Could ‘talented teenagers’ manage your money?

Thursday, 22 February 2018
Melbourne, Australia
By Bernd Struben

  • We seek the holy grail
  • The Chinese manifesto
  • This could be the dodgiest cryptocurrency yet

We open today’s Port Phillip Insider with a rhetorical question. Or one I sincerely hope is rhetorical.

Would you trust talented teenagers to look after your investments?

I’m going to assume you answered ‘no way’. Not, at least, until after they study finance and have a few years of on-the-job training. (Sorry teens!)

The reason I bring this up is because that’s exactly how Tim Whiteley describes the current abilities of artificial intelligence (AI) — as ‘talented teenagers’.

Whitley is the general manager of technology applications development at Westpac Banking Corp [ASX:WBC]. And like most forward-looking businesses, Westpac is investing heavily in automated systems.

This headline comes from The Australian Financial Review (AFR), ‘Westpac banks on AI advances as automation and cognitive systems mature’.

The article continues:

Customers are also dealing with AI-enabled chatbots based on work with IBM’s Watson in its contact centres and Mr Whiteley said AI would be phased in across the bank steadily over the coming years.

“A couple of years ago, the AI tools ‘out of the box’ were like a teenager, they could read and write, recognise when you’re happy or sad, and pass year 9 maths class,” Mr Whiteley said.

“They have probably now progressed to high school graduates. However, bringing them into our environment, we still have the similar challenge to the teenager in terms of it taking multiple years of further teaching about our business to graduate to a bachelor or PhD level to achieve the outcomes we are after.”

…“And we are working on how we use machine learning to help improve the quality of the data analytics and leverage data better for customer outcomes through creating contextualised customer experiences.”

I’m not quite sure what a ‘contextualised customer experience’ is. Or whether I’d care to experience one.

But Westpac is obviously betting on a future heavily influenced by AI.

One thing that jumps out at me, though, is that Whiteley believes it will be multiple years before the bank’s machines reach PhD level. That’s how long it will take humans to teach them all the tricks of the trade.

He may be right.

But if ‘unsupervised learning’ takes off as our in-house tech expert Sam Volkering predicts, the timeframe may be much shorter.

And the companies who deliver that solution to the market — cracking what Sam calls the ‘Black-Box equation’ — should see the demand for their tech innovations explode. Along with their share prices.

Sam’s uncovered three stocks he believes are on the verge of doing just that. You can get all the details here.

More after the markets.

Markets

Overnight, the Dow Jones Industrial Average closed down 166.97 points, or 0.67%.

The S&P 500 lost 14.93 points, or 0.55%.

In Europe, the Euro Stoxx 50 index finished down 4.92 points, or 0.14%. Meanwhile, the FTSE 100 gained 0.48%, and Germany’s DAX fell 17.41 points, or 0.14%.

In Asian markets, Japan’s Nikkei 225 is down 259.58 points, or 1.18%. China’s CSI 300 is up 2.00% on its first day of trading following the Spring Festival Golden Week holiday.

In Australia, the S&P/ASX 200 is up 9.38 points, or 0.16%.

On the commodities markets, West Texas Intermediate crude oil is US$61.26 per barrel. Brent crude is US$65.42 per barrel.

Gold is trading for US$1,325.27 (AU$1,698.41) per troy ounce. Silver is US$16.52 (AU$21.17) per troy ounce.

One bitcoin is worth US$10,480.27.

The Aussie dollar is worth 78.03 US cents.

We seek the holy grail

Right now, machines predominantly learn through what’s known as ‘supervised learning’.

This is done through human coding. And by walking a machine through its lessons step by step, over and over again, until it gets it right. In this way machines can be taught to recognise images or understand speech. And they can be taught the most desired response for various situations.

You can see how this a capital-intensive process. And it takes a lot of time. Which is why Westpac’s Tim Whiteley believes it will take multiple years to bring their talented teenage machines up to PhD levels.

Enter the prospect of unsupervised learning. What Sam Volkering calls ‘the holy grail of AI’.

The biggest names in technology have been in hot pursuit of the grail for several years now.

Here’s what Facebook CEO Mark Zuckerberg posted about unsupervised learning back in 2016:

Unsupervised learning is learning how the world works by observing and trying things out rather than being told what to do.

It’s key to building systems with human-like common sense because it doesn’t require a person to teach it everything they know.

Unsupervised learning is a long term focus of our AI research team at Facebook, and it remains an important challenge for the whole AI research community.

Machines learning by observation. Not just observing us, but each other.

Think about that for a moment.

Think about how much information currently exists on the internet. And how much more is uploaded each day.

Now think about all the connected cameras and devices already in existence. Not just smartphones and laptops. But CCTV, Siri, and smart-appliances. Appliances like refrigerators that monitor your eating habits, and helpfully remind you when you’re running low on beer.

These devices are already proliferating at an astounding rate. And that’s before a flood of semi-autonomous cars begins cruising the streets. Cars that will be equipped with dozens of connected cameras and sensors.

Finally, envision machines that can learn how the world works by observing and trying things out rather than being told what to do. Machines with access to all of the data mentioned above…and more.

You can see how cracking the ‘Black-Box equation’ would be a game changer for today’s nascent AI systems.

Rather than multiple years of supervised learning to bring Westpac’s talented teens up to post-graduate level, this kind of exponential learning curve could see that happen in weeks. Or days…

No wonder Sam calls this the ‘holy grail of AI’. And no wonder he expects these three pioneering tech companies to skyrocket as they help unravel the ‘Black-Box equation’.

Sam details all of that in his brand new report, released yesterday. You can find that here.

The Chinese manifesto

The tremendous opportunities presented by artificial intelligence have not been lost on China.

From the AFR:

In July, China unveiled a plan to become the world leader in artificial intelligence and create an industry worth $150 billion to its economy by 2030…

It outlined the Chinese government’s aggressive plan to treat AI like the country’s own version of the Apollo 11 lunar mission — an all-in effort that could stoke national pride and spark agenda-setting technology breakthroughs.

The manifesto was also remarkably similar to several reports on the future of artificial intelligence released by the Obama administration at the end of 2016.’

Trump’s administration has yet to respond in kind. But the odds of the US sitting back and letting China take the lead in AI are right about zero.

This means the governments of the world’s two biggest economies may soon be locked in a new, virtual arms race.

It also means that the little-known companies already leading the way in this race could soon become household names.

You can find Sam Volkering’s three favourite ways to play this breaking, revolutionary trend here.

And lastly, while on the subject of technology, this from The Australian Tribune:

This Could be the Dodgiest Cryptocurrency Yet

Millions of people have taken the plunge and invested in bitcoin.

Even ether, the world’s number two cryptocurrency, has a market cap of US$82.8 billion.

Some people have made five or even 10 times their initial investment. Others have lost half or more of their funds.

It’s a risky market. But none looks riskier than…

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Cheers,
Bernd