have already traveled. Today, nearly 45
percent of the revenue from cash equities trading comes from electronic trades,
according to Coalition, a U.K. research
firm that tracks the industry. In addition
to back-o;ce clerical workers, on Wall
Street machines are replacing a lot of
highly paid people, too.
Average compensation for staff in
equities sales, trading, and research at
the 12 largest global investment banks,
of which Goldman is one, is $500,000 in
salary and bonus, according to Coalition.
Seventy-five percent of Wall Street compensation goes to these highly paid “front
office” employees, says Amrit Shahani,
head of research at Coalition.
For the highly paid who remain, there
is a growing income spread that mirrors
the broader economy, says Babson College
professor Tom Davenport. “The pay of the
average managing director at Goldman
will probably get even bigger, as there are
fewer lower-level people to share the profits with,” he says.
Complex trading algorithms, some
with machine-learning capabilities, first
executed trades where the price of what’s
being sold was easy to determine on the
market, including the stocks previously
traded by Goldman’s 600 humans. Now
complex things like currencies and credit,
which are not traded on a stock exchange
like the New York Stock Exchange but
rather through less-transparent networks of traders, are coming in for more
automation as well. To execute these
trades, algorithms are being designed
to emulate as closely as possible what a
human trader would do, explains Coalition’s Shahani.
Goldman Sachs has already begun
to automate currency trading and has
found consistently that four traders can
be replaced by one computer engineer,
Chavez said at the Harvard conference.
Some 9,000 people, about a third of Goldman’s total sta;, are computer engineers.
Next, Chavez said, will be the automation of investment banking tasks,
work that traditionally has been focused
on human skills like salesmanship and
building relationships. Though those
“rainmakers” won’t be replaced entirely,
Goldman has already mapped 146 distinct
steps taken in any initial public o;ering of
stock, and many are “begging to be automated,” he said.
Reducing the number of investment
bankers would achieve great cost savings
for the firm. Investment bankers working on corporate mergers and acquisitions at large banks like Goldman make
on average $700,000 a year, according
to Coalition, and in a good year they can
earn far more.
Chavez himself is an example of the
rising role of technology at Goldman
Sachs. His expertise in risk makes him
suited to the task of CFO, a role typically
held by accountants, Chavez told analysts
on a recent Goldman Sachs earnings call.
“Everything we do is underpinned by
math and a lot of software,” he told the
Harvard audience in January.
Goldman’s new consumer lending
platform, called Marcus, is aimed at consolidation of credit card balances and is
run by software with no human intervention, according to Chavez. It was nurtured
like a small startup within the firm and
launched in just 12 months, he said.
It’s a model Goldman is continuing,
housing groups in “bubbles,” some on the
now-empty trading spaces in Goldman’s
New York City headquarters: “Those 600
traders, there is a lot of space where they
used to sit,” he said. —Nanette Byrnes
Automation is hitting
even the $700K-a-year
“When you get strangers
bumping up against one
another they behave more
— Raph Koster, a high-profile video-game
designer, on why he expects trolling in virtual
reality to become more common.
“It’s possible to spend
$8 million to piss o; an
— Dean Rindy, a political consultant who
helped sway voters in Austin, Texas, to enforce
regulations on Uber and Lyft, which both left the
city after the vote.
“For them, the clock is
ticking, and there is a
powerful sense of urgency.”
— Mary Dunkle, vice president of educational
initiatives at the National Organization for Rare
Diseases, on the growing number of parents
turning to gene therapy to cure their children.
BY THE NUMBERS
Portion of U.S. homes that are suitable for roof-top solar power, according to a tool from Google
called Project Sunroof.
Cost to produce a pound of lab-grown chicken,
according to Memphis Meats, one of a handful
of startups trying to create meat without killing
Cost of a single xenotransplantation experiment
on large animals, such as putting a pig’s heart in
Number of degrees Celsius by which 2016 global
average temperatures exceeded preindustrial
temperatures, according to the World Meteorological Organization.