Artificial Intelligence, Chess, and the Stock Market
In 1997 chess grandmaster Gary Kasparov met the Singularity. And the Singularity won.
In 1985 Kasparov easily beat a chess-playing computer, even though he resorted to a trick to out-Kasparov the machine’s Kasparov program. Eleven years later, though, the chess legend struggled with Deep Blue, a computer with even more powerful processing power. But even Kasparov couldn’t compete with Deep Blue once its development team doubled the processing power a few years later.
Kasparov was beat, but he drew new lessons from the run-in that he details in New York Review of Books. These lessons might help you become a smarter–and less anxious–trader.
According to Kasparov, the exponential gain in technology didn’t ruin the game; it actually had some surprising aftershocks.
First, the game became more global. With access to computer programs that could train students available anywhere and everywhere, students far from the chess epicenter of Russia began to crop up.
“With the introduction of super-powerful software it became possible for a youngster to have a top- level opponent at home instead of need ing a professional trainer from an early age. Countries with little by way of chess tradition and few available coaches can now produce prodigies.”
Another interesting side effect: players became more disciplined. It became far less about style and more about pragmatism–plain old winning and losing
“It is entirely free of prejudice and doctrine and this has contributed to the development of players who are almost as free of dogma as the machines with which they train. Increasingly, a move isn’t good or bad because it looks that way or because it hasn’t been done that way before. It’s simply good if it works and bad if it doesn’t. Although we still require a strong measure of intuition and logic to play well, humans today are starting to play more like computers.”
This brings me to speculation about the future of investing. AI and other forms of advanced technology are already making plays in the market–some speculate that AI plays part in 30 percent of the trades today. Others say that figure is too low.
Traders, like the chess masters who saw the great Kasparov go down in defeat to a computer, may hypothesize similar doom and gloom endings for the stock market. It will be the realm of machines, not man.
But, like the “unintended consequences” of Deep Blue, trading could evolve into unexpected territories. Will trading become more disciplined? Will humans and machines interface to make an even more efficient market? Will Automated Trading, once the realm of hedge funds and big banks become more democratized and give everyone the ability to trade like a master?
It’s hard to tell. But AI doesn’t mean checkmate for investing just yet.