“AI in Finance: Speed Without Scrutiny?”“Joseph Plazo on Why Algorithms Still Need Human Judgment”
“AI in Finance: Speed Without Scrutiny?”“Joseph Plazo on Why Algorithms Still Need Human Judgment”
Blog Article
At a recent event hosted by the Asian Institute of Management in Manila, the algorithmic investor and strategist Joseph Plazo argued that automation may have outpaced accountability.
He offered a sober reminder: faster trades are not always wiser ones.
“AI can make correct decisions. But are they the right ones?”
???? **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.
“Optimisation without orientation is simply acceleration in an unknown direction.”
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 interpreted data, not decisions.”
???? **Strategic Friction as a Form of Risk Management**
Plazo referred to what he terms **“strategic friction”**—the time it takes to think before a trade.
“That pause is not inefficiency,” he said. “It is governance.”
He presented a framework his firm uses, called **Conviction Calculus**. It includes three questions:
- Does this trade align with the organisation’s ethical posture?
- Does the broader geopolitical or sectoral context support it?
- Do we have a human at the helm, or merely a dashboard?
???? **Asia’s Automation Drive and Its Oversight Deficit**
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 capital advantage.
But as Mr. Plazo points out:
“Governance is lagging behind growth.”
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.
“The models did what they were told. But no one asked whether they should.”
???? **The Case for Narrative-Aware AI**
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.
“The next phase of AI must engage with uncertainty, not ignore it.”
Investors from Tokyo and Jakarta reportedly expressed interest in these models after the speech. One more info regional fund manager noted:
“We need systems that understand politics, not just price movement.”
???? **Silent Errors in a World That Doesn’t Pause**
Plazo ended with a line that encapsulated his thesis:
“Flawless code may be the most dangerous tool in the wrong context.”
It was less a warning than a call to apply the same rigour to ethics as we do to execution.