Skip to main content

Expert vs. the machine

I've been coming across and reading a fair amount of material on the rise of data-driven decision making lately.

In fact, Monday's expert quiz was taken from an FT.com article on the subject, entitled, "How computers routed the experts".

Whether by accident or design, I seem to be stumbling on one piece after another on the subject, as well as some analysis on expert performance.

I thought it might be a good idea to put all of these items into one post, and allow you, the reader, to sort them out. But first, a few words about our latest theme, the expert vs. the machine.

Over at EconLog, Arnold Kling mentions that he is currently reading through Ian Ayres' new book, Supercrunchers.

The book's focus is the rise of statistical decision making, and Kling quotes a relevant passage from an early part of the book to establish this idea's importance.

"We are in a historic moment of horse-versus-locomotive competition, where intuitive and experiential expertise is losing out time and time again to number crunching."

If you happened to read through the beginning of Michael Mauboussin's essay on expert performance (found in Wednesday's post, "Becoming an expert"), then you'll no doubt recognize the parallels between the essay and Ayres' book.

To illustrate their discussions of data-driven analysis, both writers decided to cite the example of ongoing changes in the field of medicine. Due to advances in medical technology and the advent of the "Super Crunching revolution", doctors now find themselves pitting their judgement (or, diagnosis) against the analysis of a machine.

According to the authors, this type of decision making battle will increasingly play out over the coming years, with the traditional experts and prognosticators pitting their judgement against the findings of data-crunching computers. This conflict will be present in any number of areas in our daily lives.

We already see the onset of this theme in the areas of investing and market speculation. As we noted back in our May 25th "Features", the rise of scientific and quantitative investing is made apparent by the success of James Simons' Renaissance Technologies fund, and the increased adoption of computer-driven trading and artificial intelligence programming.

But will computers be able to successfully mimic or replace human judgement and decision making?

As The Financial Philosoper recently noted, investors seem to forget that computers offer help with strategies and organizing data, but they cannot replace our judgement or learn from accumulated wisdom.

At least not yet...

Popular posts from this blog

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL!  Please bookmark our new web address at Financetrendsletter.com Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner .   Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead! As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter . You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter).  Stay up to date with our real-time insights and updates on Twitter .

Moneyball: How the Red Sox Win Championships

Welcome, readers . T o get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter .   The Boston Red Sox won their fourth World Series title of t he 21st century this we ek. Having won their first Se ries in 86 years back in 200 4, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it? Quick background: in late 2002, team own er and hedge fund manager, John W. Henry (with his partners ) bought the Boston Red Sox and its historic Fenway Park for a reported sum of $ 695 million. Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship. This brings us to one of my fav orite scenes from the 2011 film , Moneyball , in which John W. Henry (played by Ar liss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pi

William O'Neil Interview: How to Buy Winning Stocks

Investor's B usiness Daily founder and veteran stock trader, William O'Neil share d his trading methods and insights on buying winning stocks in an in-depth IBD radio interview. Here are some highlights from William O'Neil's interview with IBD: William O'Neil's interest in the stock market began when he started working as a young adult.  "I say many times that I didn't get that much out of college. I didn't have much interest in the stock market until I graduated from college. When I got married, I had to look out into the future and get more serious. The investment world had some appeal and that's when I started studying it. I became a stock broker after I got out of the Air Force."    He moved to Los Angeles and started work in a stock broker's office with twenty other guys. When their phone leads from ads didn't pan out, O'Neil would take the leads and drive down to visit the prospective customers in person.