Bobby Fischer died – big news for the chess enthusiast in me. To my surprise, my editor suggested that I think of something to write about this, but with a financial angle. This was also a proper breakingview - the heady rush of stress, nervousness, creativity and excitement when you are on deadline is truly something. This was what I came up with in about 2 hours of thinking, researching and writing.
Flash
The death of Bobby Fischer, a former world chess champion and considered the most talented player of all time, reminds us of a time when man could beat machine. In finance, however, the contest is not over yet.
Considered view
Bobby Fischer gave up chess at the height of his power and never tested himself against modern chess computer programs. Even with his brilliance, he may have had a tough time against chess computers today, which are now so strong that they have beaten the last two world champions, and remorselessly crush top grandmasters.
In finance too, increased computing power have allowed traders to create complex automated trading models, able to act on the smallest of profit opportunities in the markets. Smart quantum physics PhDs found a lucrative surge in demand for their brainpower from quantitative/statistical arbitrage hedge funds.
But in 2007’s summer market volatility, similar computer-driven strategies at quantitative hedge funds generated herding behaviour and lost money en masse. Some bankers jeered, saying that “common sense” would have prevented the problems. Even Jim Simons’ Renaissance Technologies, the envy of most quant funds, did not prove infallible. Its institutional equities fund has faced redemptions of some $4bn in recent months after losing 1% of its value in 2007, Renaissance’s first loss in nearly 20 years.
The match between computers and human talent is not finished in the world of finance. But those not wishing to be embarrassed by a computer in their leisure time may want to switch to go, whose complexity is still bamboozling computers, and their human programmers.
Context
Bobby Fischer, the former world chess champion, died on 18 January.
Filed under: Uncategorized | Tagged: BV, journalism, professional
