I. Human & Computers/Robots
As we consider artificial intelligence, we would be wise to remember the lessons of earlier technology revolutions — to focus on the technology’s effects rather than chase broad-based fears about the technology itself. Technology has put us on a path to a cleaner, greener planet. We don’t need to veer off in a new direction. If we do, we risk retarding progress.
However, I see so many people being afraid of the Artificial Intelligence “revolution”. Most people are scared that it takes jobs and ruins careers.
* Technology is neither good nor bad. It is a tool that we must use wisely to benefit us all.
On the subject of humanity’s future alongside technological advancements, history has shown that such developments have the power to change the world but are “never deterministic” on their own.
Technology in itself is neutral, neither good or bad, and it is up to us to make sure we use it for something positive in the workforce. How you see AI depends on which side of the hustle spectrum you’re on. While it may seem like a rat race when it comes to adopting new technologies, it is crucial to not neglect the humans who will ultimately be driving that change.
While the last big revolution brought discoveries such as trains, cars, electricity and television, it didn’t tell us what to do with it.
As emerging technologies such artificial intelligence and biotechnology gain increasing prominence, humanity still has a choice on how they will be used. We are still in control.
Technology can be used mindlessly or mindfully. The key is to put it to work for you rather than getting pushed around by it.
This is the job of governments. The problem lies with many administrations around the world focusing on “old problems” and placing insufficient focus on the potential of emerging technologies.
Exacerbating matters, is the fact the public remains “quite ignorant about these issues” and the subject matter experts in private business or academia don’t have the political mandate to regulate such new inventions.
So we should spend less time worrying about the AI going out of control and more time worrying about the people controlling the AI.
* While it might be true to some extent, the one thing that AI cannot replicate is creativity. Logic is replaceable. Anyone can count 1+1.
Computers are fast, accurate, and stupid.
Humans are incredibly slow, inaccurate, and brilliant.
Machines follow rules.
Humans use judgement and reason.
As computing speed doubles about every eight months, humans soon will no longer be the fastest computer. The human brain, though, is in no danger of being replaced. Computers can mimic how we process information. But how we feel, and how it affects what we do with the information, that can never be coded in. Humans possess the always-in-demand skill of creativity, which computers cannot master. With our creativity and soft skills, we can change and adapt to an environment. Computer aren’t capable of thinking out of the box in ways they weren’t programmed for.
Computers, though, can facilitate that change and adaptation to advance human intelligence. Computers are very fast idiots that are very good at doing the easy (but tedious) grunt work. And by taking over those tasks free up human workers to do the more challenging jobs (i.e financial advisors, etc.) that require intelligence (beyond what automation is capable of today). So, activities that are easily automatable just include physical activities in highly predictable and structured environments, as well as data collection and data processing. Especially for many workers in routine, repetitive jobs, the risk of being replaced by robots is very high. They will no doubt see their job requirements transformed by technology. So while automation will take over more and more of tasks it just means that you’ll have to do less grunt work and more brain work.
The cost of cognitive labour is going to near-zero. It will change how we undertake the future of work. There are categories that we want to remain expensive. People want wine to be more expensive. They want certain art to be expensive. Luxury goods related to status or exclusivity will remain undisplaced by AI.
There will also be categories where we want a human to be involved–-we don’t just want to talk to a computer. Humans are much better than AI in tasks involving creativity, flexibility, and common sense reasoning.
The way we’re building AI right now is a very alien intelligence. The way birds inspired us to build airplanes; but airplanes work very differently from birds. There will be surprising strengths and weaknesses to both kinds and in turn, plenty of roles for humans.
* It was inevitable that AI may take over logical jobs one day. But the answer to technology disruption lies in our ability to apply humanity to the challenge.
The question is not whether automation going to eliminate jobs. There is no finite number of jobs that we’ve been sitting around dividing up since the Stone Age. New jobs are being created and they’re usually better and more creative jobs. So the question is — how quickly is this transition going to happen, what kinds of jobs will be eliminated, and what kinds of jobs will be created?
I do believe that automation, over a long enough period of time, will replace every non-creative job. This isn’t a new problem — throughout history, automation has replaced jobs. But it’s always freed people up for new creative work. Technology obsoletes jobs, but there is no upper bound on number of technology jobs themselves. Temporal displacement, not permanent.
Society will always create new jobs, but it’s impossible to predict what those jobs will be. Would you have been able to predict, 10 years ago, that people would be able to create huge amounts of wealth through podcasting? — NO.
The Internet has massively broadened the possible space of careers. Most people haven’t figured this out yet. Technology obsoletes jobs, but there is no upper bound on number of technology jobs themselves. Temporal displacement, not permanent.
If you look at the technologies that have been introduced over the years and how they have impacted what people do, new jobs have always emerged. If you think of the amount of email and the amount of documents you write yourself. In the past a large company would have had a bunch of people in a room somewhere typing up those documents. Now they don’t do that. What I see is not so much jobs disappearing [but] shifting — for the most part from a productivity point of view into something higher, something more productive, something greater in that mix. Jobs will remain, but they will require a whole new set of skills to do them. New technologies will make some jobs obsolete; however, they will also reduce costs and drive expansions that will lead to employment growth in new areas. Across all job roles, individuals would be required to take on new or expanded tasks that have a higher element of judgement and creativity, while tasks of a more repetitive and rules-based nature are automated. While machines will be increasingly powerful, humans will actually be more essential.
The challenge of the next decade is not Artificial Intelligence, but Human Intelligence. Can we retrain the workforce as knowledge workers?
Believing that technology will create permanent unemployment is the same as believing that people can’t be educated to build technology.
One of the myths that we have today is that adults can’t be re-educated. We view education as this thing where you go to school, you go to college, you come out and you’re done… no more education. Well that’s wrong.
Career isn’t a destination we stay in for the rest of our lives; it is an ever changing journey that provides opportunity to learn, grow and be recognized for our efforts. This is especially relevant, as the half-life for any learned skills has been shrinking, with some suggesting that we may be down to five years at this point. In other words, half of the knowledge you’ve acquired five years ago is now obsolete.
So, the problem in finance is not about technology replacing jobs. It’s about old skills not matching new jobs. As many professionals in finance fear that their jobs are being replaced by machines, we actually see banks struggling to find the right talents, i.e. people who understand both finance and technology. The issue that we’re starting to see today is therefore not technology replacing jobs, but a mismatch between new jobs and old skills. The question is how we automate without leaving low-skilled people behind. Figuring that out will require employers, labor and public officials to work together to train and retrain people for the jobs of the future.
The best way to solve that issue is by upskilling professionals. Over the next decade, our world will be tasked with solving some of the most pressing issues it has ever faced, including climate change, wealth gaps and health costs in rapidly ageing societies. It is only through building a strong foundation for the new skills economy — investing in our youth and supporting lifelong learning programmes for our existing talented workforces — that we can ensure our nations and people are ready to take on a turbulent tomorrow. In this era of technology-driven transformation, helping our people become tech-enabled is essential. It is not just for people to achieve career mobility throughout life, but also a smart business move to get ahead.
The people least likely to get replaced by machine learning are learning machines. The key is to ensure that workforces are properly retrained, and that the old educational norms we take for granted need to be shaken up. You need to be reskilled three or four times over the course of your career. You go to high school, you go to college, you learn a career, you do that for 30 years — that is over because you are going to need to be retrained three or four times in the course of your lifespan. This is a very different educational model.
Be perfectly imperfect and start exploring now before it’s too late. Focus on creative skills and sharpen your ability to think. This is how you take advantage of living in the post-internet world and make a good living doing so. If you’re constantly on the move, trying to increase value add to yourself, and finding new ways to challenge and improve yourself, then AI helps you reach your goals faster. History shows that technological innovation, from the combine harvester to the computer, can make work safer, more productive and ultimately strengthen the economy. It’s clear that technology will not be a replacement for many of the skills needed for the jobs of the future. It will simply act as a supporter and integrator — making digital fluency just as important as literacy and numeracy in the future. Together, the “brain on a bicycle” partnership can lead to “Human Version 2.0” — accelerating breakthroughs and advancing discoveries.
If you’re unwilling to change and adapt, and you just want to rot in the same job for 25 years, then forget AI, anyone can replace you. Yet innovation can also produce losers — namely, the often low-skilled workers displaced by technology and the communities that rely on those workers. In the 21st century, the really big struggle will be against irrelevance. It’s much worse to be irrelevant than to be exploited.
The demand for tech skills will grow much faster than supply. All industries should plan for workforce transformation and build talents. All industries should tackle the challenges of adapting tech head on by addressing the talent gap that will eventually form in today’s workforce.
Unions have a responsibility to defend the interests of more than just their current members, just as industry has a responsibility to help the next generation of workers prepare for a new type of work.
And government has to get communities ready for the changes to come, while also doing a better job of ensuring that the benefits of increased efficiency and productivity aren’t captured just by the employers hiring fewer workers. One thing we can do to protect against automation. We need a culture of adult education (gearing them towards creative professions). What might it look like? Every 5–10 years, the government would pay for you to go back to school/re-educate yourself towards different profession.
II. Human Advisors & Investors
Here I talk about financial advisors that include stock brokers, insurance agents, tax preparers, broker-dealers, money managers/portfolio managers/fund managers, estate planners, bankers, financial planners and more.
We basically can’t and shouldn’t compare humans to robots, or human advisors to robo advisors. Robo services don’t provide the qualities that people want in an adviser. Digitized advisers may work as a complement to humans, but can never replace the expertise of a flesh-and-blood counselor. Creating and coaching households through the realization of an optimal comprehensive financial plan still relies on the responsiveness and rapport only a traditional adviser can provide.
Robo advisers do a great job of maintaining client portfolios. But that’s only one part of the job of financial management. Many investors out there want to (1) grow their wealth fast and (2)(3) need the kind of personalized and professional service — and that’s why human advisers cannot be replaced.
1. The returns
Computers are better at public-market investing than humans are.
Returns in public markets won’t be that good, for whatever reason. (Maybe because efficient robot-and-index investing have raised valuations and lowered future expected returns?)
Humans are better at weird-market investing than computers are.
Returns in weird markets will be better, for whatever reason. (Because robots haven’t gotten involved yet, or because they’re getting paid more for taking liquidity risk?)
Financial firms are always coming up with new complex instruments to trade and invest in.
Human advisors are the ones who can look beyond public markets (which include the multitrillion-dollar stock exchanges, bond-trading platforms, and big deals backed by private equity and venture capital etc.), and put their clients’ money into weird illiquid stuff where the computers can’t compete. The point about these investments is that they require “high human capital” to manage, even if they’re plentiful. It’s like “dark-matter”. They dwarf the visible stuff lit up by markets.
As such, the clients won’t be able to compare their performance with the computers’. It’s sure that money managers underperformed the S&P 500, but you can’t compare them to the S&P 500. They were investing in refugee camps, where of course the risk/return profile is entirely different.
Therefore human money managers should flee into assets where computers can’t follow them, because the weird stuff will be better for the clients. But maybe what money managers should do is quit. It depends on whether the weird assets are a good idea.
2. Personalized service
High net worth investors need — and want — the human touch. Human advisors will be needed for the foreseeable future to advise wealthy clients with complicated financial planning needs.
For the machine, it’s about using data and machine learning to make market predictions and identify trade opportunities.
While artificial intelligence holds great promise (63% of fintech professionals cited it as the key technology most worth watching), its application is too unpredictable to fully entrust with a family’s financial nest egg and peace of mind. In finance, a machine may excel at making accurate market predictions, but it does so in a “black box” — a very dark and unknowable pool for high net worth investors, in particular. These individuals are used to the high-trust relationships such as in private equity, in which there is a premium for explaining how an investment strategy is structured and is expected to perform. Even the most accurate black box is not likely win the trust of a high-touch client who relies on a human relationship. While robo-advisors are embraced by retail investors, high net worth clients who are used to high touch service will still need the human part of the mind-and-machine collaboration. For this clientele, it’s a matter of trust.
Major issues you would have with robo advisors would be quality of data input. Ever did a personality questionnaire online? When doing it, have you ever been self aware that the answers may be tailored to what you want the results to be, knowing you’re under a test? Until there is a true way to bridge mosiac theory of an individual, and their needs, either through IOT or other methods, the tricky part to robo financial advisory will always be the true quality of data input and relevancy. Simple risk-tolerance questionnaires, which serve as the core of robo advisers’ client-discovery process, do not get to the heart of understanding the entirety of an investor’s financial needs and goals and how their investment portfolio works in the context of their complete financial situations.
For the human, it’s about relationships and building trust, an area of expertise in which people still have considerable edge over computers.
For the bulk of wealthy investors, turning over one’s life savings to an adviser of any kind requires a level of trust that a purely electronic interface cannot replace. Traditional human advisers can deliver the kind of personal, hands-on service that investors consistently say that they want. Investors have consistently cited an adviser’s willingness to take the time to understand their needs and goals, look at their entire financial picture and explain analysis clearly as the most important qualities they are looking for in an advice provider. By working with an adviser, clients are able to create customized plans that address everything from the evolving insurance needs of a growing family to balancing multiple savings goals and, finally, to creating an effective estate plan.
Just as important, advisers are also able to offer the continuing coaching to address the challenges clients face along the way — from market volatility to cash-flow needs — to ensure that transitory issues don’t devastate their long-term strategy. The critics say that human advisers are prone to unscrupulous moves, like pushing investments that are suboptimal for the client but profitable for the adviser. There are bad actors in any profession, of course, but the vast majority of advisers are doing their best to serve their clients. Additionally, it’s important to note that the use of robo advisers does not eliminate this type of conflict. The people who set up these services might design their portfolios or algorithms in ways that systematically maximize their own revenue, potentially at the expense of their clients’ best interests.
3. Professional Management
Why are there still teachers when we are capable of reading books on our own?
Why are there mailmen when we can deliver mails on our own?
Why are there waiters when we can just get our orders on our own?
There are a lot of people who give their service for things we can do alone, but prefer not to. While there’re plenty of computers/robots that allow you to choose shares for yourself and buy and sell them yourself out there, human advisors are the ones who are LICENSED to do it. They exist to guide and offer help in many cases or while you are using a computer.
A professional investment manager takes care of your investment using careful research and skillful trading. Mutual fund managers are professionals — which means that they are going to help avoid some of the risk that you’d take on if you were buying your own stocks personally. Not to mention, active mutual funds can represent a great way to get diversified exposure to just about any asset class (discipline diversification). Since it pools money from many smaller investors, it can invest in certain assets or take larger positions than a smaller investor could. For example, the fund may have access to IPO placements or certain structured products only available to institutional investors.
This means that robots cannot replace human advisors.
Big-box legacy financial advisors introduced automated investing services while robo-advisors added a human touch after conceding their algorithms alone were insufficient. Neither has struck the perfect balance. I stand firm in my belief that nothing in the marketplace can match the benefits of an experienced, un-conflicted, technology-enabled bionic financial advisor.
Human advisors will work alongside rapidly evolving machines to address client needs, which will require human skills also evolve. By bringing together expertise in each field — those who know algorithms and those who finance can offer a high-powered collaboration. A human-and-computer collaboration makes an unbeatable combination. Together, the “brain on a bicycle” partnership can lead to “Human Version 2.0” — accelerating breakthroughs and advancing discoveries.
Those of people in technology need to guide it to augment humans, not replace them. And companies and society as a whole need to invest in education to ensure we and our children are ready for jobs we can’t even imagine yet. If we do that, as our ancestors did at the beginning of the 20th century, we can help ensure that AI will usher in an era of opportunity and wealth for all. Individuals should position themselves for a lifetime of learning since the skills demanded by the workplace are changing more rapidly than ever. Traditional college degrees no longer lead to stable long-term employment opportunities — fresh training on new skills is much more impactful.
4. Investment strategy
You get what you pay for:
High cost = High risk/return + Personal service
Low cost = Low risk/return + Public service
Some say that a passive, robo-managed portfolio will outperform a portfolio actively managed by a human. While money has flowed from more expensive actively managed funds to less expensive passively (robo) managed funds, and more generally from mutual funds to Exchange-Traded Funds (ETFs), which for the most part are passively managed, that’s just a matter of investment strategy, not an argument for going exclusively with digital advisers.
Many human advisers might recommend passive investment strategies, depending on the needs of the client.
Clients whose financial goals are fully met by achieving the market return, less a minimal expense fee, are advised to stick with robo-managed index funds, while those who need (or wish) to generate more might be advised to select more active funds.
* Here’s the route I recommend for beginners:
Index Funds => Mutual Funds => Index Funds or ETFs
The starting point should be an index fund, with due diligence performed on any active fund options available. For beginners, one easy way to invest is to get exposure to the market as a whole, like the S&P 500. Building your own portfolio of stocks, bonds, and other securities provides the ultimate level of control. You got to understand how to put your money to work for you by yourself before taking any further step.
After that, consult an accountant, lawyer, and financial adviser so these professionals can explain tax fallout and the other ramifications for you, your family, and your heirs.
The ending point should be Index funds or ETFs. After you master all the investing techniques, you can go passive if you want in order to avoid unnecessary fees (Index funds or ETFs).
