Worlds largest hedge fund to replace managers with artificial intelligence:

[JHan]

Last edited Tue Jan 3, 2017, 03:50 PM - Edit history (2)

Bridgewater Associates has a team of engineers working on a project to automate decision-making to save time and eliminate human emotional volatility

"The world’s largest hedge fund is building a piece of software to automate the day-to-day management of the firm, including hiring, firing and other strategic decision-making.

Bridgewater Associates has a team of software engineers working on the project at the request of billionaire founder Ray Dalio, who wants to ensure the company can run according to his vision even when he’s not there, the Wall Street Journal reported.

“The role of many remaining humans at the firm wouldn’t be to make individual choices but to design the criteria by which the system makes decisions, intervening when something isn’t working,” wrote the Journal, which spoke to five former and current employees.

The firm, which manages $160bn, created the team of programmers specializing in analytics and artificial intelligence, dubbed the Systematized Intelligence Lab, in early 2015. The unit is headed up by David Ferrucci, who previously led IBM’s development of Watson, the supercomputer that beat humans at Jeopardy! in 2011.

The company is already highly data-driven, with meetings recorded and staff asked to grade each other throughout the day using a ratings system called “dots”. The Systematized Intelligence Lab has built a tool that incorporates these ratings into “Baseball Cards” that show employees’ strengths and weaknesses. Another app, dubbed The Contract, gets staff to set goals they want to achieve and then tracks how effectively they follow through.

These tools are early applications of PriOS, the over-arching management software that Dalio wants to make three-quarters of all management decisions within five years. The kinds of decisions PriOS could make include finding the right staff for particular job openings and ranking opposing perspectives from multiple team members when there’s a disagreement about how to proceed.

The machine will make the decisions, according to a set of principles laid out by Dalio about the company vision.

“It’s ambitious, but it’s not unreasonable,” said Devin Fidler, research director at the Institute For The Future, who has built a prototype management system called iCEO. “A lot of management is basically information work, the sort of thing that software can get very good at.”

Automated decision-making is appealing to businesses as it can save time and eliminate human emotional volatility.

“People have a bad day and it then colors their perception of the world and they make different decisions. In a hedge fund that’s a big deal,” he added.

Will people happily accept orders from a robotic manager? Fidler isn’t so sure. “People tend not to accept a message delivered by a machine,” he said, pointing to the need for a human interface.

“In companies that are really good at data analytics very often the decision is made by a statistical algorithm but the decision is conveyed by somebody who can put it in an emotional context,” he explained.

Futurist Zoltan Istvan, founder of the Transhumanist party, disagrees. “People will follow the will and statistical might of machines,” he said, pointing out that people already outsource way-finding to GPS or the flying of planes to autopilot.

However, the period in which people will need to interact with a robot manager will be brief.

“Soon there just won’t be any reason to keep us around,” Istvan said. “Sure, humans can fix problems, but machines in a few years time will be able to fix those problems even better.

“Bankers will become dinosaurs.”

It’s not just the banking sector that will be affected. According to a report by Accenture, artificial intelligence will free people from the drudgery of administrative tasks in many industries. The company surveyed 1,770 managers across 14 countries to find out how artificial intelligence would impact their jobs.

“AI will ultimately prove to be cheaper, more efficient, and potentially more impartial in its actions than human beings,” said the authors writing up the results of the survey in Harvard Business Review.

However, they didn’t think there was too much cause for concern. “It just means that their jobs will change to focus on things only humans can do.”

https://www.theguardian.com/technology/2016/dec/22/bridgewater-associates-ai-artificial-intelligence-management

A.I. may be an improvement tbh. IMHO hedge funds are overrated anyway.

[RKP5637]

1. Also, this is already being done for portfolio management.

https://investorjunkie.com/35919/robo-advisors/

What is a Robo-Advisor?

There are many definitions of what exactly a robo-advisor means. To put it simply, a robo-advisor is a method to automate the asset allocation of investments via a computer algorithm. In a broader sense, a robo-advisor may also include financial advisors, but for services that require human assistance (i.e. taxes, retirement or estate planning).

Overall I consider the rise and interest in automated investment services a “good thing.” Pushing down the costs of high fee Wall Street advisors that offered no real value, and if anything, a drag on returns. This is a great thing in any competitive marketplace. In addition, these firms are helping individuals with goal setting and asset allocation — when they typically have no clue where to begin.

Like most anything, the one size does not fit all when it comes to financial advice. I do see this space filling the need of most beginner investors and investors with an uncomplicated financial portfolio. Are they right for you? That depends upon your net worth, the complexity of your investments, and if you feel comfortable you can do it yourself?