Algorithms have played an increasingly important role at many big trading firms over the past few years. The world’s largest hedge-fund is taking the technology to the next level though, developing a system that automates the firm’s management. Bridgewater is basing the system on founder Ray Dalio’s management philosophy and hopes to take the “emotional volatility” out of ever day decision making, which would include hiring, promotions and settling disagreements. Bridgewater put together a team of programmers that specialize in analytics and artificial intelligence back in 2015, which is headed up be David Ferrucci, former lead developer of IBM’s supercomputer Watson. The division, called the Systemized Intelligence Lab, has already rolled out some of the tools that will be incorporated into the final system. For example, meetings are recorded and employees are expected to rate their counterparts throughout the day. The rankings show up on what are called “Baseball Cards” which show an employees strengths and weaknesses based on their individual dot rankings. The overall system will be called PriOS and Dalio wants it to be responsible for full three-quarters of management decisions within the next five years. Those decisions are based on Dalio’s own philosophy, which in theory guarantees that the company will still be run according to his vision whether he is around or not. The Wall Street Journal says the system will dole out “GPS-style directions for how staff members should spend every aspect of their days, down to whether an employee should make a particular phone call.” That might seem a bit of an overreach, but consider this – Bridgewater manages more money than any hedge-fund in the world and has earned its customers twice as much as any of its rivals. Dalio’s approach may be unorthodox, but there is no denying that his way of doing things has made him and his firm incredibly successful. The Bridgewater rule book is known as the “Principles”, in which Dalio himself expresses his opinion that successful managers “design a ‘machine’ consisting of the right people doing the right things to get what they want.” Dalio’s vision is for PriOS to be that most efficient of machines, freeing management from “mundane” decision making that a computer may be as good – or better – suited. Bridgewater’s ultimate goal for its system is pretty ambitious, but this may be just the tip of the iceberg when it comes to replacing middle-management positions with artificial intelligence systems. Devin Fidler, research director at the Institute For The Future, is a lead developer of their prototype management system called iCEO. He explains that a lot of management is basically just the sorting of information, something software can be much more efficient at than humans. Automated decision-making is highly appealing to businesses as it saves time and strips out emotional volatility. A research report from Accenture highlighted this, showing managers across a wide range of businesses believe AI will ultimately prove to be cheaper and more efficient. However, that doesn’t mean that human managers will become obsolete – “It just means that their jobs will change to focus on things only humans can do.” (Source: The Wall Street Journal, The Guardian)
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