423 The Algorithm of Fear #reading #internet #skills #history #brain #fears #economy #finance above all substitute leave a digital trail. makes them ideally suited to trading. isolate, measure and factor in to our market calculations, derive entirely from human behaviour gives smth / smb a competitive edge. substantive data. act on fear Around 350 BC. [0:03 - 0:06] (He looks up and speaks.) Aristotle defined human beings as "the animal that has language." [0:07 - 0:10] (The camera cuts to another man with glasses, listening intently.) Language, above all, is what differentiates us [0:11 - 0:13] (Back to the first man.) from the other creatures on the planet. [0:14 - 0:19] The development of language freed us from a world of physical objects [0:20 - 0:23] (The shot widens to show him addressing a boardroom table.) and substituted a universe of symbols. [0:24 - 0:28] For over 50,000 years only humans were "the animal with language." [0:29 - 0:31] But now, for the very first time that is no longer the case. [0:32 - 0:34] We share our world with computers. [0:35 - 0:37] Everywhere we go, we leave a digital trail. [0:38 - 0:40] All that data can be read and analysed. [0:41 - 0:43] But here's the thing. We still read at the same rate as Aristotle did. [0:44 - 0:47] We still read at the same rate as Aristotle did. [0:48 - 0:52] And so we, as a species, only reads 450 words a minute. [0:53 - 0:58] A computer can perform trillions of calculations every second. [0:59 - 1:03] There's a physical limit to how much we can, as a species, process and absorb. [1:04 - 1:06] But there's no such limit for computers, [1:07 - 1:10] (The camera shows the board members listening.) as long as we give them enough processing power and memory. [1:11 - 1:13] (A bald man in the audience speaks.) And on top of that, algorithms don't have imagination. [1:14 - 1:17] (The speaker smiles faintly.) [1:18 - 1:23] They don't give in to panic, unlike humans. [1:24 - 1:28] So, that makes them ideally suited to trading. [1:29 - 1:31] in the financial markets. [1:32 - 1:36] (The speaker stands and walks away from the table.) With our new generation of VIXAL, we were able to isolate, measure [1:37 - 1:41] (He gestures back towards the group.) and factor in to our market calculations, [1:42 - 1:46] the element of price that derives entirely from human behaviour. [1:47 - 1:51] We built an algorithm that can adapt its strategy and that's what gives it a competitive edge. [1:52 - 1:56] (A woman in the audience asks a question.) So basically, this is just behavioural finance? [1:57 - 2:00] (Another man asks.) You're going to analyse every aspect of human behaviour in the markets. [2:01 - 2:03] That would be impossible, as you well know. [2:04 - 2:08] (The speaker responds.) No. The solution was to choose one emotion for which we have substantive data. [2:09 - 2:12] (A woman asks.) Which is? (The speaker answers.) Fear. [2:13 - 2:17] (A man in the audience speaks.) Fear is historically the strongest emotion in economics. [2:18 - 2:20] (The speaker continues.) Remember FDR during the Great Depression? [2:21 - 2:23] (The camera focuses on two listeners.) The most famous financial quote of all time. [2:24 - 2:27] "The only thing we have to fear is fear itself." [2:28 - 2:32] In fact, fear is probably the strongest human emotion, period. [2:33 - 2:36] No one wakes up at four in the morning because they're happy, do they? [2:37 - 2:39] Children leave the light on because they fear the dark. [2:40 - 2:43] We put our money in a safe because we fear it being stolen. [2:44 - 2:46] We act on fear. [2:47 - 2:52] With VIXAL, we are able to correlate recent market fluctuations with the frequency of fear-related words in the media [2:53 - 2:57] and the conclusion we've drawn is that fear is driving the world like never before.