Will The Absurdity of Algorithmic Trading Erode Confidence in Capital?
The whole automated trading thing that @taskmaster4450 just called attention to in his excellent post makes me so uneasy.
He writes about all the high-paying stock trader jobs that are in jeopardy as a result of robots taking over trading tasks. The fact that these jobs can be outsourced so easily now just highlights how absurd trading has become.
I mean, the whole point of stock trading was to do some research, invest in an enterprise you believed would produce good, solid returns, and then sell your shares and move on when you found something better.
This is how it was described to us in school, anyway. It seemed like a good enough explanation for why capitalism was so successful.
Image by Ant Rozetsky via Unsplash.com
Someone has a great idea for producing widgets. (It's always "widgets" in these examples.) They don't have much money, but their idea is so good, and they're so persuasive that they get a bunch of people with money to invest in their plan. Those people really are invested. They're sharing in a big risk, but with enough of them sharing, the risk is acceptable. And if things work out, they get a share of the returns.
This way, capital increases the welfare of everyone while serving the self-interest of the investors. Seems pretty solid to me.
But it's a rose-colored scenario. Clearly, investing for the long-term well-being of an enterprise was never really the point of trading. The real point is to get as rich as you can, as fast as you can.
And now there are increasingly complicated ways to do this. Ways that are so complicated, they can only be understood by computers.
Why can't we just accept this?
Well... when capital's not being invested to grow successful companies, it erodes the idea of a free market being something that benefits society. Before long, it doesn't even benefit the caste responsible for managing the mechanisms of capital!
The stock market has always been a den of gamblers. At least those gamblers could say, "Hey, some of us are getting rich. Maybe you can get rich too! It's all just a game, but you're all free to play!"
But when that den of gamblers becomes a den of gambling algorithms, no one can even try to pretend that the game's not rigged. And then, how can we justify the prominent position of finance in our economy?
It doesn't even benefit the gamblers, any more. It only benefits the people who own the gambling computers. That's a tiny clique, indeed.
How long can we pretend this is an equitable system? And what will happen when no one has faith in it, anymore.
It might be satisfying to see it all collapse.
But it'll be mighty terrifying, too. Does it scare you as much as it does me?
Indeed, the only difference between gamblers, day-traders, traders, and fund managers is the amount of capital speculated. The venue does not truly matter, as all "investing" is but speculation. When the basis of monetary system encourages short-term exploitation and rape of the planet via debt-based interest bearing money, it is only logical that the entirety of social interaction from financial to cultural be reflective of that foundation.
The mark of a human, as opposed to animals, is his ability to overcome his base tendencies. Modern society has built a social edifice centered on men's base desires in the lunacy of "checks and balances" without any system of fostering development of humans. A system built around weaknesses will foster those very weaknesses in its members.
Is it any wonder that the modern West, having organized its social structure along the line of 18th century mechanical machine (the much lauded division of power among different components of government) will eventually be supplanted by 21st century electronic overlords?
With Greed Bots will alsways exsist. Good Article
Thanks!
Anything to make our own lives easier, I suppose. Problem is, only one person can have the smartest bots!
Eish its so terrific where we going no one knows but l sense a huge collapse and we should just accept it
Yes - accept and plan for it, I think. We can't save the world but maybe we can save ourselves!
Building monolithic trading bots that take over the industry? If that's the case, then in the future it'll essentially be one group gambling money that their bot has a better algorithm than everyone else's or at least the majority.
Exactly. But won't that mean money is essentially worthless at that point? (Not that it's not on the way there now.)
Well if you're talking about cryptos taking over from fiat currencies? I just don't see that happening. Cryptos are a form of investment which are now becoming mergers between a business idea and a form of Internet Property. I can see it becoming prominent around the world, but i just don't see it fully taking over fiats. Maybe in a poor economic climate it could fully succeed?
At this point, I am at "hand me the match."
Let's not waste firewood. It would be easier to unplug the robots!
Okay, okay, we'll do that. Ruin my fun. ;)
algorithmic trading is NOT new. It's been going on since before BitCoin was invented. It's a tool...nothing more...nothing less.
Sure...jobs are being lost...for quite some time now.
It couldn't happen to a nicer bunch of guys..
Oh I'm not defending the traders, believe me!
It's what happens when the vast majority of people suddenly lose confidence in the financial system that concerns me. Maybe it'll be the start of something better, or maybe it'll just be collapse?
You know that Chinese expression: "May you live in interesting times..."