We are often asked about the origins of our firm’s name. What connection could a philosopher of antiquity have with artificial intelligence decision-based trading?
A Philosophical Digression
How does one describe philosophy? A series of tenets or beliefs? A value system? A method of thought? A grand debate? Perhaps all of the above?
A definition of philosophy can of itself be a thing of contention. One thing is clear: any definition is contextual. It encompasses the subjective interpretation and the objective interpretation; both form some portion of the context ranging from 0 – 100% depending on the perspective contained in the context. In 2020 when looking at the philosophy of antiquity, we carry with us (for better or worse) the baggage of the intervening two millennia of thought. This bag contains for example, cultural bias, misinterpretation, and victor-written history. All of which forms a context, a context of now.
Grand Old Antiquity
Plotinus (204/5–270 CE) is often described as the father of Neoplatonism, a term that for him would have been meaningless as it would have had no context. In viewing things from a context of now, people seek historical aids to assist or enhance their ability to understand the world around them. To this end, we find the timeless propositions contained in Plotinian philosophy useful. Doing this of course is an interpretation, there is no blueprint and there are no specific yes/no answers. This is the kind of scenario that all traders are familiar with. Trader’s decisions are made on interpretation not concrete certainty, since there is no market when there is concrete certainty and full agreement. Philosophy–like trading– is an argument. By applying philosophy, you take your ideas off their comfortable armchair of ponderings and put your money where your mouth is.
Cutting Edge Contemporary
Our firm is at the leading edge of the development of AI decision-based trading. We are part of the sea-change that AI is creating across so many sectors of the economy, in our case in financial services. It is vital, however, not to get carried away on this sea, awed by technology’s sparkle. We must remember that AI is a tool and like any other tool, with improper, unskilled, or misguided application it becomes useless. This is an all-the-more important consideration when you are involved in the development and building of the tool. A tool will be judged by a single criterion to determine whether it is fit for purpose: Does it work?
In the field of AI-based asset management, the answer to “Does it work?” is results. In reality, though, for a sophisticated investor this is just the top layer of answering that question. With a new technology, results alone are not enough. The investor needs to assess for instance whether there is repeatability in an AI manager’s results, they need to see the investment process and perceive how strategy drift is being avoided.
This brings us back to Plotinus. The key to providing an investor with the necessary confidence to invest with an AI manager is philosophy. An investment philosophy which guides and regulates the trading decisions, particularly when these decisions themselves are the fruit of artificial intelligence. It is essential that an AI manager can deliver to their clients a core set of beliefs that subsequent investment decisions can be checked against, to provide the explanatory framework, the context, for their investment process. There must also be a philosophy that governs the technological development that can explain to investors how the technology has got to where it is today, from its conceptual origins, in order to show the depth of thinking behind it. Illustrating a unity of thought as our namesake did nearly two centuries ago. ■
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