Who Guesses Better: Humans or Smart Software

March 28, 2018

MBAs are likely to pay close attention to smart software which makes decisions about which start up or stock to back.

With all the hand wringing about how artificial intelligence is going to put a lot of people out of work and drastically change our future landscape, it’s almost as if commentators are making it a given that humans are inferior. These writers and thinkers don’t seem to have any faith that our brains can do the heavy lifting to. CNBC recently found a niche where maybe we simple men and women can keep up thanks to…research, of course. We learned more in the article, “Doing Your Homework Does Lead to Better Investing returns.”

According to the story:

“…sophisticated hedge-fund managers are simply more skilled at processing swaths of information and data, their advantage may be more in their ability to match private data with public disclosures and SEC filings. ‘We look at the people who do robotic downloading. The people who use it suggests that hedge funds are going out and that they’re getting public information whenever they need.’”

It’s a great angle, for sure. That with endless hours of research, our investments can turn to gold. However, this overlooks the idea that there may be flaws with the data itself. What if you are using biased info or downright bad data?

Perhaps the humans are better at picking winners than smart software. Data are not created equal. Smart software may incur a penalty because of flawed inputs. Bad data can cripple some data analytics outputs.

Net net, as the MBAs say, data have to be reliable. For now, bet on the human when it comes to deciding about investments.

Patrick Roland, March 28, 2018


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