Growing up, in the late 80’s and 90’s, if you needed to research, seeking information/knowledge, or looking for entertainment, your options were limited to ordering books by mail order, accessing books at the local library, which invariably never had what you were looking for and for entertainment, you had 2-3 hours of television on state run single channel.
The kids of today don’t appreciate when their parents from that era get worried about their future or their career goals.
They can’t relate to the non-internet, non-technology, and non-connected world of the 80’s and 90’s.
Even those who were working on some of the technological advances, or their academic theories perhaps might not have realized the deep impact they would have on subsequent generation for whom tech will be as normal as sleeping/bathing/eating.
The point where equations stop making sense, where technology changes the way people are used to living and previous generations find it hard to align themselves with the way things are is “Singularity”.
The very 1st issue of The Public Interest in 1965 had an essay title, “The Great Automation” which talked about how American wages will skyrocket, working time will decrease and Americans will get rich and bored.
Well, this didn’t happen.
As Peter Thiel points, for the society to remain stable, things need to grow, which means we need singularity, the “GOOD” kind.
The “Good Singularity” can lead to improvements that uplifts people from poverty, hunger, disease etc.,
The fear of machines, computers/robots, empowered with AI taking over our lives shouldn’t stop us from leading to “Good Singularity”.
The Search for Alpha
The holy grail of investing is driven by search for a manager or a strategy that can continuously deliver meaningful alpha over the benchmark.
Many have predicted the takeover of active investing by powerful machines and automated trading strategies that will negate the need for an active manager.
And for a while the Medallion fund by Renaissance came up with stupendous returns based on its quant strategies that looked for market signals to trade.
The fund failed to deliver in 2020 and saw an exodus of over 15Bn USD in 2021.
The smart computers and all the smart people combined should make the hurdle to achieve alpha higher and higher.
So, would Alpha go to zero?
Will the financial markets become perfect?
Should we brace ourselves for this “financial singularity”?
The challenge to this hypothesis is that people continue to trade on emotions driven by greed and fear propelled by narratives given by half-baked influencers and out of job fund managers, more than knowledge.
There is always a positive story and an equally compelling negative story about the same investing opportunity.
And there are enough number of people sitting on either side for the market to become perfect.
You can automate an investment guru’s investing style, however that doesn’t account for the creativity of that investment guru to device new investment models.
As an idea financial singularity seems tempting, however human judgement both good and bad will continue to drive investment decisions and financial markets outcomes for the rest of our lives.
Thanks for Reading