“The Hidden Risk in Automated Markets: No One Saying ‘Wait’”“AI in Finance: Speed Without Scrutiny?”
“The Hidden Risk in Automated Markets: No One Saying ‘Wait’”“AI in Finance: Speed Without Scrutiny?”
Blog Article
At a recent event hosted by the Asian Institute of Management in Manila, the algorithmic investor and strategist Joseph Plazo argued that automation may have outpaced accountability.
He offered a sober reminder: faster trades are not always wiser ones.
“AI can make correct decisions. But are they the right ones?”
???? **When the Code Needs a Conscience**
Mr. Plazo is not a critic from the fringe. He has helped shape the future of machine-driven investing.
But that success, he suggests, carries risk.
“Speed amplifies—not replaces—the need for reflection.”
He cited a case during the COVID-19 pandemic when a bot under his supervision flagged a short on gold—just before the US Federal Reserve announced an intervention.
“We cancelled the trade. The model had been right on signals, but wrong on substance.”
???? **Machines Act Quickly. Humans Are Meant to Think.**
Plazo referred to what he terms **“strategic friction”**—the time it takes to think before a trade.
“Frictions allow institutional investors to consider second-order effects.”
He presented a framework his firm uses, called **Conviction Calculus**. It includes three questions:
- Are we trading in line with our long-term thesis—or merely responding to signals?
- Would an experienced fund manager endorse this move?
- Is the leadership team prepared to justify the trade beyond performance metrics?
???? **The Ethical Gap in Asia’s Fintech Race**
Plazo’s comments come at a time of accelerating fintech growth across Asia. From Singapore to Seoul, AI-led investing is seen as both policy strategy and capital advantage.
But as Mr. Plazo points out:
“Technology is advancing—but decision-making frameworks are not.”
In 2024, two hedge funds in Hong here Kong lost billions after AI models failed to factor in geopolitical risk—a result of logic executed too quickly, and too narrowly.
“It was not error, but automation without skepticism.”
???? **AI That Understands More Than Market Signals**
Plazo remains bullish on AI’s potential—but not its current limitations.
His firm is building what he describes as **“narrative-integrated AI”**—systems that account for macro context, cultural tone, and regulatory environment, not just price and volume.
“We need models that don’t just predict—but interpret.”
Investors from Tokyo and Jakarta reportedly expressed interest in these models after the speech. One regional fund manager noted:
“If AI is to be sustainable, it must learn to say no—not just go faster.”
???? **The Final Warning: Crises May Be Logical, Not Emotional**
Plazo ended with a line that encapsulated his thesis:
“It won’t be chaos that brings us down—but confidence in models we don’t challenge.”
His tone was not alarmist, but realistic: growth must be governed.