Looks like the Captain Magic saga is not over yet. Bloomberg tells us that it "all started over lunch at a Dubai restaurant" so the moral of the story is not to talk about high tech stuff in a restaurant. First of all it's hard to demonstrate your computing prowess in a food establishment. More importantly, aren't such things supposed to be super secretive? My quant managers wouldn't even let me keep that piece of paper/napkin that has just their back-tested returns, as if there's anyway I can figure out anything even standing in front of their matrix-looking computer screens.
Now the comments by the lawyers acting for Costa and Li are really cute.
AI-is-exactly-my-kind-of-thing Li's lawyer says the stop-loss order on Feb 14, 2018 "wouldn't have been triggered if K1 was as sophisticated as Costa led him to believe". Ok so the lawyer knows what a sophisticated computer was supposed to do. Based on what? How did other algo programs in Rentech or Two Sigma or Worldquant behave? And Costa allegedly telling Li that you can manage money entirely using AI? That would really be the end of the human race. Maybe that will free up time for the quants to watch Game of Thrones. Or Terrace House. Which you watch when you really have nothing to do.
But the S&P rebounded within hours, something Li’s lawyers argue shows K1’s stop-loss threshold for the day was “crude and inappropriate."
What if the S&P didn't rebound quickly? What would qualify as a sophisticated program? Was the system "crude and inappropriate" because it lost money? Yeah.. my dad wonders whether the money spent on my Ivy League education (just the school fees we didn't have $6.5M to pretend I was a sailor) was worth it because he made more money than I ever did by flipping properties. Buy low sell high, doesn't take a rocket scientist to figure that out.
Then Captain Magic's lawyer goes for the kill by saying Li "was never guaranteed the AI strategy would make money." Wait, is Li saying he was cheated because CM guaranteed the strategy would 100% definitely make money? If someone says you will make money for sure, you have to either 1) punch the guy; 2) report him to the police; or 3) run away as fast as you can. Because nothing guarantees you can make money. Madoff kind of guaranteed and look what happened.
My insurance agent tried to convince me the other day that I should buy yet another policy because I am guaranteed to die one day, and someone else is guaranteed to make money off my demise. But I countered that if the insurance company goes belly up there will be pay-outs. Ha-ha.
Who to Sue When a Robot Loses Your Fortune [Bloomberg]