AI Poised to Considerably Contribute Towards Global GDP: Productivity Gains of $15.7 Trillion

This article was written by Graham Ellinson, a Financial Analyst at I Know First.

 

AI Poised to Considerably Contribute Towards Global GDP: Productivity Gains of $15.7 Trillion

“We’ve never really unbundled decision making before—we usually think of human decision making as a single step. Now we’re unbundling decision making” – Ajay Agrawal professor of entrepreneurship and strategic management at the University of Toronto’s Rotman School of Management

Source: pixabay.com

Summary:

  • Artificial Intelligence is a data focused tool where performance improves dramatically the more data it is fed.
  • AI assists to multiple day-to-day decision making beyond simple automation of tasks.
  • Artificial intelligence is expected to result in an increase of global GDP by 14% over the next decade.

AI Poised to Considerably Contribute Towards Global GDP

Artificial intelligence thrives off data. In many ways AI biggest limitation is on the data that it is fed. Consequently, the more data that it is provided with the more natural and responsive the AI will be. Perhaps this is one of the largest distinctions between humans and AI is that humans can be overloaded with data. When faced with a choice both human and machine needs information to assist them in making the correct decision. Too much information however and a human will unlikely make the correct choice and the chances the machine will make the correct decision increase.

The drawback to such a data centric focus is privacy. Users are left unsure of what happens to this data in the future and are aware that privacy assurances to not necessarily always protect them; certainly not in the long-term. Already, we all agree to terms and conditions almost on a daily basis without every really paying attention to the vast permissions we are granting the likes of Facebook, Google and Apple. Conversely, there has long been widespread media attention and outcry over Government infringement of our data and the ever-growing Orwellian atmosphere. Indeed, this issue will likely be the biggest challenge to AI in coming years and perhaps be the biggest limitation to its improvement. This is especially true for government implementation of AI.

How does it improve day-to-day decision making?

A common mistake is the distinction between artificial intelligence and a typical robotic machine. It is important to establish a frame of reference in this regard on one end of the spectrum is the robotic, unadaptable and inexpressive robot. At the other end is the human persona which granted has limited capabilities in terms of data processing but has a unique and critical advantage: freedom to choose. It is important not to underestimate this flexibility in decision making. The classical example is high frequency robotic trading. A robot receives market information and simply buys or sells stock based on this information, given that it can do this far quicker than any human, when it sells it attempts to essentially ‘beat the human to it’.  However, these robots are frequently reported to be self-destructive and can essentially create havoc in the market when competing against each other. Simple human perspective in this case would identify such behaviour and adjust accordingly.

Source: Nick Youngson CC BY-SA 3.0 Alpha Stock Images

AI sits firmly in between these two. It is adaptable and perceptive but is also able to outperform and out-process any human. Furthermore, AI takes advantage of machine learning to improve and essentially learn from its mistakes.  Labour productivity improvements can drastically improve profit margins as companies “augment” the productivity of their labour force with AI technologies. This goes beyond simply automating tasks but can include research, communication and quality control.

Economic Impact

In a recent report published by PwC artificial intelligence is expected to result in an increase of global GDP by 14% over the next decade. In sheer numbers this is approximately an additional $15.7 trillion by which the global economy is expected to grow in a direct response to widespread implementation of AI. This is more than the current GDP of China and India combined. In near term figures roughly $6.6 trillion of expected GDP gains will result from the productivity gains AI can provide. Over time, increased consumer demand for AI-enhanced offerings will overtake productivity gains and result in an additional $9.1 trillion of GDP growth by 2030.

Source: pixabay.com

This extensive study states that 58% of GDP gains will be a result of a sharp increase in consumption.  Essentially, for new technology to be truly transformative it must open up new areas and sectors to consumers that where never available before. An example would be automated driving, where traditionally a consumer would only purchase a car, the additional availability of a driverless car is now a new market driving the increase in global GDP. Similarly, efficiency gains that AI can provide will now provide room for greater investment and growth. Companies such as I Know First that provide daily market forecasting will enable investors to invest smartly. It is unsurprising that in a recent article by Irving Wladawsky-Berger in The Wall Street Journal he states: “Companies slow to adopt AI-based productivity improvements be warned.

How I Know First Is Using AI As a Decision Support System

Artificial intelligence has a broad range of services this includes automated intelligence where routine tasks are managed and performed by an AI. It also acts as a medium to assist human decision making and in some cases even make the decision for them. However, the critical task that an AI can perform is augmented intelligence. This is the assistance in helping humans physically make smarter decisions. I Know First incorporates all of these aforementioned AI techniques to assist in daily market forecasting and predictions.

A particular advantage with the use of AI in daily market forecasting is that it does not have as many of the data privacy concerns as other fields of AI, as most of the information is publicly available and it does not require users to part with vast quantities of sensitive data for the AI to optimally perform. The algorithm unlike a robot still regards the market as organic so utilises the same learning techniques that would perhaps be familiar in a human setting or environment. This algorithm can then be utilised as a decision support system (DSS) when making decisions in the financial markets.

I Know First is a fintech company that provides state of the art self-learning AI based algorithmic forecasting solutions for the capital markets to uncover the best investment opportunities. I Know First’s AI-based algorithm, which incorporates multi-layered neural networks and genetic algorithms, allows us to model the market without human derived assumptions. By doing so, our algorithm is able to achieve flexibility with regards to the model and evolve with the ever-changing markets. The algorithm continually learns and adapts based off of its previous forecasts, and adapts to new conditions and features quickly.

Additionally, the design of the algorithm further enhances its capabilities to be able to make predictions in circumstances not observed before, as a result of its learning experience and intelligence. This is something one cannot achieve without AI technology. This maximises efficiency of employees when applied to financial institutions. Financial employees become more efficient when they have help from the I Know First algorithmic system. The algorithm is already in use among institutional investors; the product is used by research and analyst teams in hedge funds, banks and family offices or by financial advisors.

I Know First develops, back-tests and offers systematic trading strategies which are used in partnerships with hedge funds and other asset managing entities. These strategies are rules-based and utilise algorithmic forecasting indicators in order to rank and select the trades as well as time the execution. Here the final product are the trades recommendations for execution, depending on the investment strategy profile chosen. The type of strategies varies, including mean-reversion logic and more trend focused approaches, all generating high positive alpha while keeping beta in the 0.3-0.8 range, yielding overall high risk-adjusted returns. The strategies can be used in partnership with I Know First to launch hedge funds, mutual funds or other investment vehicles.

Secondly, the two-fold business model puts I Know First in a unique position: offering custom and standardised algorithmic forecasts to variety of clients (institutional and retail) and researching and developing systematic trading strategies for fund management purposes on a revenue sharing basis. The business model proved itself and I Know First has earned clients’ trust for over four years now and is partnering with large financial institutions not only in Israel (asset manager) but also Europe (bank), United States (wealth management) and Japan (financial information provider).

The algorithm generates daily market predictions for stocks, commodities, ETF’s, interest rates, currencies, and world indices for the short, medium and long term time horizons. The I Know First algorithm is designed for large financial institutions, banks, and hedge funds in the capital market as well as private investors looking for an advanced algorithmic support system. The algorithm is currently tracking and predicting a growing universe of over 10,000 financial assets.

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