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Hedge Fund Is Building an Algorithmic Model From Its Employees’ Brains

wsj.com

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Re: Hedge Fund Is Building an Algorithmic Model From Its Employees’ Brains

#11

Post by devoply »

Vindicis wrote: post #10

It reminds of "managing the numbers". Not to say Dalio himself doesn't know what he's doing. But translating that to software, yeah...good luck. It's challenging enough to translate simple trading systems into machine code, and have it reproduce human results. At least that's my experience. To distill your knowledge and wisdom down to a set of algorithms, the complex interactions, discretion on when to use and ignore…

Not to mention the fact that there is incentive for the people you are trying to use to try to mess you up. There are so many little mistakes you could make that would result in significant errors when added up that it would make the end result worthless. And it's in their interest to do that... the employees.

Re: Hedge Fund Is Building an Algorithmic Model From Its Employees’ Brains

#12

Post by blazespin »

Vindicis wrote: post #10

It reminds of "managing the numbers". Not to say Dalio himself doesn't know what he's doing. But translating that to software, yeah...good luck. It's challenging enough to translate simple trading systems into machine code, and have it reproduce human results. At least that's my experience. To distill your knowledge and wisdom down to a set of algorithms, the complex interactions, discretion on when to use and ignore…

Vindicis, unless you're not working, you probably already work at a place like this.

All Dalio is doing is tying the pieces together and stating the obvious.

Re: Hedge Fund Is Building an Algorithmic Model From Its Employees’ Brains

#13

Post by puddintane »

FT_intern wrote: post #6
ajamesm wrote: post #3

FYI, I was able to dodge the paywall and read the article by copying the URL into Google to get their referral, then clicking the top link.

not sure why the regular search links aren't working anymore when you click web. The link in "Top stories" section worked

Seems to be related to the title - if I take the article title from the actual page, google's first result works.

However if I take the title from here it goes to the paywall.

I wonder if Google has recently adjusted the algorithm for this? Makes me wonder if they actually like paywalls, as I've always thought Google was against them.

Re: Hedge Fund Is Building an Algorithmic Model From Its Employees’ Brains

#14

Post by blazespin »

Bridgewater manages $160 billion, the most of any hedge-fund firm. It has earned clients twice as much total profit as any rival, says LCH Investments NV, a firm that puts client money into hedge funds. Mr. Dalio personally earned $1.4 billion last year, according to research firm Institutional Investor’s Alpha.

Re: Hedge Fund Is Building an Algorithmic Model From Its Employees’ Brains

#15

Post by SonicSoul »

devoply wrote: post #11
Vindicis wrote: post #10

It reminds of "managing the numbers". Not to say Dalio himself doesn't know what he's doing. But translating that to software, yeah...good luck. It's challenging enough to translate simple trading systems into machine code, and have it reproduce human results. At least that's my experience. To distill your knowledge and wisdom down to a set of algorithms, the complex interactions, discretion on when to use and ignore…

Not to mention the fact that there is incentive for the people you are trying to use to try to mess you up. There are so many little mistakes you could make that would result in significant errors when added up that it would make the end result worthless. And it's in their interest to do that... the employees.

not necessarily. some (maybe most?) black box quants own their algorithm even if they leave the Hedge Fund. And of course they make profits while the algos are used. So the architects of the system are incentivized for it to work well.

Re: Hedge Fund Is Building an Algorithmic Model From Its Employees’ Brains

#17

Post by sailfast »

arcanus wrote: post #5

How could any quant models not be based on the brains of their inventors?

From the article, it doesn't appear this has anything to do with quant models - they're looking to optimize how their employees conduct the work and how they are managed as personnel. This does not seem to target their trading strategies at all.

Re: Hedge Fund Is Building an Algorithmic Model From Its Employees’ Brains

#18

Post by chollida1 »

I think this....

> Mr. Dalio returned to run Bridgewater earlier this year after stepping back to a mentor role six years ago.

Is what's driving almost all of his new found desire for a unified AI to run everything.

Here you have a man who by any measure has been wildly successful, he tried stepping back and letting other take over but ended up finding that the team he left in charge didn't make the exact decisions he would have.

If the story ended there it wouldn't be in any way surprising, who hasn't left a team and second guessed the decisions that the new leaders have made.

It turns out that when you are worth 15 Billion one of the things you can do is hire a shit load of AI experts, like one of the heads of IBM's Watson team, to build an AI to make decisions based on WWRDD, "What would Ray Dalio Do"?

Since his first retirement failed, this is his new take on how to have his second retirement go smoother. Just build an AI that bases all decisions on the Bridge water principles that he wrote down years ago.

see: https://www.principles.com/

As an aside, he recently let Tony Robbins publish his ideal portfolio, the all weather portfolio. It's actually a pretty strong portfolio for the average person.

http://awealthofcommonsense.com/2014/11/back-testing-tony-ro...

http://www.moneysense.ca/invest/raining-on-the-all-seasons-p...

Re: Hedge Fund Is Building an Algorithmic Model From Its Employees’ Brains

#19

Post by whatok »

SonicSoul wrote: post #15
devoply wrote: post #11

Earlier quoted context omitted.

Not to mention the fact that there is incentive for the people you are trying to use to try to mess you up. There are so many little mistakes you could make that would result in significant errors when added up that it would make the end result worthless. And it's in their interest to do that... the employees.

not necessarily. some (maybe most?) black box quants own their algorithm even if they leave the Hedge Fund. And of course they make profits while the algos are used. So the architects of the system are incentivized for it to work well.

> some (maybe most?) black box quants own their algorithm even if they leave the Hedge Fund.

I've never observed this be the case at all.

Re: Hedge Fund Is Building an Algorithmic Model From Its Employees’ Brains

#20

Post by sailfast »

"Hit a nerve - a prized attribute." It would be interesting to see how quickly the company as a whole (and the system, if possible) responds to the results of incentives. Does the culture quickly regress to fooling the algorithm or does a cat and mouse game result?

Either way not something I'd want to use to drive culture, but an interesting take on how to "institutionalize" a culture and cultural norms even long after one has left the business.

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