IT is a living organism. We have seen faster computer and network, clustered database, automation in DevOps (IT work in formula) and recently introduced bitcoin and machine learning/AI. As evolution happens, it usually cannibalised its own parents. A simple example, a 10 years ago IT books and their theory are now useless. Similar to it, is Finance. It keeps evolutionizing itself but in a more stubborn way. Amazingly, I still see economists are still using decades of Keynesian economic books and theory which is now less and less working. Recent easing, normalisation, and new 2018 paradigm shows that finance and central bank try hard to keep their status quo through the use of money power and policy. They have been successful so far to keep new tribal like bitcoin in check. A simple example of old economy theory of supply and demand should now less be working because price is no longer function of demand but now most importantly is supply of money. Economists are stubborn enough to keep weighting of their old economy theory. Due to this, human forbids evolution in finance, unlike IT which can run more as a free animal. Evolution of more affordable IT (cheaper hardware, faster network and abundant of IT workers) has born HFT and computerized finance industry where human is trying to utilise IT to compete each other in taking larger piece of the cake. It successfully canabalizes human traders and economists who are still using slow hardware of their human brain. Similar to it, is the central bank. Up until up today, central banks are still hardly able to escape from easiness of money. They are stubborn enough to keep their status quo through their only last weapons of power, which are money and policy. Truly, they afraid that any kind of wild animal will lead their extinction, just like happening in 2008 GFC. A recent machine learning evolution by google on their tensorflow amazed me last year and I strongly believe it could lead evolution in IT and will also rock the finance industry. Most sophisticated finance company is still relying on human formula and math. Quants enforces set of math formula into their HFT and then trying to tweak their formula and weights accordingly. I start to see ability of machine learning to actually replace quant professors. It is still an early sign, but I don’t think it will be impossible in near future. A machine learning is basically able to replace human brain and should be able to develop set of quant formula which will be able to closely follow economy evolution. As not many people realize nor they do stubborn enough to try keeping their jobs or status quo, is that machine learning is able to develop quant formula by its own. Admit it, they can work 24×7 and not 9 to 5, and they can get upgraded unlimitedly to be faster since there is still huge possibility of affordable quantum supercomputer. We do know machine learning is immortal, an economist brain that can undergo centuries of life. How does it work? It doesn’s require a wizard. We can teach slowly a machine learning to read massive amount of data as much as we have which our brain can not and they will slowly learn themselves to see credibility of information when learning is converged. Machine learning is not a new thing, it is just getting sophisticated. I did write adaptive noise cancelling in my bachelor thesis 20 years ago using assembly, c++ and very basic adaptive weights. In a simple way, we have heard a lot about noise cancelling in our headphone, airplane and many industry. Noise frequency is converted into time series (FFT) then feed them into machine to learn. That is the very basic of machine learning. Machine or formula is trying to detect pattern in a set of brain array, weight them, then use it to create an opposite noise to cancel. The same is happening to facial recognition where picture is converted into a time series, feed them into machine and start learning. We will see an evolution of new computerized quant professors and economist in developing and tweak the economy trend formula. In a good way, machine learning will be able to do math research within microseconds. Again, human is trying to hold back the evolution inflation before it runs too hot and canabalizes itself, using their called status quo of power and policy. We may not yet be able to give born to a ‘God’ (perfect AI) by now but soon we may start to see human gives a born to unlimited babies. AI in chinese word means love, something born as a result of our love to our babies. One day, I strongly believe we will soon see a machine speaking in Bloomberg, presenting their economy theory and take QA. Are we allowing this new race to overpowering us or will we enforce a border policy to this new born organism because simply we can’t compete our productivity with them? One day central bank will sure get big challenge with their mandate to get human unemployment and inflation in control.]]>