The rise of three of the most anticipated technologies of this decade is often perceived to be a threat and an attack on human choice – yet others regard big data, AI, and machine learning as tools that enable a previously unknown level of accuracy in human decision-making. So in the age of information, what is ‘choice’?
Just a decade ago, the business world made decisions in a very different way to today. The rather slippery concepts of human intuition and gut instinct reigned supreme in human resources and marketing departments worldwide, and it was those who held this ‘magic’ sixth sense that would be held in the highest regard. But while intuition certainly should not be disregarded and should be viewed in the same way as conscience when it comes to decision making, it is often based more on luck than judgement.
The human brain as a problem-solver has its flaws; it focuses on information that affirms assumptions and prejudices, reaches conclusions that stick to the status quo, and also places disproportionate weight on the first piece of evidence learned on any given topic. This means that decisions made through intuition and instinct are influenced by biases and will often to lead to a lack of diversity in terms of ideas. Coupled with the rising time pressures in corporate settings, judgement errors are likely to occur; errors that, in recruitment (for example) could cost the business between four and twenty times the salary of the person involved. Clearly, this decision-making process is flawed, and this is where big data, AI and machine learning play a central role.
Big data refers to the large and dynamic volumes of data being created by people, tools and machines. Technologies are able to collect, host and analyse the vast amount of data to provide real-time business insights that relate to consumers, risk, profit, performance, and productivity amongst many other things. The data includes information gathered from social media, internet-enabled devices (including smartphones and tablets), video and voice recordings, and the continued preservation and logging of structured and unstructured data.
The main benefit of big data for businesses is the insight that it provides, and the fact that these insights can be provided instantaneously. It drastically eliminates the need to make a risky, ‘gut-feeling’ decision, as the information needed to make the same choice rationally is available. This elimination of risk inevitably means fewer poor decisions are made, and judgements are instead based on real evidence in which clear patterns and correlations are likely to exist. The preference for a big-data-informed decision is evident based on the growth of data generation; today, we generate more data in ten minutes than all of the humanity has ever created through to the year 2003.
AI and Machine Learning
Artificial Intelligence (AI) involves the process of analysing data to model some aspect of the world. Inferences from these models are then used to predict and anticipate possible future events. AI models will use collections from big data in order to provide as robust and well-informed predictions as possible. Because these huge datasets are used to build AI models, it means that the chances of anomalies in its results are very slim, and this, in turn, provides a degree of reliability that businesses really value. The fact that the models are pre-designed, and ready to be used whenever needed, also means they are perfectly suited to a high-pressure and time-constrained environment; an environment in which a human could make a critical mistake.
Lastly, machine learning is AI which possesses the ability to learn without being explicitly programmed. Its capability is most effectively conveyed in the example below by Avinash Kaushik:
“A large hotel chain wanted to solve this problem: ninety-thousand travellers are stranded every day in America across 5,145 airports. How can the hotel ensure that they show up at the right moment for all these people? The solution was to leverage real-time signals like bad weather, flight delays at 5,145 airports, and other such data, combine that with machine-learning powered algorithms to automate ads and messaging in the proximity of local airports. The result? A 60% increase in bookings in targeted areas.”
This case clearly shows the benefits of machine learning; it can combine a range of variables and process them in a way to produce a result precisely at the time that humans want it to, while simultaneously saving a huge amount of time and effort for the person who otherwise would have had to analyse it manually.
What This Means
It is indubitable that these three technologies can vastly improve human decision making. But what does it all mean for human choice? Do humans even still have a choice to make?
The answer is: absolutely. These technologies do not eliminate human intuition; they simply improve it. Humans still have several choices to make in any instance despite the availability of these technologies. Would using AI help find a better solution? Which insight model should be run? Does the result being given seem correct? Should this advice be followed or go with a different plan? These are all questions that will be asked, despite the intelligence and the automation of the technology. And it is imperative to remember that – it is humans that create all this technology in the first place.
In reality, given the evidence, this discussion should not be a question of whether human choice still exists or not, but instead an examination of how our choices have changed – and in many ways enhanced. Human intuition and instinct remain critically important in business; all that these technologies do is fine-tune them.
South Korea Bitcoin Regulation on The Horizon
South Korea’s government held an emergency meeting to discuss the impact of cryptocurrency speculation last Wednesday. Banning minors from investing and introducing capital gains tax on cryptocurrency were suggested as means of protecting citizens, reports say.
The meeting was a response to talk of cryptocurrencies being in an asset bubble and the impact investing is having on younger generations. New measures to tackle this problem could be announced by the end of the week, according to Reuters.
Why It’s Important
South Korean exchange Bithumb – the worlds busiest – has hit it off with students. The ease of opening an account and the option to invest small amounts has caught the attention of many young people.
This group’s obsession with the digital assets prompted the emergency meeting. President Moon recently expressed his fear of students joining the trend and becoming obsessed with the rapid price changes of cryptocurrency prices. He labelled this a “serious pathological phenomenon.”
“Some even abandoned their studies and part-time jobs as they believed they could make much more money by investing in bitcoin,” said Reuter Correspondent Dahee Kim. The trend appears to be causing social problems in the country.
The country banned initial coin offerings back in September.
Jamie Dimon Comments on Bitcoin After Futures Contracts Go Live
“I remain highly skeptical of it,” said JPMorgan’s CEO Jamie Dimon, when recently asked about bitcoin. “I’m open-minded to uses of cryptocurrency if properly controlled and regulated,” Dimon added. The executive, who famously called bitcoin a “fraud” appears to have softened his opinion just days after the bitcoin-based futures derivative began trading on the Chicago Board Options Exchange.
Why It’s Important
This is the first time Dimon has spoken about bitcoin for two months. The timing of Dimon’s comments might suggest JPMorgan will offer the bitcoin derivative to its clients. The contract would allow clients to take long or short positions on bitcoin’s price.
Similar contracts will trade on the CME and Nasdaq exchanges in the near future.
SEC Warns Against Bitcoin and ICOs
“If a promoter guarantees returns, if an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost,” said US Securities and Exchange Commision Chair Jay Clayton regarding buying cryptocurrencies and investing in ICOs. Clayton urged investors to ask several questions before investing in cryptocurrencies.
While he said ICOs “can be effective ways for entrepreneurs and others to raise funding”, he warned that “any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require.”
Why It’s Important
The SEC’s message is clear: while they welcome innovation, the legal basis for regulating securities has not changed. This is quite a contrast from South Korea and China, who both banned ICOs in September.
Regulation of cryptocurrencies has been expanded under Clayton’s watch. Last week the SEC’s Cyber Unit filed charges against an ICO for defrauding investors and shut down a San Francisco based ICO just yesterday.
Cryptocurrency markets are likely to remain largely unregulated, but ICO surveillance appears to be on the rise.
What The Bitcoin Futures Regulator Had to Say
Head of the Commodities Futures Trading Commission (CFTC) J Christopher Giancarlo, who approved the bitcoin futures contracts which recently went live on the Chicago Board Options Exchange, said investors should be aware of the “potentially high level of volatility and risk”. Giancarlo stressed that the CFTC would not be able to protect investors trading cryptocurrencies in many venues.
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