Hedge fund turns to AI to navigate through the maze

By John E Dunn, Sophos

January 2, 2016

Hedge funds have long boasted the use of machine algorithms to remove base human emotion from complex investment decisions.

Now it appears the world’s largest hedge fund, Bridgewater Associates, could be about to take this idea to the next level – by using machines to run large parts of the company too.

It sounds like a risky experiment from the bleeding edge of AI, but according to a Wall Street Journal story based on insider testimony, the company is already well on its way to turning on what it calls PriOS: Principles Operating System.

Envisioned by the man who ordered its creation – Bridgewater’s famous founder Ray Dalio – PriOS will go far beyond the old-world “operating system” moniker.

The software will use algorithms developed from Dalio’s long career in finance – summed up in his famous 123-page Principles document – to help employees in decision-making, including ranking opinions where a disagreement about strategy arises among managers.

Within five years, Dalio wants PriOS to be used to carry out up to three quarters of day-to-day management decisions, including decisions normally seen as nuanced – hirings and firings, for example.

The WSJ says:

The role of many remaining humans at the firm wouldn’t be to make individual choices but to design the criteria by which the system makes decisions, intervening when something isn’t working.

Sceptics of hedge funds and their obsession with technology will dismiss the whole scheme as a glorified expert system of the sort that have been used for years.

Others will see Dalio’s mechanistic idea as a cold vision of hell and yet another example of how AI threatens to de-humanise business as fast as it steals jobs.

And yet there are strands of a deeper backstory in this tale that guarantees Dalio, Bridgewater and PriOS an audience.

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