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The race to build ‘‘big data machines’’ in financial investing

Robot wealth managers and approaches will grow and offer alternative ways of investing.

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Editor’s note: This post originally published in Big Data at Mary Ann Liebert, Inc., Publishers, in Volume 3, Issue 2, on June 18, 2015, under the title “Should You Trust Your Money to a Robot?” It is republished here with permission.

Financial markets emanate massive amounts of data from which machines can, in principle, learn to invest with minimal initial guidance from humans. I contrast human and machine strengths and weaknesses in making investment decisions. The analysis reveals areas in the investment landscape where machines are already very active and those where machines are likely to make significant inroads in the next few years.

Computers are making more and more decisions for us, and increasingly so in areas that require human judgment. Driverless cars, which seemed like science fiction until recently, are expected to become common in the next 10 years. There is a palpable increase in machine intelligence across the touchpoints of our lives, driven by the proliferation of data feeding into intelligent algorithms capable of learning useful patterns and acting on them. We are living through one of the greatest revolutions in our lifestyles, in which computers are increasingly engaged in our lives and decision-making, to a degree that it has become second nature. Recommendations on Amazon or auto-suggestions on Google are now so routine, we find it strange to encounter interfaces that don’t anticipate what we want. The intelligence revolution is well under way, with or without our conscious approval or consent. We are entering the era of intelligence as a service, with access to building blocks for building powerful new applications. Read more…

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