Trade Ideas Blog

Enter the Centaur: Human + A.I. Intelligence

Sep 24, 2016

Humans and Artificial Intelligence are taking the next step together – not pitted against one another.

This week I joined a group gathered in one of Atlanta’s Midtown skyscrapers to listen to Kevin Kelly, a founder and founding editor of Wired magazine who David Pogue (Yahoo Tech) described as a futurist holding “a crystal ball, only without the risk of shattering.” He’s written a new book called, The Inevitable, that describes the technology landscape we’re headed towards. He argues it’s hard to predict specific product and service innovations such as an iPhone, but like rain on a mountaintop, technology “leans” and flows in a certain direction that we can anticipate and from which we can innovate.

Much of Kelly’s conversation is the open door through which the team assembled at Trade Ideas, is running. Here’s some key thoughts from the talk:

Humans and A.I. think in vastly different ways. And therefore an opportunity to collaborate.

Kelly renames the Industrial Revolution and eras as late as the 1970s as the age of “Artificial Power” where manual processes were mechanized with various forms of power: electricity, combustion, etc. Advances in all sorts of activity were created with the formula of “Take X, add electricity = something improved”. Take chopping vegetables, add electricity, and you get a blender. Take sewing clothes, add electricity, and you get a sewing machine. Take a horse and buggy, add 250 horses in the form of a combustible engine, and you get an automobile. This sets up nicely the Artificial Intelligence revolution.

To no real surprise it turns out humans by and large, are terrible drivers. With over 1M Americans killed in auto accidents in 2015, there’s opportunity to reduce auto fatalities with A.I. technology. Take 250 horses + 250 A.I. minds and you have a self-driving car.

Much of this formula is being applied around us now.

Take X, add A.I., get something new. Take a taxi, add A.I. and you have UBER. Take investing and trading in the markets, add A.I. and you have Trade Ideas’ Investment Discovery Engine, HOLLY.

Innovation Recipe: 1 Commodity & 2 Core Competencies

Kelly observes that the arrival of A.I. in our lives is the congruence of 3 items: Cheap parallel computing, Big Data, and Better Algorithms. A decade ago it was within the realm of possible to navigate the markets manually applying indicators like RSI, Elliott Wave or Bollinger Bands to charts and to make a decision. Those days are gone. Today’s markets demand an enormous amount of analysis across a much larger range of variables. That’s possible with the plentiful capacity of computational power available and the next wave in Big Data I refer to as Big Data 2.0.

The first wave of Big Data showcased the insight gained from vast quantities of analysis and information. The second wave of Big Data is the automation of actions based on such perspective and insight. Among our strongest competencies at Trade Ideas’ is this ability to turn Big Data into actionable market intelligence. That’s in part because the market provides a real-time avalanche of data spanning decades necessary to feed an A.I. engine and teach it to produce daily ideas with the highest statistical probability of profitability.

Finally there’s the pursuit of the better algorithm. In 1997 IBM’s Deep Blue (predecessor to Watson) beat the reigning chess grand master Garry Kasparov. After his defeat Kasparov realized that he would have performed better had he access to the same database of all previous chess moves. This led to the creation of “freestyle” chess matches where today the option exists for A.I. to assist humans against other such teams or A.I. alone. Kasparov coined the term Centaur to describe when A.I. augments human behavior. The algorithms produced by Trade Ideas’ A.I. are tested and optimized from “base” strategies designed by our technicians. Our customers receive the stream of A.I. ideas with specific trading plans that they then decide to follow, modify, or extend beyond hold times. The kind of A.I. needed for robotic surgery is still not ready for primetime yet, but Centaurs like HOLLY and our customers are examples of a combination of human, oceans of data, and A.I. connected to achieve more that’s here today.

It is worthwhile to mention that the futurist at the beginning of his presentation was not able to overcome a last minute glitch in technology that prevented the audience from seeing his slides! Take A/V equipment, add A.I., and get the auto-tuning, self-adjusting presenter?

David M. Aferiat