Do we have perfect market knowledge?

I’ve thought for years that we are moving towards perfect market knowledge, where demand and supply information becomes equal to all buyers and sellers. Now that we have OpenAI and Gemini, are we getting there?

During the 1990s, I spent a lot of time discussing neural networking where we could pair stocks to buy and sell. Thirty years later, we can do far more than this. We moved from paired stocks to algorithmic trading to flash markets to markets that rise and fall without the touch of a mouse. It’s all automated.

We moved from markets that were run by computers to markets that are run by computers. I had this old joke that the world would be run by one man and his dog. The dog was there to stop the man touching the computers … the man was there to feed the dog. Are we there yet? I think we are.

This then leads to an uncomfortable question: if markets are run by systems, is that acceptable?

If we delegate the commerce of the world to algorithms, what is our role? If we no longer run the systems, can the systems run themselves?

Hmmm …

The real issue at the heart of that debate, in a financial context, is that we have reached perfect market knowledge. Those who are buying know just as much as those who are selling and, not just that, but the whole market knows. There’s no leverage. Is this where we are?

Some would say no, some would say yes, but I’m in the space that says it is possible, but not real.

Firstly, we would have to assume that all stocks, products and services were fungible – like-for-like or equitable. They are not.

Secondly, we would have to assume that AI, algorithms and related technologies could predict the movement of the markets. They cannot.

Of course they can make forecasts, but a forecast is not firm. It’s just a forecast. It is not firm, and none of the world is firm. Just look at Ukraine and Israel.

So, the answer is that systems, AI, networks and the world we live in today can invest in markets with imperfect knowledge, just as they always did. The biggest difference now is that it is real-time. There are no laggards.

I guess this is where perfect market knowledge exists.

You can programme everything, automate everything, connect everything … but there is still a space for a human interruption. In other words, we have everything organised on the network with what appears to be perfect knowledge, but someone is always going to interrupt the network.

Perfect markets? Imperfect humans. It’s always been this way.