Will Algorithms Replace Human Traders? | Peter Tuchman, The Einstein of Wall Street

0:00 I was four years old when I started. I was a prodigy trader. Our house growing up. Art was everywhere and books were everywhere. I'd been a broker on the floor for 41 years. With technology, now it happens in a millisecond.

0:11 But before you sit down. Right.

0:13 You should all you should all see this. It's all about branding, marketing, and merchandise.

0:23 You got a mic next to you. Alrighty. Let's get right into this. Um I'm a former hedge fund allocator in another life, and this man's face told me on a daily basis more about the direction of the market than any analyst report that I ever had to read. So, Peter, it's just a it's a weird thing sitting on the stage next to you at Christie's.

0:50 So thank you so much for joining us. My pleasure. You know and name frequently the exact day you started on the exchange.

0:58 I do. It was March 28th, 1985.

1:01 How did you know this was your calling?

1:03 You know what? I actually did not. You know, I grew up in New York City and I was sort of uh entrepreneur as uh as a high school. I went to Riverdale Country School and I was already sort of a bit of a hustler there. I was making actually t-shirts and selling them at Grateful Dead, sorry, uh making t-shirts and selling them at Grateful Dead concerts.

1:22 And um and then I went to college and actually I have a degree in agriculture. That was my first degree, I'm not sure where that came from. And then I sort of pivoted into international finance, and I ended up spending two years in West Africa running an accounting for a Norwegian oil company. So I've done lots of things sort of on the quest to find what I really love to do.

1:42 And then uh, but after college, I uh I came back to New York and I ended up, I was getting a master's at uh Baruch in uh business. I opened up a record store on Bleaker Street, uh, and it was, you know, we're talking 1978. It was modeled after a European uh record store. It had a coffee shop and an art gallery, actually, way back then.

2:02 I didn't even realize that. That's where my relationship to art goes to. So it was a sort of a beautiful little shop on Carmine Street, and uh everyone should know that neighborhood. And uh so you read a coffee shop, an art gallery. You could listen to the records before you bought them. So it was already sort of a concierge experience that I was involved in, and um, and I was trading commodities.

2:23 Uh, and then that sort of didn't really work out, and I was smart enough to know when you know you start something and you make a go at it and it's not working, you go to the front door, you lock it, and and move on. And so after uh spending that time in Africa, I came back to New York and I was 24, and I ended up getting a summer job on the floor of the stock exchange.

2:44 And I had, you know, a number of family members who were in finance, and um they knew that that atmosphere, that sort of adrenaline-filled, I mean, you have all you've probably all seen what the movies of Wall Street looked like back in the 70s and 80s. It was a open outcry, auction market, Christie's, right?

3:02 I mean, it was not as as um uh uh sort of, I don't know what the word would be. The the difference between the way our auction market works and the Christie's auction market is a little bit different. You know about that. We're a bunch of adrenaline filled screaming and yelling. Open outcry is how we describe it.

3:19 But I kind of knew it was for me. Literally, the moment I walked down on the floor, there were 7,000 people there. And uh, you know, I felt like I had arrived.

3:26 And you you you mentioned to it so the Corona Record Gallery.

3:30 It was called Corona Record Gallery, it was uh named after Norwegian money.

3:34 And uh rare jazz vinyl African art. Correct. And you also talked about uh nights at Studio 54.

3:42 I was actually the doorman at Studio 54, and I I survived to tell the story, yeah. Not that many people did.

3:50 So was there a collector and a curator already inside you?

3:54 You know, I really think so. I mean, the fact that I was already collecting African art and selling it, you know. The funny thing about my uh experience with my record store was that by the time I opened the doors of the store, which really was it was a beautiful espresso bar and a beautiful art gallery, I did not, I had not uh budgeted for records.

4:14 And so I did not have enough money by the time I opened the door to buy records for the store, so I put my own record collection in the stacks, and I ended up having to sell that. But uh, you know, there was definitely a uh a collector and a curator in me at that point.

4:28 And you've also traced this to your childhood, your parents arrived in 1949 with what you called a certain aesthetic.

4:36 You know, look, my parents are from Eastern Europe, they're Holocaust survivors, um, you know, so they went through four years in in concentration camp. They ended up falling in love after the war and uh moving to America and really realizing their American dream. My father became a well-known doctor, and my mother uh was by his side throughout the whole time.

4:56 And so that Eastern European, uh, I would say, you know, sort of Jewish um uh, you know, education and art, you know, I mean, uh in our house growing up, you know, there were uh art was everywhere and books were everywhere, and that whole aesthetic of, you know, knowing as much my mother spoke 14 languages.

5:16 Um and so we had that clearly some uh special aesthetic, you know, and it are obviously art was uh a big part of that.

5:23 And and that inheritance, you know, it shapes your eye, and I think this is incredible. Um you eventually took over a whole corridor in the New York Stock Exchange, the big board art hall.

5:37 So yeah, I would love to talk about that a little bit because you know the so the stock exchange is, you know, the artwork in the stock exchange, you know, their etchings of Alexander Hamilton and their pictures of, you know, the 1600s, 1800s. And when I got, and I I've been a broker on the floor for I've been there now for 41 years.

5:55 I was four years old when I started. I was a prodigy trader. Um anyway, you know, when social media came along and I got on Instagram, you know, Instagram has this amazing ability of introducing you to things that you're interested in and watching. And so they started sending me things about finance and things about art.

6:12 And it turns out that there's an incredible generation of young artists, pop artists, uh, whose art relates to money. Uh, and there's one, Mr. E is another one, King Saladin is another one. And so they all sort of started to come into my world, and I met them. It turned out very many of them knew each other.

6:29 And so I went to the stock exchange and I said, you know, we're, you know, Twitter is listening and Snapchat, and the market is becoming a little hipper, as it were. I said, would you guys give me a wall to put up some more modern art than is in the building? And they uh I did not think they would go for it because they they're a little bit conservative.

6:46 And the gentleman who was head of communications fell in love with the art that I had proposed. And so not only did they give me a wall, they gave me the corridor where, so the sixth floor of the stock-chain is where the boardroom is. The boardroom is an incredible room modeled after Versailles. The ceiling was commissioned in 1860 by Tiffany.

7:04 You know, before Tiffany made diamonds, they made stained glass, and there's this incredible room. The ceiling is all uh the the walls are made of gold. And so uh so everybody, every CEO, every head of state, prime minister, everybody who's launching a new company uh has to walk from the elevator to the boardroom when they're ringing the opening or closing bell.

7:26 So they were nice enough to give me that walk from there, and that's where I put my gallery. So we were recently voted one of the most notable private galleries in the world. I've done three curations uh since then, and so I basically everybody who gets to ring the opening bell, which is a very exclusive group, uh gets to walk through my gallery, and it's been that's been one of the most extraordinary things.

7:49 And you know, it's it's interesting because in a way you embody that there is more of an overlap between Wall Street and 20 Rock than I think we we want to to believe or led to believe. And you call the exchange the last human market.

8:09 Correct.

8:09 You know, and the art world runs on, I think, a similar irrational conviction. What do you believe they both get right about valuing what can't be measured?

8:23 You know, it's amazing. So there, you know, stock markets around the world historically did have human beings involved. Obviously, technology came along probably late 80s uh into the early 2000s. We resisted the technology coming in and taking over the the trading world on the floor of the New York Stock Exchange.

8:41 Everyone should know that, which is where a lot of the tech stocks are traded, is you know, you may see it on TV when they ring the bell, but it that's you know, and they see confetti and you see people there. There are no humans there. It is literally an electronic marketplace. So the NYSE, the New York Stock Exchange, is the last human marketplace in the world.

8:58 There may be three brokers somewhere in Amsterdam trading a few shares of stock, but that's been one thing that we we have maintained on the floor of the stock exchange. At one point, you know, in 1903 they issued 1366 seats on the stock exchange, which gives you the right to trade. And they've they've kept that.

9:14 And so that that place where you know humans were you know interacting and actually you know negotiating, finding value in these publicly traded companies, something that no machine or no AI, sorry, I wasn't gonna say AI, uh could do. Um and so we've been able to, you know, in this world that is where our whole lives have been sort of not taken over, but infiltrated, I would say, by technology, and a little bit virtually every business has been infiltrated by it.

9:42 Uh we, the stock exchange and the people there um have realized that that human element is so important, more important now than ever before. Everyone says, oh, you you guys are like a bunch of you're an old museum, we don't need you anymore, you know. Uh the stock market doesn't need humans involved.

9:59 But in a world and a market where this volatility and madness, you know, we have days now, uh, courtesy of our the new administration where this volatility levels that we've never seen before. Things happen in one day today that used to take a generation to happen. We can literally, by definition, go from a bear market to a bull market over a coffee break, right?

10:19 And that's trillions of dollars of value being lost and added to the market in any given day. And so if you think about it, you know, you get on a plane and you're going across to Europe and everything's cool and the weather's fine. You know, you wouldn't be that concerned if you went to the cockpit and it was just on autopilot.

10:36 But if you're out there and you hit a storm over the ocean, you surely want to know that there's somebody flying that plane, right? I'm not somebody who's going to, you know, get on a plane where there's no pilot, get in a car where there's no driver, and let nobody or a robot uh take control of my money, right?

10:52 And put a value on things that are important to me. And so we've been able to, in this world where so much technology has taken and infiltrated our lives, we still have that human element. I happen to be lucky enough to be the ambassador and sort of the face of the stock exchange. And, you know, obviously my emotional uh quote you, uh, you know, everybody seems to know that I'm the face when there's a great market or there's a bad market.

11:14 So I'm, you know, it's it's an equal opportunity face uh emotion. Uh but the human element in this world, even though people think it's not necessary, is more necessary and relevant, I think, than ever before.

11:27 You in the world that I lived in, and really what I was telling somebody at the dinner last night that uh I won't say where I worked, but I owned for three years in a row the largest seamless web uh tab and the largest uh black car tab. Um and my team was small, and you said something in a past interview, and it landed with me.

12:01 I think because I I lived this and was forced to live this. Um I spent over a decade in investment management, and more than half of that was rebuilding uh the private funds product desk uh again for this very prestigious investment bank that bought a once very prestigious investment bank. And yeah, we're naming this.

12:27 Um and over that period of time I had a very small team and we regrew this this business line from literally zero dollars to multiple billions um just prior to me coming over to to Christie's. And again, I'm I'm I'm emphasizing how small my team was. I was trying to do the math. We're talking maybe 12 people total that built this.

12:50 And it was the camaraderie. It was that human connectivity that really allowed for that success to be possible. And you were alluding to it, but I'm just gonna give the number. Um and for some of you who just may not be familiar with this, 70 to 90 percent of the daily market volume is now algorithmic.

13:13 And so what you said was that nothing productive about it. So, what do you working on the exchange floor still see and feel that a machine doesn't?

13:27 So, um, well, good question. It's kind of complicated. Uh look, obviously, order flow is one thing that I can see. Uh, you know, I mean the market, you it's fascinating that how um uh having technology, as I say once again, infiltrate you know, uh our business and as it's done every business, it's incredible to note how.

13:47 So think about it. If I go back to 1985, the way orders were disseminated, right? There was people would be sitting up on a desk at Goldman Sachs or any other company, and they would decide they've got a couple of billion dollars under management. Today they decide they're gonna buy XYZ and sell, you know, ABC.

14:03 And then they would call those orders down to the floor, and there would be a human being there at a at a tree of telephones. We used to have a hundred phones, if you remember when you used to press those little buttons where the light would go on. And we'd pick up the phone, take an order, beep a broker, a broker would come in, you'd give him the order, he would run out to the crowd, there would be a whole crowd, a market maker and other brokers, you know, and everybody would sort of say what their interest was, and we started this open outcry negotiation.

14:29 Um, and then we would we would trade, right? And then the orders would go, I would raise my hand, scream squad, a little person, not a little person, a person would come running up in a little blue coat who made 47 bucks a week. They'd grab the paper, take it to the booth, it was reported, and and uh and then the process began, which was uh you would think this uh with technology now it happens in a in a a millisecond.

14:54 But back then the that order would be input into a computer, it would go upstairs, we would wrap it in a little plastic thing, it would be shot up in a mnemonic tube to a floor where there were these women who would input it and create the ticker tape, right? And then a few days later the money would be matched up, right?

15:09 And you know, and and then in the crowd, there was a person called a reporter who would be putting on the trade, they would have to uh notate uh if that's a if that's a word, who bought, who sold, how many shares, uh, the price, the time. So that we it was basically the beginning of blockchain. They would have to put a ledger to every trade that happened, right?

15:29 Now this is all done at at you know within a millisecond, right? But it's still this the that process still is exactly the way it was done back then. It's just happening, you know, in a queue, right? If I enter an order now electronically, the order still has has to go behind everybody who got ahead of me on this amazing information highway.

15:50 And so, you know, even though it's being done electronically, you know, it it it the human element is still very powerful within that mode. I mean, right now, you know, when I get to the stock exchange, I'm able to identify the order flow, the dollar notional value of stocks coming in for the opening bell and closing bell, which are our biggest auctions, right?

16:12 If anyone is watching their portfolio, please never look at your portfolio when the market's down a thousand points at the end of the day, because there's nothing you can do about it. Um, you know, but but still, those are our biggest auctions, right? Which is amazing, you know, to be in Christie's, right?

16:27 For me, that's incredibly exciting because my world is all about auctions. So on the opening bell, you know, millions of shares trade. On the closing bell, those are that's our largest auction. But everything that goes into that moment, it starts with a bell, ends with a bell, all the the the the the elect the technology and then the human input is incredible that goes into that auction, right?

16:50 I mean, I can just sort of think of, you know, when you see what goes on here when there's an actual auction of the person up front and the people in the crowd with their number and all that. Um what what I can see there, you know, even though there are very few people, I mean there are probably about seven, eight hundred people, you know, everybody has sort of a different way of interpreting what happens on the floor right now.

17:10 There's so much that I see as a human being that's really important. I mean, my customers still want to use me because I offer them an edge. And that edge is how I interpret what I see, right? Within this electronic and techno world of you know, orders going by in milliseconds, the way my brain works, I can actually see it and identify it.

17:30 Yeah, it it's it's that context, and you know, you you alluded to this as well. You know, again, you your expressions, they're they have been called the aspirations and disappointments of investors the world over. But you've also experienced a number of key moments of their um panic in both directions, right?

17:51 So Black Monday in 87, the dot-com burst in 2008, because created my career, to be honest with you. Um COVID. We're obviously sitting now on a another panic trade, a FOMO trade. And there's something interesting, you actually said this. Um you apparently read my notes, even though you said you didn't want to know my questions.

18:12 Um that these recoveries they're quicker than the one prior.

18:18 You know, um I'm glad you asked for that because it is so important, that is information. So, one of the things I do, I'm not a financial advisor, I'm a trader, and I'm I call myself a forensic broker. I try and explain to the world, I have a huge social media following, who uh for some crazy reason loves to listen and watch everything I say about the market.

18:37 Uh but you know, the um I've actually traded more crashes than any human being alive today. My dear friend Julia uh was on the floor for many years, and we would do interviews at the end of the day to try and understand from a forensic point of view why the market uh did what it did. But literally every one of these sell-offs, pullbacks, consolidations, and crashes, and there have been just a handful of them, have actually been a better buying opportunity than a selling opportunity.

19:05 If you want to get specific, if one goes back to the uh the financial crisis of 2008, right, and each one of the crashes that we've had has had different components that made it happen, right? If you go back to the crash of 2008, each one of these crashes and pullbacks that we've had has had different components that made them up, right?

19:26 We know that 2009 was a predatory lending crash, right? We knew that those those guys up at what firm we won't discuss, you know, created these or decided they were going to lend uh credit and give sell houses to people who could not afford either of them, and then they created this this this big bubble, and uh we ended up in a massive financial crisis.

19:48 When we had to, and when when when the uh the gavel fell on the New York stock exchange and our economy, the Federal Reserve decided they would put $800 billion into the market as a stimulus to backstop what would have been an incredibly devastating, it was devastating as it was, but it would have been a lot worse, uh, to uh backstop the the economy at that time.

20:10 They put $800 billion into the market over 18 months. It took nine years for the market to get back to even. During COVID, and we obviously a health crisis, way bigger in a lot of ways, uh, they realized that the work they had done in the last one would not be sufficient in this one to bail out our economy, and they put $3 trillion into the market over three months, and we were back to even by August 12th of 2020.

20:35 If you'll remember, COVID was May 23rd, 2020. Okay? We were back to even in the market after selling off 10,800 points in the Dow Jones Industrial Average. We were back to even by August 12th.

20:48 Well, the humans chase the algos and all of those. I mean we'd uh as we wrap up here. You started off as a collector, we'll call it. You today champion young street artists, you encourage students to chase their dreams. Forty years on the exchange, you will eventually walk off that floor for the last time.

21:10 No. What do you hope they'll carry?

21:14 What?

21:14 All right, they'll carry they'll drag you off the floor of the exchange. One last time.

21:20 What do you hope the market remembers about the human side that the data uh about you know uh how how integral human beings look, you know, this this thing that we have here, while everybody seems to think it's a way of connecting us, it's very it can be we can stand at a party and sort of hide in the back and be anybody we want, and nobody really knows who we are, are, and we can really isolate ourselves.

21:44 And it, you know, as much as social media has sort of come out as this way of connecting us, it really isn't. You know, if you look at I I do a lot of work with high school and college students, and you'd be amazed at how they have no idea how to interact with another human being, right? They only know how to do it with this, and then and that's not their real self, you know, and and so I really try and uh I think the most important thing is the human connection.

22:09 That is I I the legacy that needs to be, you know, happening from now on is the fact that we need to connect to each other. So much can happen. We everybody thinks, oh, you need to do some really big thing to change the world, but literally one person to another, that connection that can start something, uh, you know, start the ball rolling that's so powerful, and it's really important that we use all the technology that we have and all this social media to connect each other in every possible way, as opposed to it being, you know, something that's very exclusive and not inclusive.

22:41 And you know, the human interaction uh from one human being to another is clearly the most important thing. That will be it. If we don't do that, we'll probably blow ourselves up. But uh it is. And and no one will even know what happened to you know who what happened to the person next door. We need when when the work I've done, when I've been able to put people together uh around whether it's the stock market or around whether it's art, uh, it's extraordinary that feeling that you get, you know, when you're I'm a team player.

23:09 I love, you know, I I don't need to be standing on some mountaintop with a whole bunch of cash by myself. I want everybody to sort of uh you know experience the success and the feeling you get when people are together and and talking to each other and communicating. So that's what I'm hoping for.

23:23 Well, thank you so much for being uh for being the face of the market for 40 years, educator.