Finance

Take the Office Computer Out for a Beer After Work

They're on the verge of becoming our co-workers after all.

Cheers to you, AI.

George Marks / Stringer
This post originally appeared in Money Stuff.

Here is a article about how "computer-powered trend-following hedge funds" are increasingly following trends into "less liquid, more exotic markets ... like Brazilian and Czech interest rate derivatives, natural gas, uranium funds and even cheese and milk contracts," where returns are better than in more traditional markets. (Presumably all the trend-followers following the trend into trend-following in traditional markets have dissipated the returns to trend-following there, while trend-following in exotic markets has only just become trendy.) One simple story about the computerization of stock markets is that you'd expect it to start in extremely liquid stuff where there is tons of data and not much friction involved in implementing an idea derived from that data, and then move on to places where data is sparser and trading is more difficult, and that seems to be happening here.

Another story about computerization is that you'd expect computers to do a lot of analytical grunt work, freeing up humans to do higher-level thinking and add more value. In a sense that story is implicit in every article like this -- the humans, after all, are the ones who decided to apply their computerized strategies to milk trading or whatever -- but there's also the hint of the opposite story too:

Hedge funds dabbling with these markets therefore need to make a big investment in expensive and sometimes complicated traditional trading infrastructure, hiring human traders and establishing relationships with big banks that can facilitate activity in “over the counter” markets, as opposed to assets that trade on an exchange.

“Some of these markets require human traders and relationships with brokers and banks,” Mr Sargaison says.

You'd think that execution trading would be easier to automate than the investing decisions, but perhaps not. Perhaps in the future the high-level trading and investing decisions will be made by the computers, but they'll keep humans around to introduce them to banks and make sure the paperwork is in order.

Elsewhere, here's a heartwarming holiday story:

A computer glitch has allowed all of American Airlines’ pilots to take vacation during the week of Christmas, according to ABC and Reuters. The error could leave thousands of planes grounded during one of the busiest travel weeks of the year.

What if this is the future of artificial intelligence? What if the computer has grown a heart? Actual human managers, faced with the problem of staffing planes for Christmas, would pursue ruthless economic efficiency, flying more planes to make more money at the cost of making pilots miss the holidays with their families. But the computer decided instead to give everyone a Christmas miracle. "The system went from responsibly scheduling everybody to becoming Santa Claus to everyone," said a spokesman for the pilots' union. The computer has the holiday spirit, or at least a sense of humor.

Look I know that this computer system is not like a sentient AI that actually made a conscious decision to do this -- I realize it's just a spreadsheet or whatever that was programmed badly -- but still I can dream. Eventually a sentient AI is going to be scheduling the pilots, and doing the trading, and so forth, and it would be nice if that AI is the sort of AI you could get a beer with.

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    To contact the author of this story:
    Matt Levine at mlevine51@bloomberg.net

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    James Greiff at jgreiff@bloomberg.net

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