There’s weakness of data, any data, all data. It’s generated by what has happened. It is historical. And trying to predict the future from the past is tricky, to say the least. Data based predictive decisions work best when the time window they operate in is at its smallest. Nano seconds in trading, to get the edge over the next firm only able to respond in micro seconds.
But this ever tightening loop of more data less time is on a road to strangling itself, and beyond flash trading, has modest applications. One thing is certain in the real World, including market behaviour. Change. Another thing is certain. Unexpected change. Another thing is certain. Human beings respond in the real world not on data, but on feelings. Evolution has favoured those who can feel what might be happening without requiring data sets on the probability of grizzly bears being hungry at this time of year.
So, if the ultimate AIM (Artificial Intelligence Motivation) is to predict futures, we need to look at what information, NOT data, such a computer might like to eat. Actually, it’s information plus data that will complete the picture.
Understanding what a sector is thinking, about itself and its future, is a considerable improvement on data alone, which only tells us what it has done.
Feelings are the precursor to action. Markets collapse not because of data reaching a certain level, but because the feeling of confidence flips to one of fear. On a macro level, everything happens because of how people are feeling. How they feel affects how they think, and how they think effects how they act.
So why on earth is so much emphasis placed on trying to predict the future behaviour based on the actions of previous behaviour? It misses the aim entirely.
Facebook will already have a particularly unique understanding of humanity. It can read our feelings, or at least the feelings of our digital personas, which are a (distorted) reflection of our real World selves. Artificial Emotional Intelligence. The missing piece. Understanding what we feel. By understanding what we feel, the machine will understand our most probable futures. It may also, in its own way, come to understand humanity. Artificial humanity at least.
By Bird Lovegod, Editor of The Fintech Times
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