Opportunity Cost for Active Managers Is High Institutional investors typically contemplate opportunity cost within the context of portfolio returns, individual stock returns and ROIC. What however is the opportunity cost associated with pursuing a broken business model versus correcting course? The capital markets are filled with smart people and smart machines. It is more difficult than ever…
Disintermediation Defined Disintermediation is when one party inserts itself between an interested party and its customers (see below table of “disintermediators” and “disintermediatees”). Ironically, parties that suffer disintermediation often invite it upon themselves. Google Disintermediates Yelp and OpenTable For the past several years Yelp restaurant reviews appeared on Google business listings (this appears to have…
Machines don’t complain. Machines don’t get sick. Machines don’t ask for a raise. Machines don’t get tired. Machines don’t take lunch. Machines can perform complex tasks – including surgical operations and making investment decisions.
Perhaps most importantly – with the advent of machine learning – machines perpetually remain on the learning curve. The old axiom “you can’t teach an old dog new tricks” does not apply to machines.
Many tasks lend themselves well to “machine-led” environments (by “machine-led” we refer to discrete tasks and complex workflows that have or could have machine learning and/or artificial intelligence as a core underpinning). For these tasks, humans will add value by providing machines with access to data sets that machines could not acquire on their own. The saying “feed the beast” will have never been truer.
However, there are instances where machine-led processes are not optimal. For example: great works of art, music and other forms of inspired creativity and original thinking where the outcome isn’t clear.
We are inspired to create when we are inspired to create. Would a sentient machine be inspired to create the Mona Lisa? Would a sentient machine be inspired to put people on Mars as Elon Musk wishes to do? (more likely that a machine would only pursue colonization of Mars when it would be practical to pursue that outcome as a result of an event or series of events here on earth). Would a sentient machine have been motivated to create electric vehicles?
Count me an optimist in that I believe that the most strategic, creative endeavors will always benefit greatly from human participation and leadership.
Making Numbers Is Not Enough The hallmark of a great company is not one that simply meets or beats consensus estimates with some regularity. Imagine if Reed Hastings and Netflix chose not to pursue the company’s over-the-top (“OTT”) strategy when investors where hungry for DVD profits. Imagine if Jeff Bezos and Amazon scaled back their…