Post #301232
2026-02-06 13:55 UTC
Proposition: Index funds are AIs.
I don't mean "someone is using a neural network to run what they call an 'index fund,'" which is no doubt true, but uninteresting. I mean the conventional kind of index fund, based on an actual index, is already an AI itself.
It's making decisions based on the statistical aggregation of a massive collection of recorded human decisions. Training that model looks easy because the structure of the market does most of the work of collecting the data, but /
Replies (1)
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@mattskala@mstdn.io 2026-02-06 13:58
the amount of computation is significant that goes into the individual buying and selling decisions that cause the prices to be what they are - and determine the not-coincidentally-called weights of the securities in the index. There's a function being minimized to determine those weights, namely the losses suffered by market participants, or ideally, the inverse of their profits. Without being a neural network, an index is something very much like a machine learning model. Maybe it is one.