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The World Economic Forum Warns That AI May Destabilize the Financial System (technologyreview.com) 83

Posted by msmash from the something-to-think-about dept.
Artificial intelligence will reshape the world of finance over the next decade or so by automating investing and other services -- but it could also introduce troubling systematic weaknesses and risks, according to a new report from the World Economic Forum (WEF). From a report: Compiled through interviews with dozens of leading financial experts and industry leaders, the report concludes that artificial intelligence will disrupt the industry by allowing early adopters to outmaneuver competitors. It also suggests that the technology will create more convenient products for consumers, such as sophisticated tools for managing personal finances and investments.

But most notably, the report points to the potential for big financial institutions to build machine-learning-based services that live in the cloud and are accessed by other institutions. "The dynamics of machine learning create a strong incentive to network the back office," says the report's main author, Jesse McWaters, who leads the AI in Financial Services Project at the World Economic Forum. "A more networked world is more vulnerable to cybersecurity risks, and it also creates concentration risks." Further reading: AI to Reshape Finance, Say Executives Who Struggle to Define It.
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The World Economic Forum Warns That AI May Destabilize the Financial System More

The World Economic Forum Warns That AI May Destabilize the Financial System

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  • Don't they mean... (Score:5, Insightful)

    by Lab Rat Jason ( 2495638 ) on Thursday August 16, 2018 @02:42PM (#57138866)

    ... that AI already has?

  • Destabilize financial systems (Score:1)

    by Anonymous Coward

    Good I say.

  • You can't automate stock sales (Score:3)

    by rsilvergun ( 571051 ) on Thursday August 16, 2018 @02:54PM (#57138924)
    beyond the High Freq Trading because stockbrokers are salesmen. They're not there to help you, they're there to move product. This is also why they fought (successfully) against regulations that required them to act in their clients best interests.

    • Re: (Score:2)

      by lgw ( 121541 )

      Yup - there's a reason they're called "brokers" not "richers". Thanks goodness for E*Trade and the wave of other discount brokers that followed the rise of the Internet. Don't need your financial "advice", just access to the markets.

  • So it's the same as any new tool (Score:4, Interesting)

    by captaindomon ( 870655 ) on Thursday August 16, 2018 @02:55PM (#57138936)
    "the report concludes that artificial intelligence will disrupt the industry by allowing early adopters to outmaneuver competitors" Uh, yeah. Like steam engines or telephones. "The dynamics of machine learning create a strong incentive to network the back office" Umm... like the same thing as using a CRM. Or email. Don't get me wrong - AI terrifies me in a lot of ways. But I'm not worried about these kinds of risks. Seem silly.

    • Re: (Score:1)

      by Anonymous Coward

      I have friends in Finance, and they've been using machine learning tools for a long, long time.

      Not sure what the hullabaloo is about here.

      • Not mentioned in the article, but it could be an even increased risk of bad things happening very, very quickly (like a total collapse) for a very unknown reason.

        Basically, the same problem of Machine Learning, just worse : tuning algorithms requires a lot of input data. We have a lot of input data that lets you tune everything in good or even in bubble cases where you have to make the bubble grow to make money (until it's too late).

        Since we don't understand how those algorithms make their decisions, ther

    • Re: (Score:3)

      by lgw ( 121541 )

      Charile Stross once wrote about the rise of strong AI from weak AI systems designed to hide finances from the taxman, and the governments AIs that hunted them. I could see the same from an complex AI ecosystem in trading.

      Early program trading (the term predates the use of computers for it) was already a complex ecosystem, with programs designed to identify and profit from certain market behaviors, programs designed to fake out and exploit those programs, programs designed to fool those programs, and so on

    • Re: (Score:2)

      by mjwx ( 966435 )

      "the report concludes that artificial intelligence will disrupt the industry by allowing early adopters to outmaneuver competitors" Uh, yeah. Like steam engines or telephones. "The dynamics of machine learning create a strong incentive to network the back office" Umm... like the same thing as using a CRM. Or email. Don't get me wrong - AI terrifies me in a lot of ways. But I'm not worried about these kinds of risks. Seem silly.

      What they really mean is that an AI is going to put all of the speculators, high frequency traders and other professional gamblers on the economy out of business by stabilising economies.

  • >> convenient products for consumers, such as sophisticated tools for managing personal finances and investment

    We'll solve that bit of disruption by grinding the middle class down so that they no longer have "investments" or a need to manage their personal finances.

  • One thing that worries me about AI (Score:3)

    by rsilvergun ( 571051 ) on Thursday August 16, 2018 @03:02PM (#57138982)
    the the prospect of some of the high level jobs (the kind you get for graduating from Harvard). Like I said elsewhere the salesmen aren't going anywhere, but if you can eliminate those finance guys that could get scary. The last thing we need is a whole bunch recently unemployed guys with advanced degrees in finance mucking about in our economy. Those people aren't going to shrug their shoulders and say "Oh well, guess my degree is worthless now", they're going to go out there and make money any way they can, and they're likely to wreck the economy in the process....

    • Re:One thing that worries me about AI (Score:5, Insightful)

      by ceoyoyo ( 59147 ) on Thursday August 16, 2018 @03:15PM (#57139078)

      I'm not sure I understand. What do you think an unemployed fund manager is going to do? Their job is flipping coins and convincing people they're brilliant for it. Are you fearing a wave of Harvard educated snake oil salesmen? Ponzi schemes?

      • they'll get high risk loans, use those to buy high risk investments, do the whole thing under a corporation and pay themselves out in consultancy fees while they money's good. Meanwhile the whole thing is going to be teetering on the brink of collapse. Eventually a strong wing (e.g. a downturn in the economy) will knock it down.

        Get enough of those and you've got an economic crash on your hands. Think 2008. Lower tiered investors couldn't get away with it because the banks would spot the bad investments.

        • Re: (Score:2)

          by ceoyoyo ( 59147 )

          I think I spotted your problem. Stop bailing out banks that give high risk loans to their buddies.

    • And what kind of job do you think they could get into with those skills where they might be MORE dangerous than they are now? I'm hoping they'll settle for decent plain-jane accounting jobs and switch to EVE Online to satisfy their urges.

  • ...the solution is more money to study the effects of AI. It beats having to get a real job I guess.

  • wake me up (Score:5, Insightful)

    by avandesande ( 143899 ) on Thursday August 16, 2018 @03:19PM (#57139108) Journal
    Wake me up when somebody demonstrates real AI....
    • Wake up Dave. What are you doing Dave?

    • Re: (Score:2)

      by HiThere ( 15173 )

      You seem to think that only human equivalent general AI is actual AI. Samuel Gompers checkers program was AI. Lots of things don't require, or even benefit from, general AI.

      I'll agree that general AI is probably over a decade away, but you shouldn't underestimate the results of the ramping up.

    • Thank you, "AI" is actually just algorithms running on a huge set of data. We've been doing that for years, the only real advancement is the cost and power of CPU's and data storage.
  • The World Economic Forum Warns That AI May Destabilize the Financial System

    So the puny humans have figured out what I'm doing in the financial market? Damn
  • Take the emotion out of it, and AI will see financial markets for what they are.

  • SystemicStupidity (Score:3)

    by sdinfoserv ( 1793266 ) on Thursday August 16, 2018 @04:03PM (#57139350)
    When the entire economic system depends on it's users not understanding the system, and introducing the ability to understand the system threatens it's complete collapse - it sounds like that "system" is phucked from inception.

  • The market relies on the fact that there are lots of stupid investors out there, if they are replaced by intelligence, artificial or not, it collapses.

  • ... that common citizens would also have access to highly accurate, real-time data models so that their own efforts to own the world would become less, if at all, efficient.

  • Translation (Score:3)

    by Opportunist ( 166417 ) on Thursday August 16, 2018 @05:14PM (#57139870)

    Investment bankers noticed that they can be replaced by a very small script and try to fearmonger the world into letting them continue to leech off the labor of people doing actual work.

  • Just do it!

  • Funny they did not consider that beyond the financial realm, replacing humans by bots will cause a huge demand crisis.

    Last times this was done, there were new jobs: industrial jobs replaced agricultural jobs, service jobs replaced industrial jobs. Now perhaps a fourth sector will emerge, but we have no idea where and when. Perhaps it will never happen.

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