“Prediction is very difficult, especially if it's about the future.”
— Niels Bohr, Nobel Prize-winning physicist
Watch out, investment professionals — machine learning is coming to a company like yours. This subset of artificial intelligence isn't just for programming self-driving cars or sorting cat pictures. It's entering the investment management space, and its disruptive potential is only beginning to emerge.
From Siri and Alexa to Amazon and IBM's Watson, computer programs driven by artificial intelligence draw on massive amounts of data to solve previously intractable problems. Machine learning gives computers the additional ability to learn without being explicitly programmed. This type of AI enables computers to change — to learn — when exposed to new data.
The technology behind machine learning is being propelled by major algorithmic innovations that allow machines to synthesize extremely large data sets and reveal patterns, trends and associations that are relevant to prediction problems. And the increasing ubiquity of inexpensive parallel computation is making this technology accessible to even lean startups.
The technology already has transformed many industries, from the medical to the automotive. In addition, machine learning is widely seen as a leading driver of revenue at Google, Facebook and Amazon. However, its adoption in investment management so far has been limited. With the exception of a few leading hedge funds, the industry has failed to recognize machine learning's potential to drive investment decisions.