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Creating Shareholder Value with AI?

In a wonderfully titled report, Creating Shareholder Value with AI? Not so Elementary, My Dear Watson, the Equity Research company, Jefferies, LLC, take a hard look at IBM’s bet on cognitive computing, or Artificial Intelligence (AI). The 53 page report is well worth reading to understand why the research analysts consider IBM, despite significant investment in to their cognitive computing platform, Watson is losing the opportunity in AI and hence the authors consider IBM stock to under perform.

On a positive note for AI researchers they do acknowledge there is serious business and economic interest in AI, citing Andrew Ng’s Stanford talk on AI as the new Electricity:

AI is the New Electricity….Our checks confirm that a wide range of organizations are exploring incorporating AI in their business, mostly using Machine and Deep Learning for speech and image recognition applications.

And that IBM has an advantage in terms of technology:

IBM’s Watson platform remains one of the most complete cognitive platforms available in the marketplace today.

But IBM fall flat due to hefty service charges and the inability to attract AI talent:

The hefty services component of many AI deployments will be a hindrance to adoption. We also believe IBM appears outgunned in the war for AI talent and will likely see increasing competition.

I’m never a fan of forecasts for market share, forecasts in Robotics have shown how wide off the mark the industrial robotics landscape is from where it was forecast to be, nevertheless the Jefferies numbers are worth looking at, even if much of AI will be in house in organisations such as Google, Facebook, Amazon, etc. Jeffery’s seem to think the value of the market, shown in the chart below, is underestimated “we think these forecasts are unlikely to fully capture the value created by internal use of AI applications such as machine learning. For example, Facebook and Amazon are aggressively using machine learning to improve their offerings, make operations more efficient, and create new embedded services.”

Jefferies research exhibit 8

The analysts do note that the singularity is not near and provide an interesting chart depicting the areas they see growth… interestingly they see a large percentage of growth in algorithmic trading strategies, equivalent to 17% of the market! Yet strangely indicate health care spend will be slightly less, and driverless AI even less, despite this being where much of AI is heading today.

Many AI Apps Will Take Time to Emerge; The Singularity Is Not Near While we are big believers in the long term potential of AI and see rapid adoption of machine learning in the near term, our checks convince us that many AI methods and applications will take time to be adopted.

Jefferies exhibit 9

The analysts emphasise how IBM is losing the talent war and also has less access to the rich data of Google, Apple, Facebook and Amazon. Talent will be a major game changer in AI.

The report also does a good job of showing the current flow of investment by major corporations, in terms of acquisitions, and also investment into AI start-ups. Overall the analysis, except the forecasts, gives a fair overview of the AI market, but omits the major $’s flowing into Academic research and the costs of employing and training AI researchers, which is likely already in the early billions… I do however agree that IBM’s Watson risks not capturing the markets share its technology richly deserves – maybe IBM will end up capitalising by its patent’s as it so often has.

Take a look at the report and judge for yourself (PDF).

Google’s robot and artificial intelligence acquisitions are anything but scary

Forget all the talk of machines taking over, Google’s robot and artificial Intelligence acquisitions will not More timelead human’s down the path of the dinosaur and dido towards extinction.

Google is in the business of providing information. Its mission is to organize the world’s information and make it universally accessible and useful.

Google’s acquisition of DeepMind significantly augments its ability to collect and organize data to enhance its services towards its stated mission. The Google executive team knows what the big data evangelists have been claiming for some time – the chance to gather data effectively is a game changer. It also gets patents on improved image search capabilities.

I’ve written before on the 8 robotic acquisitions Google completed in 2013. Maybe we will hear more about the cost of those acquisitions during Google’s Q4, 2013 Earning’s release after the closing bell on Thursday 30th January 2014. I still stand firm that much of those acquisitions are connected to Google’s mapping related activities. As I wrote at the time:

Maps are clearly at the core of Google’s development strategy, from driverless cars, online shopping and search, to wearable technology. Many of the recent robot acquisitions will enhance Google’s mobile strategy and improve its delivery services, hardware capabilities and above all localization experiences. “Google’s geographic data may become its most valuable asset. Not solely because of this data alone, but because location data makes everything else Google does and knows more valuable.”

This week’s acquisition of DeepMind (which I wrote about here) has gathered a huge amount of press attention considering the relatively small amount Google paid ($500 million), compared to the recent Waze acquisition ($ 969 million), Nest acquisition ($3.2 billion) and Motorola ($12.4 billion).

Much of the media, and indeed social media hype, has expressed comments that Google now has the ability to build Skynet, the self-aware artificial intelligence system from the Terminator movies, focusing on the fact that – “the technology could be used to controversial ends,” – hence Google was required to establish an Ethics board as part of the DeepMind acquisition, which: “will devise rules for how Google can and can’t use the technology.”

The DeepMind technology is indeed somewhat impressive and closer to a level of artificial intelligence than many others. Maybe the reinforcement learning of the DeepMind technology can be compared to IBM Watson as the closest other known technology currently available – and that’s a big maybe, but with the team Google has built and its capabilities in Machine Learning, and Artificial Intelligence the DeepMind acquisition certainly could give it similar ‘supercomputing’ capabilities as Watson.

IBM Watson, like Google’s ambitions are not something we should fear, they are developments we should embrace. According to IBM’s John Kelly and Steve Hamm, writing in their book: Smart Machines: IBM’s Watson and the Era of Cognitive Computing:

“The goal isn’t to replicate human brains, though. This isn’t about replacing human thinking with machine thinking.  Rather, in the era of cognitive systems, humans and machines will collaborate to produce better results – each bringing their own superior skills to the partnership.  The machines will be more rational and analytic – and, of course, possess encyclopedic memories and tremendous computational abilities. People will provide judgment, intuition, empathy, a moral compass and human creativity.”

But let me get to the point – and back to focusing on Google’s mission. Google believes organizing the world’s data will make us more productive and therefore its services will be more useful.

Through its Google Now service it wants to offer us the ability to talk with and have question and answer sessions with our personal assistant, or cybernetic friend. Think the Star Trek computer or ‘assistant.’ Although, personally I see it more as Jarvis, (or more correctly: J.A.R.V.I.S. Just A Rather Very Intelligent System) from the Iron Man franchise, the AI system which ‘acts’ as Tony Stark’s best friend.

Let’s turn to two high-ranking executives within Google for an idea of the big problem that Google could solve with DeepMind’s technology improving Google Now’s service. First if we listen to Astro Teller, the Captain of Moonshots at Google X (a moonshot is a long term project to solve a problem with a radical (often futuristic) solution). Astro said in a video presentation one of the biggest problems to be solved was “having more time.” He talks about one of the biggest issues most people claim is they “don’t have enough time.” And being able to help people have more time, or manage their time better could be ‘building the impossible.’

Now let’s not get carried away Google will not attempt to slow down the rotation of the earth, but through its Google Now assistant service it could work with us to enhance our own neurological limits, which lead us to forgetfulness and oversights by providing an information rich, data system designed to support our needs.

If that sounds far fetched, consider what Google Executive Chairman, Eric Schmidt writes in his latest book: The New Digital Age – Reshaping the future of people, nations and business:

Centralizing the many moving parts of one’s life into an easy to use almost intuitive system of information management and decision-making will give all interactions with technology an effortless feel. These systems will free us of many small burdens, including errands to do list and assorted monitoring tasks – that today add stress and chip away at our mental focus throughout the day. By relying on these integrated systems, which will encompass both the professional and the personal sides of our lives, we’ll be able to use our time more effectively each day.

Suggestion engines that offer alternative terms to help a user find what she is looking for will be a particularly useful aid in efficiency by consistently stimulating our thinking process, ultimately enhancing our creativity, not preempting it. So there will be plenty of ways to procrastinate too but the point is that when you choose to be productive, you can do so with greater capacity.

Mr. Schmidt further adds:

Other advances in the pipeline in areas like robotics, artificial intelligence and voice recognition will introduce efficiency into our lives by providing more seamless forms of engagement with the technology in our daily routines.

This technology will surely save many of us time in our daily affairs.

No, Google does not have ambitions to be Skynet! Its machines are not taking over. It is working on providing an assistant to help us manage the one resource humans have failed so miserably to do for generations, manage our time better with a personal interactive assistant.

On another level, and further technology advances which will have appealed to Google (and perhaps why Facebook was so interested), DeepMind engineers Benjamin Coppin and Mustafa Suleyman recently filed 2 patents which cover intelligent ways to improve the process of “reverse image search,” the ability of uploading a picture to a search engine which allows it to find similar ones. Of course to some extent this is already possible on Google’s image search, but it sometimes returns irrelevant images. The US patent filing 2014/0019484, by the DeepMind engineers reveals a unique approach; it allows the user to input two images, then it lets the algorithm find similarities between the two, and then search for those instead.

The second patent (filed by the same two engineers) enables the user to home in on a small area of two pictures to improve image search still further.

And let’s not forget Google is in the business of providing search.

Photo credit JoC

Which skills will be most in demand in the robot economy?

It seems de rigueur in the press to claim that robots will take our jobs, or drones will be able to make their own decisions, we read often about how advances in technology will lead to our own destruction. The Chief Investment Officer of Blackrock Fundamental Fixed Income even suggested that as many as 35 million jobs in the US may have been displaced by the advances in technology over the last 10 to 15 years.

Frankly I’m tired of the doomsayers. We will always evolve and advances in technology will create jobs. Sure jobs will be displaced … but new ones will be created.

We often hear of the Industrial Revolution being a catalyst for growth, and indeed it was, but also consider the 13th century in England. The 1200s were one of the golden ages of the Middle Ages where businesses flourished as a result of advances in technology. Royal Courts were richly furnished, monasteries grew in abundance, cathedrals rose towards the sky, watermills, windmills, bridges and ports were built all over England. The fact is we have always had cycles where new technologies contributed to new ways of doing business. There has always been and always will be new ways of production, of transportation and new consumer demands in all industries. During the Industrial Revolution advances led us away from lives that were as Hobbes so aptly put it: “nasty, brutish, and short.”

In order to thrive in the new economy those who learn to continuously upgrade their skills and harness technology will increase their worth. Those who do not will stagnate.

This dynamic creates highly skilled, highly productive workers that are increasingly in demand. Salaries for these high-performing workers will continue to grow “creative” workers, as defined by Richard Florida, may command a $61,000 premium in compensation over the average worker.

In his book The Rise of the Creative Class Revisited, (New York: Basic Books, 2012, pp. 398-400.) Richard Florida, classified those that will be in demand as:

Super-Creative workers include: computer science and mathematics; architecture and engineering; life, physical, and emotional science; education, training, and library management; and arts, design, entertainment, sports and media studies. Creative workers include: management; business and financial operations; law; health care and technical fields; high-end sales and sales management.

And above all, those that posses strong analytical skills. (See for example: The world needs data scientists).

One area that is and will continue to be in demand was so well written about some 5 or 6 years ago by Marc Andreesen, the man who essentially developed the internet browser (Mosaic, Netscape), and who is acknowledged as a leader within the technology world, with ownership positions in companies such as Skype (now sold to Microsoft), Twitter and has held (or still holds) board positions at FaceBook, HP, and eBay, among others:

Which undergraduate degrees are useful in the real world?

Typically, those that have a technical element of some form — that teach you how to do something substantive.

Engineering degrees obviously qualify. The current myth that engineering and computer science degrees are less useful because all the jobs are going to India and China is silliness; ignore it.

Hard science degrees — physics, chemistry — also clearly qualify, as do mathematics and economics.

Why do I take this stance?

Technical degrees teach you how to do something difficult and useful that matters in the real world. Even if you don’t end up actually doing what the degree teaches you how to do, going through the experience of learning how to do it will help you go through other serious learning experiences in your career. Complexity and difficulty will not faze you.

Plus, technical degrees teach you how to think like an engineer, a scientist, an economist, or a mathematician — how to use reason, logic, and data. This is incredibly useful in the real world, which generally demands rigorous thinking on the path to doing anything big.

Plus, technical degrees indicate seriousness of purpose to future employers and partners. You get coded right up front as someone who is intent on doing real things.

Marc’s companies and investments in early stage entities have added billions of dollars to the world economy, changed the way many of us communicate, learn and do business. Indeed created channels of accelerating and improving the way we do business, enabling our own businesses to prosper and in the process possibly created tens of thousands of new jobs.

Marc’s philosophy, and now mentoring and investments into new companies, has been the bedrock of economic growth and with it substantial job creation and innovation of new tools that add real value to the world.

In another blog post Marc indicated his hiring preference of engineers.

I think as the robot economy continues its upward spiral of growth we would be well advised to follow his suggestion.