Oh, that would be meta-black-boxes. A fine idea.
Perhaps more humbly - I was suggesting simple black-boxes that do behave differently. In statistical jargon: uncorrelated or even independent.
Perhaps more humbly - I was suggesting simple black-boxes that do behave differently. In statistical jargon: uncorrelated or even independent.
It's like the thousands of entrepreneurs that saw Friendster and said "Oh look, only one competitor in the market, I'll build myself a social network and get rich!" Or the thousands of entrepreneurs that saw Reddit and Digg and said "Oh look, only two competitors in the market, I'll build myself a social bookmarking site and get rich!" Or the thousands of entrepreneurs that saw YouTube and said "Oh look, only one competitor in the market, I'll build myself a video sharing site and get rich!"
The only way to get rich is to build things where there are zero popular competitors in the market, or where there are 1-2 competitors and everyone believes it's fruitless to compete with them. Otherwise, you can bet that thousands of people you haven't heard of are doing the same thing, and by the time you get a product out they'll be getting a product out too.
(Incidentally, the first few quant hedge funds, like Renaissance or D.E. Shaw, made out like bandits.)
I'm not so sure. I interviewed at a Wall Street company that was programming data channels headed into the black-boxes. They boasted that 30% of trades were dealt with by computers. I mentioned that that should probably be enough to drive some pretty serious feedback effects. I asked: in principle, if these black-boxes handled all the trades, where would the decision to trade or not come from.
Instead of a blank stare, I was presented a cold, nervous look. He said "basically all these algorithms have been worked out in the 70's and 80's, in Academia. Nobody really knows what they're doing, or why they're doing it. But they are trying to compete by getting more data faster than the next guy. If everyone trades the same, as long as you trade faster, you'll win."
I asked if it was moral to play such a risky game with the economy.
I didn't get the job.
To put it in web terms, it's almost like these quant funds are just adapting to industry best practices. We see that people like social networking, crowdsourcing, "web 2.0" page layouts, etc., so we see lots of sites racing to add these features--because hey, that's what works, that's what users want. But what happens if people get sick of one of those features (or any other you pick)? The relationship between the market and that feature breaks down. All those sites who counted on that strategy will all fail (or adapt) at around the same time, and many will rush into the next hot area (Pointcast-style "push" technology, anyone?).
Quant funds are basically just advanced machine-learners; you could implement a black box-of-sorts on your website by looking at Comscore numbers/trends for different sites and plotting that out against the features/layouts/topics they use, and instantly adding some new widget to your sidebar or something when you see a positive relationship with traffic generation. (Techmeme is a great example of a web black box, BTW, always on the hottest tech trend.)