technological singularity

The first conscious machines will probably be on Wall Street

We must consider the possibility that intelligence, creativity, and even consciousness are purely functions of the material world, with human beings as a peculiar kind of computer. In a world operating under this assumption, machines can theoretically have directed cognition, decision-making and consciousness. Even today we see supercomputers owned by financial institutions making trading decisions on behalf of the companies that own them. These are specialized machines that do something that produces similar results to cognition, and the fact that they are specialized thinking machines might lead one to believe that this precludes them from being conscious. I think the opposite is true; human beings are not generalized computing organisms. The machines in question, just like humans, are not general purpose beings, but highly selective imitation devices with an innate dedicated language system.

The financial industry is always on the bleeding edge of technological application. Always. Beyond ticker tape, the telecommunications revolution and mere computer algorithms, today’s Wall Street is the first and perhaps only industry putting artificial intelligence toward actual productive ends. Machine trading, which today mostly falls under high-frequency trading, (HFT) accounts for 73% of US equity trading volume, an increase from 25% of equity trading volume only five years prior. HFT machines make dozens or even hundreds of trades within a second, which far outstrips the ability of a human or any group of humans to make such a decision. The Sharpe ratio, which is used in the financial world to indicate reward against risk, is much higher with HFT than with traditional strategies. Vast profits can be made by these trades being made before others, whether it is a few milliseconds before competing traders, or executing trades before others even realize it. The supercomputers executing these strategies look for various signals, such as volume, volatility, changes in global interest rates and tiny economic fluctuations. But beyond quantitative data, news articles, tweet and other qualitative information accessed through the internet is taken into the calculations by use of natural language processing system that convert mined text into meaning for the machine. A recent example of this artificially intelligent news analysis happened when Associated Press had its twitter account hacked, making a tweet on April 23, 2013, falsely asserting that there was an explosion at the White House. The S&P Index lost $136 billion in a matter of four minutes, though it was recovered just as quickly. Wallace Turbeville notes:

Most trading of securities and derivatives is accomplished using supercomputers wired directly into exchanges and other venues. They operate at trading speeds well below milliseconds so no human is involved. The trades are dictated by artificial intelligence software… pattern recognition software that infers motivations and other characteristics of other traders in the markets to pick which ones to exploit. Another element of the system is software that reads data, including Twitter traffic, for key word combinations so that the supercomputers can fly into action within, let’s say, one ten thousandth of a second of the appearance of the words. I am going to go out on a limb, here – I suspect that a tweet that comes from a “verified” Twitter account and includes “Obama”, “White House”, and “bombs” might qualify as a sell-triggering word combination.