Limitless

Frank Pierce, who was quite chubby and had beady eyes, said, ‘Horseshit. If it could be done, you think someone wouldn’t have done it by now?’ He looked around, and then added, ‘I mean, we all do quantitative analysis, we all do the math, but they’ve been going on about this other stuff for years, this black-box stuff, and it’s crap. It’s like trying to turn base metals into gold, it can’t be done, you can’t beat the markets – but there’ll always be some jerk with too many college degrees and a pony-tail who thinks you can.’

‘With respect,’ Kevin said, addressing himself to Frank Pierce, but obviously trying to draw me out at the same time, ‘there are some examples around of people who have beaten the markets, or appear to have.’

‘Beaten the markets how?’

Kevin glanced over in my direction, but I wasn’t going to rise to the bait. He was on his own.

‘Well,’ he said, ‘we haven’t always had the technology we have now, we haven’t always had the capacity to process such huge amounts of information. If you analyse enough data, patterns will emerge, and certain of those patterns just may have predictive value.’

‘Horseshit,’ Frank Pierce boomed again.

Kevin was a little taken aback at this, but he soldiered on. ‘I mean, by using complex systems and time-series analysis you can … you can identify pockets of probability. Then you patch these together into some mechanism for pattern-recognition …’ – he paused here, less sure of himself now, but also in too deep to stop – ‘ … and from there you build a model to predict market trends.’

He looked over at me imploringly, as if to say Eddie, please, am I on the right track here? Is this how you’re doing it?

‘Patterns my ass,’ said Pierce. ‘How do you think we made our money?’ He leant his weight forward in the chair and with his stubby index finger rapidly identified himself and Van Loon. ‘Huh?’ Then he pointed to his right temple, tapped it slowly, and said, ‘Un-der-stan-ding. That’s how. Understanding how business works. Understanding when a company is overvalued, or undervalued. Understanding that you never make a bet you can’t afford to lose.’

Van Loon turned to me, like a chat-show host, and said, ‘Eddie?’

‘Absolutely,’ I said in a quiet voice, ‘no one could argue with that …’

‘But?’ Pierce snorted sarcastically. ‘There’s always a but with these guys.’

‘Yes,’ I went on, sensing Kevin’s obvious relief that I had deigned to speak, ‘there is a but. It’s a question of velocity’ – I had no idea what was coming next – ‘because … well, there’s no time for human judgement anymore. You see a chance, you blink and it’s gone. We are entering the age of decentralized, online decision-making, with the decisions being made by millions – and potentially hundreds of millions – of individual investors all around the world, people who have the ability to shift huge amounts of money around in less time than it takes to sneeze, but without consulting each other. So, understanding doesn’t come into it – or, if it does, it’s not understanding how companies work, it’s understanding how mass psychology works.’

Pierce waved a hand through the air. ‘What – you think you can tell me why the markets boom or crash? Why today, let’s say? And not tomorrow, not yesterday?’

‘No, I can’t. But these are legitimate questions. Why should data cluster in predictable patterns? Why should there be a structure to the financial markets?’ I paused, waiting for someone to say something, but when no one did I went on, ‘because the markets are the product of human activity, and humans follow trends – it’s that simple.’

Kevin had gone pale by this stage.

‘And of course the trends are usually the same … one, aversion to risk, and two, follow the herd.’

‘Pah,’ said Pierce.

But he left it at that. He muttered something to Van Loon that I didn’t catch, and then looked at his watch. Kevin remained motionless, staring down at the carpet, almost in despair now. Is that it, he seemed to be thinking, human fucking nature? How am I supposed to turn that to my advantage?

What I was feeling, on the other hand, was acute embarrassment. I hadn’t wanted to say anything in the first place, but I could hardly have ignored Van Loon’s invitation to contribute. So what happens? I speak and end up being a patronizing asshole. Understanding doesn’t come into it? Where did I get off lecturing two billionaires about how to make money?

After a couple of minutes, in any case, Frank Pierce muttered his excuses and left without saying goodbye to either Kevin or myself.