Gary Gensler, the head of the SEC, has warned that AIs will “run amok” and crash the market.
That’s the least of our worries.
The premise of Gensler’s warning is that there’s only a finite amount of data and developers qualified to run the complex AIs necessary for trading. This could lead to the AIs thinking the same things and doing them at the same time, like selling a particular stock and starting a series of actions leading to an overall market crash.
He’s right, up to a point. Regulators should do their best to ensure that AIs can’t pile onto one another in such a way, as well as require their owners to have enough capital to fill any margin shortfalls that their zealous AIs might create.
But the real risk is that AIs do things exactly as planned.
Markets exist because people possess imperfect information. Outsiders don’t know everything that’s going on inside a company, and company leadership doesn’t always know, either. External circumstances can seem unpredictably varied to everyone. Conclusions can be wrong. Questions can remain unanswered or unasked.
Markets also exist because people have different intentions that are opaque. Build capital over time or make short-term profits. Hedge future costs. Bet on disruptions.
None of these attributes will survive the arrival of super-intelligent AI.
The deltas of imperfect knowledge will get smaller and smaller as AIs can gather and process more data. Opinions on future performance will get less like informed guesstimates and more like foregone conclusions. Prices won’t fluctuate as widely or as often as they do now as similarly knowledgable and smart AIs keep one another in line.
So, I’m not overly worried about robots deciding to sell a stock at the same time. Human beings do it all the time. At least AIs might be expected to do it for better reasons, as well as react to such actions more sensibly.
What’s far more likely is that AIs equipped with perfect knowledge (or it’s corollary, near-perfect big data analyses) will leave us with few divergent views to drive pricing or trades. Markets will become transparent transaction platforms, nothing more.
That would be crash from which they’ll never recover.
[This essay appeared originally at Spiritual Telegraph]