Tom Whipple in More Intelligent Life:
An algorithm, at its most basic, is not a mysterious sciencey bit at all; it is simply a decision-making process. It is a flow chart, a computer program that can stretch to pages of code or is as simple as “If x is greater than y, then choose z”.
What has changed is what algorithms are doing. The first algorithm was created in the ninth century by the Arabic scholar Al Khwarizami—from whose name the word is a corruption. Ever since, they have been mechanistic, rational procedures that interact with mechanistic, rational systems. Today, though, they are beginning to interact with humans. The advantage is obvious. Drawing in more data than any human ever could, they spot correlations that no human would. The drawbacks are only slowly becoming apparent.
Continue your journey into central London, and the estates give way to terraced houses divided into flats. Every year these streets inhale thousands of young professional singles. In the years to come, they will be gently exhaled: gaining partners and babies and dogs, they will migrate to the suburbs. But before that happens, they go to dinner parties and browse dating websites in search of that spark—the indefinable chemistry that tells them they have found The One.
And here again they run into an algorithm. The leading dating sites use mathematical formulae and computations to sort their users’ profiles into pairs, and let the magic take its probabilistically predicted course.
Not long after crossing the river, your train will pass the server farms of the Square Mile—banks of computers sited close to the fibre-optic cables, giving tiny headstarts on trades. Within are stored secret lines of code worth billions of pounds. A decade ago computer trading was an oddity; today a third of all deals in the City of London are executed automatically by algorithms, and in New York the figure is over half. Maybe, these codes tell you, if fewer people buy bananas at the same time as more buy gas, you should sell steel. No matter if you don’t know why; sell sell sell. In nanoseconds a trade is made, in milliseconds the market moves. And, when it all goes wrong, it goes wrong faster than it takes a human trader to turn his or her head to look at the unexpectedly red numbers on the screen.
More here.