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Goldman Sachs automated trading replaces 600 traders with 200 engineers

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Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#41
post #26

Earlier quoted context omitted.

Not really. The world is data. Anything you need to know about the world is in a table somewhere, and the web has done a great job of making the planets data accessible to machines. Other areas may be more complex, but complexity isn't as big a barrier as it may seem. Also, those areas are probably not as complex as people think they are. I'm reminded of the AI that started making breakthroughs in oncology by looking…

The problem is understanding data. A human can learn a new word's meaning by reading its definition in a dictionary; a computer can't.

It's a dictionary. I'm pretty sure a computer can look it up faster than a human can.

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#42

A agency that I once worked for was asked to create a presentation of the future of trading for a well known trading platform. It was the typical fluff around voice interfaces, augmented reality, VR and all that drivel. But we all knew what the future really meant - taking people out of the equation - but we also knew that the people paying for the presentation didn't want to hear that. When people talk about the ris…

Isn't this type of trading sort of unique in how easy it is to consume the data? Even in other investing areas, people who just "look at data and make decisions" cannot be easily replaced until computers can read and understand natural language and understand the state of the world. I can't immediately think of anything else this type of automation could apply to.

Another obvious example is actuaries and any number of other analysts in the insurance industry. According to Google[1], actuaries earn an average of just over $97k/year. While this may not strictly be an "investing area," it's a clear target for automation.

1. https://www.google.com/search?q=actuaries

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#43

Earlier quoted context omitted.

Not really. The world is data. Anything you need to know about the world is in a table somewhere, and the web has done a great job of making the planets data accessible to machines. Other areas may be more complex, but complexity isn't as big a barrier as it may seem. Also, those areas are probably not as complex as people think they are. I'm reminded of the AI that started making breakthroughs in oncology by looking…

> Anything you need to know about the world is in a table somewhere No it isn't. If I read an article about the Volkswagen emissions scandal, what table do I look in to figure out how much consumers will care, and how aggressive various governments will be with their punishment? When Disney buys the rights to Star Wars, where should I look to see if it's worth what they paid for it? Should I rely on data from 30 year…

I think a lot of people get hung up on how humans make decisions, with the expectation that you need to be able to understand the same ideas to perform the task.

Even if a computer can't figure out the stats you mention, maybe it doesn't matter? Maybe just reacting fast enough to what people in the market are doing is good enough? Maybe simple sentiment analysis on articles on Disney around the web is a good enough proxy for share price increase.

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#44
post #39
post #32

Earlier quoted context omitted.

>Absolutely, but isn't this type of software generally used to augment existing jobs, rather than replace them? Is there a difference? If a person does 10x as much you need 1/10th as many of them.

Or you can have 10× productivity.

You have that either way. The question is do you need 10x the output?

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#45
post #32

Earlier quoted context omitted.

Absolutely, but isn't this type of software generally used to augment existing jobs, rather than replace them? The program can make basic inferences like "10 negative GE articles -> Sell GE stock", but you still need a human to make more general decisions about an industry as a whole, related companies, how long-term an issue is, etc. Basically, nobody's job is as simple as reading the news and deciding whether artic…

>Absolutely, but isn't this type of software generally used to augment existing jobs, rather than replace them? Is there a difference? If a person does 10x as much you need 1/10th as many of them.

These algorithms are only good at front running the reaction of the market, which is fairly predictable in the short term when a relevant piece of news is published. They are nowhere for making long term investment decisions.

AI everywhere is as naive as software everywhere. It costs a lot of money to develop and maintain software professionally. It's uneconomical to staff an IT team to replace every routine job there is with software.

It will be the same with AI. If you apply enough bright people's mind for long enough, we can possibly automate certain niche jobs, but that's going to be completely uneconomical. You need to pay these AI specialists, and retain them so that you can adapt your algos as the problem moves, and there needs to be more than one in case one goes or is ill. You can easily spend more that the salaries you are going to spare.

Other problems are I believe too vast and open ended for AI to come up with anything useful. What company will be successful in 5 years? What is the right level of renumeration for the management of that company? Where is innovation going next? You really think that AI is anywhere near answering that kind of questions?

AI will shine in similar areas where software shines. Problems that are simple enough to be understood by computer scientists (and that narrows down this vast world quite a bit), and that are broad enough to justify the economics of making high investments to build data, or where there is already ample of existing and relevant data. Driving a car. Cleaning or building a house. Replicating certain hand movements. Things like that. I doubt an expert on a narrow and specialised domain has much to fear from AI.

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#46
My question is are the jobs disrupted really stolen..

according to Mr Klarman(see the NYTime article) this automation trends lead to more inefficiency in markets not less and thus give opportunities to some traders to bet long term in the other direction..

Or are those disrupted jobs just getting re-deployed as new trading businesses betting on some long term stuff..

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#47

https://en.wikipedia.org/wiki/Long-Term_Capital_Management ?? Edit: Due to the swift downvotes, let me elaborate. I am not saying this will be the case, I just think that philosophically, blind reliance on algorithms can be catastrophic.

>blind reliance on algorithms can be catastrophic.

And in other places, basic algorithms smash human judgement:

https://www.amazon.com/Clinical-Versus-Statistical-Predictio...

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#48
post #12

Earlier quoted context omitted.

Isn't this type of trading sort of unique in how easy it is to consume the data? Even in other investing areas, people who just "look at data and make decisions" cannot be easily replaced until computers can read and understand natural language and understand the state of the world. I can't immediately think of anything else this type of automation could apply to.

Computers are already making trades based on natural language articles. EX of some research from 2008: http://www.seas.upenn.edu/~cse400/CSE400_2007_2008/DavdaMitt... You see real world movement within seconds of the release of some public data. Which is far to soon for humans to read much of anything.

Ah but in 2008 these news articles were still written by humans :-)

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#49
post #40
post #18

Earlier quoted context omitted.

No doubt. The last people to be replaced are going to be software devs (because when you can write a computer program with an AI you can make the AI write the AI and you have general AI), cleaning ladies and probably police investigators.

because when you can write a computer program with an AI you can make the AI write the AI and you have general AI There doesn't need to be a single AI to create the entire app. An AI to model data structure, an AI to build an interface, an AI to consume external APIs, etc. We already mostly bolt libraries together to make software; it doesn't take a huge leap for those libraries to be generated by machine learning. B…

I have a feeling someone said the same thing 10 or 20 years ago.

Re: Goldman Sachs automated trading replaces 600 traders with 200 engineers

#50
The article talks about the number of traders they replaced with engineers. Assuming that other investment banks are on the same trend, where are these traders going to get new jobs? Are they just retiring because they made enough money while trading?
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