Artificial Intelligence (AI) and Investing: How Can it Help You?

Artificial intelligence (AI) as a field of study has roots stretching back to the mid-20th century with the term being coined in 1956. Over the past decade, however, there has been a shift from AI being primarily a speculative realm occupying the minds of academics to companies in all different industries harnessing the power of AI. But what does this mean? Are artificially intelligent agents taking over the world? In terms of investing, will it soon be the case that intelligent machines will be making decisions about how to manage our money rather than people? Not quite.

There is a lot of confusion and ambiguity in the way people talk about AI. In its initial manifestation, the field of AI was devoted to one primary task: to build intelligent entities. Or as the cognitive scientist John Haugeland put it in his book Artificial Intelligence: The Very Idea: “[AI is] the exciting new effort to make computers think . . . machines with minds, in the full and literal sense.” (Haugeland, 1985) Building machines with minds, machines capable of solving problems, and taking actions that are not the direct result of human programming, is what is known as the hard problem of AI. This problem has yet to be solved. True artificial intelligence is still the stuff of science fiction.

How, then, can so many companies claim to harness the power of AI? Simply put, it is because the definition of AI has expanded to include other fields; most prominent among them is machine learning. Machine learning (ML) is a field of data science that uses statistical models and computer algorithms to detect and extrapolate patterns from large sets of data. ML, however, while not ‘intelligence’ in the true sense of the word, it has proved to be a very fruitful field of study with many practical applications to real-world problems. When artificial intelligence is discussed in the financial industry, it is primarily in reference to these machine learning techniques.

Since its inception, Inukshuk Capital Management (ICM) has been a leader in the application of ML to the challenges of investing. We do not believe these techniques offer predictive capacity, nor are our investment decisions solely driven by ML algorithms. Instead, we use ML as one tool among many. ML allows us to glean valuable information from huge sets of data – information which is undetectable to the human eye. We then use this information to help us actively manage risk and to construct robust, customizable portfolios tailored to our client’s needs. While ML may not be AI in the pure sense of the term, it is an extremely powerful tool.  We have been employing these techniques to manage and optimize client portfolios for over a decade. ICM prides itself on being at the forefront of this exciting trend in the world of technology and we are committed to using these tools to help our clients achieve the financial longevity for which they’ve worked so hard.