🤖Prompt Engineering: Domains (Just the Quotes)

"The idea behind transfer learning is that the pre-trained model has already learned a lot of information about the language and relationships between words, and this information can be used as a starting point to improve performance on a new task. Transfer learning allows LLMs to be fine-tuned for specific tasks with much smaller amounts of task-specific data than would be required if the model were trained from scratch. This greatly reduces the amount of time and resources needed to train LLMs." (Sinan Ozdemir, "Quick Start Guide to Large Language Models: Strategies and Best Practices for Using ChatGPT and Other LLMs", 2024)

"As the tech industry moves from non-generative models to generative models, it is shifting away from feature engineering, or creating features to model the data and experimenting with different hyperparameters to optimize performance. Generative models, and specifically LLMs, do not require feature engineering. Today, the core requirements are usually prompt engineering or building a RAG pipeline - skills that lie within the domain of AI engineers." (Abi Aryan, "LLMOps: Managing Large Language Models in Production", 2025)

"Context is crucial for how language models understand and generate code. The model processes your input by analyzing relationships between different parts of the code and documentation to determine meaning and intent. [...] The model evaluates context by calculating mathematical relationships between elements in your input. However, it may miss important domain knowledge, coding standards, or architectural patterns that experienced developers understand implicitly." (Jeremy C Morgan, "Coding with AI: Examples in Python", 2025)

"Despite their impressive capabilities, LLMs are not without limitations. One of the most significant challenges is the problem of hallucination, where an LLM generates factually incorrect or misleading information that appears plausible. This is particularly problematic in domains requiring high factual accuracy, such as healthcare, finance, and legal applications. To mitigate hallucinations and enhance the reliability of LLM outputs,  Retrieval-Augmented Generation (RAG) has emerged as a powerful technique. RAG works by dynamically retrieving relevant information from an external knowledge source (such as a knowledge graph) at inference time, rather than just relying on pre-trained knowledge. This approach ensures that the model has access to up-to-date and accurate data, grounding answers in verified information rather than generating content purely from its internal representations." (Aldo Marzullo et al, "Graph Machine Learning" 2nd Ed., 2025)

"In prompt engineering, we customize the prompts or questions we give the model to get more accurate or insightful responses. The way a prompt is structured has a massive impact on how well a model understands the task at hand and, ultimately, how well it performs. Given LLMs’ versatility, prompt engineering has become an important skill for getting the most out of these models across different domains and tasks. The key is to understand how different prompt structures lead to different model behaviors. There are various strategies - ranging from simple one-shot prompting to more complex techniques like chain-of-thought prompting - that can significantly improve the effectiveness of LLMs." (Abi Aryan, "LLMOps: Managing Large Language Models in Production", 2025)

 "There are three techniques for model domain adaptation: prompt engineering, RAG, and fine-tuning. Strictly speaking, RAG is a form of dynamic prompt engineering where developers use a retrieval system to add content to an existing prompt, but RAG systems are used so often that it’s worth discussing them separately. One critical difference with fine-tuning is that you must have access to the model’s weights, information that is usually not available with cloud-based, proprietary LLMs." (Abi Aryan, "LLMOps: Managing Large Language Models in Production", 2025)

"Generative artificial intelligence (GenAI), powered by large language models (LLMs) like Google’s Gemini and OpenAI’s GPT, has transformed how we work and live, revolutionizing business after business. Despite this success, generative AI falls short in domains where specific domain knowledge, high accuracy, and explainability are essential. And it has other significant limitations, including hallucinations and a lack of context and relations. This is where knowledge graphs (KGs) come in, provid-ing contextual information - such as experiences, environmental characteristics, cultural aspects, and social normsneeded to build the 'third wave of AI' for mission-critical applications." (Alessandro Negro et al, "Knowledge Graphs and LLMs in Action", 2026)

"KGs are sophisticated graph structures that represent real-world entities (people, places, diseases, proteins), define meaningful connections between them, and provide context. KGs provide structured, explainable knowledge representation but are challenging to build and query; LLMs offer natural language processing capabilities but suffer from hallucinations, stale information, and a lack of domain-specific grounding. Together, they are a 'killer combination': LLMs can extract entities and relationships from unstructured text to build KGs more efficiently, providing more autonomous and powerful graph querying and analysis. Meanwhile, KGs provide reliable, up-to-date domain knowledge to ground LLM responses and prevent hallucinations." (Alessandro Negro et al, "Knowledge Graphs and LLMs in Action", 2026)

"RAG is a paradigm that combines the strengths of LLMs with the rich, often unstructured data stored in a lakehouse. Rather than asking an LLM to generate responses purely from its internal parameters and training data, where knowledge can be outdated or incomplete, RAG systems first retrieve relevant documents, records, or data slices from your lakehouse and then feed those pieces into the model as context for its generative step. The result is an AI that can speak confidently about the latest reports, proprietary datasets, or domain-specific knowledge you have stored without having to retrain the model each time your data changes." (Bennie Haelen, "ML and Generative AI in the Data Lakehouse Building and Deploying AI Applications at Scale", 2026)

"Traditional paradigms build systems for specific purposes with structured, homogeneous databases. This approach works for tailored needs but is impractical for complex domains that need to adapt to user characteristics and integrate heterogeneous data. KGs capture connections, enabling relationship discovery through graph pattern matching and traversal. Both the Resource Description Framework (RDF) and Labeled Property Graphs (LPGs) provide machine-readable formats that humans can interpret. KGs emphasize rich, meaningful data representations usable by both humans and machines, enabling a paradigm shift where intelligent behavior is encoded in a unique source of truth." (Alessandro Negro et al, "Knowledge Graphs and LLMs in Action", 2026)

🤖Prompt Engineering: Intelligence (Just the Quotes)

"Deep learning has instead given us machines with truly impressive abilities but no intelligence. The difference is profound and lies in the absence of a model of reality." (Judea Pearl, "The Book of Why: The New Science of Cause and Effect", 2018)

"First, intelligence is situational - there is no such thing as general intelligence. Your brain is one piece in a broader system which includes your body, your environment, other humans, and culture as a whole. Second, it is contextual - far from existing in a vacuum, any individual intelligence will always be both defined and limited by its environment. (And currently, the environment, not the brain, is acting as the bottleneck to intelligence.) Third, human intelligence is largely externalized, contained not in your brain but in your civilization. Think of individuals as tools, whose brains are modules in a cognitive system much larger than themselves - a system that is self-improving and has been for a long time." (Erik J Larson, "The Myth of Artificial Intelligence: Why Computers Can’t Think the Way We Do", 2021)

"Inference is to bring about a new thought, which in logic amounts to drawing a conclusion, and more generally involves using what we already know, and what we see or observe, to update prior beliefs. […] Inference is also a leap of sorts, deemed reasonable […] Inference is a basic cognitive act for intelligent minds. If a cognitive agent (a person, an AI system) is not intelligent, it will infer badly. But any system that infers at all must have some basic intelligence, because the very act of using what is known and what is observed to update beliefs is inescapably tied up with what we mean by intelligence. If an AI system is not inferring at all, it doesn’t really deserve to be called AI." (Erik J Larson, "The Myth of Artificial Intelligence: Why Computers Can’t Think the Way We Do", 2021)

"The idea that we can predict the arrival of AI typically sneaks in a premise, to varying degrees acknowledged, that successes on narrow AI systems like playing games will scale up to general intelligence, and so the predictive line from artificial intelligence to artificial general intelligence can be drawn with some confidence. This is a bad assumption, both for encouraging progress in the field toward artificial general intelligence, and for the logic of the argument for prediction." (Erik J Larson, "The Myth of Artificial Intelligence: Why Computers Can’t Think the Way We Do", 2021)

"The problem-solving view of intelligence helps explain the production of invariably narrow applications of AI throughout its history. Game playing, for instance, has been a source of constant inspiration for the development of advanced AI techniques, but games are simplifications of life that reward simplified views of intelligence. […] Treating intelligence as problem-solving thus gives us narrow applications." (Erik J Larson, "The Myth of Artificial Intelligence: Why Computers Can’t Think the Way We Do", 2021)

"Agentic intelligence feels incredibly powerful in demos but breaks in production. Indeed, it is very fragile without solid infrastructure. Every day, I personally see tons of clever orchestrations around dumb prompt chains tied up in a brittle, underused LLMOps infrastructure. But building this infrastructure means acknowledging the costs: performance overhead, strict interface contracts, and state complexity, as well as a need for more LLMOps engineers to create the best practices, tooling, and frameworks to run these systems reliably, safely, and robustly." (Abi Aryan, "LLMOps: Managing Large Language Models in Production", 2025)

"Agentic AI extends GenAI by embedding intelligence within autonomous or semi-autonomous systems that can plan, reason, and take actions within defined boundaries. Instead of simply generating a report, an agentic system might determine which data it needs, retrieve that data from multiple sources, perform analysis, summarize the results, and then trigger follow-up workflows, all while maintaining auditability and alignment with governance policies." (Fern Halper, "Data Makes the World Go 'Round", 2026)

"Intelligent systems connect users to AI and ML to achieve meaningful objectives. An intelligent system is one in which intelligence evolves and improves over time, particularly when it improves by watching how users interact with the system.[...] The primary objective of the intelligent system is to support users in accomplishing complex tasks - not by replacing them, but by enhancing their decision-making capabilities. [...] An intelligent system must also have the ability to learn from user interactions and explicit feedback, as well as utilize contextual information. The system should contin-uously develop, use, and maintain an evolving knowledge base. This evolution is driven not only by data sources but also by ongoing interactions with users." (Alessandro Negro et al, "Knowledge Graphs and LLMs in Action", 2026)

"LangGraph handles the perception, reasoning, and action flow while maintaining memory and context across tasks. In this sense, it functions as both the development environment and the orchestration layer - coordinating the steps of perception, reasoning, and action while managing connections to external systems. Underneath this, emerging standards like MCP ensure that agents can connect securely and consistently to tools and data sources, making agentic architectures portable and scalable across platforms. Taken together, the orchestration layer and emerging interoperability standards like MCP form the foundation for scalable agentic AI. They make it possible for agents to perceive, reason, act, and learn in coordinated ways across complex environments, translating autonomous intelligence into practical, enterprise-grade capability." (Fern Halper, "Data Makes the World Go 'Round", 2026)

🤖Prompt Engineering: Retrieval Augmented Generation [RAG] (Just the Quotes)

"As the tech industry moves from non-generative models to generative models, it is shifting away from feature engineering, or creating features to model the data and experimenting with different hyperparameters to optimize performance. Generative models, and specifically LLMs, do not require feature engineering. Today, the core requirements are usually prompt engineering or building a RAG pipeline - skills that lie within the domain of AI engineers." (Abi Aryan, "LLMOps: Managing Large Language Models in Production", 2025)

"Despite their impressive capabilities, LLMs are not without limitations. One of the most significant challenges is the problem of hallucination, where an LLM generates factually incorrect or misleading information that appears plausible. This is particularly problematic in domains requiring high factual accuracy, such as healthcare, finance, and legal applications. To mitigate hallucinations and enhance the reliability of LLM outputs,  Retrieval-Augmented Generation (RAG) has emerged as a powerful technique. RAG works by dynamically retrieving relevant information from an external knowledge source (such as a knowledge graph) at inference time, rather than just relying on pre-trained knowledge. This approach ensures that the model has access to up-to-date and accurate data, grounding answers in verified information rather than generating content purely from its internal representations." (Aldo Marzullo et al, "Graph Machine Learning" 2nd Ed., 2025)

 "There are three techniques for model domain adaptation: prompt engineering, RAG, and fine-tuning. Strictly speaking, RAG is a form of dynamic prompt engineering where developers use a retrieval system to add content to an existing prompt, but RAG systems are used so often that it’s worth discussing them separately. One critical difference with fine-tuning is that you must have access to the model’s weights, information that is usually not available with cloud-based, proprietary LLMs." (Abi Aryan, "LLMOps: Managing Large Language Models in Production", 2025)

"RAG is a framework that combines the strengths of traditional information retrieval systems with the generative capabilities of LLMs. In this setup, an LLM is augmented with a retrieval component that fetches relevant information from external data sources, such as knowledge bases or databases, to produce more accurate and contextually relevant responses. This method enhances the LLM’s output by grounding it in authoritative, up-to-date information." (Aldo Marzullo et al, "Graph Machine Learning" 2nd Ed., 2025)

"Vector databases are designed to store and index high-dimensional embeddings - dense numeric vectors that capture the semantic meaning of text, images, audio, or other content. Instead of looking for exact matches, they use approximate nearest neighbor (ANN) algorithms to return the items whose vectors lie closest to a query vector in that multidimensional space. This makes them the engine behind semantic search, recommendation systems, image-or-audio similarity matching, and retrieval augmented generation (RAG) pipelines that supply LLM prompts with relevant context in milliseconds." (Abi Aryan, "LLMOps: Managing Large Language Models in Production", 2025)

"RAG applications must be built with semantics, metadata, and governance in mind. The retrieved information must be high-quality, secure, and appropriate for the user’s role. Equally important is monitoring and management: checking whether source data has changed, ensuring vector stores remain accurate, and watching for hallucinations or data leakage. Organizations are definitely starting to experiment with RAG models today; some are putting them into production applications. Some believe that using RAG helps mitigate hallucinations because it is grounded in trusted organizational data." (Fern Halper, "Data Makes the World Go 'Round", 2026)

"RAG is a paradigm that combines the strengths of LLMs with the rich, often unstructured data stored in a lakehouse. Rather than asking an LLM to generate responses purely from its internal parameters and training data, where knowledge can be outdated or incomplete, RAG systems first retrieve relevant documents, records, or data slices from your lakehouse and then feed those pieces into the model as context for its generative step. The result is an AI that can speak confidently about the latest reports, proprietary datasets, or domain-specific knowledge you have stored without having to retrain the model each time your data changes." (Bennie Haelen, "ML and Generative AI in the Data Lakehouse Building and Deploying AI Applications at Scale", 2026)

"The foundational form of RAG, often called naive RAG, follows a straightforward pattern. A pipeline retrieves supporting context from external sources such as enterprise documents, knowledge bases, or structured datasets and appends that information to the model’s prompt before inference. In the most common implementation, each document is converted into an embedding, a numerical representation of its semantic meaning, using either the same foundation model or a specialized embedding model. When a user submits a query, the system performs a vector similarity search to find documents whose embeddings most closely match the query’s vector representation, and the retrieved content is concatenated with the user query before being passed to the language model." (Bennie Haelen, "ML and Generative AI in the Data Lakehouse Building and Deploying AI Applications at Scale", 2026)

🖍️Nick Bostrom - Collected Quotes

"A genie is a command-executing system: it receives a high-level command, carries it out, then pauses to await the next command. A sovereign is a system that has an open-ended mandate to operate in the world in pursuit of broad and possibly very long-range objectives. Although these might seem like radically different templates for what a superintelligence should be and do, the difference is not as deep as it might at first glance appear." (Nick Bostrom, "Superintelligence", 2014)

"A question distinct from, but related to, the question of kinetics is whether there will be one superintelligent power or many? Might an intelligence explosion propel one project so far ahead of all others as to make it able to dictate the future? Or will progress be more uniform, unfurling across a wide front, with many projects participating but none securing an overwhelming and permanent lead?" (Nick Bostrom, "Superintelligence", 2014)

"A system that has the intelligence amplification superpower could use it to bootstrap itself to higher levels of intelligence and to acquire any of the other intellectual superpowers that it does not possess at the outset. But using an intelligence amplification superpower is not the only way for a system to become a full-fledged superintelligence. A system that has the strategizing superpower, for instance, might use it to devise a plan that will eventually bring an increase in intelligence (e.g. by positioning the system so as to become the focus for intelligence amplification work performed by human programmers and computer science researchers)." (Nick Bostrom, "Superintelligence", 2014)

"A system might thus greatly boost its effective intellectual capability by absorbing pre-produced content accumulated through centuries of human science and civilization: for instance, by reading through the internet. If an AI reaches human level without previously having had access to this material or without having been able to digest it, then the AI’s overall recalcitrance will be low even if it is hard to improve its algorithmic architecture." (Nick Bostrom, "Superintelligence", 2014)

"An agent’s ability to shape humanity’s future depends not only on the absolute magnitude of the agent’s own faculties and resources - how smart and energetic it is, how much capital it has, and so forth - but also on the relative magnitude of its capabilities compared with those of other agents with conflicting goals." (Nick Bostrom, "Superintelligence", 2014) 

"If some day we build machine brains that surpass human brains in general intelligence, then this new superintelligence could become very powerful. And, as the fate of the gorillas now depends more on us humans than on the gorillas themselves, so the fate of our species would depend on the actions of the machine superintelligence." (Nick Bostrom, "Superintelligence: Paths, Dangers, Strategies", 2014)

"Improvements in rationality and intelligence will tend to improve an agent’s decision-making, rendering the agent more likely to achieve its final goals. One would therefore expect cognitive enhancement to emerge as an instrumental goal for a wide variety of intelligent agents. For similar reasons, agents will tend to instrumentally value many kinds of information." (Nick Bostrom, "Superintelligence: Paths, Dangers, Strategies", 2014) 

"Once machines attain some form of human-equivalence in general reasoning ability, how long will it then be before they attain radical superintelligence? Will this be a slow, gradual, protracted transition? Or will it be sudden, explosive?" (Nick Bostrom, "Superintelligence: Paths, Dangers, Strategies", 2014)

"Some paths to superintelligence require great resources and are therefore likely to be the preserve of large well-funded projects. Whole brain emulation, for instance, requires many different kinds of expertise and lots of equipment. Biological intelligence enhancements and brain–computer interfaces would also have a large scale factor: while a small biotech firm might invent one or two drugs, achieving superintelligence along one of these paths (if doable at all) would likely require many inventions and many tests, and therefore the backing of an industrial sector or a well-funded national program. Achieving collective superintelligence by making organizations and networks more efficient requires even more extensive input, involving much of the world economy." (Nick Bostrom, "Superintelligence: Paths, Dangers, Strategies", 2014)

"Suppose that a digital superintelligent agent came into being, and that for some reason it wanted to take control of the world: would it be able to do so?" (Nick Bostrom, "Superintelligence: Paths, Dangers, Strategies", 2014) 

"The fact that there are many paths that lead to superintelligence should increase our confidence that we will eventually get there. If one path turns out to be blocked, we can still progress." (Nick Bostrom, "Superintelligence: Paths, Dangers, Strategies", 2014)

"Various considerations thus point to an increased likelihood that a future power with superintelligence that obtained a sufficiently large strategic advantage would actually use it to form a singleton. The desirability of such an outcome depends, of course, on the nature of the singleton that would be created and also on what the future of intelligent life would look like in alternative multipolar scenarios." (Nick Bostrom, "Superintelligence: Paths, Dangers, Strategies", 2014)

"We can tentatively define a superintelligence as any intellect that greatly exceeds the cog‐ nitive performance of humans in virtually all domains of interest." (Nick Bostrom, "Superintelligence: Paths, Dangers, Strategies", 2014)

"We have seen that a superintelligence could have a great ability to shape the future according to its goals. But what will its goals be? What is the relation between intelligence and motivation in an artificial agent?" (Nick Bostrom, "Superintelligence: Paths, Dangers, Strategies", 2014)

"[...] we use the term 'superintelligence' to refer to intellects that greatly outperform the best current human minds across many very general cognitive domains. This is still quite vague. Different kinds of system with rather disparate performance attributes could qualify as superintelligences under this definition. To advance the analysis, it is helpful to disaggregate this simple notion of superintelligence by distinguishing different bundles of intellectual super-capabilities. There are many ways in which such decomposition could be done. Here we will differentiate between three forms: speed superintelligence, collective superintelligence, and quality superintelligence." (Nick Bostrom, "Superintelligence: Paths, Dangers, Strategies", 2014)

🖍️Yves Hilpisch - Collected Quotes

"Algorithms without data are often worthless. Similarly, algorithms with 'standard' data from typical data sources, such as exchanges or data service providers like Refinitiv or Bloomberg, might only be of limited value. This is due to the fact that such data is intensively analyzed by many, if not all, relevant players in the market, making it hard or even impossible to identify alpha-generating opportunities or similar competitive advantage." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

"All in all, it seems questionable whether a superintelligence can be properly and systematically controlled when it has reached that level. After all, its superpowers can at least in principle be used to overcome any human-designed control mechanism." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

"Although the normality assumption is a good approximation for many real-world phenomena, such as in physics, it is not appropriate and can even be dangerous when it comes to financial returns." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

"Almost no financial return sample data set passes statistical normality tests. Beyond the fact that it has proven useful in other domains, a major reason why this assumption is found in so many financial models is that it leads to elegant and relatively simple mathematical models, calculations, and proofs." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

"Even if markets are weakly efficient on an end-of-day basis, they can nevertheless be weakly inefficient intraday. Such statistical ineffi‐ ciencies might result from temporary imbalances, buy or sell pres‐ sures, market overreactions, technically driven buy or sell orders, and so on. The central question is whether such statistical ineffi‐ ciencies, once discovered, can be exploited profitably via specific trading strategies." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

"Even strong proponents of a utopian future based on advancements in AI must agree that a dystopian future after a technological singularity cannot be fully excluded. Since the consequences might be catastrophic, dystopian outcomes must play a role in broader discussions about AI and superintelligence." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

"In the definition of learning through an algorithm or computer program, it is important to note the difference between the task of learning and the tasks to be learned. Learning means to learn how to (best) execute a certain task, such as estimation or classification." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

"It is to be assumed that any form of superintelligence will have instrumental goals that are independent of its main goal. This might lead to a number of unintended consequences, such as the insatiable quest to acquire ever more resources with any means that seem promising." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

"Of all the possible paths to superintelligence, AI seems to be the most promising one. Recent successes in the field based on reinforcement learning and neural networks have led to another AI spring, after a number of AI winters. Many even now believe that a superintelligence might not be as far away as we thought even a few years ago. The field currently is characterized by much faster advancements than originally predicted by experts only a short while ago." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

"The first and second moment of a probability distribution only describe a normal distribution completely. There are infinitely many other distributions that might share the first two moments with a normal distribution while being completely different." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

"The randomized population of training, validation, and test data sets is a common and useful technique for data sets that are neither sequence-like nor temporal in nature. However, when one is dealing, say, with a financial time series, shuffling the data is generally to be avoided because it breaks up temporal structures and sneaks foresight bias into the process by using, for example, later samples for training and implementing the testing on earlier samples." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

"Whereas in supervised learning the training, validation, and test data sets are assumed to exist before the training begins, in RL the agent generates its data itself by interacting with the environment. In many contexts, such as in games, this is a huge simplification. Consider the game of chess: instead of loading thousands of histor‐ical human-played chess games into a computer, an RL agent can generate thousands or millions of games itself by playing against another chess engine or another version of itself, for instance." (Yves Hilpisch, "Artificial Intelligence in Finance A Python-Based Guide", 2021)

 

🤖〽️Prompt Engineering: Copilot Unabridged (Part 216: How Long Can Microsoft and Other Vendors Sustain Massive AI Investments Before It Becomes an Economic Bubble?)

Prompt Engineering Series

Prompt: "write a post of 600 words on the impact of consistent and high‑quality training data on AI"

Introduction

Over the past several years, Microsoft, Google, Amazon, Meta, and other technology giants have invested unprecedented sums into Artificial Intelligence (AI). They are building GPU superclusters, expanding datacenter capacity, training frontier‑scale models, and subsidizing AI usage across consumer and enterprise products. These investments are justified by the belief that AI will become the next foundational computing platform - driving productivity, reshaping cloud economics, and unlocking new trillion‑dollar markets.

But massive investment comes with massive risk. If AI adoption, monetization, and real‑world impact fail to keep pace with spending, the industry could find itself in a classic economic bubble: inflated expectations, unsustainable burn rates, and a painful correction. The key question is how long vendors can sustain this trajectory before the imbalance becomes too large to ignore.

1. Financial Strength Buys Time - But Not Unlimited Time

Microsoft, Google, and Amazon have enormous financial buffers. Microsoft alone generates more than $80 billion in annual operating income, giving it the ability to absorb AI losses for several years. This financial resilience allows vendors to continue investing even when short‑term returns are modest.

However, financial strength is not infinite. If AI revenue fails to scale, vendors will eventually face pressure to reduce capital expenditure. The sustainability window is long - 3 to 7 years - but not indefinite. This is the core of financial runway.

2. Investor Expectations Are the Real Timer

Investors currently tolerate massive AI losses because they believe in long‑term returns. As long as vendors show:

• rapid adoption
• credible monetization pathways
• strong ecosystem growth
• increasing enterprise integration
• the market remains patient. 

But if expectations diverge too far from reality, investor sentiment can shift quickly.

A bubble forms when expectations grow faster than fundamentals. If AI revenue plateaus while spending accelerates, investors will demand:

• reduced spending
• clearer profitability timelines
• more conservative guidance

This is the dynamic of expectation inflation.

3. Infrastructure Expansion Has Natural Limits

Even if vendors wanted to sustain massive spending indefinitely, physical constraints prevent it. Datacenters require land, power, cooling, and specialized hardware. Supply chains for GPUs and networking fabric are already strained.

These constraints slow the pace of expansion and act as a natural brake on bubble formation. Vendors cannot overspend infinitely because the infrastructure simply cannot scale infinitely. This is the logic behind infrastructure bottlenecks.

4. The Bubble Threshold: When Costs Outrun Value

An economic bubble emerges when the perceived future value of AI becomes disconnected from its actual economic output. Warning signs include:

• AI revenue growing slower than AI costs
• enterprises reducing or delaying adoption
• vendors subsidizing usage at unsustainable levels
• datacenter expansion outpacing utilization
• investors questioning long‑term profitability

If these trends intensify, the bubble becomes visible. Most analysts believe the industry has 3–5 years before this risk becomes acute.

5. What Happens If the Bubble Pops?

If AI fails to meet expectations, vendors would be forced to:

• cut capital expenditure
• slow frontier‑model training
• consolidate datacenter expansion
• shift focus to smaller, more efficient models
• prioritize profitable cloud workloads

The industry would not collapse - but it would undergo a painful correction.

Conclusion

Microsoft and other vendors can sustain massive AI investments for several years thanks to strong balance sheets, strategic necessity, and investor patience. But if AI fails to deliver the expected economic transformation, the industry risks drifting into an economic bubble where spending outpaces value creation.

The sustainability window is long - but not limitless. Without measurable returns, vendors will eventually face pressure to reduce spending, recalibrate expectations, and shift toward more efficient AI strategies. The next few years will determine whether AI becomes the next great computing platform - or the next great over‑investment cycle.

Disclaimer: The whole text was generated by Copilot (under Windows 11) at the first attempt. This is just an experiment to evaluate feature's ability to answer standard general questions, independently on whether they are correctly or incorrectly posed. Moreover, the answers may reflect hallucinations and other types of inconsistent or incorrect reasoning.

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🤖Prompt Engineering: Transformers (Just the Quotes)

"Self-attention, sometimes called intra-attention is an attention mechanism relating different positions of a single sequence in order to compute a representation of the sequence. Self-attention has been used successfully in a variety of tasks including reading comprehension, abstractive summarization, textual entailment and learning task-independent sentence representations.  End-to-end memory networks are based on a recurrent attention mechanism instead of sequence-aligned recurrence and have been shown to perform well on simple-language question answering and language modeling tasks. To the best of our knowledge, however, the Transformer is the first transduction model relying entirely on self-attention to compute representations of its input and output without using sequence-aligned RNNs or convolution." (Ashish Vaswani et al, "Attention Is All You Need", 2017) [source] 

"Attention is a mechanism used in deep learning models (not just Transformers) that assigns different weights to different parts of the input, allowing the model to prioritize and emphasize the most important information while performing tasks like translation or summarization. Essentially, attention allows a model to 'focus' on different parts of the input dynamically, leading to improved performance and more accurate results. Before the popularization of attention, most neural networks processed all inputs equally and the models relied on a fixed representation of the input to make predictions. Modern LLMs that rely on attention can dynamically focus on different parts of input sequences, allowing them to weigh the importance of each part in making predictions." (Sinan Ozdemir, "Quick Start Guide to Large Language Models: Strategies and Best Practices for Using ChatGPT and Other LLMs", 2024)

"Large language models (LLMs) are AI models that are usually (but not necessarily) derived from the Transformer architecture and are designed to understand and generate human language, code, and much more. These models are trained on vast amounts of text data, allowing them to capture the complexities and nuances of human language. LLMs can perform a wide range of language-related tasks, from simple text classification to text generation, with high accuracy, fluency, and style." (Sinan Ozdemir, "Quick Start Guide to Large Language Models: Strategies and Best Practices for Using ChatGPT and Other LLMs", 2024) 

"[...] LLMs are pre-trained on large corpora and sometimes fine-tuned on smaller datasets for specific tasks. Recall that one of the factors behind the Transformer’s effectiveness as a language model is that it is highly parallelizable, allowing for faster training and efficient processing of text. What really sets the Transformer apart from other deep learning architectures is its ability to capture long-range dependencies and relationships between tokens using attention. In other words, attention is a crucial component of Transformer-based LLMs, and it enables them to effectively retain information between training loops and tasks (i.e., transfer learning), while being able to process lengthy swatches of text with ease." (Sinan Ozdemir, "Quick Start Guide to Large Language Models: Strategies and Best Practices for Using ChatGPT and Other LLMs", 2024)

"This ability to zero in on important code is why modern AI coding assistants can offer meaningful suggestions for your specific needs. It’s similar to how skilled developers know which code sections affect a new implementation the most. Each transformer layer learns about various code patterns, ranging from syntax validation to understanding the relationships among functions, classes, and modules." (Jeremy C Morgan, "Coding with AI: Examples in Python", 2025)

"Transformers are complex models built like LEGO blocks using multiple smart and specialized components. [...] Briefly, a vanilla transformer model consists of separate stacks of encoders and decoders. Each encoder block includes multi-head self-attention, enabling the model to capture relationships between tokens regardless of their positions. Residual connections help maintain gradient flow, preventing the vanishing gradient problem. Layer normalization ensures training stability, and feed-forward layers introduce non-linearity and learn complex token interactions. Decoder blocks contain the same components but also include an encoder-decoder attention mechanism to incorporate context from the encoder. The model uses embedding layers to convert tokens into a continuous latent space for contextual learning and positional encoding to preserve the order of tokens in the sequence." (Joseph Babcock & Raghav Bali, "Generative AI with Python and PyTorch" 2nd. Ed., 2025)

"A transformer is a type of deep learning model designed to handle sequential data, such as text, more efficiently than previous RNNs. It uses a self-attention mechanism introduced [...] to process all parts of a sequence simultaneously, rather than one by one. This allows it to capture relationships between words (or data points) more effectively. The development of transformers revolutionised natural language processing and was a key leap forward. Transformers also used an encoder–decoder architecture. The encoder transforms the input into an abstract representation, and the decoder generates the output. So, by tokenising text into subword units and using parallel self-attention, it enables far greater throughput than RNNs. This design eliminates the need for recurrence (in RNNs) and achieves state-of-the-art results in tasks like translation and allows for a 1,000× speed-up using GPUs." (Alan Watkins & G C Cooke, "Smarter than You Winning in Business with Superintelligent AI", 2026)

"GenAI encompasses a variety of model architectures, including diffusion models, normalizing flows, and autoregressive models. However, three types of GenAI have become particularly dominant in practical applications. GANs pit two neural networks against each other to produce realistic data. VAEs encode input data into a latent space and decode it to generate new samples. Transformer-based models, like those in the GPT, Llama, and Gemini families, leverage attention mechanisms to generate coherent and contextually relevant sequences." (Bennie Haelen, "ML and Generative AI in the Data Lakehouse Building and Deploying AI Applications at Scale", 2026)

"Transformers dominate language for several reasons: their autoregressive framework provides a straightforward training objective (predict next token), self-attention captures long-range dependencies across thousands of tokens, parallel training processes entire sequences simultaneously (unlike RNNs’ sequential bottleneck), and scaling behavior produces emergent capabilities at billions of parameters. These properties make transformers uniquely suited for the language understanding and generation tasks central to enterprise AI applications [...]" (Bennie Haelen, "ML and Generative AI in the Data Lakehouse Building and Deploying AI Applications at Scale", 2026)

"Transformer-based models represent the dominant architecture for processing sequential data, particularly text. Unlike GANs and VAEs, which excel at generating visual content, transformers have revolutionized natural language processing (NLP) and are now being applied to code, music, and even protein structures. At their core, transformers use a mechanism called self-attention that allows the model to consider relationships between all elements in a sequence simultaneously. This enables transformers to capture long-range dependencies and contextual nuances that earlier sequential models struggled with." (Bennie Haelen, "ML and Generative AI in the Data Lakehouse Building and Deploying AI Applications at Scale", 2026) 

"Unlike earlier neural network designs that processed text sequentially, transformers use a mechanism called self-attention that allows the model to consider relationships between all words in a passage simultaneously. This parallel processing enables transformers to capture long-range dependencies and contextual nuances that previous architectures struggled with. Positional encoding provides information about word order, while the attention mechanism allows the model to focus on relevant context when processing each word." (Bennie Haelen, "ML and Generative AI in the Data Lakehouse Building and Deploying AI Applications at Scale", 2026)

🤖〽️Prompt Engineering: Copilot Unabridged (Part 215: What Happens If AI Investments Don’t Meet Expectations?)

Prompt Engineering Series

Prompt: "write a post of 600 words and explain what will happen if the AI investments made by Microsoft and other vendors don't meet the expectations"

Introduction

Over the past five years, Microsoft, Google, Amazon, Meta, and other tech giants have poured unprecedented amounts of capital into Artificial Intelligence (AI) . They have built GPU superclusters, expanded datacenter footprints, acquired strategic partners, and trained frontier‑scale models that cost hundreds of millions per run. These investments are justified by the belief that AI will become the next foundational computing platform - bigger than cloud, bigger than mobile, and potentially bigger than the internet itself.

But what if this future doesn’t materialize as expected? What if adoption slows, monetization lags, or the technology fails to deliver the transformative productivity gains vendors promise? The consequences would be profound, reshaping corporate strategy, investor sentiment, and the trajectory of the entire industry.

1. Financial Pressure Would Force a Strategic Reset

If AI revenues fail to scale, the first impact would be financial compression. AI infrastructure is extraordinarily expensive, and vendors currently tolerate losses because they expect future dominance. Without that payoff, companies would be forced to:

• Reduce capital expenditure on datacenters
• Slow GPU procurement
• Consolidate or cancel frontier‑model training cycles
• Shift investment back toward profitable core businesses

This is the classic pattern of strategic retrenchment - a pivot from aggressive expansion to defensive cost control.

2. Cloud Growth Would Stall

AI is the engine driving the next wave of cloud adoption. If AI underperforms, cloud hyperscalers would lose a major growth vector. Azure, AWS, and Google Cloud rely on AI workloads to justify new datacenter regions and premium compute tiers.

A slowdown would mean:

• Lower utilization of new datacenters
• Reduced demand for high‑margin GPU instances
• Pressure on cloud revenue forecasts

This would be especially painful for Microsoft, whose AI strategy is tightly integrated with Azure’s long‑term growth.

3. Investor Confidence Would Erode

Right now, investors tolerate massive AI losses because they believe in long‑term returns. If expectations are not met, that tolerance evaporates. The market would demand:

• Clear profitability timelines
• Reduced spending
• More conservative guidance
• A shift toward predictable revenue streams

This is the dynamic of market correction - a recalibration of expectations that forces vendors to justify every dollar spent.

4. Competitive Dynamics Would Shift

If frontier‑scale AI fails to deliver, the competitive landscape changes dramatically. Companies that bet heavily on large models would lose strategic leverage, while those investing in smaller, specialized, or hybrid approaches could gain ground.

Meta’s open‑source strategy, for example, would look far more attractive if massive proprietary models fail to produce returns. Smaller vendors could also rise by focusing on niche, cost‑efficient AI rather than universal intelligence.

This is the logic behind competitive inversion.

5. Enterprise Adoption Would Slow

Enterprises currently experiment with AI because vendors subsidize usage. If investments fail, subsidies shrink, prices rise, and adoption slows. Companies would revert to:

• Traditional automation
• Classical machine learning
• Rule‑based systems
• Domain‑specific analytics

AI would remain useful - but not transformative.

Conclusion

If AI investments fail to meet expectations, the consequences would be severe but not catastrophic. Vendors would survive, but the industry would undergo a major strategic reset. Spending would decline, cloud growth would slow, investor pressure would intensify, and the competitive landscape would shift toward smaller, more efficient models.

AI would still matter - but it would no longer be the defining platform of the next era. The companies that adapt fastest to this reality would shape the future, whether or not frontier‑scale AI delivers on its promise

Disclaimer: The whole text was generated by Copilot (under Windows 11) at the first attempt. This is just an experiment to evaluate feature's ability to answer standard general questions, independently on whether they are correctly or incorrectly posed. Moreover, the answers may reflect hallucinations and other types of inconsistent or incorrect reasoning.

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🤖〽️Prompt Engineering: Copilot Unabridged (Part 214: How Long Can Microsoft and Other Vendors Sustain Massive AI Losses?)

 

Prompt Engineering Series

Prompt: "write a post of 600 words and explain how long the AI investments can be sustained by Microsoft and other vendors as they generate huge losses"

Introduction

The Artificial Intelligence (AI) boom has triggered one of the largest capital outlays in the history of technology. Microsoft, Google, Amazon, Meta, and others are spending tens of billions of dollars annually on GPUs, data centers, research partnerships, and frontier‑model development. These investments generate enormous short‑term losses, raising a critical question: How long can this level of spending be sustained?

The answer depends on three forces: financial capacity, strategic necessity, and market expectations. Together, they determine how long vendors can tolerate losses before AI must begin paying for itself.

1. Financial Capacity: The Balance Sheet Determines the Burn Rate

Microsoft, Google, and Amazon are not startups - they are trillion‑dollar companies with deep cash reserves, diversified revenue streams, and high creditworthiness. This gives them the ability to sustain losses for years, not months.

Microsoft alone generates more than $80 billion in annual operating income, which acts as a buffer for AI losses. As long as core businesses - cloud, enterprise software, Windows, Office - continue to perform, Microsoft can redirect profits to subsidize AI expansion.

This is why financial resilience is the first determinant of sustainability.

2. Strategic Necessity: AI Is Not Optional

AI is the next computing platform. Vendors know that whoever controls the dominant AI ecosystem will shape:

• cloud workloads
• enterprise automation
• developer tooling
• search and advertising
• productivity software

This creates a strategic imperative: spend now or become irrelevant later.

Microsoft’s partnership with OpenAI is not just an investment - it is a defensive moat against Google’s Gemini, Amazon’s Anthropic partnership, and Meta’s open‑source strategy.

This is the logic behind strategic dependency.

3. Market Expectations: Investors Tolerate Losses - For Now

Investors understand that frontier AI is a long‑term play. As long as vendors demonstrate:

• rapid adoption
• strong ecosystem growth
• credible monetization pathways
• increasing enterprise integration
• the market will tolerate losses.

But this tolerance is not infinite. If revenue growth stalls or adoption plateaus, investor pressure will force vendors to slow spending.

This is the dynamic of market tolerance.

4. The Real Constraint: Infrastructure Saturation

The biggest limiting factor is not money - it is physical infrastructure.

Datacenters take years to build. Power grids must be upgraded. Supply chains for GPUs and networking fabric are constrained.

Even if vendors wanted to double spending, they often cannot.

This natural bottleneck slows the burn rate and extends sustainability.

This is the core of infrastructure saturation.

5. When Does the Spending Plateau?

Most analysts expect the current hyper‑investment phase to last 3–5 more years, followed by a stabilization period where:

• model training becomes more efficient
• inference costs decline
• monetization improves
• enterprise AI revenue grows
• datacenter expansion reaches maturity

At that point, losses shrink and AI becomes a net contributor rather than a drain.

Conclusion

Microsoft and other vendors can sustain massive AI losses for several years because they have the financial strength, strategic motivation, and investor support to do so. But this spending cannot continue indefinitely. Physical infrastructure limits, competitive pressure, and the need for profitability will eventually force a shift from expansion to optimization.

AI is following the same pattern as cloud computing: a decade of heavy losses, followed by decades of dominance. The companies investing today are not trying to win the next quarter - they are trying to win the next era of computing.

Disclaimer: The whole text was generated by Copilot (under Windows 11) at the first attempt. This is just an experiment to evaluate feature's ability to answer standard general questions, independently on whether they are correctly or incorrectly posed. Moreover, the answers may reflect hallucinations and other types of inconsistent or incorrect reasoning.

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🤖〽️Prompt Engineering: Copilot Unabridged (Part 213: Why Massive AI Investments Generate Massive Losses)

Prompt Engineering Series

Prompt: "write a post of 600 words and explain why the AI investments made by Microsoft and other vendors generate huge losses,. "

Introduction

Artificial Intelligence (AI) has become the defining battleground of modern technology. Microsoft, Google, Amazon, Meta, and others are pouring tens of billions into AI infrastructure, model training, and ecosystem development. Yet despite explosive public interest and rapid enterprise adoption, these companies report staggering short‑term losses tied directly to their AI initiatives.

This paradox - sky‑high investment, sky‑high losses-is not a sign of failure. It is a structural feature of frontier‑scale AI. To understand why, we need to examine the economics behind training large models, the infrastructure required to run them, and the strategic pressures that force vendors to spend aggressively even when profitability is years away.

1. Frontier‑Model Training Costs Are Exponential

Training a frontier model is not a linear expense. Each generation requires more parameters, more training tokens, larger datasets, and more compute cycles. A single training run for a cutting‑edge model can cost hundreds of millions of dollars.

This is why frontier‑model training is the first and most visible driver of losses. Vendors must run multiple training cycles, safety evaluations, fine‑tuning passes, and inference optimizations. Microsoft’s partnership with OpenAI means Azure absorbs the bulk of these compute costs, directly impacting earnings.

2. Infrastructure Build‑Out Is Historically Unprecedented

AI does not run on ordinary cloud servers. Vendors must build:

• GPU superclusters
• High‑bandwidth networking fabrics
• Liquid‑cooling systems
• Specialized datacenters optimized for AI workloads

Each hyperscale datacenter costs $1–$2 billion, and hardware depreciates quickly. Today’s top‑tier GPU becomes mid‑tier in 18–24 months. This creates a cycle of continuous capital expenditure that depresses short‑term profitability.

This is the core of AI infrastructure economics.

3. Inference Costs Scale With Usage

Traditional software has near‑zero marginal cost. AI does not.

Every query to a large model consumes compute, electricity, and cooling. When millions of users interact with Copilot, ChatGPT, Gemini, or Claude, vendors pay for every token generated.

This is why AI inference is a structural loss generator: revenue must grow faster than usage to break even, which rarely happens in early adoption phases.

4. Monetization Is Still Immature

Most users expect AI to be:

• Free
• Unlimited
• Always available

But the cost structure makes that impossible. Vendors experiment with subscriptions, API pricing, enterprise licensing, and usage‑based billing, yet none of these models currently offset the full cost of running frontier AI.

This is the challenge of AI monetization.

5. Competition Forces Overspending

AI is an arms race. No vendor can afford to fall behind. This creates irrational spending patterns:

• Microsoft invests heavily to stay ahead with OpenAI
• Google accelerates Gemini development
• Amazon pours billions into Anthropic
• Meta open‑sources massive models to shape the ecosystem

In an arms race, losses are tolerated because the alternative is losing strategic control of the next computing platform. This is the logic behind competitive overspending.

Conclusion

AI investments generate huge losses because vendors are not selling a finished product—they are building the foundation of a new computing era. Frontier‑scale AI requires unprecedented capital, massive compute, and continuous reinvestment. The losses are not a sign of weakness; they are the cost of securing future dominance in a market that will reshape productivity, cloud infrastructure, search, advertising, and enterprise automation

Disclaimer: The whole text was generated by Copilot (under Windows 11) at the first attempt. This is just an experiment to evaluate feature's ability to answer standard general questions, independently on whether they are correctly or incorrectly posed. Moreover, the answers may reflect hallucinations and other types of inconsistent or incorrect reasoning.

Previous Post <<||>> Next Post 

🏭𝐌𝐢𝐜𝐫𝐨𝐬𝐨𝐟𝐭 𝐅𝐚𝐛𝐫𝐢𝐜: 𝐃𝐚𝐭𝐚 𝐖𝐚𝐫𝐞𝐡𝐨𝐮𝐬𝐞 (𝐓𝐞𝐜𝐡𝐧𝐢𝐜𝐚𝐥 𝐎𝐯𝐞𝐫𝐯𝐢𝐞𝐰)

 Introduction (Some Background)

Typically, PowerPoint slides and similar content must be broken in small pieces and structured in such a way that the audience can digest the information presented. Thus, a presentation ends up spreading over multiple slides that must be structured in such a way that it facilitates also digestion, retention, and whatever further aspects are targeted. Conversely, on social networks the average author/publisher has only a small chance of capturing an audience's attention, given that the competition for readers' attention increases exponentially in the long sequence of posts. So, what information would we show for this purpose? 

When I want to learn something, typically I need a few pieces of information/knowledge that would allow me to anchor and integrate the text into existing knowledge. It usually starts with high-level definitions of the main concepts that reflect the various aspects that would help me associate and differentiate the respective concepts from similar concepts or knowledge. The volume of such information depends on many aspects - the complexity of the concepts and the contexts they belong to, how many similar concepts or metaphors are available, the gaps available, analogies and differentiators, etc.

A high-level list of the main capabilities for the respective concept(s) would further allow a (wider) surface to anchor the various information of interest. No matter how much text can be included, we shouldn't forget that a (well-chosen) picture is (often) worth a thousand words. Therefore, a well-chosen image that depicts a high-level representation of the concepts/ideas presented, the architecture or even a metaphor can have a considerable impact on the readers.  

Ideally the image should serve as a sketch or sample of the finished product. Then, even if from the used representation one can guess what are the ingredients used, the difference between a good dish and a fiasco often resides in details. Like in preparing a dish, one needs to know what ingredients are needed and how they must be prepared and used together, for the maximum effect. An experienced cook needs at least the list of ingredients and some general information on how the dish differentiates from other dishes. The more inexperienced the cook, the more information needs to be provided and somewhere a line must be drawn, otherwise a simple recipe becomes the cookbook itself. Therefore, like in any cookbook, I must assume that some basic knowledge is available!

So, as part of the learning/teaching process, I started a series of slides on Microsoft Fabric that should help me narrow down the recipes for delivering great products. The information comes from training material, various presentations delivered by Microsoft or third-parties, the various books and other technical material I read over the years. 

Let's start with the basics - the (data) warehouse!

   📣Technical Overview 

    

Conclusion

The slide barely scratches the surface, especially if we consider it from a broader context - what the average professional must know. Even if the gap between the presented information and a business case, for example, or anything similar capable of convincing the audience is considerable, the slide should serve as a starting point, if not a foundation on which something durable can be built. 

Enjoy the ride and feel free to like it, download it, respectively share it further!

🖍️Hayden Van Der Post - Collected Quotes

"A critical aspect of neural networks is their ability to learn from data. This learning occurs during the training phase, where the network is exposed to vast datasets, allowing it to adjust its internal parameters - the weights and biases associated with each neuron. The goal of this adjustment is to minimize the difference between the network's predictions and the actual outcomes, a process known as optimization. Through techniques such as gradient descent and backpropagation, neural networks iteratively refine their parameters, enhancing their ability to make accurate predictions or decisions based on new input."(Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"Beyond the choice of model, the accuracy of neural network predictions in trading significantly depends on the quality and relevance of the data fed into them. This underscores the importance of meticulous data preparation, encompassing cleaning, normalization, and feature engineering. By ensuring that the input data is reflective of the market's complexities, traders can fine-tune their neural networks to produce more accurate and actionable predictions." (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"Deep learning algorithms are exceptionally adept at identifying anomalies within large datasets, making them an indispensable tool for detecting fraudulent transactions and financial irregularities. By learning from historical transaction data, these models can pinpoint patterns and behaviors indicative of fraudulent activities with remarkable accuracy. This ability not only aids in safeguarding assets but also ensures compliance with increasingly stringent regulatory standards aimed at preventing financial fraud and misconduct." (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"Deep learning is an advanced subset of machine learning, distinguished by its ability to process data through layers of neural networks, each layer abstracting information from the one preceding it. This hierarchical approach enables the model to handle complex, high-dimensional data, learning features and patterns at multiple levels of abstraction. [...] Traditional neural networks, with their shallower architectures, often struggle with the nuances of financial data, limited by their capacity to extrapolate and interpret intricate patterns. Deep learning, however, with its deeper, more sophisticated networks, can navigate these complexities, offering nuanced insights into market dynamics." (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"Feature selection is the first critical step in model optimization. It's the art of identifying which features in your dataset contribute most significantly to the outcome you're trying to predict. This not only helps in enhancing the model's accuracy but also in reducing computational complexity, leading to more efficient models. [...] While feature selection is about cherry-picking the most useful features, feature engineering is about creating new features that increase the predictive strength of the model. This is where creativity and domain knowledge come into play, especially in financial data, where market sentiment, economic indicators, and other external factors can influence market movements." (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"Genetic programming represents a frontier in feature engineering, allowing for the automated creation of new features through the application of evolutionary algorithms. By combining existing features in non-linear and complex ways, genetic programming can uncover hidden relationships in the data that were not apparent through manual exploration. This technique, while computationally intensive, holds the promise of discovering novel predictors that can enhance the performance of trading algorithms." (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"Neural networks are structured into layers, each comprising a collection of neurons. The arrangement begins with an input layer, which receives the raw data. This is followed by one or more hidden layers, where the actual processing happens through a complex web of interconnected neurons. The journey through the layers culminates in an output layer, where the network delivers its final decision or prediction. The hidden layers are the cradle of the network’s learning capability, enabling it to detect patterns, make associations, and refine its predictions through repeated exposure to data." (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"Predictive analytics, involves the use of data, statistical algorithms, and machine learning techniques to identify the likelihood of future outcomes based on historical data. Neural networks, with their remarkable ability to learn and model complex patterns, have become the backbone of modern forecasting methods. Their application ranges from predicting consumer behavior in retail to forecasting the stock market trends, from anticipating weather patterns to foreseeing potential healthcare outbreaks." (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"The beauty of neural networks lies in their ability to learn and improve. Through a process known as 'training', a neural network is fed large amounts of data along with feedback on its performance. This feedback guides the network in adjusting its internal parameters, known as weights, to minimize errors in its predictions. This iterative process of learning from mistakes closely mirrors the cognitive and learning processes of the human brain, making neural networks particularly adept at tasks that involve pattern recognition, such as image and speech recognition [...]" (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"The essence of backpropagation is captured in the gradient descent algorithm, which seeks to minimize the error by iteratively adjusting the weights in the direction that most steeply decreases the error function. This rigorous process requires a meticulous balance; too large a weight adjustment can lead to erratic learning, while too small an adjustment can trap the network in local minima. In algorithmic trading, the capacity to learn from past predictions and refine strategies accordingly is invaluable, allowing for the continual optimization of trading algorithms in alignment with market dynamics." (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"The power of neural networks lies in their flexibility and adaptability. They are not confined to a single type of problem or dataset but can be tailored to a wide range of applications, from voice recognition and image classification to forecasting financial market movements. This versatility stems from the network's ability to capture and model complex, non-linear relationships within the data it is trained on, making it a potent tool in the arsenal of data scientists and algorithmic traders alike." (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"Weights and biases are pivotal in shaping the neural network's decision-making process. Weights determine the strength of the connection between two neurons, influencing how much of the input signal is passed forward. Biases, added to the weighted sum before the activation function, allow neurons to adjust their output independently of their input, providing an additional degree of freedom. The process of learning in a neural network involves adjusting these weights and biases based on the error between the network's predictions and the actual data, typically using an algorithm like gradient descent." (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

"While forward propagation provides the prediction, backpropagation is the mechanism through which a neural network learns from its errors and enhances its accuracy. Backpropagation, a form of reverse engineering of the forward propagation process, involves calculating the error between the predicted output and the actual output, and then distributing this error back through the network. This distribution occurs layer by layer, in reverse order from output to input, adjusting the weights of the connections based on the magnitude of the error." (Hayden Van Der Post, "Neural Network: Mastering the Art of Algorithmic Trading", 2024)

🤖Prompt Engineering: Challenges (Just the Quotes)

"Another problem that can be confusing is that LLMs seldom put out the same thing twice. [...] Traditional databases are straightforward - you ask for something specific, and you get back exactly what was stored. Search engines work similarly, finding existing information. LLMs work differently. They analyze massive amounts of text data to understand statistical patterns in language. The model processes information through multiple layers, each capturing different aspects - from simple word patterns to complex relationships between ideas." (Jeremy C Morgan, "Coding with AI: Examples in Python", 2025)

"Chain-of-thought prompting is a method that forces LLMs to reason through a series of steps, resulting in more structured, transparent, and precise outputs. The goal is to break down complex tasks into smaller, interconnected subtasks, allowing the LLM to address each subtask in a stepby-step manner. This not only helps the model to 'focus' on specific aspects of the problem, but also encourages it to generate intermediate outputs, making it easier to identify and debug potential issues along the way. Another significant advantage of chain-of-thought prompting is the improved interpretability and transparency of the LLM-generated response. By offering insights into the model’s reasoning process, we, as users, can better understand and qualify how the final output was derived, which promotes trust in the model’s decision-making abilities." (Sinan Ozdemir, "Quick Start Guide to Large Language Models: Strategies and Best Practices for Using ChatGPT and Other LLMs", 2024) 

"AI isn’t just going to be about our digital world. It’s also about our physical world; and applied properly, imagine what AI can do for the pace of discovery and innovation. It’s not just makeup; imagine what it can do for new materials discovery for medicine, energy, climate, and all the other pressing challenges we face as a species - these are the same challenges of makeup, just described with a different 'language'. And quantum computing evolves, we’re bound to see a synergy of these innovations that we can use to tackle these problem domains and more." (Rob Thomas et al, "AI Value Creators: Beyond the Generative AI User Mindset", 2025)

"LLMs can inadvertently produce toxic content or biased language, leak private information, or be vulnerable to jailbreak prompts. These risks carry serious legal and reputational consequences. To mitigate them, evaluation tools must integrate automated filters and classifiers that flag problematic outputs in real time, as we discussed earlier in the chapter. Metrics such as safety scores, toxicity indices, and bias measurements should be collected alongside model metadata for auditing purposes." (Abi Aryan, "LLMOps: Managing Large Language Models in Production", 2025)

"LLM developers can train the model simply to perform well on the benchmarks, like a student memorizing the answers to an upcoming exam. This is a very serious problem in practice. It’s not uncommon to see an LLM perform well in general benchmarks, only to perform below the level of GPT-3.5 (a now-obsolete but inexpensive model) in a practical application, like describing a scene. When this happens, there’s usually little reason to use the model that has the higher general scores - your users should have the final word. Another problem is that LLMs are highly sensitive to the compatibility of the data used in training and prompts used in evaluation. A seemingly minor change in the prompt can lead to drastically different outputs. This makes it difficult to design prompts that consistently elicit the desired response and assess the LLM’s true capabilities." (Abi Aryan, "LLMOps: Managing Large Language Models in Production", 2025)

"The art of mega-prompts spanning multiple written pages and looking like essays has become commonplace for complex tasks when building applications to get things `just right'. Unfortunately, they bring with them lots of issues: errors, portability, complexity, and more. The GenAI world didn’t plan for mega-prompts. They have simply evolved into what they’ve become today because practitioners kept wanting to do more and more complex things, and their only way to express those intents was with a prompt. But step back and look at some of these prompts [...] Lurking just below the surface are a bunch of classical computing concepts like data, programming instructions, control flows, memory, and stora - all the components typically associated with classical computing elements." (Rob Thomas et al, "AI Value Creators: Beyond the Generative AI User Mindset", 2025)

"The same difficulties that characterize training deep feedforward networks also apply to RNNs; gradients tend to die out over long distances using traditional activation functions (or explode if the gradients become greater than 1). However, unlike feedforward networks, RNNs aren’t trained with traditional backpropagation, but rather a variant known as Backpropagation through Time (BPTT): the network is unrolled, as before, and backpropagation is used, averaging over errors at each time point (since an 'output', the hidden state, occurs at each step). Also, in the case of RNNs, we run into the problem that the network has a very short memory; it only incorporates information from the most recent unit before the current one and has trouble maintaining long-range context. For applications such as translation, this is clearly a problem, as the interpretation of a word at the end of a sentence may depend on terms near the beginning, not just those directly preceding it." (Joseph Babcock & Raghav Bali, "Generative AI with Python and PyTorch" 2nd. Ed., 2025)

"When there are hidden layers between the input and output, the problem becomes more complex: when do we change the internal weights to compute the activations that feed into the final output? How do we modify them in relation to the input weights? The insight of the backpropagation technique is that we can use the chain rule from calculus to efficiently compute the derivatives of each parameter of a network with respect to a loss function and, combined with a learning rule, this provides a scalable way to train multilayer networks." (Joseph Babcock & Raghav Bali, "Generative AI with Python and PyTorch" 2nd. Ed., 2025)

"There is no law of physics tdictates AI must remain expensive. The cost of training and inference isn’t fixed - it is an engineering challenge to solved. Businesses, both incumbents and upstarts, have the ingenuity to push these costs down and make AI more practical and widespread." (Rob Thomas et al, "AI Value Creators: Beyond the Generative AI User Mindset", 2025)

"While the backpropagation procedure provides a way to update interior weights within the network in a principled way, it has several shortcomings that make deep networks difficult to use in practice. One is the problem of vanishing gradients. [...] As the value of the sigmoid function increases or decreases toward the extremes (0 or 1, representing either 'off' or 'on' ), the values of the gradient vanish to near zero. This means that the updates to and , which are products of these gradients from hidden activation functions , shrink toward zero, making the weights change little between iterations and making the parameters of the hidden layer neurons change very slowly during backpropagation. Clearly, one problem here is that the sigmoid function saturates; thus, choosing another nonlinearity might circumvent this problem." (Joseph Babcock & Raghav Bali, "Generative AI with Python and PyTorch" 2nd. Ed., 2025)

🖍️Andreas C Müller - Collected Quotes

"A major challenge in unsupervised learning is evaluating whether the algorithm learned something useful. Unsupervised learning algorithms are usually applied to data that does not contain any label information, so we don’t know what the right output should be. Therefore, it is very hard to say whether a model 'did well'. [...] As a consequence, unsupervised algorithms are used often in an exploratory setting, when a data scientist wants to understand the data better, rather than as part of a larger automatic system. Another common application for unsupervised algorithms is as a preprocessing step for supervised algorithms. Learning a new representation of the data can sometimes improve the accuracy of supervised algorithms, or can lead to reduced memory and time consumption." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"An important property of neural networks is that their weights are set randomly before learning is started, and this random initialization affects the model that is learned. That means that even when using exactly the same parameters, we can obtain very different models when using different random seeds. If the networks are large, and their complexity is chosen properly, this should not affect accuracy too much, but it is worth keeping in mind (particularly for smaller networks)." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"[...]  adding nonlinear features to the representation of our data can make linear models much more powerful. However, often we don’t know which features to add, and adding many features (like all possible interactions in a 100-dimensional feature space) might make computation very expensive. Luckily, there is a clever mathematical trick that allows us to learn a classifier in a higher-dimensional space without actually computing the new, possibly very large representation. This is known as the kernel trick, and it works by directly computing the distance (more precisely, the scalar products) of the data points for the expanded feature representation, without ever actually computing the expansion." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Agglomerative clustering produces what is known as a hierarchical clustering. The clustering proceeds iteratively, and every point makes a journey from being a single point cluster to belonging to some final cluster. Each intermediate step provides a clustering of the data (with a different number of clusters). It is sometimes helpful to look at all possible clusterings jointly. [...] While this visualization provides a very detailed view of the hierarchical clustering, it relies on the two-dimensional nature of the data and therefore cannot be used on datasets that have more than two features. There is, however, another tool to visualize hierarchical clustering, called a dendrogram, that can handle multidimensional datasets." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Before building a machine learning model it is often a good idea to inspect the data, to see if the task is easily solvable without machine learning, or if the desired information might not be contained in the data. Additionally, inspecting your data is a good way to find abnormalities and peculiarities. Maybe some of your irises were measured using inches and not centimeters, for example. In the real world, inconsistencies in the data and unexpected measurements are very common." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Decision trees have two advantages over many of the algorithms [...]: the resulting model can easily be visualized and understood by nonexperts (at least for smaller trees), and the algorithms are completely invariant to scaling of the data. As each feature is processed separately, and the possible splits of the data don’t depend on scaling, no preprocessing like normalization or standardization of features is needed for decision tree algorithms. In particular, decision trees work well when you have features that are on completely different scales, or a mix of binary and continuous features. The main downside of decision trees is that even with the use of pre-pruning, they tend to overfit and provide poor generalization performance. Therefore, in most applications, the ensemble methods we discuss next are usually used in place of a single decision tree." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Essentially, random forests share all of the benefits of decision trees, while making up for some of their deficiencies. One reason to still use decision trees is if you need a compact representation of the decision-making process. It is basically impossible to interpret tens or hundreds of trees in detail, and trees in random forests tend to be deeper than decision trees (because of the use of feature subsets). Therefore, if you need to summarize the prediction making in a visual way to nonexperts, a single decision tree might be a better choice. While building random forests on large datasets might be somewhat time consuming, it can be parallelized across multiple CPU cores within a computer easily." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"For regression tasks, the goal is to predict a continuous number, or a floating-point number in programming terms (or real number in mathematical terms). Predicting a person’s annual income from their education, their age, and where they live is an example of a regression task. When predicting income, the predicted value is an amount, and can be any number in a given range. [...] An easy way to distinguish between classification and regression tasks is to ask whether there is some kind of continuity in the output. If there is continuity between possible outcomes, then the problem is a regression problem." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Gradient boosted decision trees are among the most powerful and widely used models for supervised learning. Their main drawback is that they require careful tuning of the parameters and may take a long time to train. Similarly to other tree-based models, the algorithm works well without scaling and on a mixture of binary and continuous features. As with other tree-based models, it also often does not work well on high-dimensional sparse data." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"How well the uncertainty actually reflects uncertainty in the data depends on the model and the parameters. A model that is more overfitted tends to make more certain predictions, even if they might be wrong. A model with less complexity usually has more uncertainty in its predictions. A model is called calibrated if the reported uncertainty actually matches how correct it is - in a calibrated model, a prediction made with 70% certainty would be correct 70% of the time." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"In binary classification we often speak of one class being the positive class and the other class being the negative class. Here, positive doesn’t represent having benefit or value, but rather what the object of the study is. So, when looking for spam, “positive” could mean the spam class. Which of the two classes is called positive is often a subjective matter, and specific to the domain." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"It’s important to note that model complexity is intimately tied to the variation of inputs contained in your training dataset: the larger variety of data points your data‐ set contains, the more complex a model you can use without overfitting. Usually, collecting more data points will yield more variety, so larger datasets allow building more complex models. However, simply duplicating the same data points or collecting very similar data will not help." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Kernelized support vector machines are powerful models and perform well on a variety of datasets. SVMs allow for complex decision boundaries, even if the data has only a few features. They work well on low-dimensional and high-dimensional data (i.e., few and many features), but don’t scale very well with the number of samples. Running an SVM on data with up to 10,000 samples might work well, but working with datasets of size 100,000 or more can become challenging in terms of runtime and memory usage. Another downside of SVMs is that they require careful preprocessing of the data and tuning of the parameters. This is why, these days, most people instead use tree-based models such as random forests or gradient boosting (which require little or no pre‐ processing) in many applications. Furthermore, SVM models are hard to inspect; it can be difficult to understand why a particular prediction was made, and it might be tricky to explain the model to a nonexpert." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017) 

"Learning a decision tree means learning the sequence of if/else questions that gets us to the true answer most quickly. In the machine learning setting, these questions are called tests (not to be confused with the test set, which is the data we use to test to see how generalizable our model is). Usually data does not come in the form of binary yes/no features as in the animal example, but is instead represented as continuous features [...]. The tests that are used on continuous data are of the form 'Is feature i larger than value a?'" (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Linear regression, or ordinary least squares (OLS), is the simplest and most classic linear method for regression. Linear regression finds the parameters w and b that minimize the mean squared error between predictions and the true regression targets, y, on the training set. The mean squared error is the sum of the squared differences between the predictions and the true values. Linear regression has no parameters, which is a benefit, but it also has no way to control model complexity." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Manifold learning algorithms are mainly aimed at visualization, and so are rarely used to generate more than two new features. Some of them, including t-SNE, com‐ pute a new representation of the training data, but don’t allow transformations of new data. This means these algorithms cannot be applied to a test set: rather, they can only transform the data they were trained for. Manifold learning can be useful for exploratory data analysis, but is rarely used if the final goal is supervised learning. The idea behind t-SNE is to find a two-dimensional representation of the data that preserves the distances between points as best as possible. t-SNE starts with a random twodimensional representation for each data point, and then tries to make points that are close in the original feature space closer, and points that are far apart in the original feature space farther apart. t-SNE puts more emphasis on points that are close by, rather than preserving distances between far-apart points. In other words, it tries to preserve the information indicating which points are neighbors to each other." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Neural networks - particularly the large and powerful ones - often take a long time to train. They also require careful preprocessing of the data, as we saw here. Similarly to SVMs, they work best with 'homogeneous' data, where all the features have similar meanings. For data that has very different kinds of features, tree-based models might work better. Tuning neural network parameters is also an art unto itself. In our experiments, we barely scratched the surface of possible ways to adjust neural network models and how to train them."  (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Ridge regression is also a linear model for regression, so the formula it uses to make predictions is the same one used for ordinary least squares. In ridge regression, though, the coefficients (w) are chosen not only so that they predict well on the training data, but also to fit an additional constraint. We also want the magnitude of coef‐ficients to be as small as possible; in other words, all entries of w should be close to zero. Intuitively, this means each feature should have as little effect on the outcome as possible (which translates to having a small slope), while still predicting well. This constraint is an example of what is called regularization. Regularization means explicitly restricting a model to avoid overfitting." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"The gradient boosted regression tree is another ensemble method that combines multiple decision trees to create a more powerful model. Despite the 'regression' in the name, these models can be used for regression and classification. In contrast to the random forest approach, gradient boosting works by building trees in a serial manner, where each tree tries to correct the mistakes of the previous one. By default, there is no randomization in gradient boosted regression trees; instead, strong pre-pruning is used. Gradient boosted trees often use very shallow trees, of depth one to five, which makes the model smaller in terms of memory and makes predictions faster. The main idea behind gradient boosting is to combine many simple models (in this context known as weak learners), like shallow trees. Each tree can only provide good predictions on part of the data, and so more and more trees are added to iteratively improve performance." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Typically only a subset of the training points matter for defining the decision boundary: the ones that lie on the border between the classes. These are called support vectors and give the support vec‐ tor machine its name. To make a prediction for a new point, the distance to each of the support vectors is measured. A classification decision is made based on the distances to the support vector, and the importance of the support vectors that was learned during training.". (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)

"Unsupervised transformations of a dataset are algorithms that create a new representation of the data which might be easier for humans or other machine learning algorithms to understand compared to the original representation of the data. A common application of unsupervised transformations is dimensionality reduction, which takes a high-dimensional representation of the data, consisting of many features, and finds a new way to represent this data that summarizes the essential characteristics with fewer features. A common application for dimensionality reduction is reduction to two dimensions for visualization purposes." (Andreas C Müller & Sarah Guido, "Introduction to Machine Learning with Python: A Guide for Data Scientists", 2017)