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Why do traders in investment banks feel their jobs are immune from AI, etc?

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Re: Why do traders in investment banks feel their jobs are immune from AI, etc?

#141

Earlier quoted context omitted.

Machine learning is "learning from data." It is not the assumption that there are no dynamics, and that the future will simply be a repetition of the past. To the extent that the future is predictable, learning from data is the best that can be done. The reality is that speech recognition, language translation, face recognition, object classification and detection, semantic segmentation, speech and image synthesis ha…

There are varying levels of sophistication from which data can be learned from. Pigeons can learn non-trivial word concepts and statistics but they do so at a rate that is much slower than a human infant. Thus far, machines have not done well in scenarios of low stationarity. Those are scenarios where the past is not so good a predictor of the future or where the data manifold is rapidly changing. This occurs for exa…

No one is suggesting that AI is a solved problem. I simply cited a handful of areas such as computer vision where progress in ML has been remarkably rapid after many years where the problems seemed daunting and skeptics had written off the prospects of the field.

Citing Newton as a typical example of the superiority of human inferential abilities perhaps represents a case of cherry picking. How often do most human beings come to exhibiting the level of insight and reasoning power required to construct the calculus and discover the laws of classical mechanics? Inventing supernatural explanations for natural phenomena, burning sacrifices / witches / books (on Evolution or other heresies) seem more par for the course than Newtonian level revelations.

Having said that, learning the laws of classical physics from observational data strikes me as a pretty natural task for the right kinds of machine architectures, since they represent essentially geometric symmetries which hold over a vast range of scales, space and time.

Re: Why do traders in investment banks feel their jobs are immune from AI, etc?

#142
post #135

Earlier quoted context omitted.

yeah, i really don't know what these guys are talking about. the business day to day has been massively revamped by automation. there are hft ops that are blasting millions and millions of orders a second and probably account for 70%+ of all trading volume.

I think you have cash equity in mind. This is a very small subset of what investment banks trade.

i trade financial futures and cash equity. i realize ibanks offer leveraged bets on all kinds of nonsense to provide a "service", but pretty much any strategy known to humanity can be achieved on an exchange with negligible counterparty risk

Re: Why do traders in investment banks feel their jobs are immune from AI, etc?

#143
post #135

Earlier quoted context omitted.

I think you have cash equity in mind. This is a very small subset of what investment banks trade.

i trade financial futures and cash equity. i realize ibanks offer leveraged bets on all kinds of nonsense to provide a "service", but pretty much any strategy known to humanity can be achieved on an exchange with negligible counterparty risk

Being centrally cleared to reduce counterparty risk and being traded electronically on an exchange are two distinct things.

Electronic trading does change dramatically the shape and profile of a trading floor. Introducing central clearing with margining not so much.

You won't achieve electronic trading anytime soon on products where there are perhaps at most 200-300 buyers in the world, must of who are only interested in buying big chunks.

Re: Why do traders in investment banks feel their jobs are immune from AI, etc?

#144

Earlier quoted context omitted.

There are varying levels of sophistication from which data can be learned from. Pigeons can learn non-trivial word concepts and statistics but they do so at a rate that is much slower than a human infant. Thus far, machines have not done well in scenarios of low stationarity. Those are scenarios where the past is not so good a predictor of the future or where the data manifold is rapidly changing. This occurs for exa…

No one is suggesting that AI is a solved problem. I simply cited a handful of areas such as computer vision where progress in ML has been remarkably rapid after many years where the problems seemed daunting and skeptics had written off the prospects of the field. Citing Newton as a typical example of the superiority of human inferential abilities perhaps represents a case of cherry picking. How often do most human be…

> Inventing supernatural explanations for natural phenomena

If our mathamechanical minions ever start musing about 'The Supreme Eigenvector' that would be the time to start worrying about machines taking over.

Re: Why do traders in investment banks feel their jobs are immune from AI, etc?

#145

Earlier quoted context omitted.

Machine learning is "learning from data." It is not the assumption that there are no dynamics, and that the future will simply be a repetition of the past. To the extent that the future is predictable, learning from data is the best that can be done. The reality is that speech recognition, language translation, face recognition, object classification and detection, semantic segmentation, speech and image synthesis ha…

But the idea that you can predict the future is absurd. And even if you could, acting on that knowledge would change the future.

The nuances of the game are different from strictly trying to predict the future.

Casinos don't try to predict the future of every spin of the wheel or roll of the dice. Every individual game is random. But over a large enough sample size (number of games played), the odds are not random.

The same principle is at play in trading the markets, except the "odds" are determined by the traders' skill - their "edge." Which is roughly some combination of access to the right people, access to better information (where better might but not necessarily mean quicker), and experience (gut feelings, hunches, what-have-you).

So the real question is, can machine learning algorithms develop an "edge", and if so, can they stay solvent long enough to do so.

Re: Why do traders in investment banks feel their jobs are immune from AI, etc?

#146
A good trader can explain their trades, a good AI cannot yet. This is important in many financial settings when some human must still be personally responsible for the trades. For a manager it is much easier to approve regression coefficients or a particular trading formula than to sign a neural network into production.

Re: Why do traders in investment banks feel their jobs are immune from AI, etc?

#147
post #6

Due diligence on the financials of a company (what investment bankers are supposed to do) is actually really hard to get right with the algorithms we have today. Much of the data and insight compiled by an I-banker today does not exist in an easily parse-able form for automated algorithms, and a substantial amount of the computation relies on common sense knowledge.

> Due diligence on the financials of a company (what investment bankers are supposed to do) is actually really hard to get right Diligence is automatable, in the long run. There is a human element to it, but it is small in most contexts. Bankers solve trust problems. An AI would need to be trustworthy in a personal way to replace bankers--this only happens with AGI. For a long time, as long as humans control capital,…

> An AI would need to be trustworthy in a personal way to replace bankers--this only happens with AGI.

This happens with an unbeatable public track record. We trust AIs in lots of tasks already, and that is not because they smile and speech nicely.

Re: Why do traders in investment banks feel their jobs are immune from AI, etc?

#148

Earlier quoted context omitted.

Regarding your airplane example, it's actually the opposite: plane crashes are so infrequent that you have to believe "I am special" (with a negative twist) if you think you are likely to be in a crash.

They're a lot more frequent than many realise: http://www.planecrashinfo.com/database.htm & https://aviation-safety.net/database/ Although per passenger mile, it's true that air is very safe overall.

Scheduled flights inside or between advanced countries are incredibly safe. Unscheduled flights and any flights in non advanced¹ countries aren't that safe.

The overall statistics are not useful for evaluating your next trip. You must use the ones from your cohort.

1 - Mostly, the countries with broken governments. If human rights aren't respected, that's a great predictor that flights aren't safe.

Re: Why do traders in investment banks feel their jobs are immune from AI, etc?

#149
post #116

Earlier quoted context omitted.

> because traders are used to seeing such predictions fail. There was a joke from the 80s: soon the whole trading floor will be replaced by a computer, a man and a dog. The man presses the button to turn on the computer every morning. The computer operates all of the transactions and settlements automatically. And the dog is there to bite the man if he touches any other button. 30 years later, still no dog on the flo…

But on the flip side, most physical trading floors are closed. Can't see the last few lasting much longer.

> Can't see the last few lasting much longer.

I believe the remaining ones are effectively TV studios for business channels, so they have a completely different purpose now.

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