ROBO Global Aims to Profit from AI Revolution

Fri, Oct 20, 2017 - 12:08pm

As a technology and business concept, AI is beginning to feel very similar to the type of euphoria towards the internet in the mid to late ‘90s. This time, however, AI has way more hype, promise, confusion, mystery, and even fear—depending on your view of it—than the internet ever did.

Recently, Financial Sense Newshour discussed this topic with William Studebaker, President of ROBO Global, creator of the robotics and automation ETF, ROBO, on why this truly represents the next greatest revolution impacting the world economy.

See podcast Artificial Intelligence: Overhyped Buzzword or the Next Frontier?

AI Is Already Here

We’re already seeing AI applications taking form in smart appliances, online search algorithms, recession forecasting, autonomous weapons systems, and data collection and analysis. While many still think of AI in sci-fi terms, the reality is, AI is here and companies have embraced it, particularly in the financial industry.

Consider The Massive Hedge Fund Betting on AI

Man Group, which has about billion under management...has gone from viewing AI with skepticism to making it a cornerstone strategy. Among the company’s biggest expenditures now is computer equipment—along with hiring engineers to keep up with the technological change and the ensuing growth. AI is now not only out of the nuclear bunker but on a pedestal. “It went from total isolation to ‘OK, you are allowed to sit at dinner with the rest of us, but don’t talk’ to the point where it’s become a part of the family,” Ellis says.

Man Group’s embrace of artificial intelligence puts it at the forefront of a seismic change that’s not only reshaping global finance but also raising profound questions about an industry in which self-altering algorithms are making multibillion-dollar decisions with little human involvement. Even as Man embraces the revolution, its CEO is awestruck by the speed of the transformation—cautious that it can live up to the hype, nervous about what the new tools say about the future. “My hope is always that there will be parts that humans do that AI doesn’t do,” Ellis says. But, he adds, “I wouldn’t bet my life on it.”

Studebaker believes the biggest fundamental force feeding this development is the vast quantities of data being produced. This data — amounting to tens of billions of gigabytes daily — is the fuel that drives AI forward.

“Firms that wait for the AI dust to settle are going to be left behind,” he said. “AI is being viewed as the new electricity. It’s being applied to all industries. It’s the same thing with robotics, which is why robotics and AI should not be viewed under the lens as being a niche.”

Benefits Are Real

Artificial intelligence has the potential to accelerate shifts in market share, revenue, and profits, Studebaker noted. Traditionally, these are all hallmarks of digitally disruptive sectors.

For example, Amazon achieved impressive results when it purchased Kiva Systems in 2012. Now, it has 100,000 robots that do picking in warehouses. Amazon found that the click-to-ship time of 60 to 75 minutes with humans went down to 15 minutes with an automated system in place. Also, inventory capacity increased by 50 percent and operating costs fell by an estimated 20 percent.

The largest tech companies in the world are now banking their collective futures on deep learning, which has not only led to incredible breakthroughs in AI but is considered by some as the future of technology itself.

There are many innovations — most of which we can’t predict now — that are likely to improve our quality of life and reduce costs at the same time, Studebaker stated. With quantum computing now taking off, we truly are entering a brave new world.

Are Fears Misplaced?

While it’s popular to assume ill intent in AI, the fact is, such a system doesn’t inherently have human instincts or emotion, Studebaker stated. We’d have to give these things to an AI in the first place.

The fear that robots will lead to massive technological unemployment is also overblown, Studebaker argued. While recent studies indicate AI’s impact on low-skilled jobs could be substantial, he noted that we’ve been automating industry for hundreds of years now with the greatest result being an increase in productivity and wealth creation.

“I tend to believe that is the outlook as we go forward,” he said. “Clearly, automation brings affordability to the masses. … I think what we’re actually seeing is, in many cases we’re creating more employment, more opportunity, lowering costs and creating more demand.”

As we saw at the dawn of the computer age, this coming age of automation will see job titles shift to reflect the impact of technology, Studebaker stated. Though we may lose low-skill positions to machines, over time we’re going to create a lot more new, interesting jobs.

“The most important thing for investors is not to fear the change, but embrace it,” he said. “Those that embrace it will find ways to be resourceful. The U.S. economy and the world economy have been resourceful in navigating change for hundreds of years. I’m pretty confident that we’ll be able to do that as we go forward.”

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