This ancient and quietly important word seems to have achieved a new blaze of publicity due to the noisy financial earthquake that has recently circled the globe, partly in the electronic wires and wireless spaces that are the digital highways, partly in the minds of the people who decide whether to trust the numbers on their computer screens, all in the no-man’s land that could be called the global trading space.
A highly educated friend of mine recently revealed to me that she did not know the meaning of the word Algorithm. I was rather shocked because normally this friend would know the meaning of a word and I might not. This made me wonder how I know the word but I felt that I had always known it. Maybe it goes back to the days of school maths.
Wikipedia gives a full description of the term including its history and its various classifications. Having read the Wikipedia entry I now believe that I never did understand the meaning of the word after all. I had the simple idea that it referred to a number of steps that in some way or other represented a formula along a timeline. Not being a mathematician it was a term that I only ever had to understand in a vague sense.
That vague sort of understanding of Algorithm will I think become more common. The term has gone mainstream. It is no longer confined to hallowed mathematical spaces. It has escaped into the real world in a very big computer assisted fashion, and this week as the financial crisis that we are told originated in America has hit the British high street the spotlight is on the rogue algorithms that may have played some role in this vast computer game that seems to me to be what they call money.
This week Algorithms feature strongly in the Economist, which has an article simply entitled Algorithms, with the subtitle “Business by numbers”. We are given a nice easy description from the head of Microsoft Research in Cambridge – “A computer program is a written encoding of an algorithm“. In fact computers feature widely in this article. We are told, for instance, that algorithms that control different aspects of the internet do not always communicate with each other. In another article in the same issue we are told that ants could help us to design better Algorithms. In yet another article we read about “computer generated ‘algorithmic trading‘ programs”, which in some big exchanges are responsible for about a third of the trading.
In “Algorithmic Trading: the use of algorithims in automated trading” John Bates writes “In the algorithmic trading space, an “algorithm” describes a sequence of steps by which patterns in real-time market data can be recognized and responded to in order to detect trading opportunities and place and manage orders in the market.”
Algorithmic Trading, Wikipedia tells us, is also known as “algo, automated, black-box, or robo trading“. These terms are interesting give-aways. A “black-box” normally refers to something that we don’t understand the workings of. “Robo” I assume refers to “robotic“, although I like to think that it might have a hint of “robber” in it. After all, where did all the missing money go?
It originated from the term Algorism, which was derived from the name of a medieval Persian mathematician, al-Khwārizmī, “the father of Algebra“.
See the Online Etymology Dictionary