Saturday, September 01, 2007

When Algorithms Shrug

World has visualized what happens when intellectuals shrug thanks to Ayn Rand, and it is popular in fiction to visualize when computers shrug, say due to some coordinated, distributed attack, or whatever. What we saw the past month in the wall street is the computers and communication infrastructure staying intact, intellectuals and media remaining engaged, but the sophisticated algorithms (that turn data into trading strategies for hedge funds) shrug, and the market tumbled. I am no expert, but I hear that majority of hedge funds have suffered (see their Quants' letters to clients), including the impossibly-dominant Renaissance Technologies of the legendary Jim Simons.


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