When I got to San Francisco, Jamie and I started playing chess on his iPad. I haven’t played chess since high school and it brought back some good times and memories, but it was a great game to pass the time while waiting for our beds and furniture to arrive. Playing chess on the iPad is easy, convenient, and reconstructs the same simple design of a tournament board. In addition to these traditional requirements, it also outlines your potential moves when you select a piece and does not have a undo button for those moments when you don’t have a physical chess piece to keep your hand on once its moved. If you drag a piece to a spot and attempt to hold your finger over it, the move is completely whether you meant to move that pawn to c5 or not. I still haven’t played chess on an actual board in years and I’m sure my level of play would be significantly lower than starting again on the iPad for any number of reasons.
So there are some fundamental differences between an iPad and a chess board, but that is rather obvious from the start…
A few times last week, I played the computer in chess on its most difficulty level. It was indeed a challenge and I did lose, but the game lasted only about ten minutes while some of the games I’ve played recently against human competitors lasted over forty minutes. When I played the computer, I spent less time considering alternative moves and securing defenses and instead, I nearly had the computer checkmated when suddenly, I found myself in check. The computer makes moves without any time to pass for me to think about a next step. This is discouraging to me, since I strive to have the qualities of a chess computer. Just kidding, but I felt the need to make moves quickly, a tactic that can work well against a human, but alas the computer doesn’t even need to see me.
In chess, a game where one player wins by forcing the other to make a bad decision, computers have the qualities of an unbeatable person with the capacity to calculate hundreds of moves per second, but do computers crunching numbers for investing algorithms have the same impenetrable qualities? When a grandmaster sits down to play deep blue, the IBM chess machine, they sit and think about each move carefully since they hope to have a chance at an error-less game. When an intermediate chess player sits down to play deep blue, they are less likely to focus on having a precise game. A lot of financial trading is conducted by computers. Those same computers are created by humans for the purpose of never losing money and they do a great job. They don’t lose money.
Unfortunately, the people using them lose money still somehow. People understand the end game and purpose of having a chess super-opponent with a circuit board for brains: its really neato. People fail to understand that to attempt to replicate any part of what that computer does, they must be among the best chess players ever. Its pretty clear that amateur and intermediate traders exist on Wall Street. They make hasty choices and move quickly to compete with high powered machines that earn their salary in a matter of minutes, yet still think they have a shot at coming out on top someday. Its as if I were to be playing deep blue in chess and captured a pawn, but got destroyed for the rest of the game.
When humans meet computers, strange things happen. It seems the qualities of approaching something that is unbeatable, unless you take the skill down a notch, is so debilitating that you act without thinking. Amateur and intermediate traders are essentially playing against deep blue all day and their managers expect them to actually win. The most depressing things though: Deep blue has been beaten. I’m sure no human has ever out-earned even simple trading algorithms.
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