WILL AI MAKE TRADING ABSOLETE? · SMART HUB NETWORK

David Obwao

4d (edited) • MINDSET & GROWTH

WILL AI MAKE TRADING ABSOLETE?

Hello family

Yesterday I ended my day staring at my phone as usual.

Staring back at me was an invitational article in THE ECONOMIST

The headline read:

“If you thought the global financial crisis was bad…”

I almost just ignored it. Just another someone talking about the AI bubble.

But then, the subheadline reeled me in.

“When the crash comes, stabilising markets will be easy compared with reordering society for AI, writes short-seller Carson Block.”

According to this guy in a few short years AI will replace a ton of the “world’s highest paid knowledge workers”.

But that’s not the interesting part.

The interesting part is why.

I’ve never heard this argument before.

Now, in the past, new technology increased productivity. Productivity reduces prices. You can afford more stuff. Everyone grows together. A small number of people miss out, but broader society climbs higher.

Think about farming. In 1750, 43% of all employment in the UK was in farming. And yet, the number of malnourished and starving families was sky high.

By 1850 only 22% of people worked in agriculture.

And then, things got really bad…

“The invention of global refrigeration and the expansion of steamships allowed cheap, surplus grain and meat from the United States, Australia, and South America to flood the British market.

Domestic grain prices crashed by over 50%. Farms went bankrupt, and landowners converted crop fields into permanent pastures, which required far less labor…

Between 1871 and 1901, the number of male agricultural laborers in England dropped by over one-third.”

Yikes! It’s weird to think that today we are living with fridges and ships at the expense of workers in the 19th century.

By 2025, just 0.85% of the workforce were in agriculture. A complete job apocalypse by all accounts, but people are better fed than ever.

Also, the new technology meant people could reskill over time and create even better jobs, and living standards.

Society as a whole benefited massively over the next 150 years, because technology kept replacing humans in every single industry.

And things kept getting better. Kings from 300 years ago couldn’t live as comfortably or as safely as we live now.

Humans learned to use computers, design rocket ships, and more boringly… management processes and systems to run large organizations.

Demand goes up, because the new jobs pay better.

But, according to this article, AI is not the same.

AI models are doubling in power every six months. Chances are that this rate increases, because they have started working on their own code.

In the past, humans would have several decades to upskill themselves to something the technology can’t do.

And this time?

Well, let’s say you lose your job as a coder for a software company. You spend the next 6 months upskilling yourself to a Tech Lead. Someone who can shape what the AI codes.

But, in six months the AI has already doubled its capacity to reason and think. Your new skill gets replaced just like the old one.

You cannot learn faster than AI. Your learning starts linear and compounds slowly over years of gaining experience.

AI compounds its learning from day one.

So what happens? Well, according to Carson Block, highly paid jobs will go. About 15% of knowledge workers in America will lose their job in five years (about 15 million people).

And this will cause the stock market to crash. These formerly highly paid people will draw down their investments.

Instead of paying into the indexes like S&P 500, they will be selling.

According to the article, “The job displacement will fall disproportionately on highly educated, well-paid workers whose retirement savings drive America’s stock markets”.

Alright, so where does this leave trading?

Surely, big investment houses and banks are attacking the trading problem with AI as well. Racing to replace their expensive and emotional humans.

Well, yes and they have been using AI for way longer than ChatGPT has been a thing.

But here’s the thing.

We need to not flatter ourselves. You are not in a boxing match with Goldman Sachs.

You aren’t going toe to toe with market makers and trying to push prices to fill limit orders.

You have NEVER been able to compete with those guys.

You aren’t even on the same playing field.

The private trader sitting at home has never had the same tools, or access to the same information.

A bank with 50,000 employees, research departments, analysts, traders, economists, quants, risk managers, execution desks, algorithms, data feeds, and billions in capital is already so far beyond the private trader that it might as well be an artificial intelligence.

Whether those decisions are made by thousands of highly paid humans, or one extremely powerful AI system, the retail trader is not playing the same game.

You do not move markets, you ride them. Just like a surfer who rides the wave.

A surfer does not compete with the ocean.

He does not try to overpower the wave.

He does not try to move the water himself.

He studies the conditions, waits for the right moment, positions himself correctly, and rides a tiny section of a force much larger than him.

You aren’t competing with the big oil tanker that creates the wave and is moving heaven and earth through the water. But you know where the wave is and how to get on it.

A lot of retail traders misunderstand this.

They think every trade is a battle.

They imagine that when they win, someone else must lose.

It’s not quite that simple.

When you buy a stock and later sell it for a profit, who did you beat?

Was the person who sold it to you necessarily a loser?

Not always.

They might have been drawing money from a retirement account.

They might have been an index fund rebalancing at the end of the day.

They might have been a large institution reducing exposure for reasons that have nothing to do with your trade.

The same with currencies. There doesn’t have to be a loser.

So stop thinking in terms of ‘winning’ and ‘losing’.

Yesterday I had something interesting from one of my mentors Mr Jason Grig.

“With trading it’s not: find a winning strategy.

It’s: stay in the race long enough to let your edge play out”

That means controlling risk.
That means taking the same setup again and again.
That means treating trading like a process, not a fight.

AI does not remove the need for money to move. It does not remove the need for companies to hedge. It does not remove the need for funds to rebalance.

And as long as money moves, markets move.

As long as markets move, waves form.

And as long as waves form, there will be an opportunity for you to ride them.

The important thing is to master trading for yourself. It’s your moat. It’ll protect you from the coming disruptions brought on by AI.

Ride the wave and take advantage of the upheaval. It’s going to happen whether you want it to or not, so you may as well protect yourself and your family from it.

However, this doesn’t mean we’re ignoring AI. Not at all.

In fact, we’re doing more with AI behind the scenes than many of you realise.

We are studying how AI can improve trading education, testing, feedback, research, etc.

And if someone knows how to build wealth using AI and trading, we will find them, study them, turn their knowledge into a curriculum, and bring it to you.

Because this transition is coming whether we like it or not.

The goal is not to pretend it isn’t happening.

The goal is to make sure you are not the person being swept away by the wave.

The goal is to become the person who knows how to ride it.

Kind regards,

David Videe - founder of SMARTHUBNETWORK

Your thoughts will be highly appreciate

Check out this book THE 4HR WORK-WEEK BY Timothy Ferrisshttps://youtu.be/kw2cGaE0hzo?si=_LL3Qs7DK34hdXIj

0 comments

WILL AI MAKE TRADING ABSOLETE?