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Can A Software Program Be A Better Investor Than Warren Buffett?

Back in 1990’s, no one thought that a computer might one day be a better chess player than a human. However, in 1997, IBM supercomputer Deep Blue defeat world chess champion Garry Kasparov in a nail-biting 6 games.

Now, most people would agree that it is only logical that a supercomputer will be better in chess than a human player. Chess has roughly 140 million maximum logical possible moves and it seems that as long as it is a game of probability, a computer can easily calculate the best possible move every time, thus increasing its chances of winning. Advancements has also been made in the field of board games such as WeiQi, known to be a far more complex game from a mathematical point of view. Interestingly, the program used to find the perfect WeiQi computer master is based on the “Monte Carlo” software, the same platform used for many investment stimulations.

So, does that mean that one day a Supercomputer be a better investor than Warren Buffett?

The short answer is maybe. Though I feel it might take a far longer time compared to creating the perfect chess player. This is because there are many obstacles for computer software in becoming the next Warren Buffett. For one, unlike a game of chess, investing is less dependent on mathematic probability and formula. It also depends on the sentiment and psychology of the market. We always hear the cliché that investing is both an art and a science. I am sure it is possible to use software to simulate the “science” part of investing, it is the “art” part that programmers have to worry about.

I imagine that some challenges that a software might have problems analysing would relate to qualitative analysis that involved the management, culture of the business, and market sentiment on the company. Unlike a chess board, the environment that exists for an investor is ever-changing. This makes it extremely hard for a logical computer to comprehend. It begs the question of whether the ultra-logical supercomputer is able to make decision based on irrational market condition.

Foolish Summary

Yet, I feel it is too early to say that it is impossible for a computer to be a great investor like Warren Buffett. After all, IBM has also invented Watson, the supercomputer that is able to understand human language and process information like a human. It went on to win the famous game show “Jeopardy”, opening up the prospect of its commercial usage in the future. Maybe one day, the best investor in the world will also be a supercomputer located somewhere in a server room. For now though, your best bet is still to rely on yourself.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim does not own any companies mention above