Why Cyborgs Rule

I recently watched Magnus, an excellent documentary about Magnus Carlsen. The movie covers the personal and public life of Carlsen, who is a Norwegian chess grandmaster and the current World Chess Champion. He became a chess grandmaster in 2004, at the age of 13, making him the third youngest grandmaster in history. He is the highest rated player in the history of chess, with a peak rating of 2882.

As high as Carlsen is ranked, he does not beat the best chess-playing computers in the world. The best chess programs are routinely ranked in the 2900 to 3400 range. The current king of chess software is the Komodo Chess Engine, with a ranking of 3393.

As high as Komodo is ranked, it is not the current king of chess. With rankings in the 3500 to 3800 range are a small group of “Cyborg Chess Players.” These are human players who are making decisions with the aid of chess programs. Several years ago, Steven Crampton and Zackary Stephen paired with three chess programs, defeated a significant list of grandmasters (humans) and the best chess programs. Today, freestyle chess tournaments (where any combination of human/computer can be used to compete) are routinely won by these human/computer teams.

Interestingly, the humans leading these winning cyborg teams are not grandmasters themselves. Crampton and Zackary are ranked as chess amateurs (with rankings of 1398 and 1685 respectively), yet their skills put them at the top of the chess world.

What’s going on here? How are amateur chess players armed with chess programs better than the best humans and the best chess programs?

The cyborg player has a different skill set which leads to their success. These players excel at knowing when and how to intervene in important decisions. They are helping the computers focus on goals and priorities, adding scenarios the computers may not have reviewed, and considering each program’s strengths and weaknesses in order to make their final decisions.

I think this is virtually identical to the skillset required to provide excellent financial planning advice! (Yes, this article does have something to do with financial advice!)

It’s not hard to find software that will ask you questions necessary to complete your tax return. It’s not hard to find software that will run complex simulations to determine 10,000 possible paths to your retirement. It’s not hard to find software that will make a recommendation for the timing of taking your Social Security benefits. It’s not hard to find software that will build and actively rebalance your investment portfolio.

However, these crucial decisions are not made in a vacuum. They require knowledge of your goals, preferences, and priorities. They need to consider alternative scenarios. They often require combining software programs (say a Social Security optimizer and retirement projection software) to find the best answer for you.

Although software solutions are getting better every day, financial advisors that put you at the center of every decision, use their experienced intuition, and have excellent software skills will continue to best serve clients. I work hard in all of these areas, so I can be an excellent cyborg advisor.

Besides, today’s automated advice falls short in helping clients with the behavioral side of planning (spending too much, spending too little, chasing returns, jumping out of the markets, etc.). Holding hands and keeping clients accountable has the most impact on clients’ long-term financial health - it’s one of the most important things I do.

(Special thank you to Michael Kitces for an excellent article on this topic.)

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