For those of you who would prefer to listen:
I was in Arizona this week for strategy sessions with Schwab. There were over 150 firms represented from across the country congregating together to discuss industry issues and opportunities. The focus was both on today and, even more so, tomorrow. The future is clearly now.
It should come as no surprise that the advancement of Artificial Intelligence (AI) was a chief focus of discussion. The subject was analyzed and debated as to the compelling benefits but also the very real threats AI poses. Throughout time, innovations have always required clear understanding and responsibility of use. Early humans learned quickly about the extreme benefits fire provided, as well as the devastating danger that fire posed. Fire brought light and warmth. It also destroys.
AI is revolutionizing the financial services industry. Increased accuracy and consistency are the early results. AI is providing more efficient operations and has really enhanced risk management. That’s important for all of us. Schwab is our frontline partner there.
So what does AI look like in our industry now? I get the same answer from humans as well as ChatGPT. AI-powered chatbots and virtual assistants are increasingly used by financial institutions to provide customer support, answer queries, and assist with routine tasks. AI is instrumental in detecting and preventing financial fraud by analyzing patterns and anomalies in transaction data. It can identify suspicious activities in real-time and flag potentially fraudulent transactions for further investigation. It doesn’t stop. Machine learning algorithms can continuously learn from new data to improve the accuracy of fraud detection systems. It works 24/7.
AI presents many challenges too. Remember, AI runs on data. There is a massive amount of data out there in this Digital Age. Maintaining our privacy is essential. Proper oversight is required. The problem is, who decides? Corporate America is playing a major role in the development. Silicon Valley is showing signs of collaboration. It’s a really good start. Our Federal Government needs to establish rules and provide proper oversight. One of the biggest problems is the lack of confidence in Congress’s ability to deliver. Washington doesn’t seem up to the task.
There’s a natural fear that AI will destroy jobs. No question. It will. It already is. But that’s been the case with innovation all along. The Industrial Revolution brought heavy machinery to the forefront to do what human labor couldn’t. It resulted in an increase of jobs that were more dependent on human brains than human hands. Consumers benefitted.
Venture Capitalist and Silicon Valley entrepreneur Peter Diamandis presented to our group this week. Exponential Tech was his theme. He reminded everyone that change is a constant. The thing is, learning a new strategy can be easy. Unlearning an old strategy is what’s hard. People get used to certain ways. They tend to resist change. To stay ahead, you need to evolve and adapt. What got us here won’t get us there.
Diamandis explained that our brains are wired for the linear world. Today’s Digital world is exponential. It’s being driven by supercomputers. Computers are getting faster and at a much faster rate. The world is speeding up.
Diamandis said that in 10 years, there will be 2 kinds of companies: Those that are fully using AI and those that are out of business. Robots are coming. They’re washing dishes. They’re cleaning toilets. Robots are taking jobs that most don’t want. He referred to them as the 3Ds: Dull, Dangerous and Dirty.
Here’s the good news: Automation of mundane, repetitive tasks will mean that core human qualities such as creativity and emotions will see increasing value. Emotional engagement is still real. Behavioral economics emphasize human capital. 90% of decisions are driven by emotion. We humans make a lot of decisions, every single day. We are not thinking machines that feel. We are feeling machines that think.
Our hearts are 100k times stronger electrically and 5K times stronger magnetically than our brains. That means people can sense and feel connections and turnoffs far before words are spoken. Hi-Tech is about hardware and software. Our bodies are the hardware. DNA is our software. Enter CRISPR. Clustered Regularly Interspaced Short Palindromic Repeats is a technology used to selectively modify the DNA of living organisms. It’s a gene-editing tool that can identify and treat deadly diseases. Innovation has made it possible.
Claude 3, the Large Language Model AI application developed by San Francisco based start-up Anthropic, is considered the smartest in AI today. A recent test resulted in a 101 IQ. Claude is the first AI to clear 100, which is the average human IQ. For perspective, Albert Einstein had an IQ of 155. Elon Musk is believed to have tested at 160.
Artificial Intelligence is getting close to human intelligence. ChatGPT-4 came in with an IQ of 85. Google’s Gemini tested at 78. The next Claude version is expected to hit an IQ of 120 next year. ChatGPT is expected to hit 104 with its next version. What’s more, ChatGPT passed the medical exam as well as the Law Bar exam. Those are no easy tasks. Machines are constantly getting smarter. AI will ultimately represent a combination of all the smartest people who’ve ever lived.
Have you heard of Ameca? It is one of the world’s most advanced “humanoids.” That’s a human-like robot. Ameca has realistic facial expressions and movements. She can also hold an engaging conversation with eye contact and a smile. Communication is not just about speech but also about expressions and gestures, a concept integral to Ameca’s design and functionality.
Ameca did something revolutionary at the United Nations last Summer. The humanoid demonstrated not just technological advancement but also conversational skills. She discussed global challenges and the potential contributions of robotics. Ameca confidently stated that robots could help improve lives and make the world a better place.
Ameca’s performance at the UN was not just a demonstration of the technological advancement but is also a symbol of the limitless possibilities for AI. Humanoids are specifically designed to interact with humans and perform tasks in environments built for humans. They are entering hospitals, factories, office and even homes providing basic services and company for those that are increasingly lonely and forgetful.
The Digital Age is impacting pretty much everyone. 86% of the global population has a smartphone today. That’s an incredible statistic. The world has never before been so connected. Devices have become advanced communicators. They’re also educators. Access to information is so prevalent. Extreme poverty has fallen to all-time lows. The playing field has been leveled. There’s still work to be done.
It’s important to understand that AI is learning from us. Misinformation and manipulation are serious threats. It could land in the wrong hands. Bad actors using Artificial Intelligence are what’s most dangerous. Governments are not prepared to deal with the advancements. They won’t slow down. There’s no on/off switch. Leaders and regulators have got to get in front of it, and fast.
We’ve had a series of sessions on AI at our firm. We are studying and embracing innovative solutions to enhance our services. In fact, if you’re listening to this audio cast, it’s my voice with AI. After recording these weekly pieces for the last 20 months, there were sufficient samples to replicate and repurpose my voice. So, what you’re hearing today is the result of entering my written text into an AI app that generates a recording with my AI voice.
It’s just incredible what’s happening today. The level of advancement and innovation keeps accelerating. It’s changing our lives. It’s also incredibly investable.
For those that feel like you don’t understand this AI revolution and would like to learn, here is a video that is an excellent introduction. It really simplifies this extremely complex theme.
https://www.youtube.com/watch?app=desktop&v=2IK3DFHRFfw
Have a nice weekend. We’ll be back, dark and early on Monday.
Mike
