I attended a presentation a few weeks ago hosted by a Sales and Trading Analyst from Barclays Capital, and this gentlemen put things in a very interesting, yet scary prospective.
He gave a Powerpoint presentation, which started with the first slide being the ad for the recent Movie Terminator Salvation. Everyone in the in the audience was very confused, but then the Analyst made a very strong and relevant connection to this movie. He mentioned how today, machines are responsible for 70% of trades executed, daily, and that traders these days need to be able to compete with these computers in order to be successful in financial markets. In other words, they need to fight the machines, just like in Terminator Salvation.
But how can a human being compete with a machine that can execute trades in less than a second and profit from it? Then, I thought of The Filter Bubble, in which Pariser mentions a man by the name of Peter Thiel. Thiel is known for founding PayPal advising, and for his unorthodox believes. But there is one thing that Thiel believes that I am starting to believe as well, and that is the idea of man and machine eventually melding. I know this sounds crazy, but the Sales and Trade analyst lead me to believe so.
As for executing trades, and high-frequency trading, the computer is using algorithms and rules of code that have been written by humans (programmers). It is considered artificial intelligence since the computers are receiving unpredictable data and must make a decision of how to handle it. But the limit of today’s technology is just that, computational decision making. Compared to the human brain, computers lack creativity and cannot learn from experiences in the same way humans do. Computers currently do not have emotions, the way that humans do. To put it short, computer code and algorithms will continue to advance, but computers are still a long way from working the way our brains do.