338   0.50364302]
Average:  0.511201041299
Accuracy: 0.5112 (+/- 0.029456)
End:  Fri May 13 16:20:51 2016


Commentary and Conclusions

1. As expected, the 100,000 coin flips run shows exactly what you would expect.  With an Average AUC of 0.4981, this is almost the definition of the ROC curve. .  For 100k flips and all the generated features, the 5 ROC curves basically follow the 45 degree line.  So, there was no benefit found over random guessing what the next flip will be.

2. For  4600 days of S&P 500 'flips', there appears to be a very slight edge from the model, with an average AUC of 0.5419609577.  Not enough to risk actual money.

3. Now, the 4600 coin flips output raises some interesting questions.    The average AUC was 0.5112 and the five ROC curves somewhat hug the 45 degree line.  This raises the question of the validity of the 0.54 found in run #2  (4600 days SP500) ?  I wonder what would happen if we had 100,000 days S&P 500 data.  That is about 380 years worth.  Maybe some motivated enough, could dig up 100,000 hourly readings try this experiment again.  I would be curious to see the results.

Have we disproven the Random Walk Hypothesis?  No.  There are much better mathematical minds than myself who have effectively put that theory to rest.  An interesting and thoroughly enjoyable read on this subject is the Misbehavior of Markets by Benoit Mandelbrot.
You can also read the abstract here:

What I think we have shown:
1. Machine learning cannot predict a coin toss  (but we knew that already).
2. Next day stock price forecasting is a hard problem.

Feedback?  Hit me up on Twitter @anlytcs

Wednesday, April 20, 2016

Stock Forecasting with Machine Learning - Are Stock Prices Predictable?

In the last two posts, I offered a "Pop-Quiz" on predicting stock prices.  Today, I would like to ask the most important issue when attempting to use any form of predictive analytics in the financial markets.  Do you even have a chance of getting reliable results?  Or are you wasting your time?  Back in 2003, when I first built the described Neural Network solution, it was my first naive take on the problem and I wasted a lot of time.

Today, with the expansion of machine learning research and mathematical techniques combined with the proliferation of open source tools, we are in a much better position to answer these questions directly.   A few months back a new algorithm came to my attention via an interesting post on the FastML blog entitled "Are Stocks predictable".   Check this link:

The short story is this: A PhD student at Carnegie Mellon University named Georg Goerg developed an algorithm and published his findings in what he called 'Forecastable Component Analysis'.  This algorithm looks at a time-series and tries to determine how much noise vs. how much signal.  The answer is provided as an 'Omega Score'.  The algorithm was also provided as an R package ForeCA.  

In English, if the data contains too much noise, attempts to predict the series will fail.  This is really useful for stock prices.  FastML shows that next day %changes for stock indexes have ridiculously low Omega scores, between 1.25% and 6%.  Not enough to bank on.

I discovered a similar effect in my research.  No matter how much you torture the input data, forecasting the next day's close is a fool's folly.    It is analogous to attempting to predict the flip of a coin.  However, what I have discovered (assuming I am interpreting the results correctly), is that as you go out in time, the results start to become more meaningful.  So, what would happen if you fed the ForeCA algorithm with Percentage change values for 1,5,10,15,20,25, and 30 days in the future ?

Here are the results.   Note: ForeCA reorders the columns from most to least forecastable (after transformation), so for the sake of simplicity, just pay attention to the 'Orig' series' omega scores and the top right bar chart. (bars labeled X1-Day through X30_DAY).   As you can see, the noise/signal ratio and your ability to forecast improves as the number of days increases.  

Series 7  Series 4  Series 5  Series 6  Series 3  Series 2  Series 1
31.998529 28.954507 25.660565 23.572059 20.275582 11.857304  4.612705

   X1_DAY    X5_DAY   X10_DAY   X15_DAY   X20_DAY   X25_DAY   X30_DAY
 1.632106 11.253286 18.363721 22.831144 26.353855 29.138379 31.560240


Again, assuming I am interpreting the results correctly, we have a 31.56% chance of getting the forecast right 30 days in the future. Still not enough to bank on.  In the end, stock market success is not about the perfect algorithm or forecast or formula.  It is about managing risk when your signal goes wrong.

(Note: I would have provided the R source code and input data, but it was left on my work laptop when I recently finished up a project with Cisco).

Friday, May 29, 2015

Stock Forecasting With Machine Learning - Seven Possible Errors

Here are at least seven reasons why pumping the last ten days of SP500 O/H/L/C/V into a neural network in an attempt to solve for the next day's O/H/L/C is a bad idea. 

1. Not enough data.  Ten days of data is simply not enough.
2. No feature engineering.  The plan used raw data.  A better approach might be to use to solve for percentage gain or loss.  How about daily range as a converted to a percentage volatility value?  How about Volume spike true/false?
3. No separate train vs. test set.  You have no way of determining the accuracy of the model on unseen data.
4. If you are training and predicting during in a trending market, the neural network is being asked to solve for values outside its known range of values.  Not a task that is well suited for a Neural Network.
5. Separate Neural Network should be used to solve for multiple output values.  While some algorithms can be constructed to solve for multiple targets, the Neural Network is not one of them.
6. The Neural Network is a very brittle and opaque algorithm.  Sometimes it does not converge at all and when/if it does, it is very difficult to understand the results of the model.
7. Attempting to forecast next day's numbers based on a series of End-of-Day values is a fool's folly.    For more information refer to this book: The (Mis)Behaviour of Markets: A Fractal View of Risk, Ruin and Reward Book by Benoit Mandelbrot

However, on the plus side, there was an important kernel of truth here.  The notion that the model needs to be adaptable to current market conditions.  This is the bane of many black box or mechanical trading systems.  If the model does not adapt to current conditions, the best it can do is average over long periods which are likely not suitable for today's market.

Bottom line.  This model is crap.  "Operation Make Millions" was naive and ill advised.  It never made $10.00 !

Feedback?  Hit me up on Twitter @anlytcs

Wednesday, October 29, 2014

Stock Forecasting With Machine Learning - Pop-Quiz

A few years back, I decided that machine learning algorithms could be designed to forecast the next day's Open, High Low, Close for the SP500 index.   Armed with that information, it would be a cinch to make $Millions !

The following chart shows the initial design of the Neural Network:

As it turns out, this ML model did not work.  In fact, this approach is completely wrong !  Can you think this through and come up with reasons why ?

(Note: This slide was taken from a recent presentation entitled "Building Effective Machine Learning Applications"). 

Tuesday, October 28, 2014

Hire a Data Scientist for only $5.00

Got a Machine Learning problem? Got $5.00? Consider it solved !

Visit this page on

While I don't have any knowledge of the quality of their work, I suspect this price is reflective of the cost of living in their location minus a discount for the promotional benefit.

 The Internet is the great equalizer.

Thursday, September 25, 2014

Understanding Online Learning - Part 1

Online learning is form of machine learning with the following characteristics:

1. Supervised learning
2. Operates on streams of big data
3. Fast, lightweight models
4. Small(er) RAM footprint
5. Updated continuously
6. Adaptable to changes in the environment

Many machine learning algorithms train in batch mode.  The model requires the entire batch of training data to be fed in at one time.  To train, you select an algorithm, prepare your batch of data, train the model on the entire batch, check the accuracy of your predictions.  You then fine tune your model by iterating your process and by tweaking your data, inputs and parameters.   Most algorithms do not allow new batches of data to update and refine old models.  So periodically you may need to retrain your models with the old and new data.

There are a number of benefits to the batch approach:
  1. Many ML algorithms to choose from.  You have many more algorithms because that is typically how they are developed at the universities and the batch approach aligns with traditional statistics practices. 
  2. Better accuracy.   Since the batch represents the "known universe", there are many mathematical techniques which have been developed to improve model accuracy.
  3. Can be effective with smaller data sets.  Hundreds or thousands of rows can results in good ML models.  (Internally, many algorithms iterate over the data set to learn the desired characteristics and improve the results). 
Online learning takes a stream approach to learning.  Instead of processing the entire batches of data, the online learning algorithm sees one row at a time from a larger stream, runs a prediction, checks the error rate and updates the model continuously.   (In a production setting, you may not have the true target value immediately, so you may need to split the predict and update phases into separate processes).

There are some advantages and a few drawbacks to the online learning approach.   

  1. Big Data: Extremely large data sets are difficult to work with.  Model development and algorithm training is cumbersome.  With online learning, you can wrestle the data down to manageable sized chunks and feed it in..
  2. Small(er) RAM footprint.  Obvious benefits of using less RAM.
  3. Fast: Because they have to be.
  4. Adaptive:   As new data comes, the learning algorithm adjusts the model and automatically adapts to the changes in the environment.  This is useful for keeping your model in sync with changes in human behavior such as click-thru behavior and financial markets etc.  With traditional algorithms using a batch approach, the newer behavior is blended in with the older data so these subtle changes in behavior are lost.  With online learning, the model continuously moves toward latest version of reality.
  1. It requires a lot of data.  Since the learning is done as it goes along, the model accuracy is developed over millions of rows not thousands.  (You should pre-train your model before production use, of course).
  2. Predictions as not as accurate.  You give up some accuracy in the predictive powers of the model as a trade off for the speed and size of the solution.
In the Part 2, we'll point out some of the existing tools which can be used for Online Learning.  In later posts, I will attempt to relate the concept of adaptability to the field of Black Box Stock Trading systems.   Black box trading systems are notorious because they make money at first and then fail miserably when the market morphs into something totally different.

Meanwhile, here are some interesting links to learn more:

Enjoy !