6th March 2025
In the Terminator films, the AI (artificial intelligence) known as Skynet reduces human civilisation to rubble by seizing control of nuclear weapons and deploying armies of killer robots. Back in the real world, however, the Financial Stability Board are more worried about a banking version of Skynet AI destroying the world (or at least our financial systems) by aggressively buying derivatives or over investing in the Chinese property market.
Such a fear, while not as cinematically exciting, is far from unfounded. AI research (and AI here means complex, self-teaching algorithms rather than true artificial intelligence) is expanding through the financial sector in leaps and bounds. A huge number of workers are likely to find their roles replaced by robots: and these will be white-collar workers, as machines begin to undertake complex tasks such as assessing the quality of credit, drawing up legal contracts, and even interacting with clients. The benefits, as the FSB acknowledges, are considerable. Companies that fail to take advantage of new initiatives are liable to find themselves outpaced rapidly by those that do.
However, algorithms can do unexpected things. A famous example is the price war that broke out over an out-of-print book about flies on Amazon. Two online sellers had both relied on algorithms to calculate the price for their copy of the book. However, the two competing pieces of code reacted to each other as well, raising the prices of the book incrementally in a tit-for-tat price war. The book was eventually being offered at a less-than-reasonable $23m before someone noticed and corrected it. You can read the full story here. http://www.michaeleisen.org/blog/?p=358
It’s an amusing tale, but imagine if you were a major retailer and the same thing happened to your entire stock. How long would it take for someone to a) recognise this as an issue and b) resolve it? The issue is even more of a concern in the financial sector, with trades between machines now being carried out in microseconds. The reduction in jobs is also likely to be a political headache. While currently politicians are railing against jobs being sent ‘overseas’, how long will it be before populists start campaigning against jobs being sent into servers?
However, that’s not the whole picture. While AI suggests, on the one hand, a huge reduction in the number of traditional white collar jobs, it does suggest that there will be an increased need for ‘code wranglers’: those who understand both the complex science of algorithm creation and the ins and outs of the industry in which it is being used.
These people will also need to be able to work in a pattern that spans 24 hours to ensure there is no redundancy (think three 8-hour shifts based in three countries with suitable time zones and the required infrastructure). An expensive investment, but necessary if major companies truly want to take advantage of the benefits of AI while providing adequate protection against the risks.
If you’d like to investigate the benefits of AI and recruit the right staff to guide your growth (while protecting against unexpected consequences) then contact Clifford Associates today.