The Catch 22 of AI Trading Bots

Catch 22 is the terminology describing a problem for which the only solution is impossible because of circumstances inherent to the problem. Its origin is Joseph Heller’s book of the same name, first published in 1961. A literary masterpiece that’s considered to be the greatest satirical work ever produced, in any language or culture.

Fact Imitating Fiction

You’ll undoubtedly have experienced Catch 22 at some point in your life; the most prevalent variant being ‘I can’t get a job because I have no experience, but how can I gain experience if I don’t have a job?’.

Today, 63 years after the phrase was first coined, AI trading bots find themselves in a Catch 22 situation. Whatever the anticipated yield of an AI Trading Bots proposed investments, or whichever the  risk category, nobody should entrust their money to it until it has proven itself, a process that’ll take years. But how can it prove itself if nobody trusts it?

This probably reads like some clever marketing rhetoric from a firm employing hundreds of human investment advisors. But there is a measure of sage advice in it, in terms of how your money should be managed.

Rudimentary AI has been deployed for about forty years by investment analysts and advisors. But Data collection and basic intuitive protocols were the only possible benefits from the tech at the time. With data processing capability now immeasurably bigger in speed and quantity, however, it was inevitable that Generative AI would soon offer itself as the pre-eminent investment expert.

Rudimentary or generative, AI still needs the same base from which to initiate any pattern of logic. The human brain. But the human brain cannot, by definition, cope with the unpredictable. So this levels the playing field for investment, as far as which is the surer bet: an AI trading bot or a human advisor.  

Remembering 9/11

No human financial advisor (unless he or she was was working with the FBI, CIA, MI6, KGB, Mossad etc.) could ever have predicted 9/11. On this day, $1.7 trillion was wiped off the value of U.S. stock markets. In today’s dollars that’s nearly $3 trillion. If you’d invested in air transportation or the insurance market your stocks would have dropped faster than the twin towers.

If humans have no answer to unpredictability, then Generative AI certainly doesn’t. Anyone invested in Palladium, Neon or Platinum for example, would have been feeling fairly smug right up until the 24th February 2022. On that day, their investment would have been crushed under the weight of a Russian tank as it rolled into Ukraine.

You know where I’m going with this, don’t you? Any recently-acquired investment confidence in the Levant would have vanished somewhere between Hamas’ sneak attack and Israel’s disproportionate response. Don’t get me started about the impact the Houthi’s PR stunt in the Red Sea will have had.

Yes, the region has been economically unstable for years. Any old AI could have informed you of that fact. But no AI could have predicted the events which followed.  As could no human who’s remotely connected to investment opportunities.

In Summary

Generative AI has no window into a future that’s, frankly, more unpredictable than it’s ever been, ironically because of AI itself. As no human does. But what we do have, however, is the certain knowledge that unpredictability and change are the only constants in life.

So before you succumb to the tsunami of online trading bots which are definitively offering you a better-than-ever ROI, you should know that, right now, they provide no advantage whatsoever over a human analyst. Except perhaps one.

They can give you the wrong advice quicker.

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