Again, chatbots are not the be-all and end-all of AI development. Far from it. Machine-learning/AI programs that can tease-out connections humans don't see have been around for over a decade. Even the people who train the machines don't know exactly what they are doing and the effect can disappear at any moment.
On top of that nebulousness the edge you gain is small which means that if you have found a positive expectation game you also need a bankroll large enough to weather a string of losses longer than you might have imagined possible using a puny human frame of reference.
But if you are sure you have a positive expectation of winning and a bankroll that can handle the drawdowns, your heirs and begats-unto-the-nth-generation should end up owning all the wealth in the solar system, if not the universe.*
From Bloomberg Opinion, December 18:
Bots may invent better ways to beat the market, but they won’t necessarily benefit investors.
Meet the new stock pickers. They will remind you of the old stock pickers.
One thing to watch for next year is AI-driven investment products. There’s a lot of buzz around Wall Street about artificial intelligence taking over from real-life fund managers, presumably because AI will be better at picking stocks.
It can’t do worse. Twice a year, S&P Global Inc.’s Spiva scorecard shows that most active managers unfailingly lose to a broad stock market index over most time periods. S&P’s report doesn’t extend to hedge funds, but they haven’t fared any better.
Enter AI with hopes of doing what mortal managers can’t. Don’t hold your breath. For starters, in aggregate, stock pickers end up with the market return minus fees, as the late Vanguard Group Inc. founder John Bogle often reminded investors. That applies to humans as well as bots. So, as a group, the bots are destined to lose.
Sure, some will beat the market, but many won’t win by a big enough margin to overcome their fees. The experience of real-life stock pickers is instructive. I counted more than 7,000 actively managed stock mutual funds for which Morningstar calculated risk-adjusted returns relative to the market over the past 10 years. Roughly 45% of them won before fees, but only 27% won after accounting for cost.
Another challenge for AI is competition from other bots. The truth is that human stock pickers are already obsolete. There are numerous low-cost exchange-traded funds that replicate traditional stock-picking strategies, such as value, quality and momentum, often following a rules-based, quantitative approach mostly run by computers. Like human managers, they don’t always beat the market, but the low-cost ones have a much better shot....
...One of the spookiest features of black box artificial intelligence is that, when it is working correctly, the AI is making connections and casting probabilities that are difficult-to-impossible for human beings to intuit.You have to be shading the odds in your favor and be a world-class communicator to successfully solicit outside money with the 'ol gizzlefab, blythfornik pitch. But I have seen it happen.
Try explaining that to your outside investors.
You start to sound, to their ears anyway, like a loony who is saying "Etaoin shrdlu, give me your money, gizzlefab, blythfornik, trust me."...
