By Loren Francis on November 24, 2017
HighView recently had two educational seminars, one in Oakville and one in Toronto, on the fascinating subject of Artificial Intelligence (AI).
A Primer on Artificial Intelligence
Human progress moves ever more quickly as time marches on. More advanced societies have the ability to progress at a faster rate, so it’s no surprise that 19th century humanity made far more advances than 15th century humanity. This is referred to as the “Law of Accelerating Returns”.
And now, we are entering a new age of rapid AI advancement.
AI investment is growing fast. Tech giants such as Google are spending billions of dollars on R&D. Adoption patterns illustrate growing gaps between digitized early AI adopters and others. AI can deliver real value to serious adopters and can be a powerful force for disruption; it has the potential to improve forecasting and sourcing, optimize and automate operations, develop targeted marketing and pricing, and enhance the user experience. There are no shortcuts for business today. Companies cannot delay their digital journey if they wish to remain competitive. Adaptation will be crucial to survival.
Despite it’s upsides, artificial intelligence is scary for many. The idea of AI as a threat stems from the academic theory known as “the singularity” which argues that researchers will eventually develop a machine smarter than its creators. In doing so, this machine would be able to program itself in more advanced ways than humans can understand.
Welcome to the World of AI: Embracing Disruptive Change
Our first speaker, Gayemarie Brown, embraces AI and sees abundant opportunity.
Gayemarie has more than 25 years of digital transformation experience. A seasoned, bold leader and entrepreneur, Gayemarie, through her work as National Innovation Leader for Deloitte Canada, and now as founder and CEO of her own consulting firm, Wintam Place Consulting, is a strategic visionary, helping companies translate their ambitions into practical plans. She is a sought-after speaker, world renowned female futurist, and a self-described lover of humanoids and artificial intelligence.
Highlights from Gayemarie’s presentation “Welcome to the World of AI: Embracing Disruptive Change”:
- We are living in an exponential world. Humans understand linear progress, but exponential progress requires new models and new ways of thinking.
- The rate of change continues to accelerate:
- Digitalization of everything
- Disruption of the old guard
- Costs of technology continue to decline (3D printing, industrial robots, drones, solar energy are just a few examples of how costs have decreased in a short period of time)
- Accessibility to knowledge and the internet on a global basis
- Computational power, discoveries, and breakthroughs in AI advancement, the Cloud, the internet, the proliferation of data, and the rise of Quant computing is changing the landscape.
- Changing business models – many businesses are being disrupted. It’s important for management to stay abreast of change, apply AI, and adapt.
- AI today is excellent at understanding patterns, learning tasks, and is ok with logical reasoning but still weak at abstract learning.
- AI is here to make lives better. Advanced machine learning will augment human capability or replace mundane tasks.
- AI is learning fast. Amazon’s virtual assistant Alexa now has over 15,000 third party skills in just over one year of learning.
- The 2015 DARPA Robotics Challenge required robots to climb a set of stairs, turn valves on and off, open a door, get in and out of a car, and master an obstacle course.
- Today robots are being used for many things – check out Pepper.
A Machine Learning Revolution
Sri Iyer, Managing Director and Head of Systematic Strategies at Guardian Capital, and portfolio manager for the Guardian Global Dividend Strategy is one of HighView’s investment managers. Sri began his career in the financial services industry in 1995, firstly with Global Value Investors based in Princeton, New Jersey, and since 2001, with Guardian Capital.
Sri spoke about how AI, machine learning, and Big Data are changing the investment industry and how Guardian has applied AI and Big Data into their research and forecasting abilities.
Highlights from Sri’s presentation “A Machine Learning Revolution”:
- Exponential increase in amount of data available – 90% of world data has been created in past two years alone.
- Data flood expected to increase digital universe of data from 4.4 zettabytes (or trillion Giga Bytes) in 2015 to 44 zettabytes by 2020.
- Open source frameworks for splitting complex tasks across multiple machines and aggregating results has dramatically diminished barriers to entry allowing for large scale data processing and opening up big/alternative data based strategies to a wide group of quantitative investors.
- Significant developments in machine learning methods – big strides in pattern recognition, increased focus on investment applications of Deep Learning.
- Adoption of Amazon Echo, Google Home, and Apple Siri rely heavily on Deep Learning Algorithms.
- Goal of machine learning is to enable computers to learn from their experience in certain tasks. Machine learning methods attempt to uncover relationships between variables: when given historical patterns, the machine forecasts outcomes out of the sample.
- Guardian applies machine learning to help predict outcomes for dividend securities.
- Collective intelligence of a diverse and independent group typically yields better estimates than any one superior individual.
Artificial Intelligence: Impact and Benefits to Competitive Strength
Another of HighView’s investment managers, Chris Page is President, CIO, and founder of Laurus Capital. Laurus relies on deep fundamental research and maintains concentrated portfolios of financially strong and well-managed companies with long term growth potential. For more than 30 years, Chris has held a number of senior positions within the investment and insurance business and founded Laurus with a vision of a firm focussed on client wealth creation through prudent risk averse investing and a culture that fosters independent thought.
Chris spoke about some of the Laurus Small Cap investments in companies with regards to how AI impacts and benefits competitive strength.
Highlights form Chris’s presentation “Artificial Intelligence: Impact and Benefits to Competitive Strength”:
- Businesses can use AI to their competitive advantage.
- AI can add value to knowledge and data, enriching the client experience and enhancing human judgement.
- Advantages of AI include:
- Limiting competition (first to market, specialist knowledge, quality differential)
- Increasing margins
- Greenfield capability
- Having a continuous client (locking in client with technology platform)
- We all know big names like Google and Amazon, but there are numerous investment opportunities in the small cap market where companies are utilizing AI to their advantage.
- Examples Chris spoke about include Kinaxis, Wabco, and Intuit among others.
For Chris’s presentation, please click here.
In Closing
The capabilities of artificial intelligence are rapidly increasing, which will have a significant impact on business and the economy, as well as the investment industry in particular.
It’s important for savvy investors and forward-thinking investment firms to stay engaged in the ongoing discussion and developments as this exciting technology progresses.
HighView is an experienced fiduciary investment counselling firm committed to investor transparency. We would be happy to discuss our goals-based investment approach with you and your professional advisors.
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