P R E D I C T I O N E R R O R S

One System

How one computation unifies neuroscience,
accounting, finance, and artificial intelligence

Spencer Nash

predictionerrors.com

What if there's only one computation?

What if the way neurons process reality,
the way accountants measure performance,
and the way emotions drive behaviour
are all the same operation?

What Neurons Do

Expected − Actual = Prediction Error

Zero error

As expected.
Nothing to learn.

Negative error

Worse than expected.
Update the model.

Positive error

Better than expected.
Update again.

What Accountants Do

Budget − Actual = Variance

A budget is an expectation.
An actual result is an outcome.
The variance is a prediction error.

Profit is a positive prediction error.
Loss is a negative prediction error.

Every financial report ever written is a prediction error document.

Same Computation

Neuroscience

Expected reward − Actual reward
= Prediction Error
→ Update the model

Accounting

Budget − Actual
= Variance
→ Update the forecast

Not an analogy. The same operation.

Five Independent Channels

The Emotional Comparator Framework

Resource Depletion → Abundance −10 to +10

Status Dismissal → Recognition −10 to +10

Belonging Rejection → Connection −10 to +10

Values Violation → Integrity −10 to +10

Novelty Boredom → Fascination −10 to +10

Mood emerges from these five channels interacting. It is the dependent variable.

Two Outputs, Not One

Output 1: The Result

Emotion → Mood
Finance → Return

Where you are right now.

Output 2: Reliability

Trust the mood?
Trust the return?

How much that means.

A 15% return on stable foundations is a fundamentally different thing from a 15% return on shaky ones. Both systems know this.

The Reliability Function

Operationalises Friston's precision

Reliability = f ( Volatility, Age, Sample Size, Trend )

Volatility

How erratic the signal is.
High volatility → low reliability.

Age

How recent the data is.
Stale data degrades reliability.

Sample Size

How many observations.
More data → higher reliability.

Trend

Direction of change.
Clear trend → higher reliability.

Same four variables in both domains. Domain-independent.

The Same Five Channels in Finance

Resource Available markets, capacity, funding Constrained → Abundant

Status Competitive position, pricing power, brand Weak → Strong

Belonging Customer, employee, supplier loyalty Churn → Loyalty

Values Governance, compliance, integrity Failure → Strength

Novelty Market maturity vs emergence Saturated → New

Return emerges from these five channels interacting — decomposed through market size, market share, prices, cost, and capital structure.

The Channel Mapping

Channel	Emotional Domain	Financial Domain	Shared Dimension
Resource	Depletion → Abundance	Constrained → Abundant	Available inputs
Status	Dismissal → Recognition	Weakness → Strength	Capability recognition
Belonging	Rejection → Connection	Churn → Loyalty	Relational security
Values	Violation → Integrity	Failure → Strength	Standards maintenance
Novelty	Boredom → Fascination	Saturation → Newness	Environmental newness

Output	Emotional	Financial
Result	Mood	Return
Reliability	Trust the mood?	Trust the return?

Neural Grounding

The four variables are directly observable on a spike train

Volatility

Random variation in spike rate

Age

Duration of the spike train

Sample Size

Number of spikes

Trend

Rate increasing or decreasing

Phasic firing encodes the prediction error — the event-driven signal.
Tonic firing encodes the standing expectation — the baseline.
The contrast between them is expected minus actual.

The Large Accounting Model

Period Entry replaces double-entry bookkeeping.

Transactions tracked over temporal intervals, not arbitrary points
Co-signature technology, not blockchain
Reconciliation eliminated — payments at email speed

Financial Assets

Measured in £ / $ / €
Traditional currency on a ledger

Knowledge Assets

Measured as Competence (−10 to +10)
Bankable on the same ledger

Finance & Process Engineering

In an AI world, accountants don't do the books.
They develop the systems that do the books.

Green Belt Foundations — build your first system ↔ Diploma

Black Belt Advanced — architect complex systems ↔ Degree

Master Black Belt Expert — lead, teach, innovate ↔ Masters

What This Means for AI

A nervous system for LLMs

ECF doesn't add emotion. It makes visible what's already there. Prediction errors across five channels, weighted by reliability, accumulated on a ledger.

Dreaming

A persistent memory ledger enables offline processing of accumulated prediction errors. The system updates its own model. Not being trained — learning.

Alignment through interpretability

Every decision traceable to specific channels, weightings, and reliability scores. The ledger is the explanation. No black box.

LLMs already had a brain. They were missing a nervous system.

One Computation

Neuroscience Prediction errors drive learning

Psychology Emotions as reliability-weighted PE

Finance Return + reliability from five channels

Accounting The original prediction error system

AI A nervous system with a memory ledger

Accountants have been neuroscientists all along. They just didn't know it.

P R E D I C T I O N E R R O R S

predictionerrors.com

Read the papers
Watch the course
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Spencer Nash

Master Black Belt: Financial, Process & System Development