BlackRock Inc., the $5 trillion money manager, announced last month that it would be overhauling its actively managed equities business, increasingly betting on computers rather than humans to make investment decisions. This move sent shudders through the financial services industry that has long relied on people to help others with their asset allocation decisions. For all industry observers, it is the next nail in the coffin of actively managed accounts, as technology disrupts the age old financial services business model. The question that corporate consultants must now ask is: "Are we next?
Ideas about artificial intelligence (AI) have tended to swirl around without offering me much to think about. I use Siri and Hello Google on my iPhone, I'm aware of the increasingly powerful social media algorithms, and I've watched, with some interest, the accomplishments of IBM's Watson. Yet I haven't really thought much about it.
Machine Learning is an application of Artificial Intelligence that allows computers to learn without being explicitly programmed to do so. It's the product of established statistical theory and more recent developments in computing power. Combined, the Machine Learning algorithms offer businesses the opportunity to transform their operations and the services they provide.