Kehuan Zhang
Publications
When Agent Automation Becomes Profitable: Quantifying and Insuring Autonomous AI Risk through Trace-Economic Underwriting
AI agents can now take irreversible actions in operational systems, but agent-caused losses are still not clearly assigned, priced, or transferred. Providers often disclaim consequential damages, users are left with uncompensated losses, and default human review limits the efficiency gains of automation. We ask when autonomous AI deployment can become economically acceptable despite failure risk. Our answer is to quantify risk at the customer-task-trace episode level and transfer it through insurance. Automation is acceptable when its expected benefit exceeds the premium, control cost, and remaining risk. This requires a defined role with bounded permissions and comparable traces. We introduce trace-economic underwriting, which maps tool-use traces to customer exposure and claimable loss, then uses this representation for pricing, control, and risk transfer. It uses deterministic economic labels rather than an LLM judge. In our trace-to-loss testbed, trace-economic pricing reduces pricing MAE from $17.7K to $569 and removes regressive cross-subsidy. A 300-trace expert audit accepts 295 labels unchanged. On 1,000 real SWE-smith traces, trace-conditioned controls reduce CVaR95 by 72%. Theorem~1 gives a finite-sample scope condition. We release code, labels, and audit sheets.
Contextual Agentic Memory is a Memo, Not True Memory
Current agentic memory systems (vector stores, retrieval-augmented generation, scratchpads, and context-window management) do not implement memory: they implement lookup. We argue that treating lookup as memory is a category error with provable consequences for agent capability, long-term learning, and security. Retrieval generalizes by similarity to stored cases; weight-based memory generalizes by applying abstract rules to inputs never seen before. Conflating the two produces agents that accumulate notes indefinitely without developing expertise, face a provable generalization ceiling on compositionally novel tasks that no increase in context size or retrieval quality can overcome, and are structurally vulnerable to persistent memory poisoning as injected content propagates across all future sessions. Drawing on Complementary Learning Systems theory from neuroscience, we show that biological intelligence solved this problem by pairing fast hippocampal exemplar storage with slow neocortical weight consolidation, and that current AI agents implement only the first half. We formalize these limitations, address four alternative views, and close with a co-existence proposal and a call to action for system builders, benchmark designers, and the memory community.
From Multi-Agent to Single-Agent: When Is Skill Distillation Beneficial?
Multi-agent systems (MAS) tackle complex tasks by distributing expertise, though this often comes at the cost of heavy coordination overhead, context fragmentation, and brittle phase ordering. Distilling a MAS into a single-agent skill can bypass these costs, but this conversion lacks a principled answer for when and what to distill. Instead, the empirical outcome is surprisingly inconsistent: skill lift ranges from a 28% improvement to a 2% degradation across metrics of the exact same task. In this work, we reveal that skill utility is governed not by the task, but by the evaluation metric. We introduce Metric Freedom ($F$), the first a priori predictor of skill utility. $F$ measures the topological rigidity of a metric's scoring landscape by quantifying how output diversity couples with score variance via a Mantel test. Guided by $F$, we propose a two-stage adaptive distillation framework. Stage 1 acts as a selective extraction mechanism, extracting tools and knowledge while discarding restrictive structures on "free" metrics to preserve exploration. Stage 2 targets computationally intensive iterative refinement exclusively toward "rigid" metrics ($F \lesssim 0.6$) to eliminate trajectory-local overfitting. Evaluating across 4 tasks, 11 datasets, and 6 metrics, $F$ strongly predicts skill utility ($ρ= -0.62$, $p < 0.05$). Strikingly, identical agent trajectories yield diametrically opposite skill lifts under rigid versus free metrics, demonstrating that skill utility is fundamentally a metric-level property. Driven by this signal, our adaptive agent matches or exceeds the original MAS while reducing cost up to 8$\times$ and latency by up to 15$\times$.