As Goldman Embraces Automation, Even the Masters of the Universe Are Threatened

Description:   At its height back in 2000, the U.S. cash equities trading desk at Goldman Sachs’s New York headquarters employed 600 traders, buying and selling stock on the orders of the investment bank’s large clients. Today there are just two equity traders left.

Source: MIT Technology Review

Date: Feb 7, 2017

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The experience of its New York traders is just one early example of a transformation of Goldman Sachs, and increasingly other Wall Street firms, that began with the rise in computerized trading, but has accelerated over the past five years, moving into more fields of finance that humans once dominated. Chavez, who will become chief financial officer in April, says areas of trading like currencies and even parts of business lines like investment banking are moving in the same automated direction that equities have already traveled.

Today, nearly 45 percent of trading is done electronically, according to Coalition, a U.K. firm that tracks the industry. In addition to back-office clerical workers, on Wall Street machines are replacing a lot of highly paid people, too.   READ REST OF STORY

 Questions for discussion:

1. Do you feel that that Computerized trading and AI will make the financial industry almost a employee less industry ?  Why or Why not?

2.  Do you feel that Government industries are susceptible to this sort of computerization and AI to reduces Public service employees in Canada by a significant amount?   explain

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65 thoughts on “As Goldman Embraces Automation, Even the Masters of the Universe Are Threatened

  1. Jordan D.

    I believe that there is potential for computerized trading and AI to make the financial industry employee less because there is no room for human error and some individuals and businesses rely on technology more than themselves. I think one-day humans may create a technology that is far more intelligent than humans. If programs are able to trade stocks more effectively than humans why would companies like Goldman Sachs bother to hire traders? Companies main objective is to make a profit and they won’t hire humans if the can do it more efficiently with technology. Machines are less costly than hiring professional traders and they are constantly getting faster and smarter.

    I think that government industries are especially susceptible to computerization to reduce public services because they are less costly and they do not require salaries or days off. Public transportation could be the first service to be automated in the future because of self-driving trains and buses. This may eliminate jobs in one sector but can create potential growth in another, the government will need to hire more computer engineers to improve AI and automation.

    Reply
  2. jordan kwiecinski

    Computerized trading and AI actually are producing more jobs into the industry. Specifically, there is now more of a need for algorithm traders who can actually build these models as well as fine tune them. Even though there is the threat of other traders being laid off there is still a real need for a human component to do instinctive trade’s that an algorithm can’t pick up. So in reality, the computerized trading is a tool that now traders are able to use. This will also help trading firms to reduce costs of hiring these traders, as well help traders reduce the stress they have from trying to make their bonus which is based on how much profit they generate. Overall, I think the addition of AI and computerized trading will benefit the financial sector exponentially and increase employment opportunities in the industry.

    Reply
  3. Luke B

    I have mixed feelings about the article and the question at hand. I don’t know enough about the financial industry and the inner workings of it to really give a good opinion. I’m pretty much clueless about the role AI and automation plays in trading. I’ts clear that the development of these software’s and technology’s are eliminating jobs, a lot of jobs.. however, I don’t think it will make it an employee less industry. For example, they talk about AI taking over investment banking tasks. Which Im sure many of them it will be able to. However, those essential elements to investment banking such salesmanship and building relationships aren’t going to be replaced by AI or automation in my opinion. How is automation and AI going to handle the merger and acquisition of two corporate companies? You still need actual people to facilitate these types of business decisions.

    Reply
  4. Katie Bergeson

    I do think that computerized trading and AI will make the financial industry a computer dominated industry, because computers can process information, react to that information, and act on those reactions, way faster than is humanly possible. This greatly reduces the need for human capital, while reducing the risk of errors or fraudulent activity. Using an AI for trading can produce much more financially beneficial results than a human who will always have a natural bias towards what they “want” to make them money, instead of what can accurately be predicted by a computer.
    I do think that government industries are susceptible to computerization and AI, and it will reduce the amount of public service employees in Canada. For example- the postal service. Lately I’ve had some issues with Canada post. I do not believe for any reason that a package has to sit in Calgary for 2 days before coming to lethbridge, and then another full 24 hours in lethbridge before attempted delivery. I think it would be way more efficient to use AI technologies or drones in order to stop wasting time. Another sector that could benefit from AI is public transportation. With self-driven cars, self driven busses or trains could be amazingly beneficial. Also, when it comes to making difficult government decisions, I think having a computer program that could lay out all the options and outcomes would be extremely helpful, instead of humans trying to riffle through (for example) the complex trade policies of 22 different countries.

    Reply
  5. Leonorah Chikukwa

    I do believe that computerized trading will make the financial industry almost a employee less industry. Technology keeps advancing, artificial intelligence is going to become more than anyone ever imagined thus resulting in this industry employee less. They may be individuals there to monitor whether the systems are functioning properly or not but actual traders will not be existent.
    Governments may be suspect about this sort of computerization reducing public service employees,however computerizing the trading industry will benefit companies in the long and bring income into the country which may be something governments need to take into consideration.

    Reply
  6. Jessica L

    This article states in the beginning the effects of AI in the employee sector of the financial industry; 600 trader down to two at Goldman Sachs. I think that it’s very realistic to assume that this will turn into an industry that will have a few human employees. It’s interesting to me though that you would always need to have at least one or two people to monitor the systems and be sure everything is running smoothly. That person, or those people, would need to be experts in their field in order to catch any errors conducted by the AI. In order to be experts in their field however, experience could play a large role. These people will not be able to gather the same experience that they would have earlier because entry-level trader jobs will be filled only by computers. These one or two people will become harder to find and more expensive to keep. Overtime I think that the human element could be lost, even if there are still human employees because those employees will now be using AI as their trainers and their ways of gathering information and learning, rather than the experts that can before them and the element of intuition or physical cues that traders would have had to use in the early 2000’s.

    Reply
  7. Michael Isfeld

    I do believe that computerized trade and AI will make the financial industry almost an employee less industry. While I do believe, there will always be a need for some employees to be present within the industry, the computing power of computerized trade and AI far and away out due most if not all the employees in the financial industry. They more efficiently analyze trends than humans do; however, there is no definitive future and there is no magical crystal ball that AI uses to trade, the fact that overall, AI and computerized trade come out on top as far as efficiency is concerned says a lot. From my experience with the financial industry, most consumers want to be in and out as fast as possible. So while some people like the human interaction, from my experience I would say that in the financial industry it is less so, making it more likely that people will be okay with the switch from humans to AI.

    I also believe that government industries are susceptible to the same technology and it will eventually reduce the public service employees in Canada by a significant amount. The first place that comes to mind is Service Canada. When I went to get my SIN card number I had a 3 hour wait. I think most people would agree that if the switch to AI and other computerized trade would cut down the wait hours it would be worth it. Also the government could save some money by making their industries more efficient by introducing AI.

    Reply
  8. Layla Lahiji

    The article has shown us the toll technology has already taken on the financial industry. Six hundred traders at the New York office alone, lost their positions. Only two of the six hundred employees remained. Two hundred computer engineers replaced them. It’s good news for those two hundred computer engineers, but over all, four hundred jobs were lost. Not only were the front-line workers losing their jobs, but those with higher paying salaries were being let go as well. This came as a surprise to me. In my mind, those with higher positions were always more secure in their position. That doesn’t seem to be the case anymore. What does that mean for us studying management? Does that mean the positions we’re shooting for are not going to be there when we graduate? Or maybe those jobs will disappear a couple years after we find a position. In any case, with so many jobs already lost, it will only be a matter of time until the two hundred computer engineers will not be needed anymore. Technology will eventually reach a point where it can do the work better than the engineers themselves. If that’s the case, it will not only affect the millions of people in the financial industry, but their families as well. It will also be an issue for students. Eliminating an entire industry will force everyone looking to get into the financial industry, to look for a different career path. This will cause for greater competition within other industries, risking our jobs as well.

    Reply
  9. Clark

    1. Do you feel that that Computerized trading and AI will make the financial industry almost a employee less industry ? Why or Why not?
    Yes, I believe that computerized trading and AI will make the financial industry an employee less company. The utilization of an AI are much more efficient and you don’t have to deal with employee’s that might possible have external factors that will much likely affect their work. In the article it states the following,” Goldman Sachs’s New York headquarters employed 600 traders, buying and selling stock on the orders of the investment bank’s large clients. Today there are just two equity traders left.”. This statement already proves how fast the growth of the use of AI’s are and how incapable they are in taking the jobs of many employees. These employee’s are much more expensive in terms of wages, although I am sure that there has to be some money going into the utilization of this AI but it will be far less than paying salaries.
    2. Do you feel that Government industries are susceptible to this sort of computerization and AI to reduces Public service employees in Canada by a significant amount? explain
    No, I don’t think that Government industries would be susceptible to this type of computerization because I believe that there are some things that a computer or AI that should not be able to control or manipulate. I think the human element in making government decisions are very important.

    Reply
  10. Amanda Brown

    I do feel that that Computerized trading and AI will make the financial industry almost a employee less industry. In the article it first states that “Goldman Sachs’s New York headquarters employed 600 traders, buying and selling stock on the orders of the investment bank’s large clients. Today there are just two equity traders left.” This is really representative of just how fast AI is taking over some business sectors. If the company doesn’t need to employ 600 traders its not going to because it more expensive then having an AI. Each of the 600 employees requires a wage, vacation time and benefits where as the AI may need maintenance but overall the cheaper and more efficient option is going to be the AI.
    I believe to a degree that Government industries are susceptible to this sort of computerization and AI to reduce Public service employees in Canada, but not to the extent of what happened with Goldman Sachs. I think the government has a very important job to do and that while some tasks may be fitting for an AI within the government, the majorities are not. I don’t think an AI system that we are currently capable of making is able to make the complex decisions the government is forced to make every day. I feel like there’s a large human element to things such as policy making and running a government that works in the grey areas a lot and when I think of an AI I think of one which knows how to work in the black and white, or right and wrong but not on a spectrum.

    Reply
  11. mackenzie

    I think that computerized trading and Al will make the financial industry almost an employee less industry. I think this for a number of reasons. First, computers are must faster and adaptable to training.Second, computers made fewer mistakes than a human would and if you were to compare the salary of a human and the salary of a “computer” the costs are far more less for a computer than a human. Although this would be a smart idea it means that employees will soon become jobless. This will be a problem because with less employeed workers it means that the overall consumption by consumers is going to decrease. As technology of computerized jobs keeps evolving, soon there are going to be many people jobless.

    Reply
  12. Sandy Derksen

    After reading this article I do believe that computerized trading and AI will make the financial industry almost an employee less industry. As mentioned in the article, New York headquarters initially employed over 600 traders and now there are only two left. This is a consequence of automation being introduced into the trading industry. Other sectors of the industry are also seeing an increase in automation taking over areas of work. Wall Street machines are replacing a lot of back-office workers, as well as highly paid employees. This reduces the amount of money paid out to employees and allows for an increase in benefits and salary for front end employees. It is stated in the article that Goldman Sach’s employees are made up of at least 33% computer engineers. This leads me to believe that there will continue to be a rise of automated machines taking over jobs in the financial industry which could potentially lead to an almost employee less industry. Financial institutions are at an advantage when it comes to employing automated machines rather than humans to perform tasks because of the elimination of salary needed to be paid out. For instance, the article mentions that investment bankers make on average $700,000 a year. By eliminating the need for investment bankers in a firm, the business receives major cost savings.

    Reply
  13. Joshua Lam

    I would agree that financial technology will take over a lot of jobs (traders etc), but it will allow better investments and allow companies make better decisions, turn more profits, and potentially allowing expansion, for more jobs in return. I think it is beneficial for everyone, similar to a trickle down.

    Reply

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