Question:  

How do you think artificial intelligence will influence financial markets, consumer behavior and society?

Answer: 

Until recently, computers needed humans to program their functions and computational capabilities. Artificial intelligence, or AI, allows computers and related devices to acquire and apply knowledge without human programming with AI.

AI has expanded beyond the limitations of human intelligence. International Business Machines (IBM) states that “if every person on earth completed one calculation per second, it would take 305 days to do what the world’s most powerful computer can do in one second.” Robots perform surgery and other complex tasks because they can evaluate billions of transactions for automated systems. The impact on financial markets, consumers, the workforce and the global economy is profound.

AI is simply based on a binary code of zeros and ones. In high school we used computer punch cards to write computer code for computers as big as an entire classroom. Today’s computers use AI as the foundation for learning without dependence on humans. As singer and songwriter Joe Walsh of The Eagles wrote, “I’m just an analog man in a digital world.”

Natural language processing (NLP) allows computers to understand our language rather than its binary language. Examples of this are Siri and Alexa. The more we use them, the better they become, teaching themselves to be more efficient, expanding into the “consciousness” and experiences of computers in shared networks.

Just as humans evolve and grow based on shared experiences and discoveries,  computers do the same. We rely on specialists to share knowledge to find and produce oil to put gas in our cars. NLP is similar in that computers share neural networks creating outcomes with consumer directed advertising or anticipation of needs. 

ChatGPT is a computer program that mimics human conversation. As a form of AI, it can do things like finding information or provide customer service and support. No matter how you may feel about them, Chatbots are becoming more sophisticated. Virtual assistants can answer routine questions and know when to escalate an inquiry to a human. In these instances, AI saves time and resources. Robotic interaction is another use of AI for routine and core tasks, also deducing when to defer complex issues to human beings.

Follow the Money

Since the early 1800s, industrial and technological revolutions have led to developments influencing finance, transportation, energy, and technology companies over the years. These have included the advancement of the steam engine, railways, assembly lines, and greater productivity in manufacturing and output from increased efficiency. The 20th century transformations led to the computing and the technological revolutions.

As with previous changes and innovations, old methods are replaced with more effective, efficient, and profitable techniques. Just as Cornelius Vanderbilt drove the railroads to the forefront, Andrew Carnegie did so with steel, John D. Rockefeller in oil, and Henry Ford with the assembly line and automobiles, so have Bill Gates and Steve Jobs with computers and software. The next captains of industry will lead with prowess in Artificial Intelligence.

At the turn of the 20th century, railroads lost their prominence as cars and airplanes fueled by oil took the lead. Firms that produced oil represented a great share of the stock market until replaced by technology and software companies. A similar transition is likely to take place by the mid-21st century as firms specializing in AI could become more valuable to shareholders and society. 

AI has the potential to increase economic efficiency and effectiveness just as steam power and transportation improved output and productivity decades ago. The impact on global economic growth could be profound.

Price Waterhouse Coopers, an accounting and consulting firm, estimates that AI will boost GDP by $15.7 trillion by 2030, an increase of approximately 16% from today’s levels. In addition, AI has the potential to reduce risk and cut costs with increased accuracy and automation leading to greater value and profitability. 

During the agricultural, industrial, and technological revolutions there was a fear of job loss and a threat of automation. There’s some comfort in knowing that jobs requiring decision making and communication skills are less likely to be replaced by AI and robots. In the 18th century 50%+ of laborers were involved with agriculture. Thanks to technology, that amount is now less than one percent with non-manufacturing and non-agricultural jobs making up the largest share of the workforce.

Labor markets will evolve alongside AI although transitions can be painful for some. However, as the US and global economies experience lower population growth and labor shortages, innovative technology will come in handy by allowing workers from obsolete jobs to move into more promising, challenging and rewarding positions as we continue to evolve and adapt. Stay focused and plan accordingly.