Tech can be a blessing and curse, after Goldman Sachs reveals how automation removed need for equity traders
A stark illustration of the risk that technology can pose to people’s jobs has been revealed by Goldman Sachs.
The investment bank explained at a symposium in the United States how computer algorithms and automated programs had replaced at least 600 highly-paid equity traders.
The bank reportedly admitted that there are just two equity traders left in their positions, and hinted that other areas of the financial services sector are also soon to be replaced with automated technology options.
The revelation of the scale of the job losses at the investment bank caused by technology came about when Marty Chavez, the bank’s deputy chief financial officer and former chief information officer, explained it to attendees at a symposium on computing’s impact on economic activity held by Harvard’s Institute for Applied Computational Science in January.
The event was covered by MIT Technology Review, and it reported Chavez as explaining that 600 traders who brought and sold stock on the orders of the investment bank’s large clients, have virtually all been replaced by automated trading programs.
And these trading programs are supported by 200 computer engineers. Indeed, according to Chavez, out of 9,000 people employed by Goldman, about one third are computer engineers.
Apparently complex trading algorithms that do contain machine-learning capabilities, first replaced trades when the price of what was being sold was easy to determine on the market.
And Chavez hinted that other areas are also ripe to seeing people replaced with technology, including currency trading and even some investment banking aspects such as the futures market.
Chavez is set to become chief financial officer of Goldman Sachs in April, and he said that the bank has already begun to automate currency trading, and tends to replace four traders with one computer engineer.
Of course, the brutal headcount reduction of traders will deliver great cost savings for the firm, as these traders can earn between $500,000 (£399,450) to $700,000 (£559,230) a year on average.
“Everything we do is underpinned by math and a lot of software,” he was quoted as telling the Harvard audience. And he said that Goldman’s new consumer lending platform, Marcus, aimed at consolidation of credit card balances, is entirely run by software, with no human intervention.
These inventions are creating a lot of space in the now-empty trading pens in Goldman’s New York headquarters: “Those 600 traders, there is a lot of space where they used to sit,” he was quoted by MIT Technology Review as saying.
The Goldman Sachs example provides a timely reminder of the dangers that technology poses to the jobs market.
Although traders may not gather much sympathy among the global workforce, their demise could be the herald of things to come in other industries.
Indeed, last year business consultancy Deloitte warned that hundreds of thousands of public sector jobs could be automated by 2030, resulting in a reduction of up to £17 billion in wage costs.
The World Economic Forum has previously predicted that automation would lead to the loss of 5.1 million jobs over the next five years in 15 major countries.