Annual Client Presentation · 2019-11-20 · Annual Client Presentation November 2019. Portfolio...

Portfolio Management & Financial Counsel

Annual Client Presentation

November 2019


A Brave New WorldThe Rise of Artificial Intelligence


◆ The robots have:• Specific, useful functions

• Some emotional intelligence

◆ Robots take our jobs• Get smarter over time, then run amok

Helpful? Harmful?

2

Portfolio Management & Financial Counsel AGENDA

1. What is AI?

2. The Economics of AI

3. Implications of AI

• For business and investing

• For society

4. Nexus Update

3

Toronto is an AI innovation hub

• The University of Toronto has produced many leaders in the AI industry

• This presentation draws, in part, from “Prediction Machines”(1)

(1) Ajay Agrawal, Joshua Gans, Avi Goldfarb, “Prediction Machines: The Simple Economics of Artificial Intelligence”, 2018.


AI

WHAT IS AI?

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AI is unlike other computer systems

ATM

Computer Program

Factory Automation

• “AI applies computer systems to tasks that once required human intelligence” (1)

(1) Andrew Burgess, “The Executive Guide to Artificial Intelligence: How to Identify and Implement Applications for AI in Your Organization”, 2017.

Portfolio Management & Financial Counsel WHAT IS AI?

5

AI is essentially pattern recognition… an extraordinarily difficult task for a computer

9

4

Chihuahua?

Prediction is at the Core of AI

Data Prediction


VOICE

IMAGE

TEXT

WHAT IS AI?

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AI is already in broad daily use

Patt

ern

Rec

ogni

tion

/ P

redi

ctio

n• Remove objectionable YouTube

videos, social media images

• Assisted driving

• Legal review

• Virtual Assistant (Siri / Alexa)

Everyday AI Applications

Data Application


Technological advances have facilitated AI development

Digitization of Data

Computing Power

Data Storage

Data Communications

• Faster

• Cheaper

• More volume

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Neural Networks

Data Neural Network Prediction

Neural Network = Black Box

• Neural networks enable AI to learn and improve predictions

Data “Black Box” Prediction

Recent breakthroughs in “neural network” technology have quickened the pace of innovation


Prediction Judgement Action Outcome

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Understanding how people make decisions helps us understand the value of AI

ECONOMICS OF AI

Feedback Loop

• Drive prediction

More comfortable, more $

• Subway prediction

Less comfortable, less $

The Decision Making Process

DecisionInputData

• Comfort

• Cost

• Trade-offs • Drive?

OR

• Take subway?


• Trade-offs

Risk and reward of various actions

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Similarly, this can be applied to breast cancer screening using AI

ECONOMICS OF AI

Prediction Judgement Action OutcomeDecisionInputData

The Decision Making Process

Feedback Loop

• Abnormality

Likelihood of cancer vs. benign

• X-ray mammogram

• Biopsy?

OR

• No biopsy?


Prediction

Judgement

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There are simple, but fundamental economics-based implications

ECONOMICS OF AI

Value More Use Value

Cost

InputData

BetterCheaper

Predictions

• Improved products & services

• New applications

• Breakthroughs

Portfolio Management & Financial Counsel IMPLICATIONS OF AI

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Cheaper predictions will lead to business opportunities, societal benefits and societal issues

BetterCheaper

Predictions

Business Opportunities

Societal Benefits

Societal Issues


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AI will reshape strategy for companies

◆ Opportunity to do new things and improve current processes

• Data will provide new insights

◆ Organizational strategies will evolve • Humans, robots and AI working together

◆ Regulations will change, requiring adaptations

◆ Scale and “first-movers” rewarded

For Business

BetterCheaper

Predictions

Business Opportunities


Err

or R

ate

Time

First-Mover Follower

IMPLICATIONS OF AI

14

With AI, there is a first-mover advantage

Error Rate Over Time (Illustration)

For Business


15

AI has implications across all industries

Technology

Auto

Defence

Agriculture

Energy

Utilities

Real Estate

Mining

Healthcare

For Business


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In healthcare, there are many exciting applications for AI

Healthcare

Drug Discovery

◆ Biological & genetic profiling

◆ Treatment viability testing

Diagnosis Care

◆ Analysis of abnormal growths

◆ Disease detection

◆ Mental health

◆ ER staffing

◆ Companion care robots


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Autonomous driving is one of the most advanced applications of AI today

IMPLICATIONS OF AI

◆ Fully integrated decision process

◆ Instantaneous decisions required; highly complex

◆ High cost of error

◆ Better solution “wins”• Fewer accidents

• Lower costs

• Spend time “better”

Autonomous Driving


0.060.12

246

427

1,630

0

400

800

1,200

1,600

WaymoGM CruiseToyotaMercedes BenzUber

IMPLICATIONS OF AI

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Google’s Waymo and GM are leaders, and illustrate the first-mover advantage

Autonomous Driving

Source: State of California, Department of Motor Vehicles. (1) Tesla did not release data for this study.

Disengagements Per 1000 Kilometers (1)


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IMPLICATIONS OF AI

Autonomous Driving

Waymo Technology in Action

• YouTube video: “Waymo self-driving car at a crowded school crossing”

Waymo User Experience

• YouTube video: “Experiencing driverless Waymo rides”

https://www.youtube.com/watch?v=SUbqykXVx0A



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AI is “at work” in a number of our investments

◆ Autonomous driving

◆ Autonomous fleets

◆ Credit approval

◆ Medical research

◆ Virtual assistant

◆ Detecting objectionable content

Nexus Portfolios


◆ Increases productivity• Better services

• Lower costs

◆ Changes the nature of work• Less tedious work

• More skilled work

◆ Scientific breakthroughs

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AI will lead to key societal benefits…

IMPLICATIONS OF AI

Societal Benefits

BetterCheaper

Predictions

Societal Benefits


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…but also raises fundamental societal issues

IMPLICATIONS OF AI

Societal Issues

PrivacyHigh

Less data

Low

More data

BetterCheaper

Predictions

WorkProtect low skill jobs

Innovate & retrain

EqualityMore equality Less equality

Regulation / LiabilityNo errors permitted

Allow errors

National StrategyEU China

Portfolio Management & Financial Counsel CONCLUSION

◆ Scientific breakthroughs

◆ Better quality lives

◆ Job losses / inequality

◆ No privacy

◆ Mega companies

◆ Destructive robots

Great Leap for Humanity Dystopian Future

Where does this end?

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Portfolio Management & Financial Counsel CONCLUSION

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◆ AI is here and getting better

◆ AI creates challenges and opportunities for business

◆ Nexus’s investment approach remains unchanged

• Identify high-quality companies positioned for long-term success

• AI is one of many key considerations


25

INSIDE NEXUS

We have two additions to the Nexus team in 2019

Team Update

Brad Weber Karrie Cheng


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INSIDE NEXUS


Annual Client Presentation · 2019-11-20 · Annual Client Presentation November 2019. Portfolio...

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Transcript of Annual Client Presentation · 2019-11-20 · Annual Client Presentation November 2019. Portfolio...