March of the machines
The stockmarket is now run by computers, algorithms and passive managers
Such a development raises questions about the function of markets, how companies are governed and financial stability
FIFTY YEARS ago investing was a distinctly human
affair. “People would have to take each other out, and dealers
would entertain fund managers, and no one would know what the
prices were,” says Ray Dalio, who worked on the trading floor of
the New York Stock Exchange (NYSE) in the early
1970s before founding Bridgewater Associates, now the world’s
largest hedge fund. Technology was basic. Kenneth Jacobs, the boss
of Lazard, an investment bank, remembers using a pocket calculator
to analyse figures gleaned from company reports. His older
colleagues used slide rules. Even by the 1980s “reading the Wall
Street Journal on your way into work, a television on the
trading floor and a ticker tape” offered a significant information
advantage, recalls one investor.
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