Will Robots Wipe Out Wall Street's Highest-Paying Jobs? (bloomberg.com) 71
An anonymous reader quotes Bloomberg:
Robots have replaced thousands of routine jobs on Wall Street. Now, they're coming for higher-ups.
That's the contention of Marcos Lopez de Prado, a Cornell University professor and the former head of machine learning at AQR Capital Management LLC, who testified in Washington on Friday about the impact of artificial intelligence on capital markets and jobs. The use of algorithms in electronic markets has automated the jobs of tens of thousands of execution traders worldwide, and it's also displaced people who model prices and risk or build investment portfolios, he said.
"Financial machine learning creates a number of challenges for the 6.14 million people employed in the finance and insurance industry, many of whom will lose their jobs -- not necessarily because they are replaced by machines, but because they are not trained to work alongside algorithms," Lopez de Prado told the U.S. House Committee on Financial Services.
That's the contention of Marcos Lopez de Prado, a Cornell University professor and the former head of machine learning at AQR Capital Management LLC, who testified in Washington on Friday about the impact of artificial intelligence on capital markets and jobs. The use of algorithms in electronic markets has automated the jobs of tens of thousands of execution traders worldwide, and it's also displaced people who model prices and risk or build investment portfolios, he said.
"Financial machine learning creates a number of challenges for the 6.14 million people employed in the finance and insurance industry, many of whom will lose their jobs -- not necessarily because they are replaced by machines, but because they are not trained to work alongside algorithms," Lopez de Prado told the U.S. House Committee on Financial Services.
I can only hope so (Score:4, Insightful)
Re:I can only hope so (Score:5, Insightful)
> Just because they take a percentage doesn't mean they are parasites.
When the percentage consumed is based on the technology advantage of where the fiber optic of the stock exchange is tapped, and where they can put ASICS to monitor that data and commit arbitrge wholesale without ever keeping the stock, then that is the very definition of a parasite. It is not generating any product or services for anyone else. It's pulling funds that are designated by the design of the stock market to be available for company owners or investors and leaving the bulk of the profit in the hands of these businesses that have inserted themselves into the transaction with no benefit to the any other party.
I would, indeed, call such large-scale arbitrage traders parasites. Too many of them are also criminal, dealing with insider trading in wholesale ways. Saying "their algorithms are AI" and patented contributes to tuning them with illegal information behind the scenes. I've worked with several such investment companies, and they do insist that their supervisors have the option to "tune" the settings of the AI as desired and without records that might be apparent for subpoenas.
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I would, indeed, call such large-scale arbitrage traders parasites.
Then you would be a fool. Arbitrage traders provide a useful service, because they increase liquidity, and actually give you a better market price.
profit in the hands of these businesses that have inserted themselves into the transaction with no benefit to the any other party.
That's not how arbitrage works. They insert themselves between two disjoint markets, and offer trades from one market (e.g. London) on another (e.g. NYSE). Without these traders, you would have to open accounts on both markets, and watch the prices yourself, which would be almost certainly worse.
It is a common misconception that these traders sit between a regula
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If you have evidence that front-running is happening, take it to the appropriate authorities.
most HFT algorithms are designed to simply quit the market
Makes sense, because arbitrage has a certain risk. No matter how fast you are, there's always a synchronization delay between markets, and if the markets fluctuate wildly, the risk increases. In the end, you are still better off with arbitrage.
Re: I can only hope so (Score:2)
Traditional market makers just backed out when they believed the market was falling. If they didn't, they's go bust and then they're out, and the market would just keep falling. The fact they didn't was mostly because they were dumber. This kind of risk taking can exactly make a bank go bust, and stopping banks going bust has exactly been the focus of regulation of recent years.
The usefulness in market making is so that people don't have to worry about whether they're losing money short term. They don't ha
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"The usefulness in market making is so that people don't have to worry about whether they're losing money short term. They don't have spend time to shop around for better prices, because somebody else provides the best price or near the best price at a cost so tiny that it's often not worth the effort to shop around. HFTs make like a cent off a hundred dollar trade, much smaller than what a vending machine takes selling you a can of pepsi, and we don't hear you complaining about big evil vending machines."
E
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No, but the retirement funds are spent on everything else that have a much higher markup than 0.01%, from housing, rent, medicine etc.
Even the very funds that service 401k take management fees much higher than 0.01%, that even the "good ones" charge like 0.5%. And the fact they can charge 0.5% instead of more is because thick liquidity reduces their inefficiency in making trades. Compared to an industry as lean and automated as HFT, most things in the world are absolute rip-offs.
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This is always the excuse for the damage that arbitrage causes. Technology has long ago made the need for this kind of "liquidity" obsolete.
"Finance" is pretty much an industry that now exists only to further consolidate power and wealth. It exists to siphon value upward. They produce nothing, they provide no service of value, yet they seem to have an outsized influence over everything.
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The point is that arbitrage trades are available in the order books next to the local trades. If they don't offer a better price, you simply won't trade with them.
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Re: I can only hope so (Score:2)
Underrated post.
There are many misconceptions among laymen around HFT. HFTs are exactly the result of automation displacing human dinosaur players whose behaviour was far more parasitic.
Now they seem big, people forget they were once the David that defeated Goliath, and worse they're made a boogeyman by old-school MBA financiers who are threatened by competition.
It used to be that market makers bought seats on NYSE et al and then made 1/8 of a dollar for every share they traded. Now that the tick size is 1
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> There are many misconceptions among laymen around HFT.
And there is _enormous_ fraud and deceit by the HFT companies. I've worked directly with several, and have urged the lawyers I work with to make absolutely sure to get the money up front and to nail down the technical details in advance. It's cost us some contracts, but also protected us from exceptional losses when companies went bankrupt or divisions were laid off.
From observing them, I'm also convinced that many if not all of them use the HFT sys
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> Arbitrage traders provide a useful service, because they increase liquidity,
The liquidity is all sucked out as profit by the high frequency traders. Almost none of that profit is left for anyone else.
> That's not how arbitrage works. They insert themselves between two disjoint markets, and offer trades from one marke
It is _absolutely_ how arbitrage works. From the common definition:
the simultaneous buying and selling of securities, currency, or commodities in diff
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Microsecond Arbitrage is a very useful company to the function of the stock market and now a wholly-owned subsidiary of the RAMJAC corporation. (yes, I know it's not actually)
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I'm afraid that naming such a company "Microsecond Arbitrage" would be like naming a video copyright law firm "Fair Use Abuse". It's too close to the truth for their clients to admit to using them.
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It's the name of the company in Vonnegut's Hocus Pocus that wipes out the main character's family fortune.
Microsecond Arbitrage "claimed to be snapping up bargains in food and shelter and clothing and fuel and medicine and raw materials... before people who really needed them could learn of their existence... the company's computers... would get the people who really needed whatever it was to bid against each other, running profits through the roof."
"The computers, it turns out, weren't connected to anythin
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Oh. Oh my. I've admired various of Vonnegut's writing, but had not realized he'd predicted HFT.
Re: I can only hope so (Score:2)
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Having the robot pour coffee from a cup into an internal reservoir would be trivial at that point.
Trivial. (Score:2)
A lifting arm and a funnel for the former. Start with a modern golf computer game for the latter.
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But at least they found an industry that doesn't have any fraud. /s
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So you are saying that those Collateralized Debt Obligations (CDOs) which blew up the whole system in 2008 and the leveraged buy-outs going on then and now are "efficient allocations of capital"? And the internet tech bubble of the late 90's was efficient? I will say this, much of the financial markets are efficient in using complex financial instruments to fleece individuals and society as a whole of their earned wealth.
My financial investments are efficiently (and proudly) allocated in index funds. If
Financiers and economists are indeed parasites (Score:2, Interesting)
And it's a task which automation can do far more effectively and efficiently than people can. Indeed, in this area, "expert" humans are at the level of reading tea leaves and chicken entrails. Automation can treat allocation of capital with the precision and safety of allocating memory.
The finance industry takes a massive cut for their "services", hence dramatically reducing the efficiency of the process,
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Go visit a poor country. . . . The finance industry makes this efficiency possible.
No, actually the finance industry is what keeps those countries poor, it's deliberate and direct manipulation of their currency and their governments by the 'Economic Hit Men'. I recommend Tony Perkins' book 'The Secret History of the American Empire' if you're unaware of how it actually works.
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In their simplest forms, hedge funds are a good thing & arguably necessary, e.g. they allow farmers to get a predictable price for their crops several months down the line. Insurance is also useful to make sure that people get appropriately compensated for others' misdeeds or accidents.
I think the problem is what successive Democrat & Republican administrations have pursued an ill-informed & dogmatic approach to deregulating the financial services sector. They've let the gamblers into our civili
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P.S. You can get reasonably low fees today by investing with Vanguard.
So what? (Score:2)
Even if your inclination towards thinking “good” is more out of schadenfreud
Re:So what? (Score:5, Insightful)
the people who work there are capable of doing other jobs.
If these other jobs are similar enough, they'll probably disappear too.
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If you don't have a coder brain, no matter how much you train, you'll still be a shite coder. Those people were bean counters pretending there was more importance in counting beans than in planting and harvesting them, they are pretty useless. Sure they can try for other jobs but they will be competing against others who have already spent years training and it was their original preference, their mind bent that way and those bean counters will simply not be able to compete and the lot of them to become low
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I am not sure about your contention, the wall street guys can do other things. They are used to being paid enormous amount of money for little work and no risk. They can't pull a regular HR job.
You must have never actually worked on Wall Street. I work in the Chicago-land financial industry, and the people making enormous amounts of money are insanely hard working. Their work-life balance is often very poor, and most of the top paid directors at my company are divorced primarily because of never having time for family. I would agree with them taking fairly low levels of risk though, especially when compared to their return on that risk.
They would have no trouble getting sales jobs in any industry,
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They would have no trouble getting sales jobs in any industry, but most of them would have to get used to far less compensation. I doubt too many people will bat an eye when they are struggling to make $200k a year though.
That's kinda the point. There aren't other jobs that will support them in the manner in which they are accustomed. Many probably have much more than 200K per year alimony payments.
Sorting of the people. (Score:2)
When you run a business, you always want to find the most efficient way to run your business. Humans make mistakes in incredibly different ways. Computers make the same mistake over and over. Which is harder to fix? This system is central to how our system works.
All of these achievements have taken the vast knowledge of the human experience and compressed it into algorithms. Corporations work hard to centralize their knowledge and wealth and power. Should they reap the interest built off of socie
All jobs will be automated eventually (Score:1)
Will 100% of the population be unemployed and destitute while robots run the planet with no consumers to drive the economy? Obviously not. At that point where an underground barter economy is larger than your official economy you turn the robots off.
More realistically robots, computers, deep learning, and eventually AI will either allow fewer people to do the same amount of work, keeping production flat. Or it allows the same number of people to do more work, which is kind of the point to industrialization
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Honestly it's tough to imagine most of these financial sector jobs as any form of "production". Perhaps I'm being overly generous above.
While I understand the feeling. They actually do enable exchange of good and services. When they enable the mortgage on your new house, they also enable the construction of the house itself which is a production. As such they reap some of the benefits.
A similar argument can be made about venture capital activities.
Then IPOs, shorting, and stock exchange in general are the pricing mechanism. And in that sense what they do isn't that different from the work done by kelly blue book.
But I understand the feeling
Most high paid positions on Wall Street (Score:2)
Automation in Wall Street won't kill these kind of salesmen, but the more broad trends in Automation might eliminate so many middle and upper middle class jobs that the Salesmen no longer have anyone to hock their wares to. With Automation The King doesn't need merchants, and the 1% will have
No. (Score:3)
No need for robots. Computers have been doing this for a while now.
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Yeah, working the scams. I bet they don't set the scams up though.
Algo trading has been where it's at for 15 years (Score:2)
So when there is a discussion about computers taking well paid jobs from people, i'm assuming the suggestion is that traders are being replaced, and yes, that is certainly the case. However, traders are being replaced by CompSci types, writing Algo Trading systems. It's just one set of people skills being replaced by a different set.
Who couldn't deserve it more? (Score:2)
It's a big gravy train leaching off of pensions and savers anyway. If these peoples jobs start going 1st then maybe jobs might actually be protected from being replaced by AI.
Will Robots Wipe Out.. (Score:2)
No. </subject>
MEMO TO MEDIA: FFS I know there a slow news days, but could you just stop trying to stampede the herd by trolling them with the 'robots will take all our jobs' bait, please? It's tedious.
Maybe some mid-high jobs will disappear, but... (Score:4, Insightful)
It would be a pity... (Score:2)
It would be a pity to get rid of the only people in Wall Street making money by doing, you know, actual work.
They could still work for the content Mafia. :) (Score:2)
What ... what if they declare their "style of trading" their "intellectual property"?
And make a killing by taking license fees on every transaction in the world with the same precise level and style of greediness and incautiousness.
We can only hope... (Score:3)
...since these people produce very little of value. Seriously, what is there about trading that wouldn't be better, if automated? The only trick is auditing the automation to ensure that no one builds in some sort of secret advantage for themselves.
I hope they will wipe out all of stock trading. (Score:2)
By pushing it to its ridiculous logical conclusion.
Seriously... then concept that you can make others work for you, by pushing a few numbers around and back and forth, that very loosely represent some beliefs of worth, and acting like those numbers could be equated to a certificate of having done actual work that deserves work in exchange, is so insane and wrong, it must be the epitome of all white collar crimes.
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Central Planning Perfected? (Score:3)
We have computers now that can decide which companies to invest in and direct the economy. That means we're one step closer to full on communism with an AI god at the helm, right?
They can go back to rocket science (Score:2)
From Margin Call ...
Sarah Robertson : What's your background?
Peter Sullivan : My background?
Sarah Robertson : Your CV.
Peter Sullivan : I've been with the firm for two and a half years working with Eric that whole time, but I hold a doctorate in engineering, speciality in propulsion, from MIT, with a Bachelor's from Penn.
Jared Cohen : What is a 'specialty in propulsion,' exactly?
Peter Sullivan : My thesis was a study in the ways that friction ratios affect steering outcomes in aeronautical use under reduced
Well, if all investments are made by machines... (Score:2)
The stock market will cease to be a place where profits can be had, since transactions will all be based on logic and fact with no emotion. Profits usually come when the market is doing something dumb based based on limited facts or pure emotion, remove that so the pricing always makes sense and what's the point? You'll get a better rate of return off bonds or even a good savings account.
Exotic Investment Schemes FTW! (Score:1)
From cashiers, to whole bricks-and-mortor stores, to financial services... It looks like much of the 20th century MBA conventional wisdom is falling by the wayside.
Perhaps they are just over-qualified for the positions instead of being replaced or made redundant by technology. They could spin this as the feel-good story of the century if they play it right. A country of over-qualified workers (both skilled and unskilled l
About minorities and gender (Score:1)
I'd say good riddance... (Score:2)
I really would. A huge part of the finance industry is parasitic, and a small but economically important part of it is even destructive to the economic system as a whole. The part that didn't learn after the recent financial meltdown and crisis, not because they can't learn, but because it was more lucrative to get bailed out, keep doing the same things and hope you'll be bailed out the next time, too.
I'd say good riddance - except that the business methods and the destructive potential of the financial mar
In other news (Score:1)
Robots Perform Better (Score:1)
F*ck the appocalypse (Score:1)