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Private Wealth Management and Real Estate are two industries I once believed would easily be automated. And there have been a number of moves in each space to

Private Wealth Management and Real Estate are two industries I once believed would easily be automated. And there have been a number of moves in each space to do so [Wealthfront and Betterment, Zillow etc]. But I've come to understand these industries are NOT built on rational, dispassionate decision making. The reason they only have a foothold in automation is because at their core, they are deeply relational industries. Even for incredibly sophisticated, "rational" individuals. People simply want a person to talk to and walk them through things - even when they have all the facts generated from sophisticated algorithms giving them an unequivocal "correct" answer. It seems like lobbying is the same. There is an important role for automation. But I believe it will simply augment the existing offering rather than completely supplant it. Politics is the most relational of professions. Rational policymaking is an idealists dream - and I say this as a metric-driven, lover of numbers who once believed in that dream.

zitterbewegung 9y ago
A better replacement for Wealthfront is merely buying the https://en.wikipedia.org/wiki/S%26P_500_Index https://en.wikipedia.org/wiki/S%26P_500_Index . I bet we could create an automated version of the S&P but at this time its just not beneficial due to financial laws and also just talking to a person. We need to think of automation as more of a cybernetics concept than just a program on a computer. In the front line you will have humans doing the Sales and that probably won't go away. In the back you will have computers which make decisions and in the middle you will have engineer(s) working on the interface. Once we can replace the sales experience thats when we will get there.
- johnnyb9 9y ago
  I think the idea is that you don’t want to be holding 100% US large cap equities when you’re in retirement.
  - nostrademons 9y ago
    Vanguard, Fidelity, and other funds all offer "Target Retirement date" funds which basically shift your asset allocation from stocks to bonds as you get closer to retirement. The individual mix is generally held in typical total-market index funds, mixed foreign/domestic based on the relative size of their economies. As long as you're okay with exactly-average investment performance (which is what index funds always give you), that's a good alternative, and the expense ratio is super low - 0.05% for Vanguard's offering. Actually, I just looked, and Wealthfront and Vanguard invest in the exact same funds (Vanguard's VTI and foreign equivalents), but Wealthfront's expense ratio was around 0.12% vs. 0.05% for Vanguard.
    - thaumasiotes 9y ago
      I've never understood why these get recommended so heavily. A "target retirement date" fund seems conceptually much like a reverse mortgage - a way to liquidate everything you might have accidentally built up so you can make sure to piss it away just before you die and let your family inherit nothing. What are you investing for? The targetless fund has higher expected earnings; the whole point of the targeted fund is to get less money in expectation than the normal fund will.
      - aaronbrethorst 9y ago
        Because most people care about de-risking their portfolio? Out of curiosity, are you long on Dogecoin?
      - nostrademons 9y ago
        For exactly the reason johnnyb9 points out up-thread: you don't want to be holding 100% U.S. equities when you're in retirement and the U.S. market crashes. Target retirement date funds are very different from reverse mortgages. In a reverse mortgage, you're borrowing money, which you pay interest on, which is secured by a large asset you own (your house). The reason they're so dangerous is because you're paying interest on the borrowed money, so it compounds, and can eat up your home equity very quickly. With a target retirement fund, it's a normal investment which you receive investment returns on, but the asset mix moves from stocks to bonds as you get closer to retirement. The reason for this is that you generally don't want to put any money at risk in the stock market that you can't afford to lose within the next 5 years. Market crashes are unpredictable and often take several years to recover from; if you're in retirement and forced to live off that money month-to-month, you may be forced to liquidate stocks at very low prices, often lower than you paid for them, wiping out your investment gains. You're supposed to move assets from stocks to bonds or other more predictable income streams as you get closer to retirement, so that you know that the money you need to live on will be available when you need it, and can just let the money you don't need to live on sit in the stock market until you do need it. Target retirement funds automate this rebalancing, dollar-cost averaging out of the stock market as you get closer to retirement so you aren't tempted to panic and pull everything if there's a crash.
IIAOPSW 9y ago
I think there's a generational thing going on here. I'd love nothing more than to be able to buy stocks, real-estate etc through an online interface with 0 human interaction. Everyone I know above 40 seems to be the exact opposite. Sometimes progress is made one funeral at a time.
- tehlike 9y ago
  Similar. Our generation is more used to getting things done on our phones or computers, including human interaction. I for one hate to run errand where i need to talk to someone. It is very inefficient, and socially awkward.
- tw1010 9y ago
  I'm not sure it's here to stay though. The older I get, the more comfortable I and those around me seems to become at interacting with other human beings.
- jancsika 9y ago
  Nevertheless, an interface for "politics with 0 human interaction" is an open research problem.
- jonnycomputer 9y ago
  define progress.
stephengillie 9y ago
So long as humans exist, there will always be a demand for other humans to explain things to them.
TeMPOraL 9y ago
I think it's mostly a trust issue. Even when you "have all the facts generated from sophisticated algorithms giving you an unequivocal 'correct' answer", how do you know it's not pulling a fast one on you? Do you trust whoever gave you the algorithm? Especially that it's usually not some diverse group of open-source developers, but a particular financial institution with a product to sell you. I feel that the desire for human interaction in matters involving money has a lot to do with having someone you can look in the eyes and see yourself if they're trying to defraud you.

zitterbewegung 9y ago

A better replacement for Wealthfront is merely buying the https://en.wikipedia.org/wiki/S%26P_500_Index https://en.wikipedia.org/wiki/S%26P_500_Index . I bet we could create an automated version of the S&P but at this time its just not beneficial due to financial laws and also just talking to a person. We need to think of automation as more of a cybernetics concept than just a program on a computer. In the front line you will have humans doing the Sales and that probably won't go away. In the back you will have computers which make decisions and in the middle you will have engineer(s) working on the interface. Once we can replace the sales experience thats when we will get there.

johnnyb9 9y ago
I think the idea is that you don’t want to be holding 100% US large cap equities when you’re in retirement.
- nostrademons 9y ago
  Vanguard, Fidelity, and other funds all offer "Target Retirement date" funds which basically shift your asset allocation from stocks to bonds as you get closer to retirement. The individual mix is generally held in typical total-market index funds, mixed foreign/domestic based on the relative size of their economies. As long as you're okay with exactly-average investment performance (which is what index funds always give you), that's a good alternative, and the expense ratio is super low - 0.05% for Vanguard's offering. Actually, I just looked, and Wealthfront and Vanguard invest in the exact same funds (Vanguard's VTI and foreign equivalents), but Wealthfront's expense ratio was around 0.12% vs. 0.05% for Vanguard.
  - thaumasiotes 9y ago
    I've never understood why these get recommended so heavily. A "target retirement date" fund seems conceptually much like a reverse mortgage - a way to liquidate everything you might have accidentally built up so you can make sure to piss it away just before you die and let your family inherit nothing. What are you investing for? The targetless fund has higher expected earnings; the whole point of the targeted fund is to get less money in expectation than the normal fund will.
    - aaronbrethorst 9y ago
      Because most people care about de-risking their portfolio? Out of curiosity, are you long on Dogecoin?
    - nostrademons 9y ago
      For exactly the reason johnnyb9 points out up-thread: you don't want to be holding 100% U.S. equities when you're in retirement and the U.S. market crashes. Target retirement date funds are very different from reverse mortgages. In a reverse mortgage, you're borrowing money, which you pay interest on, which is secured by a large asset you own (your house). The reason they're so dangerous is because you're paying interest on the borrowed money, so it compounds, and can eat up your home equity very quickly. With a target retirement fund, it's a normal investment which you receive investment returns on, but the asset mix moves from stocks to bonds as you get closer to retirement. The reason for this is that you generally don't want to put any money at risk in the stock market that you can't afford to lose within the next 5 years. Market crashes are unpredictable and often take several years to recover from; if you're in retirement and forced to live off that money month-to-month, you may be forced to liquidate stocks at very low prices, often lower than you paid for them, wiping out your investment gains. You're supposed to move assets from stocks to bonds or other more predictable income streams as you get closer to retirement, so that you know that the money you need to live on will be available when you need it, and can just let the money you don't need to live on sit in the stock market until you do need it. Target retirement funds automate this rebalancing, dollar-cost averaging out of the stock market as you get closer to retirement so you aren't tempted to panic and pull everything if there's a crash.

IIAOPSW 9y ago

I think there's a generational thing going on here. I'd love nothing more than to be able to buy stocks, real-estate etc through an online interface with 0 human interaction. Everyone I know above 40 seems to be the exact opposite. Sometimes progress is made one funeral at a time.

tehlike 9y ago
Similar. Our generation is more used to getting things done on our phones or computers, including human interaction. I for one hate to run errand where i need to talk to someone. It is very inefficient, and socially awkward.
tw1010 9y ago
I'm not sure it's here to stay though. The older I get, the more comfortable I and those around me seems to become at interacting with other human beings.
jancsika 9y ago
Nevertheless, an interface for "politics with 0 human interaction" is an open research problem.
jonnycomputer 9y ago
define progress.

stephengillie 9y ago

So long as humans exist, there will always be a demand for other humans to explain things to them.

TeMPOraL 9y ago

I think it's mostly a trust issue. Even when you "have all the facts generated from sophisticated algorithms giving you an unequivocal 'correct' answer", how do you know it's not pulling a fast one on you? Do you trust whoever gave you the algorithm? Especially that it's usually not some diverse group of open-source developers, but a particular financial institution with a product to sell you. I feel that the desire for human interaction in matters involving money has a lot to do with having someone you can look in the eyes and see yourself if they're trying to defraud you.