Advances in artificial intelligence (AI) and robotics are reshaping the institutional investment management industry from all angles.
Over the last decade, high-speed automated trading has already revolutionised the day-to-day operation of financial markets and robo-advice has revamped the way wealth managers engage with clients. AI is upending the profit models of many companies in institutional investment portfolios. Within funds, many workers with repetitive and numbers-based jobs are set to be replaced. But the biggest fallout on superannuation and pension managers from the changing nature of work could be how it destroys the livelihoods of millions of their clients.
Tesla chief executive Elon Musk made headlines worldwide in July when he declared AI a “fundamental risk to human civilisation”. But despite a number of respected voices issuing dire warnings, the systemic risks associated with the rise of AI may still be underappreciated.
Centre for the Future founding executive chairman Dr Richard Hames believes most of the superannuation industry and investment community at large seems oblivious to the fact that the traditional way in which monetary value is extracted from what people do for a living – their day job – is crumbling right under humanity’s feet.
As AI technology evolves into artificial super intelligence (ASI), it will erode many job markets, Hames warns. Not only unskilled jobs, he says, but also white-collar jobs in fields such as medicine and law. He predicts this will eventually lead more nations to follow the lead of Finland and experiment with the introduction of a universal basic income (UBI) to avoid the pressures of maintaining a welfare system. And he says paying people not to work has great consequences for how society values human capital.
“It’s conceivable that Australia will have to start addressing these kinds of issues within five to 10 years and, given the likely impact on superannuation, the sector needs to start thinking about it now,” he says.
The futurist, philosopher, corporate strategist and author has been lauded by Forbes Asia as “one of the smartest people on the planet”. Since July 2015, Hames has headed the Centre for the Future, a think tank that aims to foster collaboration to improve the world for all of humanity without doing ecological damage.
Potential good, too
Shara Evans, another futurist, who is the founder of technology analyst firm Market Clarity, wants super fund executives to remember that despite a barrage of dire predictions about AI, it has the capacity to add as much good to the human condition as it does to destroy it.
Given the pace of change, however, she warns institutional asset owners that they can’t remain agnostic on the pros and cons of these new technologies. She recommends funds quickly establish a framework for evaluating the capacity of emerging technology either to enhance or disrupt an industry or specific company.
Evans says super industry executives and trustees lack a good understanding of the massive impact job disruptions will have on their investment portfolios.
“They need a better understanding of how AI and robotics are being used by the assets [in which they invest]” and must adapt their investment plans accordingly, she says. “Super execs should share an ethical responsibility to use their leverage as shareholders to agitate for companies to behave in a certain way when deploying these technologies; for example, [pushing for them to] invest in reskilling workers whose jobs are displaced by automation.”
Ahead of the imminent arrival of Amazon in Australia, everyone is talking about how the company and its robot pickers and delivery drones will spell the death knell for less sophisticated local retailers. But the often-overlooked aspect of applying these technologies to reduce costs, Evans says, is its impact on staff. She stresses that they can be reskilled and redeployed, instead of laid off.
Domino’s Pizza is trialling delivery bots and drones to help meet its 30-minute delivery target, while removing the need to use a 2-tonne vehicle to deliver a 40-gram product. While this may have reduced the pizza chain’s need for drivers, she says it’s also arguably enabled the company to hire more staff through its new-store launches and there are no known plans to lay off any of its current delivery drivers.
“Clearly, the issue of whether AI and robotics are good or bad depends on how
they’ll integrate into the workforce,” she says. It’s a pertinent comment, given Domino’s made headlines earlier this year when it was revealed the Fair Work Commission was investigating the fast-food giant for widespread underpayment and exploitation of staff.
Assuming most companies are serious about reskilling, there’s no reason dire predictions of AI, robotics and digital technologies replacing 40 per cent to 50 per cent of the world’s jobs within 20 years have to become a reality, Evans argues.
A redefinition of being human
Hames and Evans both spoke to Investment Magazine ahead of addressing the annual FEAL National Conference in Melbourne on August 3, 2017, about how AI is set to reshape the investment and operational landscape for superannuation funds.
At another recent industry gathering, a major theme was how financial services organisations might respond responsibly to the challenges AI brings. Attendees at the Banking and Finance Ethics Conference, in Sydney on June 8, 2017, heard from a range of speakers about the need for finance and investment professionals to think deeply about how AI is set to reshape their own businesses and those in which they invest.
The executive director of the Ethics Centre, Dr Simon Longstaff, said this might mean re-examining employment. “Maybe the future is not about securing work, or at least employment, as a potential source of meaning, so much as redefining the way in which human beings [develop] a sense of validity and purpose in their lives, which may be unrelated to work,” Longstaff says.
The founder of strategy consultancy 2nd Road, Tony Golsby-Smith, said the rise of thinking machines has an impact beyond the economic and is already becoming a political story, which presents uncomfortable ethical issues as jobs are killed, reimagined and moved around the globe.
“The question is, are we facing Armageddon – the death of jobs? Are we systematically destroying jobs?” he says.
More profoundly, the integration of humans and machines raises the fundamental question of what it means to be human. Golsby-Smith says AI may be creating a Frankenstein’s monster.
“The artificial intelligence community can say trust us, it’s all right; well, I don’t know about you, but my trust is always a little bit mixed,” he says. “More importantly, deep, deep, down underneath it all, there’s something more fundamental, which is the battle to be truly human. Just how smart can machines get, and are we smarter than machines?”
As machines get smarter, perhaps professionals will be forced to rely less on their intelligence to distinguish themselves and more on their personal ethics.