Visually Compelling TA

Grandmasters play chess by combining experience with intuition, backed up with calculation and study. Computers play chess by brute calculation. Garry Kasparov discusses computer chess in Man vs. Machine the thirteenth chapter of How Life Imitates Chess. The reader is treated to a history of chess-playing machines from the 18th century hoax of the Turk through Kasparov's own series of widely-followed matches with IBM's supercomputer Deep Blue. Man won the first match; Computer won the second match.

Following the Deep Blue series, Kasparov pursued the concept of Advanced Chess as collaboration between human and computer. In Advanced Chess, teams of humans and computers collaborate in games against one another. Advanced Chess has spawned the concept of "freestyle" tournaments where solo humans, solo machines, or mixed teams compete. The surprise in the inaugural freestyle tournament is the winner was not a grandmaster with a stellar machine, but rather a pair of amateurs using three modest computers. This team understood their tools and figured how to best get the most from them. The winners demonstrated a superior process. Process. Process is critical. A team of weak humans plus machines plus a superior process was stronger than both strong solo computers and teams of strong humans plus machines with inferior processes.

It is the human that possesses the ability to conceptualize problems and then task the computer to look deeply into the problem. Computers extend our reach and present us with new ways of solving old problems. Pursuit of robotic trading programs is no doubt as old as any other computing pursuit. Occasionally we gain brief glimpses into the practice such as recent widely-publicized implosions of some "quant" funds. These funds were apparently dominated by solo computer trading and while it whispers the limits of present day solo computer trading, it screams of inferior process.

No matter the tools or the processes, the never-ending challenge for investors is to conceptualize the investing problem and apply their tools to find the best choices. Investing remains an endeavor combining experience with intuition, backed up with calculation and study.

Comments: View Comments |  Sunday August 24, 2008