Category Archives: London Review of Books

The rhythm of the algorithm


If  you ever wonder where the balance of human and machine intelligence is headed in general, you’ll want to read this piece, “How to Make Money in Microseconds,” in the London Review of Books.” I think most people know, by now, that a lot of market trading is now controlled by computers that place buy and sell orders on the basis of algorithms. This essay goes well beyond that generality to describe exactly what the algorithms do, and in so doing takes a reader down an engaging if increasingly unreal rabbit hole full of statistical arbitrage, volume participation, volume-weighted average price (or VWAP, pronounced vee-wap), and even more arcane and predatory types of algorithms. Such as these:

Far more controversial are algorithms that effectively prey on other algorithms. Some algorithms, for example, can detect the electronic signature of a big VWAP, a process called ‘algo-sniffing’. This can earn its owner substantial sums: if the VWAP is programmed to buy a particular corporation’s shares, the algo-sniffing program will buy those shares faster than the VWAP, then sell them to it at a profit. Algo-sniffing often makes users of VWAPs and other execution algorithms furious: they condemn it as unfair, and there is a growing business in adding ‘anti-gaming’ features to execution algorithms to make it harder to detect and exploit them.

This is an extraordinarily detailed and well-balanced piece that includes no fear-of-computer troglodytism but still argues that computerized trading has become a ” tightly coupled and highly complex” system that probably is, therefore, “inherently dangerous.” Call me fascinated, Hal.

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Filed under computer algorithms, London Review of Books, market trading, markets

Twain Spotting


I suppose it is stating the obvious to say that the modern American novel was birthed along the Mississippi by Mark Twain and then — after some dashes of Stendhal and Tolstoi and the other major Russians were mixed in — brought to successful adulthood by another nobody from what we now consider fly-over country, Ernest Hemingway.  I also suppose the preceding, commonplace assertion will stir foment in the Webosphere among the adherents of Faulkner and Fitzgerald and Bellow and Updike and God knows what other 20th century American writer people will come up with as more seminal to the novel than Hemingway. And that’s fine by me; I have lots of favorite writers. But I do think this essay on the recently released piece of Twain’s “autobiography” in the London Review of Books is remarkably evocative of Twain and the best evaluation/explication of the work I’ve read. In makes one want to head over to the mother of rivers, even or especially during these high-water times, just to watch the water roll by. It also makes one want to dig around in the book boxes to find that copy of Huckleberry Finn and begin one’s seventh or 10th rereading of that masterstroke. During the digging, if one were to see the Nick Adams stories poking up from the stack, one might grab it, too. There is a connection there, as powerful as a river cresting.

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Filed under Ernest Hemingway, literature, London Review of Books, Mark Twain