
Robots in Finance Could Wipe Out Some of Its Highest-Paying Jobs - hhs
https://www.bloomberg.com/news/articles/2019-12-06/robots-in-finance-could-wipe-out-some-of-its-highest-paying-jobs
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ChuckNorris89
The value of high paying jobs in finance doesn't come from activities that can
be automated, but from stuff that can't like connections(which university you
attended, who your parents are, who you play golf with and also insider
trading) and soft skills(charisma, drive, looks, personality, ability to
influence people, lying to them or throwing them under the bus).

For example, people like Elon Musk and Steve Jobs could pick up the phone and
convince some very wealthy people to part with their cash on some investments
that ML algos would consider stupidly risky.

~~~
jordache
i read somewhere when comparing a financial advisor, managing one's portfolio
vs an index fund - There was no discernible higher return with the advisor
managed portfolio vs the index fund.

~~~
baron_harkonnen
While this has been true in the past, because of this advice, huge amounts of
wealth are now in index tracking etfs or similar passive index tracking funds.
This essentially means that a larger and larger amount of the market is just
“betting in the market”. If you want to spot where the next financial crisis
will come from a generally good idea is not to ask “what looks crazy right
now” (ie VC funding) but “what does essentially nobody question that is also a
major change in mainstream investing”.

Because everyone is doubling down on investing on the status quo, don’t be
surprised if a disruption to the status quo has far more dramatic impact than
it would have 20 years ago.

~~~
chii
the wrong assumption is that the large bets on ETFs are "wrong" for extended
periods.

If the ETFs are incorrectly pricing assets because of blind buying, then an
enterprising managed index fund could bet against it. Or, find some other
arbitration mechanism. But of course, this doesn't actually happen, because
price discovery _still happens_ even if ETFs account for a large percentage of
trades (since price discovery can happen even with small number of trades).

And if ETFs is just betting on the market average, then the worst that can
happen is they get average results. ETFs don't use leverage or debt.

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code4tee
It makes sense... I mean just look at stock trading. Manual stock traders used
to be a high paying profession and now it’s a job that’s almost entirely been
replaced by automation.

It’s not a ‘could’ in the future but something that’s already happening in
significant amounts. The trading room floors of most the big banks are a tiny
fraction of what they once were despite trading volumes skyrocking.

~~~
Phillipharryt
There are still millions of stock traders, if you're meaning brokers, then
yes, automated routing and matching has dropped the number of brokers
dramatically. It's estimated around 10% of the volume of trades are still the
result of people making decisions, which is actually an incredibly large
amount because electronic trades create such an enormous volume that to even
make up 10% means a lot of traders are still out there picking stocks.

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strict9
I’m always skeptical of these articles, but this is accurate:

 _> many of whom will lose their jobs -- not necessarily because they are
replaced by machines, but because they are not trained to work alongside
algorithms,”_

The story with technology is about adaptation, not replacement. Teams,
departments, technologies have come and gone out from under me in about 15
years in the software field.

One could say I was replaced by software (or cheaper devs elsewhere) when I
was laid off or when teams I was on were eliminated. But if I wanted to keep
getting a paycheck, I had to adapt to something else in demand.

That’s life and these sensational articles generate clicks but it happens in
almost every private industry.

You have to adapt and grow or else you’ll wither.

~~~
whyenot
_You have to adapt and grow or else you’ll wither._

Agreed, but we now know that as people age it becomes increasingly difficult
for them to learn new things. This is a basic function of biology and how the
brain ages.

Due to automation, change is happening increasingly quickly, more rapidly than
many people can adapt to. People are being left behind, which has pretty
serious social and political implications.

~~~
HammockWarrior
That's why it's quite important when you do get that high paying job to bank a
large percentage of your salary into income generating assets. It's basic
diversification of income streams.

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popup21
Robots in Government could wipe out just as many high paying jobs including
large swaths of redundant personnel.

~~~
gaogao
Robots in Military could wipe out huge swathes of the population

~~~
ReptileMan
You don't need robots for that. Nukes are sufficient.

~~~
topkai22
But nukes have been delivered by robots (ballistic missiles) since the 50s

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kp98
I think one thing needs to be stated; I do not have concrete numbers, but it
seems as if algorithmic trading technology has actually levelled the playing
field and created more jobs.

I am a series 3 (commodities) and quant. Take this example, at one point in
time people were literally trading seats on the exchange, and a seat on the
NYSE was as high as 3 million !!! While there may have been more people with
those jobs than today, you had virtually no choice to be in a large
institution.

Today, almost anyone can raise some money, use the simple Interactive Brokers
API which sits on top of FIX protocol, and build a trading strategy. The main
reason I think you don't see more competition from small new firms - even
though there is a lot - is that the regulation is fierce and most funds
already offer nice compensation.

Within those firms, yes there may be some decline in those jobs like a floor
trader, but someone has to program and manage those algorithms.

It's also important to keep in mind that many firms are only replacing
execution traders while directing traders through fundamental analysis, and if
all firms ever go completely algorithmic you'll find firms trying to exploit
these algos in ways unique to humans.

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sgt101
How many 100's of thousands of IT folks make their mortgages in New York,
London, Singapore, etc etc?

35 years ago, the number would have been 10's?

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jklein11
>Nasdaq runs more than 40 different algorithms, using about 35,000 parameters,
to look for market abuse and manipulation in real time.

I laughed when I read this. 40 whole algorithms!

~~~
TheSpiceIsLife
Isn’t the more intense number the _35,000 parameters_?

Why pick on the _40 algorithms_?

~~~
jklein11
I think the reason why I laughed is that I can't understand what 40 algorithms
actually means. It probably takes more than 40 algorithms to accept a request
at this url
[https://news.ycombinator.com/item?id=21730608](https://news.ycombinator.com/item?id=21730608)
and return the response that you are seeing on your screen. That bullet in the
article added no value to me as the reader.

~~~
braindeath
As far as imprecise journalism (let alone blatant inaccuracy goes) this is
pretty inoffensive IMHO. It’s not even that far off. Algorithms can be
composed. When we publish a paper on a complete ML application, the whole
thing is generally referred to as “the algorithm” because it can be documented
as precise set of steps from initial raw inputs to some kind of output. Just
because there are literally thousands of applications of sorting and
searching, matrix multiplies and what have you buried under the process
doesn’t make it unclear what is being referred to.

~~~
adatavizguy
Almost all algorithms are composition of algorithms. Probably a good way to
define a singular algorithm is the point a human has to be the source of its
input. A self driving car is a composition of thousands of algorithms by
definition -- a process that step by step calculates with an input and output
which is every single method in all its code. However, for sake of
conversation in the number of complete autonomous systems consider the car to
be a single algorithm defined by the point a human has to be the originating
input at the interface where the key gets turned to turn it on.

I think this definition will be important in law because it is where we will
define responsibility for actions of autonomous things.

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hogFeast
Does anyone know why de Prado left AQR so quickly? It seems kind of funny: AQR
hates on ML, AQR reconsiders and hires this guy, and pretty much instantly
ditches him...bad look for ML.

Btw, I think some of this is correct. It still amazes me that anyone thinks
the CFA is relevant (it is largely done by Chinese/Indian students who will
never work in finance). But there will always be a place for fundamental
investing (i.e. you should be aware that not everything in life can be
measured quantitatively).

~~~
soniman
Even granting that not everything can be measured quantitatively, how would I
identify these talented non-quantitative investors?

~~~
hogFeast
One important thing to understand about fundamental investing: most fund
managers can't outperform the index the way they manage money, and so the
business model is lever up on beta, hope to catch heat (close fund down and
reopen until you do), take the fees, and then repeat in the next cycle after
it blows up...and that is if the manager is actually trying. Skilled
management doesn't really work as a business (without luck).

So it is actually very rare. I have probably come across less than 10 managers
who are +EV, and the majority don't manage any public money (again, economics
of the business).

But it is straightforward: are they doing actual research (the majority of
fund managers don't)? Are they turning over their portfolio frequently? Do
they say dumb shit (i.e. constantly use buzzwords)? It isn't magic.

~~~
soniman
My point was that a quant manager can at least point to a strategy that's been
backtested. The non-quant manager, who doesn't have a method, can't point to
any test of his method. I agree with you that there are talented non-quant
managers, I just think it would be hard to measure and identify who they are
other than by the eyeball test.

~~~
hogFeast
All backtesting proves is that you have discovered a technique that worked in
the past. Unless you have a time machine, that isn't very useful. The
competitive advantage in quant and non-quant is identical, it is only the
tools that are different.

It isn't hard. As I said, the first thing you have to understand is that 99%
of managers cannot outperform and are not trying to.

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hodder
Robots in finance ARE wiping out some of its highest paying jobs.

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auntienomen
I have some doubts about Lopez de Prado. He gives a lot of interviews, but he
washed out of AQR after less than a year.

~~~
objektif
You are correct to have doubts. Applications of ML in finance particularly
trading has been very unsuccessful so far.

~~~
logicchains
ML in HFT has been super effective, if you don't take ML to just mean deep
learning.

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objektif
Every year around this time Bloomberg, Economist and the like publishes PR
stunt articles to lure highly skilled developers to Wall Street. I can tell
you from my experience that ML is not replacing high paying jobs in trading AT
ALL!!! Not even close.

~~~
BickNowstrom
He is saying something less controversial that was put through the PR media
machine: those without the skills or willingness to work alongside the
machines will lose their jobs.

If you look at who is saying this, and follow the money (not disclosed here,
but a short search away), you'll notice that this is a butcher grading his own
meat. Without blinking he further suggests that the U.S. government hold
tournaments on anonymized data to crowdsource market manipulation detection.

The bias in ML sections are all mealy-mouthed and elitist. Just because you
hold a PhD in a technical field does not mean you understand economics, AI
futurology, public policy, or ethics. It would be career suicide to stray from
the path of the popular safe opinion. So you get language-imperialist terms
like "Latinx" instead of "South Americans" to describe Brazilians, claims that
automation will favor taking jobs from minorities, that the government should
promote women in leadership positions at _private_ companies, and that
especially women of color have no access to study computer engineering.

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mindslight
Yeah, no. A pressure washer can easily shoot a stream of water fifty feet, but
the upright monkey that can stand back the furthest and still hit the urinal
gets the corner office.

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mirekrusin
Isn't that weird that it's easier to replace high paid jobs in finance with ai
before jobs related to flipping burgers?

~~~
hj54hj45eq5
There are several demos on the internet of robotic arms flipping burgers, many
even include machine vision, for roughly $70k per device. I'm ignorant of the
limitations, but it may be relatively soon that they become economically
viable.

Then again, there are few kitchen jobs that solely consist of flipping burger
patties.

~~~
ZhuanXia
>$70k per device

That's pretty steep compared to the price of the labour.

~~~
mschuster91
It's cheap, especially for 24/7 joints such as many McDonalds or Burger King.
Assuming a well built product, the burger flip robot will produce consistent
quality at a workload a human cannot physically cope with, with none of the
downsides that employees have (wages, vacations, sick days, inability to do
the same task repetitive over 8h with no break)... that robot will pay itself
off in two or three years, after then it is pure profit (maintenance aside).

The thing is, I (and many other lefties) would _welcome_ a world in which
robots do all the work while humans are free to do whatever they want - the
problem is that in current capitalism, the burger will cost the same for the
customer while the costs implode (most cost in restaurants is staff!)...
meaning the extra profit goes to the owner class, not the worker class which
has to fight for the few jobs that remain.

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xwdv
Not really robots, more like scripts really.

Simple scripts are already wiping out many high paying developer jobs.

~~~
ipnon
A counterexample as a web developer:

My girlfriend can't get her Squarespace website to work.

~~~
glofish
I am a developer and I could not get the Squarespace website to work!

I could not understand the conceptual underpinning of it all. What goes where
and why do some things appear on the page...

~~~
pbhjpbhj
I think with basic systems you have to give up the notion of controlling what
goes where, give it data and "trust" it to put everything in a reasonable
place. That's not a [frontend] dev approach; but it's a "i want information
showing in a webpage" approach.

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mistymountains
Good.

~~~
zelly
Couldn't have happened to a nicer group of people

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sm4rk0
48 trackers and one paywall be gone
[https://archive.is/TtIwT](https://archive.is/TtIwT)

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gadders
Still not actually robots.

~~~
Datenstrom
Yes, I dislike the use of the term for non-physical entities.

~~~
goatinaboat
The HR “industry” uses the term “robotics” to mean _any_ sort of automation.
Screen-scraping is robotics. Excel macros are robotics.

~~~
logicchains
Once nice thing about calling scripts robots is it makes swearing at a
computer feel slightly more reasonable/statisfying.

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badfrog
Lol at "robots" and "AI". The jobs of most old school traders are being
replaced by regular nerds with fairly simple code.

~~~
chillacy
As soon as AI works we call it an algorithm. AI gets used as a hype word for
something that doesn't work yet.

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sm4rk0
The more human jobs get replaced by robots the closer we get to money-less
world. Sad thing is that lower classes will suffer most. But faster we get
there shorter the suffer.

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blhack
My prediction is that the blockchains are going to eat all of this stuff
actually.

Smart ethereum contracts based on chainlink data are going to be the new
financial instruments. You are already seeing the fertilization of this with
stuff like makerdao.

I know it’s annoyingly to talk about the blockchain all the time, but
unfortunately I think I may have become a true believer. I don’t think human
“financial advisors” are going to be able to outperform these sorts of funds.

Also: deregulation (or difficult to enforce regulation) is going to allow a
LOT of innovation to happen. How long until some 17 year olds create a token
which represents the consumer side of a fund? And then how long until the
funds strategy is codified into a smart contract and runs on its own?

It’s going to be a wild time.

~~~
jordache
ahh yes.. i see blockchain is still the flavor of the month term, to throw out
there, for pretty much any domain.

~~~
blhack
Coinbase is currently valued at almost $10 billion. One of the most successful
startups the site you are posting on has EVER funded.

I don’t think it’s a flavor of the month. Maybe I’m wrong, but neither I nor
apparently the market thinks I am.

~~~
JumpCrisscross
> _Coinbase is currently valued at almost $10 billion_

Coinbase's last round's investors valued the top-of-the-stack preference they
were given at a price per share that, if multiplied across the cap table,
comes to $10bn.

That valuation printed when crypto hype was near its peak. It's reasonable to
conclude it may be stale. Given the preference, enterprise value would fall
faster than the value of those most-recent shares.

Valuation is a poor sole measure of success. It's easily manipulated,
determined by a few people and often stale.

