Business Unusual

Numer.ai wants to use AI and collaboration to beat the stock market

Everyone wants to make a buck and many believe the real money is made on the stock markets.

Warren Buffett is one of the most successful. A part of his success may be that he lives in Omaha, he lives modestly and tends to not invest in speculative ventures.

His company’s profits are made mostly thanks to the success of US firms selling to US consumers. Living as he does allows him to spot the trends among the people that drive his firm's profits.

A typical Wall Street investor could not be further from reality. Their high-flying lifestyles are shared by less than 1% of the population yet they make calls about what the future holds, whether in the US or elsewhere.

Buffett feels strongly enough about it to have wagered $500 000 with a hedge fund to see which could get a better return over 10 years. Buffett chose a single index fund, his hedge fund challenger choose an index of five hedge funds. After nine years, Buffett can’t lose with 7.1% growth versus 2.2%.

If Wall Street is shaky and Buffett is nearing retirement, who will be the next super investor?

Artificial Intelligence (AI) is being used more in all types of situations and so its use in finance and the behaviour of the stock market is no surprise.

Richard Craib, a South African, was using it too to improve his company's investment choices. When his request to share his data with others working on more sophisticated systems was declined, he opted to create a new way to run a hedge fund: Numer.ai.

Combining the use of AI, and opening the modelling to anyone who would like to use the data, is the kind of collaboration that is not possible now. There would be nothing to stop someone using his datasets and making their own trades, killing the co-operation.

To prevent that he uses homomorphic encryption. His collaborators can work with the data without knowing what the data is about.

They run their models and upload their results. The site ranks the models, posting those results into a leaderboard.

Each collaborator is rewarded according to the success of their model. They receive payment in the form of Bitcoin in a weekly tournament and an additional cryptocurrency Numeraire.

Numeraire is build on the Ethereum blockchain and is given to collaborators to use to indicate their confidence in their models. If their confidence was correct they will be rewarded with cash and get their currency(tokens) returned. If wrong the token is destroyed.

This is an ambitious experiment; it may well be akin to the experiment from 2009 to create cryptocurrency in the first place. One thing that does seem to make very good sense is that data science and AI is improving. Getting a fund with a growing pool of gifted minds that can see good returns is likely to impress investors more that a slick suit and a presentation.

The odds are good that he and his data scientist collaborators, and definitely rivals, will seek to replicate his idea and improve the current means for investing.

It may well see Richard Craib and his teams become the future oracle of investing, unless Buffett simply buys the company to make up for his misses on Google and Amazon in the past.


This article first appeared on 702 : Numer.ai wants to use AI and collaboration to beat the stock market


Recommended

by NEWSROOM AI
Read More
How to win elections and influence people

How to win elections and influence people

You could say elections are being disrupted.

Technology disrupted tax income, but nobody escapes taxes

Technology disrupted tax income, but nobody escapes taxes

Digital companies have had a good run, but new taxes are coming.

Solving puzzles and mysteries, and what all of us may be missing about it

Solving puzzles and mysteries, and what all of us may be missing about it

At last, a way to future proof yourself against the 4th Industrial Revolution.

Boredom, loneliness and addiction

Boredom, loneliness and addiction

The best way to describe our relationship with the internet is “it's complicated".

The world is reliant on fertilizer and this is who controls most of it

The world is reliant on fertilizer and this is who controls most of it

One country holds as much as 70% of the world’s phosphate and we can’t feed the world without it.

How Instagram captured the moment

How Instagram captured the moment

An app so simple even Steve Jobs would have been proud.

Popular articles
Parents no longer have to travel with children's birth certificates

Parents no longer have to travel with children's birth certificates

The new Home Affairs upgrades to the system include printing parents details at the back of the child's passport.

SA-made Rolkem cake decoration products may not be safe to eat

SA-made Rolkem cake decoration products may not be safe to eat

The UK’s Food Standards Agency issued an advisory, claiming that Rolkem failed to confirm that their ingredients were safe to eat.

KFC South Africa’s Neymar mocking ad… so epic, Nando’s would be proud!

KFC South Africa’s Neymar mocking ad… so epic, Nando’s would be proud!

The South African ad is still trending around the world. Bruce Whitfield interviews branding and advertising expert Andy Rice.

Madiba’s private secretary Zelda la Grange opens up about money (hers and his)

Madiba’s private secretary Zelda la Grange opens up about money (hers and his)

Bruce Whitfield interviews La Grange about her and Madiba's attitude to money (hopes and fears, successes and failures, etc.)

Criminals targeting homes with aluminium windows, warns neighborhood watch

Criminals targeting homes with aluminium windows, warns neighborhood watch

The Panorama, Welgelegen and Plattekloof Neighbourhood Watch has identified a new house break-in trend.