We trust our computers with everything. We trust them to let us chat with friends, search the latest trendy tweet, download music, check our bank accounts. We literally leave our lives in the hands of technology. But how much do we really trust artificial intelligence? Enough to invest our money?
A recent Wall Street Journal post just brought this to our attention, but it’s really no new fad: more and more investment firms are looking to AI to make trade decisions. The WSJ article focuses on a small New York-based firm called Rebellion Research. Using self-created complex math equations and algorithms, the hedge fund relies on machine-learning to invest in stocks and evolve as the market changes.
Sounds pretty crazy right? It’s hard to imagine that people are willing to leave their money to these secret (the created algorithms are kept private to each individual firm) formulas in hopes that the turnout will be favorable. In fact, Rebellion admits that it has struggled in recent times to raise money. How can we trust something that can’t really be explained to us?
But AI has had incredible success for many firms, especially Renaissance Technologies LLC. Started back in 1982 by James Simons, Renaissance has averaged 35% annual returns after fees, making it one of the most successful hedge funds out there. It’s hard to complain about returns that great, even with the hiked up management fees.
Who knows, if we don’t need humans to choose our investments, how long will we need them to whip up 3-course dinners or set the table.
Hey, it could happen.