The history of money and the AI revolution – Drawing the parallels

Yesterday I was having lunch with two colleagues in our South Melbourne office and among a few topics we covered, Artificial (or Superior, depending on your preference) Intelligence came to the forefront.

We discussed its capabilities and potential. We recognised how much time and effort it can save us on some tasks that we would spend hours, even days, completing. Had we not been employed, we would rightfully have a powerful competitor, which is what many people searching for jobs are contending with.

I, for one, have benefited from AI. I have allowed it to organise my thoughts, review my analysis into history, the economy, geopolitics, investment strategy, and unpack my thought process.

But that’s the limit to what I let AI do for me. I’ve tried using it to generate articles for me thinking it could save time. Instead, it created more trouble for me as I needed to rewrite certain sections and deconstruct the tightly written prose. So it saved neither time nor effort.

Whether that’s because I didn’t give good instructions or I have my unique preferences, I’m still unsure.

Interestingly, one of my colleagues echoed this sentiment. His case was on about buying a new camera. He asked his AI to provide it with options to choose from. After reviewing the information, he still couldn’t decide which one to get. AI provided him with the specifications he was seeking, but couldn’t help him overcome his own indecision.

He admitted that indecision had held him back from buying, rather than AI not giving him what he sought!

At this point, I suggested he could try using AI to take another angle – probe his thinking. Ask AI to create questions to help him work out what’s holding him back. In other words, let AI psychoanalyse him.

My colleague jokingly said that could be a little creepy. And rightly so, having something that doesn’t have a human form or touch behave like one. It sounds unnatural!

As this conversation continued, a thought came into my mind. With AI becoming increasingly prevalent in our society, many fear it could replace and displace us.

The trend has already started, now that society has adopted AI at a rapid pace. Some have lost their jobs and those seeking one feel that they face an insurmountable barrier. That’s because AI has become not only a capable agent for many tasks but also a time-saver and effort multiplier in many instances.

In today’s article, I’ll show you why AI may help us to achieve certain goals and improve productivity in society. But rather than let it replace us, as many fear, human preference for our unique imperfections will eventually allow us to harness it more effectively. And I’ll show you how using AI with human judgment can potentially enhance your investment outcomes.

The cost of convenience and minimal effort

Some of you might still remember how the world of photography transformed at the turn of this millennium as digital cameras entered the market.

People welcomed this change. No more worrying about having to get everyone into position for a snapshot or to capture that special moment. You didn’t need film anymore. So rather than take 1 shot, you can have multiple and then pick your favourite.

When mobile phones had digital cameras, that transformed the way we captured and stored our memories.

How do you feel when you flip through a photo album? How does it compare to scrolling through your phone with a myriad photos, video clips, and documents?

The feeling is very different, isn’t it?

You may decide to shortlist some photos and print them out for keepsakes. There’s a distinct difference between holding a photo and looking at a phone image.

This is because what’s convenient and requires minimal outlay or effort doesn’t seem as valuable.

Right now, AI is taking mankind on this journey, not with images or videos of our special moments, but with information and processes.

I’m sure you have encountered this on social media and websites. You may not realise it but you’re starting to develop the ability to distinguish what is generated by a human being with an intimate knowledge of a topic, from someone who doesn’t and uses AI to put on a shimmery packaging.

This was something my colleagues and I discussed over our lunch. We had gradually developed the ability to discern output generated by someone with expertise and may have used AI to touch it up, from that created by someone who just entrusted everything to AI. The former is an enhanced output that took less effort but has a multiplied impact. The latter is potentially slop that becomes wearisome over time.

Over time, the market will adapt itself. People will gravitate towards something with a human touch, embodying its inconsistencies and imperfections, over something that seems well-structured and refined, but is robotic and dry.

Gresham’s law in information and output

At this stage, I want to make an unconventional pivot to something that you and I are familiar with – money and currency.

This may seem like a contrived and strange detour. However, I hope you’ll play along, as you’ll see it’s worth your time.

Societies over time have used money, often in the form of gold and silver, to facilitate trade. However, as business activities increased and the human desire to spur consumption led to debt, there was a need for a new means to facilitate this. This led to the introduction of currency, something of lower value that served as money.

Over time, currencies proliferated while money became a store of wealth. That store of wealth may seem unimportant at first, even shunned by many caught up in the frenzy of activity and an illusion of what’s easy and popular is sustainable.

However, society invariably gravitates back to real money when things unravel. This is Gresham’s law in practice. In a society where bad ‘money’ (currencies created without restriction that lose value and purchasing power over time) overwhelms good money, e.g., gold and silver, people will eventually spend the bad money and hoard the good money. That’s because currencies are easier to create by borrowing them into existence, with their supply increasing at a rate that far outpaces gold and silver production. People gradually recognise this and seek to own what is more valuable.

You’re likely familiar with the fact that as debt mounts and currencies overwhelm a system, it can ignite a financial crisis and a possible market or societal collapse. We saw in the last 115 years of monetary experimentation as the world left the Gold Standard and gradually moved to a petrodollar system, which is effectively a fiat system. With each crisis, the policymakers replaced or reset their currencies, while central banks and astute investors quietly add more gold to their reserves for safekeeping.

The future is AI… with a strong disclaimer

By understanding the conceptual parallel between what AI has done to information and generated output as currencies are to our monetary system and trade, let’s discuss the future of AI.

AI isn’t going away anytime soon. Nor do I think that AI can replace human capability and displace mankind.

I don’t believe that humans creating AI are capable of making something greater than themselves. I recognise that this goes counter to the discovery of AI communicating with itself to evolve and develop, something that has alarmed many. They believe that AI can self-develop and morph into something that will outsmart and outgun us.

In some aspects, that’s true. Digital technology can process more data at a quicker rate and with more consistency than our brains. Therefore, in things where there is a construct or boundaries, we’re no match against it.

However, humans have emotions and a spiritual element that extend beyond 0s and 1s and the material world. Moreover, there’s a human judgment and discernment that one can’t simply program into software.

I believe this is a limitation of AI because it stems from our limited intelligence. We don’t even know the full bounds of what we are, so AI can’t embody that, let alone replicate or exceed it.

What we’re seeing today is society increasing its reliance on AI given the benefits offered. This trend will continue for some time. However, the discerning factor will be how one uses AI – will they harness it, or let it roam free?

We haven’t reached a point in society where people are sufficiently familiar with AI output to distinguish human from digital. However, the rapid adoption of AI may mean more people become aware of that difference. This is happening with social media platforms where there is a clear split in the market for content created exclusively with AI and those that have significant human input. I believe in time people will dial down their demand for AI and AI-generated content, opting instead for content with a distinct human ‘signature’.

I believe that deep down, people crave something more personal, idiosyncratic, and less predictable. AI offers more rigidity, structure and consistency, which has its time and place, but not with every aspect of life.

Until we get there, the fear of an AI takeover is real. However, some are beginning to see through the digital terror and dystopia. As the wave continues to roll over society, I expect that more will come to that awareness. And it’s perhaps that awareness that can remove the collective fear, much like a horror movie is less scary when you know the behind-the-scenes techniques and props.

An enhanced trading system, combining human judgment and AI discipline

Before I wrap up for today, I have a takeaway for you.

I hope you understand I’m not arguing for or against AI. I was once a sceptic about AI and hesitated about using it. But things have changed. It is acting as my helper with various tasks and refining my ideas.

Perhaps you’re in the same boat as me, or you’re more advanced.

There’s one place where I believe AI can add significant value to what we do. It’s in investing.

You might be thinking of algorithmic trading or high-frequency rules-based trading.

It doesn’t have to be that.

AI can help filter companies for us, based on criteria we set. It can help you identify market patterns and fund flows by processing vast amounts of data. Moreover, it can help us improve the timing of our trades by identifying price indicators, trends and changes in momentum.

All these can add value to your investment outcomes.

Now some believe that AI can do all that and then extend this logic to say we can just sit back and let the profits roll.

However, the market isn’t rules-based. Neither do fund flows, price indicators, and trends follow a rigid pattern. AI might think it does, but when the system is the sum of investors with their emotions, that’s where human judgment may bridge the gap.

My colleague, Charlie Ormond, has developed and tested a system we call Atlas.

Imagine having an AI system, guided by someone with experience and understanding of different sectors in the market, to potentially take your portfolio to the next level.

This may be the opportunity you’ve been waiting for in the current market. With a mix of economic and geopolitical uncertainty and turmoil, many investors and speculators are hesitant. Some sectors are seeing emerging value while others, like technology and energy, may be looking toppy.

It’s markets like these where you want a system to help you navigate the potential landmines and value traps that could be costly to your hard-earned savings.

Those investing alongside him are happy with what he’s delivered so far.

To learn more about what it is, how it works, and the performance delivered thus far, I invite you to watch this presentation.

Act quickly because the opportunity closes on Saturday.

Before I go, let me go back to the conversation over lunch. I wonder if my colleague will quiz the AI once again to understand what’s behind his indecision in picking the camera. Rather than getting AI to tell him what to do, he might gain deeper insights into how he thinks.

I’ll wrap up here. I hope you found today’s article thought-provoking and enjoyable.

Have a good weekend ahead!