Courtesy of Pam Martens
Source: Ru and Schoar Using Compremedia Data
By Pam Martens and Russ Martens
The Kansas City Fed’s annual symposium in Jackson Hole is typically a dry affair with central bankers and economists expounding on theories that are incomprehensible to the average working person — whose focus is on making their monthly mortgage payment, saving for their children’s college tuition and building a nest egg for retirement.
This past weekend’s event, however, produced one highly relevant paper for the average Joe. Professor Antoinette Schoar of the Massachusetts Institute of Technology (MIT) spoke on the effect of investments by “JP Morgan Chase, Citi, Goldman Sachs and Bank of America into AI [artificial intelligence], machine learning and big data,” stating that their investments are “a multiple of all other banks.” Schoar warned that the “emergent Fintech technologies” that result from these large investments “might in fact reinforce concentration in the industry given the enormous economies of scale from having larger data sets.”
Antoinette Schoar, MIT Professor
The larger data sets in the banking industry that Schoar is talking about is akin to what Facebook is doing in micro-profiling its users in order to offer deeply granular information to advertisers and thus gain ever larger market share of ad dollars. What the mega Wall Street banks are doing with artificial intelligence and machine learning is separating its customers into categories of financially sophisticated, less sophisticated, and outright dummies. That data is then used to effectively prey on the financially unsophisticated.
…
