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People focus on LLM's and diffusion models because they are so omnipresent now. But an AI for stock picking and prediction that would be realy next level and ou
by PeterStuer 3y ago
People focus on LLM's and diffusion models because they are so omnipresent now. But an AI for stock picking and prediction that would be realy next level and outcompete the current ones cosistently would siphon of so much wealth it would basically own society if the operators were clever enough not to get so gready short term that the system would litterally collapse overnight.
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- huytersd 3y agoIt would have a brief period where it would be effective and then you would just have an AI stock picking arms race, and would be back in the same situation again.
- PeterStuer 3y agoThat is the way it has been so far. Now if we could lobby for the others not to have access to or be allowed to use this technology ...
- RF_Savage 3y agoExactly. How would it differ from the current algorithm driven HFT stuff? By being slower to react?
- aeternum 3y agoArguably, this has already happened at least twice in the past. One with the discovery of the Black-Scholes model, and arguably again with the advent of HFT (and the ability to basically front-run trades). The interesting thing about markets is you generally can only make money when things are mispriced. This limits the total potential gain even for actors with perfect information. Suppose we did have an AI model that could with near certainty predict both the future cash flows of a company and future interest rates. You could very easily calculate the discounted cash flow and determine the fair share price today or at any point in the future. Rather than collapse, markets likely become more stable and stocks would perform more like bonds.
- thomasahle 3y ago> The interesting thing about markets is you generally can only make money when things are mispriced. Why would you think things are not terribly mispriced right now? If only we were a lot smarter we'd know how.
- logicchains 3y ago>If only we were a lot smarter we'd know how. That's not true. Pricing and predicting in the real economy depends on information; for a given amount of information, there are vastly diminishing returns for further intelligence. Because intelligence only allows predicting a bit further in future, as the complexity of predicting the future increases exponentially with lookahead distance; it's O(e^n). This is why hedge funds pay for things like satellite footage of oil tankers to predict changes in supply.
- aeternum 3y agoYes, things might be significantly mispriced, but the amount of mispricing is a finite quantity. This is clear in the classic pump and dump scheme. During the pumping stage, the unscrupulous actor loses money by injecting some amount of mispricing by purchasing the security and bidding up its value. The hope is to generate momentum and hype that triggers others to amplify that mispricing. Then during the dump scheme, the unscrupulous actor can capitalize by removing the mispricing.
- stubish 3y agoIt sounds like you also need an AI to generate that mispricing. Like a form of SEO, the misinformation bots tweet to all the trading bots and try to trick them into mispricing shares, so your trading bots can quickly gain advantage. Corewars using the world economy.
- VaxWithSex 3y agoThe best way to predict the future is to invent it. --Alan Kay
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- ghshephard 3y agoI'm not following that argument - such a system might siphon off the trading wealth, but presumably that's miniscule compared to the equity wealth that is assigned to the owners of the companies and the wealth that they create?
- nostromo 3y agoYeah, I honestly think this would be a good thing. ML already exists as market makers. It’s a big-ish industry maybe, but not massive. It probably should be as automated as possible which would reduce the risk free profit to be made to next to nothing.
- PeterStuer 3y agoDoes non-automated trading still hold a significant percentage of volume? Not an expert but that would seriously surprise me.
- PeterStuer 3y agoYou can create a lott of profit from a stock tanking. How would that create equity wealth?
- brutusborn 3y agoI have wondered if this is the risk that Elon is worried about. But he can’t discuss it explicitly because he is working on such a system. If he communicates its existence, then he reveals a huge attack surface and makes his life (and his teams) much more difficult. So he is limited to publically saying that AI is dangerous but not revealing the true failure mode.
- jdhendrickson 3y agoI find this comically unlikely.
- brutusborn 3y agoWhat makes it unlikely?
- RandomLensman 3y agoBecause everyone getting richer from removing uncertainty isn't a risk to start with.
- brutusborn 3y agoWhat about a single actor getting rich and leaving everyone else’s certainty unchanged?
- RandomLensman 3y agoOnly works with fairly limited riches, otherwise what is happening leaks out (kind of playing out that way already).
- brutusborn 3y agoHow would it leak out?
- dartos 3y agoI think we’ve already been aware of the limitations of ML models in the financial world. Historical financial data only predicts so well. If there was a way to make a money printing machine with ML it would’ve happened already. It’s a much easier problem space than language or image generation.
- persnickety 3y agoFinancial data is not enough to describe the financial world. To predict the movement of meme stock, you'd need Reddit/Twitter/what have you data. It's not a limitation of ML per se, but a limitation on how much data we can feed the ML model.
- spease 3y ago> But an AI for stock picking and prediction that would be realy next level and outcompete the current ones cosistently would siphon of so much wealth it would basically own society Reminds me of Rehoboam from Westworld: https://youtu.be/SSRZfDL4874 https://youtu.be/SSRZfDL4874
- jandrewrogers 3y agoThere are fundamental limits to prediction. Characterizing these limits is an essential part of algorithmic information theory[0] (AIT) and is an operative bound on AI improvement. One of the strongest arguments against "hard take-off" scenarios is that AIT constrained by physics doesn't really allow it. [0] https://en.wikipedia.org/wiki/Algorithmic_information_theory https://en.wikipedia.org/wiki/Algorithmic_information_theory
- nologic01 3y agoBlackrock already "owns" society. People get fixated on mindless algorithms when the real deal is always between humans. Software algorithms, no matter how sophisticated, are just another pawn in the human chess. In some very remote future there might be silicon creatures that enter that chess game on their own terms. Using that remote possibility to win advantage here and now is a most bizarre strategy. Except it seems to work! It shows we are really just low IQ lemming collectives, suckers for a good story no matter how ungrounded.
- nwoli 3y agoDiffusion models came from finance and have been applied there many many years before it was brought to this wave of AI
- m3kw9 3y agoA LLM that can get insider info would have an edge. Lmao.