05 – We won’t be investing in A.I for much longer
Let’s try a fun experiment. Try googling “New York City 1900” and count the cars. Now, google “New York City 1913” and count the horses. Here, I’ll help you. Remarkable isn’t it? This transformation serves as a testament to the profound impact of emerging technology that is not only more affordable but also significantly outperforms its predecessors by orders of magnitude. In a mere span of 13 years, the most buzzing street in the world underwent a complete change, heralding a new era in global mobility.
Another of these seismic shifts took place last year. In fact, it was less than a year ago, on November 30th 2022. Perhaps it caught your attention? Or perhaps like a blissful horse-carriage chauffeur, you didn’t even notice how the world had already changed.
When OpenAI released their conversational GPT app on that uncanny November day, it was an “iphone moment”. I was almost in disbelief. No way this thing could be that good. But after hitting the prompt with the weirdest questions and commands, I was utterly amazed. I think one of the first things I asked it to do was “write me a rap song about investing”, and not only did it produce these beautiful lyrics that made sense; it rhymed(!).
Next, I tried something that I hoped some App would solve years ago; give me a complete dinner recipe with instructions for whatever I had in the fridge. Now, at this specific time I had just traded two Norwegian milk chocolate bars for 2 bags of tropical breadfruit (from a farmer on a desolate island in the Marquesas, true story). Basically, I had no clue how to make a dish with breadfruit, I’d never tasted it before. So I popped up my smartphone and asked it: Make a recipe using the following ingredients: breadfruit, onion, spinach, coconut milk, chicken, garlic, lime and olive oil.
I remember my jaw dropping. I mean, one thing is to make a search result and collect this information but that wasn’t what was going on. I could ask it “make another one”, and it would genuinely come up with something original. Again and again. It seemed to enable a bottomless reservoir of creative potential, and I had never seen anything like it.
Instinctively, you start to grasp how nothing will ever be the same. And like those streets of New York, platforms using LLMs (Large Language Models) will completely change how information is produced. Except it wasn’t going to take 13 years. It took days. In fact, it’s highly probable that non-human agents now generate half of your digital content consumption. Wild.
I don’t think people really grasp the speed of development here, certainly not investors. Look at the picture below. It’s showing two images, both using the same prompt to generate an A.I picture; “Greta Thunberg climate change campaigner” (courtesy of Lifearchitech.ai). The one on the left is what cutting edge Large Language Models were able to produce in January 2021. Contrast that to the one next to it, which was prompted by me a few days ago. Look at it and tell me what you see.
As you are reading this, these platforms now have no problem sifting and ciphering through extremely large datasets, giving you the power of 10 full-time analysts with the effort of a keystroke, and doing their task within seconds.They produce remarkable graphs, 3D illustrations, building plans, financial reports, and can even interpret whatever image you throw at it. I gave it an x-ray image of my broken collar bone from years ago and not only did it know what it was, but could easily suggest effective treatment.
Had you asked me just 5 years ago, which areas are most likely to be affected by artificial intelligence I would have said manual labor. I would have said agriculture, robotics and probably also manufacturing. It turns out we were all wrong. In fact, A.I is making exponential progress in areas we thought were inherently “human” such as art, graphics, music, and storytelling. I have been using tools like Dalle-3 and Midjourney (for my second and third article) and I am just stunned witnessing the same technology being used to predict the next word, able to predict the next pixel and produce these absolutely beautiful pictures. Something that a normal person would spend countless hours on, if not days. The line between man and machine? Blurring, fast.
Which leads me to believe; it’s not obvious what areas A.I will affect the most of the coming decade. Indeed, the more likely conclusion is there is no area that will remain untouched. Whether it’s healthcare, where AI can assist in diagnosing and treating diseases, or in the creative arts, where it can generate music or visual art, the implications are staggering. And what’s even more astounding is that this technology is not confined to the labs of Silicon Valley or the boardrooms of tech giants; it’s now accessible to anyone with an internet connection. This democratization of A.I technology could be as transformative as the internet itself.
So for you investors with clout; A.I won’t be a sector you will invest in for much longer. It will be embedded into everything and be a transformative force that will redefine all sectors across the board. Those who integrate AI into their business models most effectively are likely to be leading the pack. And it’s not just tech companies; traditional industries like agriculture, healthcare, and manufacturing that adopt these technologies may find themselves leapfrogging competition and circumventing traditional barriers of entry.
Where does that leave us? Well, the transition to a world increasingly driven by artificial intelligence is not a matter of “if” but “when.” And judging by the rapid advancements we’ve seen just in the last year alone, that “when” is now. Welcome to a brand new world.
So, as we stand on the cusp of a new era, what does a contrarian strategy look like for technology investors, portfolio managers, and savvy capital allocators?
Diversify Across Sectors: Focusing solely on tech companies is a fool’s errand; AI is infiltrating all aspects of life. Traditional sectors like healthcare, agriculture, and manufacturing are ripe for disruption.
Look for AI Integration: Companies that are effectively incorporating AI into their existing business models are likely to emerge as leaders in their respective fields.
Invest in Talent and Infrastructure: Companies that are ferocious learners, invest in AI talent and build the necessary computational infrastructure are more likely to excel as the technology matures. This goes for fund manager’s core operations too.
Pay Attention to Ethical AI: As AI becomes more prevalent, ethical considerations such as data privacy and bias will become increasingly important. Companies that are proactive in addressing these issues are not just doing good; they’re also minimizing risk.
Be Agile: As you saw from my comparison above, the pace of AI development is staggering. What seems cutting-edge today might be outdated in six months. Stay agile, stay informed, and be prepared to pivot.
Now, readers, I’d love to hear from you. What are some unexpected ways you think AI might become a part of our daily lives? As investors, what signals will you look for to gauge a company’s effective use of AI? And how do you think AI will impact the job market? Do you foresee more job creation or job losses?