I, for one, do not welcome our new robot overlords. In fact, I’m not even remotely a fan of robots doing things that have historically been done just fine by humans. This is a lesson that Knight Capital learned this week as it lost $440,000,000 when its automated trading software went nuts.
At a rate of $10 million per minute, Knight Capital burned through almost its entire 2011 profits when its computers decided to buy and sell stocks in the millions. This leaves analysts wondering whether or not Knight Capital will still be a player in the trading game for very long.
This isn’t the first time a software glitch has caused a stock market meltdown. In 2010, a computer glitch caused the stock market to plunge nearly 1,000 points within an hour as automated systems from a number of different companies reacted off of one-another by selling massive amounts of stocks in what was perceived as an inevitable crash. That incident was quickly corrected and reversed, but it could have resulted in a lot of people losing their life savings, or worse.
The problem is that human intuition doesn’t translate to 1s and 0s. It never has, and it may be decades before technology will even come close. It’s easy to be amazed by voice recognition programs that feign intelligence such as Siri and Google Now, but actual artificial intelligence is still fundamentally an if this; then that set of algorithms.
Intuition is our biggest advantage over computers. If these devices could think outside of their programming, there would be no need for inventors, artists, police, or even pilots. While it might be fun to think about a world where robots can do all of these things for us, I’m much happier in one where I can write a better article than any computer can.
What about you? What do you think about robotic stock traders? Should you trust your money to these machines?
Image: The Noun Project