“Joseph Plazo on Why Algorithms Still Need Human Judgment”“Joseph Plazo on Why Algorithms Still Need Human Judgment”
“Joseph Plazo on Why Algorithms Still Need Human Judgment”“Joseph Plazo on Why Algorithms Still Need Human Judgment”
Blog Article
At a gathering of students and young professionals in Manila, Joseph Plazo—the founder of AI trading firm Plazo Sullivan Roche— posed a challenge to the prevailing techno-optimism in finance.
His argument was not anti-technology, but pro-governance.
“Delegating execution does not mean abdicating responsibility.”
???? **A Technologist’s Dilemma**
Mr. Plazo is not a critic from the fringe. His algorithms are widely used by institutional investors from Europe to East Asia.
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:
- What are the reputational implications of this decision?
- Does the broader geopolitical or sectoral context support it?
- If website this fails, will someone take responsibility—or will the blame lie with the code?
???? **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:
“You can scale capital faster than accountability.”
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 outcome was rational—and disastrous.”
???? **AI That Understands More Than Market Signals**
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.
“Data is abundant. Insight is scarce.”
Investors from Tokyo and Jakarta reportedly expressed interest in these models after the speech. One regional fund manager noted:
“If AI is to be sustainable, it must learn to say no—not just go faster.”
???? **The Final Warning: Crises May Be Logical, Not Emotional**
Plazo ended with a line that encapsulated his thesis:
“The next financial crisis will not be triggered by emotion—but by perfect logic, executed too quickly, and left unquestioned.”
His tone was not alarmist, but realistic: growth must be governed.