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In the movie Office Space, Peter Gibbons has a stroke of genius. Confronted with the utter mundanity of a life slaving away at his office park software company, he convinces his friends to make a computer virus to skim a fraction of a cent off transactions into a shared bank account.

This, of course, goes horribly wrong. But the concept is actually pretty solid.

In the real world, where there are literally billions of transactions crisscrossing the globe every day, you can make a big profit buying and selling securities whose prices barely differ.

But heres the key. You have to be fast. Inhumanly so. Enter physics and computers.

Computerized high-frequency trading was born from a collision of rapidly growing computing power and an influx of math and physics PhDs into finance. These wonks worked out complex quantitative buy-sell strategies, built them into algorithms, and set their software loose.

While the practice is nothing if not controversialand there are quantitative strategies that work over longer time frames tooits impact on the market is undeniable. In any given year, high-frequency trading is responsible for up to half or more of all trades. And of course, notoriously, such algorithmic trading was also involved in 2010s infamous Flash Crash.

But all this is only the beginning of how physics and computers can flip finance upside down.

At Singularity Universitys Exponential Finance Summit this week, Andrew Fursman said quantum computers, which harness natures most basic laws, are coming sooner than you think. And while digital computing was an evolution, quantum computing will be a revolution.

Fursman is CEO and cofounder of 1Qbit, a quantum computing software startup focused on making quantum computing applications practical for industry.

Quantum computing, he said, is just in its earliest stages, more akin to the hulking special-purpose computers of the 40s and 50s instead of the sleeker personal digital machines of recent decades. But he thinks its about to get practical, and itll pay dividends to those paying attention.

In finance, computing power is really a bit of an arms race, Fursman said. And as you all know, in many of these situations, it's winner takes all.

The next revolution has been a long time coming. It began with physicist Richard Feynman.

When modern digital computers were just gaining momentum, Feynman looked far down the roadhe was a genius theorist after alland noted the most powerful computers would not be digital, theyd be quantum. That is, theyd harness the laws of nature to compute.

Its counterintuitive to think of the world as a computer, said Fursman, but its an instructive analogy if you want to grasp the speed and simultaneity of quantum computers.

Complexity is nothing to nature. Just imagine how quickly and effortlessly glass breaks, he said.

In far less time than it takes to blink your eye, the laws of nature instruct the atoms in the glass to fracture into a massively complex spider web. Not unlike a computer, the laws of physics are the underlying logic allowing the glass to compute its complex demise in an instant.

Quantum computers similarly harness natures power to compute. Instead of using 1s and 0s to calculate things, they use the rules of quantum mechanics to compute with 1s, 0s, and both simultaneously. This means they can rapidly solve massively complex problems.

[Go here to learn more about how quantum computers work.]

But todays machines, like D-Waves adiabatic quantum computers, arent like your laptop, which is whats called a universal computer due to its ability to do many tasks. Instead, quantum computers today are specialized, complicated, difficult to program, and expensive.

Fursman thinks well get universal quantum computers in future, but well before then, in something like three to five years, he thinks early quantum computers will get practical. And because they can do things no other computer can, theyll be powerful.

In finance, its often about optimization. And todays quantum machines excel at optimization.

Consider building a portfolio out of all the stocks in the S&P 500, Fursman said. Given expected risk and return at various points in time, your choice is to include a stock, or not. The sheer number of possible portfolio combinations over time is mindboggling.

In fact, the possibilities dwarf the number of atoms in the observable universe.

To date, portfolio theory has necessarily cut corners and depended on approximations. But what if you could, in fact, get precise? Quantum computers will be able to solve problems like this in a finite amount of time, whereas traditional computers would take pretty much forever.

The work is already underway to make this possible.

Fursman noted a paper written by Gili Rosenberg, Poya Haghnegahdar, Phil Goddard, Peter Carr, Kesheng Wu, and Marcos Lpez de Prado in which they outline a new way to solve for an optimal portfolio. Instead of finding the best portfolio at discrete times in the future, they outline a way to find the best portfolio overall through time. Such a portfolio would reduce the transaction costs of rebalancing portfolios and potentially save the industry billions.

To be clear, this isnt ready for prime time yet. But Fursman thinks it will be shortly. The key? Their proposed portfolio optimization method is compatible with existing quantum computers. Specifically, they looked at D-Waves adiabatic machines, and according to the paper, they believe it can scale up in complexity as the underlying technology improves.

It's something that has real ability to impact what's possible within your industry and to make money doing all the things you already dobut in completely new ways, Fursman said.

Exponential Finance, according to Fursman, is a bit ahead of the curve. The event has focused on the possibility of quantum computing in finance for the last several years.

But now, its poised to make an impact. Google recently announced they expect to achieve quantum supremacy by the end of this year. That means theyll have shown a quantum computer capable of solving a problem no conventional computer can.

Fursman thinks the slowing of Moores Law may be lulling some into complacency. Whereas at one point you could barely keep pace, even if you bought a new computer every year; these days, the computer you bought four years ago is basically stillable run whatever you want today.

But for businesses, the pace of progress is about to speed up again.

The quantum computing industry [today] is just [the] spark. Its just the very, very beginning of whats going to be possible, Fursman said. Those sparks are going to turn into a huge explosion, and all of a sudden, youre going to be faced with incredible amounts of computing capabilities that directly tackle the types of problems most relevant to what youre doing.

This isnt going to take 20 years, he said, or even ten years. Itll be here in three to five years. So, now is the time to start thinking about what quantum will do for you.

Image Credit: Shutterstock

Excerpt from:
Quantum Computers Will Analyze Every Financial Model at Once - Singularity Hub

In 2016, Purdue University and Microsoft have signed a five-year agreement to develop a useable quantum computer. Purdue is one of four international universities in the collaboration. Michael Manfra, Purdue Universitys Bill and Dee OBrien Chair Professor of Physics and Astronomy, professor of materials engineering and professor of electrical and computer engineering, will lead the effort at Purdue to build a robust and scalable quantum computer by producing what scientists call a topological qubit.

The team assembled by Microsoft will work on a type of quantum computer that is expected to be especially robust against interference from its surroundings, a situation known in quantum computing as decoherence. The scalable topological quantum computer is theoretically more stable and less error-prone.

One of the challenges in quantum computing is that the qubits interact with their environment and lose their quantum information before computations can be completed, Manfra says. Topological quantum computing utilizes qubits that store information non-locally and the outside noise sources have less effect on the qubit, so we expect it to be more robust.

Purdue University and Microsoft Corp. have signed a five-year agreement to develop a useable quantum computer. Purdue is one of four international universities in the collaboration. Michael Manfra, Purdue Universitys Bill and Dee OBrien Chair Professor of Physics and Astronomy, Professor of Materials Engineering and Professor of Electrical and Computer Engineering, will lead the effort at Purdue to build a robust and scalable quantum computer by producing what scientists call a topological qubit. (Purdue University photo/Rebecca Wilcox)

Arxiv Topological Quantum Computation

The theory of quantum computation can be constructed from the abstract study of anyonic systems. In mathematical terms, these are unitary topological modular functors. They underlie the Jones polynomial and arise in Witten-Chern-Simons theory. The braiding and fusion of anyonic excitations in quantum Hall electron liquids and 2D-magnets are modeled by modular functors, opening a new possibility for the realization of quantum computers. The chief advantage of anyonic computation would be physical error correction: An error rate scaling like e, where is a length scale, and is some positive constant. In contrast, the presumptive qubit-model of quantum computation, which repairs errors combinatorically, requires a fantastically low initial error rate (about 10^4) before computation can be stabilized.

Manfra says that the most exciting challenge associated with building a topological quantum computer is that the Microsoft team must simultaneously solve problems of material science, condensed matter physics, electrical engineering and computer architecture.

This is why Microsoft has assembled such a diverse set of talented people to tackle this large-scale problem, Manfra says. No one person or group can be expert in all aspects.

Purdue and Microsoft entered into an agreement in April 2016 that extends their collaboration on quantum computing research, effectively establishing Station Q Purdue, one of the Station Q experimental research sites that work closely with two Station Q theory sites.

Purdues role in the project will be to grow and study ultra-pure semiconductors and hybrid systems of semiconductors and superconductors that may form the physical platform upon which a quantum computer is built. Manfras group has expertise in a technique called molecular beam epitaxy, and this technique will be used to build low dimensional electron systems that form the basis for quantum bits, or qubits.

The work at Purdue will be done in the Birck Nanotechnology Center in the universitys Discovery Park, and well as in the Department of Physics and Astronomy. The Birck facility houses the multi-chamber molecular beam epitaxy system, in which three fabrication chambers are connected under ultra-high vacuum. It also contains clean-room fabrication, and necessary materials characterization tools.

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Microsoft and Purdue work on scalable topological quantum computer - Next Big Future

The exciting landscape of modern life has been built with the aid of powerful computers. They have done dazzling things, from making the trains run on time to helping to build skyscrapers. Now, imagine a discontinuity in computing in which these capabilities are suddenly expanded and enhanced by orders of magnitude.

You wont have to imagine too much longer. It is in the process of happening. The fascinating thing is that this change is based on quantum science, which is completely counter-intuitive and not fully understood, even by those who are harnessing it.

Todays computers are binary, meaning that they are based on bits that represent either a 1 or a 0. As fast as they go, this is a basic, physical gating factor that limits how much work they can do in a given amount of time. The next wave of computers uses quantum bits called qubits that can simultaneously represent a 1 and a 0. This root of the mysteries that even scientists refer to as quantum weirdness allows the computers to do computations in parallel instead of sequentially. Not surprisingly, this greatly expands the ability of this class of computers.

The details of how quantum computers operate are more or less impossible to understand. A couple of related points are clear, however: Harnessing the power of quantum mechanics to create incredibly powerful machines is not a pipe dream: Companies such as IBM, Microsoft and Google, as well as startups and universities, dont sink billions of dollars in flights of fancy.

The second point is that the payoff is here, or at least quite near. The world of computing wont instantaneously change once quantum actions are proven. It is still a long road to being fully commercialized, bypassing classical approaches and, finally, living up to the most extravagant promise.

In late May, Microsoft and Purdue University announced research on quantum computing that focuses on one of the key challenges, which is the extraordinarily fragile nature of the qubits. Indeed, the subject of the research is a good example of the amazing complexity of the field and how far it has to go.

In quantum mechanics, the mere act of looking at the system makes it choose between the 1 and the 0 and exit the quantum state. The task of the Microsoft/Purdue research is to develop topological qubits that are stable enough to function in the real world.

In essence, according to Professor Michael Manfra, the university's Bill and Dee O'Brien Chair Professor of Physics and Astronomy, stability increases as the quantum properties are spread out.

The quantum variable that houses information is really a property of the quantum system as [a] whole, he wrote to IT Business Edge in response to emailed questions. More particles may be needed to define the qubit, but this complexity has an advantage while a local disturbance or perturbation can flip an individual spin, it is much less likely to change the state of the entire quantum system that comprises a topological qubit.Therefore these topological qubits are expected to be more robust.They do not couple well to the commonly occurring noise in the environment.

Preparing for the Quantum Future

There is an angle to all of this that is refreshingly straightforward and accessible, however: Great change is coming and companies need to prepare for quantum computing. Indeed, even assuming that the high-profile changes are down the road a bit, they will be massive when they do arrive.

The bottom line is that planners need to think about quantum computing. A logical first step in assessing the impact is identifying the tasks it will most likely perform. In responses to emailed questions, Jerry Chow, the manager of Experimental Quantum Computing for IBM, told IT Business Edge that four areas likely to be affected are business optimization (in areas such as the supply chain, logistics, modeling financial data and risk analysis); materials and chemistry; artificial intelligence and cloud security.

Things may not be quite as clear cut, however. David Schatsky, the managing director of Deloitte LLP, told IT Business Edge, in response to emailed questions, that risk management, investment portfolio design, trading strategies, and the design of transportation and communications networks will be affected. Quantum computer, he wrote, could be disruptive in cryptography, drug design, energy, nano-engineering and research.

Thats an almost intimidating list. However, Schatsky prefaced it with a disclaimer: Quantum computing will entirely transform some kinds of work and have negligible impact on others. The truth is, researchers dont yet know all the types of problems quantum computing may be good for.

There Is Still Time to Prepare

Luckily, planners have time. Quantum computing will be a massive change, but one that will be gradual. It makes sense to think of quantum computing as a new segment of the supercomputer market, which is a small fraction of overall IT spending, Schatsky wrote. Annual supercomputer server sales total about $11 billion globally by some estimates. I suspect quantum computing revenues will be a very small fraction of that for years to come. So Im not sure its going to become common anytime soon.

Though it clearly will be quite a while before people are buying quantum computers on Amazon, organizations need to be thinking about quantum computing today. The power of quantum computing is so extreme, especially when coupled with artificial intelligence and other emerging techniques, it is clear that all of that time must be put to good use.

IBMs Chow said that quantum-driven platforms such as Watson will be able to find patterns that are buried too deeply for classical computers. This will open new frontiers for discovery, he wrote.

It is a new age, not a new computer.

Corporations should ask: How do I learn about quantum computing to get a feel for where it might make a difference? Now is the time to realize its enormous potential, and that this is a field ripe for innovation and exploration that goes beyond simply just an end application. Becoming quantum-ready is about participating in a revolution within computing. People need to learn the details enough to open their minds up about what could be possible.

And, eventually, quantum mechanics may go beyond computing.

In general terms, I believe the development of quantum technologies is inevitable quantum computing is perhaps just the most visible example, Manfra wrote. It is not hard to imagine that certain businesses in which innovation may be enhanced by dramatic improvement in computational capabilities will need to have long-term plans which exploit quantum machines once they become available.

Carl Weinschenk covers telecom for IT Business Edge. He writes about wireless technology, disaster recovery/business continuity, cellular services, the Internet of Things, machine-to-machine communications and other emerging technologies and platforms. He also covers net neutrality and related regulatory issues. Weinschenk has written about the phone companies, cable operators and related companies for decades and is senior editor of Broadband Technology Report. He can be reached at cweinsch@optonline.net and via twitter at @DailyMusicBrk.

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Are Enterprises Ready to Take a Quantum Leap? - IT Business Edge