Will AI Level the Investment Playing Field? Or Will It Have an Adverse Effect?
I have been testing out artificial intelligence for the past few months and doing my best to stay up to date (without ditching my human intelligence).
This is a theory in the works: It’s about the potential for a more cohesive investment landscape using generative AI as a tool that virtually anyone can tap into with the right guidance. It’s also about the potential risks we’re just beginning to experience in 2023.
I’m no tech wonk or Silicon Valley pipe dreamer, I promise. Like so many out there, I have my valid concerns when it comes to job displacement, misinformation, heightened fraud, and other flags.
But I can certainly see the opportunities for those who use AI wisely to enhance the work they do. For small-time investors, I keep thinking about the opportunities to leverage generative AI for personal economic growth on a global scale.
New Investment Horizons
For a moment, try to forget the dystopian future where most work is carried out by machines, and picture a more democratic model for financial and capital markets—one fueled by everyday people making smarter and better-timed investments. We’ve seen similar efforts with crowdfunding, digital marketplaces, and other platforms in recent years, after all.
Now, might there be a way to take all kinds of data (stocks, jobs, interest rates, property values, fiat currencies, crypto, gold, and so on) and feed that into AI algorithms to make more informed investment decisions without major institutional knowledge or backing?
Perhaps that’s already possible to some extent.
Countless tech companies are tinkering with new AI formulas by the minute and it can be hard to keep up. Platforms like TrendSpider and Q.ai, which I won't attempt to review or rate here, are serving as incubators for a whole new potential sector and a massive paradigm shift in wealth management. The growing number of stock trading bots and other AI-fueled investment tools are constantly evolving and there will be plenty of trial and error well beyond the beta modes.
At the same time, private equity giants and other asset management firms have a huge competitive advantage with trillions in capital and globally-powered data systems that utilize AI and machine learning in-house. Think BlackRock and Blackstone, among many others.
Big Data, Big Questions
A big question looking ahead: Will mass adoption of generative AI offer similar capabilities to everyday investors who lack the same resources? This may also apply to individual companies looking to make better decisions around hiring, supply chains, climate strategies, and other important business decisions.
Perhaps the most callous rule of investing is that one person’s gain is another person's loss. That has been an unfortunate reality for centuries. But with the explosive growth of AI, I believe we may see greater meritocracy when it comes to day trading, retirement planning, limited partnerships, and other investment strategies.
As Bloomberg recently reported, AI is leveling the playing field for startups and big tech. Against that backdrop and given some of the biggest tech advancements of the past two decades, there is little stopping AI from empowering mom-and-pop investors.
Will we discover a more level investment playing field over time? Or will AI have an adverse effect, causing the financially strong to get stronger while the financially weak get weaker?
Staying ahead of the curve may likely come easier for those with strong people skills, connections, and tech prowess. For others, it will be an uphill battle and I truly hope the regulatory powers that be will take proactive measures for once. U.S. regulators waited too long to lay the ground rules for cryptocurrency trading, for example, and that has only led to messy showdowns, such as the brewing legal feud between Coinbase and the SEC.
The risks with AI-powered investment are similar to what most of us fear more broadly: Many will use AI to their own gain while others will be used by it to their own loss. One of the biggest technical hurdles, from my experience, will be the validity of the source data used. It’s much easier to predict GDP growth than it is to forecast natural disasters, for instance.
Responsible Use Only
We can't lose sight of the fact that GenAI, when used responsibly, is already doing wonders beyond investing and finance—from independent research and personalized learning to language modeling and data security. That’s not to mention the breakthroughs we’re seeing in health, medicine, and climate action, among other important fields.
Without considerable human input and careful monitoring, machine-driven work serves little purpose. Computers left to their own devices can quickly lead to artificial values.
This is an open and evolving topic for me and I welcome additional insights and related news. I know there are a number of detailed reports on how such AI investment algorithms would work and I look forward to exploring them in more detail. I will do my best to elaborate on this concept after I’ve had a chance to put my theory into practice.
For now, I am simply scratching the surface and do not encourage any kind of investment without careful research beforehand. The many caveats with AI should never be ignored. They should be used to make us think ahead and prepare for an uncertain future.