“Machines Can Trade. But Can They Govern?”“The Hidden Risk in Automated Markets: No One Saying ‘Wait’”
During a speech delivered at one of Southeast Asia’s top business schools, the algorithmic investor and strategist Joseph Plazo voiced concerns that many in his field tend to ignore.
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.
“Speed amplifies—not replaces—the need for reflection.”
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 failed to anticipate a shift that any seasoned investor would have questioned.”
???? **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:
- Does this trade align with the organisation’s ethical posture?
- Has the recommendation been challenged by human insight—policy awareness, historical precedent, market tone?
- If this fails, will someone take responsibility—or will the blame check here 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:
“Governance is lagging behind growth.”
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 models did what they were told. But no one asked whether they should.”
???? **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:
“This is the first practical answer to AI’s ethical vacuum we’ve seen in Asia.”
???? **Silent Errors in a World That Doesn’t Pause**
Plazo ended with a line that encapsulated his thesis:
“It won’t be chaos that brings us down—but confidence in models we don’t challenge.”
For investors and policymakers alike, the message was clear: AI is here to stay. But leadership cannot be automated.