So, What's Your Algorithm?

In trading circles everyone knows about algorithms.  It's how 70% or so of the trading also know as HFT (High Frequency Trading gets done.  Little black boxes collecting, churning, and spitting out information to take advantage of the smallest trading opportunity if you will.  But did you know that those algorithms could be used in our daily lives in or to make better decisions?


Daniel Kahneman world renowned psychologist and Nobel laureate in his new book "Thinking, Fast, and Slow writes ""we are often confident even when we are wrong,"  In this WSJ piece, So, What's Your Algorithm it looks specifically at how algorithms can change your life.


I took away the following points;

• These systems can now chew through billions of bits of data, analyze them via self-learning algorithms, and package the insights for immediate use. Neither we nor the computers are perfect, but in tandem, we might neutralize our biased, intuitive failings when we price a car, prescribe a medicine, or deploy a sales force. This is playing "Moneyball" at life.
• You probably hate the idea that human judgment can be improved or even replaced by machines, but you probably hate hurricanes and earthquakes too. The rise of machines is just as inevitable and just as indifferent to your hatred.
• "There is a whole class of things that couldn't be done five years ago," says Opera CEO Arnab Gupta, who just landed an $84 million venture investment from investors including Accel-KKR and Silver Lake Sumeru. His company is now valued at around $500 million. "A few years ago it might take a month to run a project involving 30 billion separate calculations. Today it can be done in two to three hours."
• A warning awaits, of course. As Mr. Rajaram explains, analytics will eventually become the norm, which will push adaptation and business cycles even faster than they are today. "As computers become better and better, our lives are becoming more and more complex. They create new problems as much as they solve old ones."

I actually read the book Moneyball by Michael Lewis and just watched the movie last evening.  Imagine being able to run your life the same way Billy Beane picks ball players?