The World Economic Forum Warns That AI May Destabilize the Financial System (technologyreview.com)

Artificial intelligence will reshape the world of finance over the next decade or so by automating investing and other services -- but it could also introduce troubling systematic weaknesses and risks, according to a new report from the World Economic Forum (WEF). From a report: Compiled through interviews with dozens of leading financial experts and industry leaders, the report concludes that artificial intelligence will disrupt the industry by allowing early adopters to outmaneuver competitors. It also suggests that the technology will create more convenient products for consumers, such as sophisticated tools for managing personal finances and investments.

But most notably, the report points to the potential for big financial institutions to build machine-learning-based services that live in the cloud and are accessed by other institutions. "The dynamics of machine learning create a strong incentive to network the back office," says the report's main author, Jesse McWaters, who leads the AI in Financial Services Project at the World Economic Forum. "A more networked world is more vulnerable to cybersecurity risks, and it also creates concentration risks." Further reading: AI to Reshape Finance, Say Executives Who Struggle to Define It.

Comments

Don't they mean...

[Lab Rat Jason]

... that AI already has?

Re:Don't they mean...

[El Cubano]

Yup. 2008 called and wants their headlines back.

You can't automate stock sales

[rsilvergun]

beyond the High Freq Trading because stockbrokers are salesmen. They're not there to help you, they're there to move product. This is also why they fought (successfully) against regulations that required them to act in their clients best interests.

So it's the same as any new tool

[captaindomon]

"the report concludes that artificial intelligence will disrupt the industry by allowing early adopters to outmaneuver competitors" Uh, yeah. Like steam engines or telephones. "The dynamics of machine learning create a strong incentive to network the back office" Umm... like the same thing as using a CRM. Or email. Don't get me wrong - AI terrifies me in a lot of ways. But I'm not worried about these kinds of risks. Seem silly.

Re:So it's the same as any new tool

[lgw]

Charile Stross once wrote about the rise of strong AI from weak AI systems designed to hide finances from the taxman, and the governments AIs that hunted them. I could see the same from an complex AI ecosystem in trading.

Early program trading (the term predates the use of computers for it) was already a complex ecosystem, with programs designed to identify and profit from certain market behaviors, programs designed to fake out and exploit those programs, programs designed to fool those programs, and so on - turtles all the way up, so to speak. And that was before machine learning.

Re:So it's the same as any new tool

[Guybrush_T]

Not mentioned in the article, but it could be an even increased risk of bad things happening very, very quickly (like a total collapse) for a very unknown reason.

Basically, the same problem of Machine Learning, just worse : tuning algorithms requires a lot of input data. We have a lot of input data that lets you tune everything in good or even in bubble cases where you have to make the bubble grow to make money (until it's too late).

Since we don't understand how those algorithms make their decisions, there is no guarantee they will converge to something that mathematically stable and overall good for people.

Also, we might not have much data however on the crashes which happen usually once. Algorithms will learn to handle those situations, only too late or after many huge problems.

That's why finance should be regulated in some cases ; some strategies need to be illegal otherwise bubbles and pyramids will cause major collapses that will hurt people (not the rich ones, more like the poor ones that have nothing to do with finance and are just taking the hit).

One thing that worries me about AI

[rsilvergun]

the the prospect of some of the high level jobs (the kind you get for graduating from Harvard). Like I said elsewhere the salesmen aren't going anywhere, but if you can eliminate those finance guys that could get scary. The last thing we need is a whole bunch recently unemployed guys with advanced degrees in finance mucking about in our economy. Those people aren't going to shrug their shoulders and say "Oh well, guess my degree is worthless now", they're going to go out there and make money any way they can, and they're likely to wreck the economy in the process....

Re:One thing that worries me about AI

[ceoyoyo]

I'm not sure I understand. What do you think an unemployed fund manager is going to do? Their job is flipping coins and convincing people they're brilliant for it. Are you fearing a wave of Harvard educated snake oil salesmen? Ponzi schemes?

wake me up

[avandesande]

Wake me up when somebody demonstrates real AI....

SystemicStupidity

[sdinfoserv]

When the entire economic system depends on it's users not understanding the system, and introducing the ability to understand the system threatens it's complete collapse - it sounds like that "system" is phucked from inception.

Translation

[Opportunist]

Investment bankers noticed that they can be replaced by a very small script and try to fearmonger the world into letting them continue to leech off the labor of people doing actual work.