“Machines Can Trade. But Can They Govern?”“The Hidden Risk in Automated Markets: No One Saying ‘Wait’”
“Machines Can Trade. But Can They Govern?”“The Hidden Risk in Automated Markets: No One Saying ‘Wait’”
Blog Article
At a recent event hosted by the Asian Institute of Management in Manila, Joseph Plazo, argued that automation may have outpaced accountability.
He offered a sober reminder: faster trades are not always wiser ones.
“If you allow a machine to manage your portfolio,” he said, “ensure it reflects your priorities—not just your profit targets.”
???? **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.
“A well-trained model can still make perfectly logical errors.”
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. It failed to anticipate a shift that any seasoned investor would have questioned.”
???? **Why Delay Still Matters**
Plazo referred to what he terms **“strategic friction”**—the time it takes to think before a trade.
“Speed without governance is simply exposure.”
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?
- Does the broader geopolitical or sectoral context support it?
- If this fails, will someone take responsibility—or will the blame lie with the code?
???? **Governance in the Age of Machine Capital**
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 more info capital advantage.
But as Mr. Plazo points out:
“You can scale capital faster than accountability.”
In 2024, two hedge funds in Hong 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.
“Data is abundant. Insight is scarce.”
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:
“The next financial crisis will not be triggered by emotion—but by perfect logic, executed too quickly, and left unquestioned.”
For investors and policymakers alike, the message was clear: AI is here to stay. But leadership cannot be automated.