Annual Client Presentation November 2019 Portfolio Management & - PowerPoint PPT Presentation

Portfolio Management & Financial Counsel Annual Client Presentation November 2019

Portfolio Management & Financial Counsel A B A Brav ave e New w World The Rise of Artificial Intelligence

Portfolio Management & Financial Counsel Helpful? Harmful? Robots take our jobs ◆ • Get smarter over time, then run amok The robots have: ◆ • Specific, useful functions • Some emotional intelligence 2

AGE GENDA NDA Portfolio Management & Financial Counsel What is AI? 1. The Economics of AI 2. Implications of AI 3. • For business and investing • For society Nexus Update 4. 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. 3

WHAT AT IS IS AI? I? Portfolio Management & Financial Counsel AI is unlike other compute ter systems ms AI AI ATM Factory Automation • “ AI applies computer systems to tasks that once required human intelligence” (1) Computer Program (1) Andrew Burgess, “The Executive Guide to Artificial Intelligence: How to Identify and Implement Applications for AI in Your Or g anization”, 2017. 4

WHAT AT IS IS AI? I? Portfolio Management & Financial Counsel AI is essentially pattern recognition… an extraordinarily difficult task for a computer Data Prediction 9 4 Chihua uahua hua? Prediction is at the Core of AI 5

WHAT AT IS IS AI? I? Portfolio Management & Financial Counsel AI is already ady in broad daily y use Data Application Pattern Recognition / Prediction TEXT XT • Legal review • Remove objectionable YouTube IMAGE videos, social media images • Assisted driving • Virtual Assistant (Siri / Alexa) VOICE Everyday AI Applications 6

WHAT AT IS IS AI? I? Portfolio Management & Financial Counsel Tech chno nolo logic gical l advance nces have facil ilit itate ated d AI devel velop opme ment Digitization of Data • Faster Data Computing • Cheaper Communications Power • More volume Data Storage 7

WHAT AT IS IS AI? I? Portfolio Management & Financial Counsel Recent breakthroughs in “neural network” technology have quickened the pace of innovation Neural Network Data “Black Box” Prediction Data Prediction Neural Networks Neural Network = Black Box • Neural networks enable AI to learn and improve predictions 8

ECO CONO NOMICS ICS OF OF AI Portfolio Management & Financial Counsel The Deci cisi sion on Makin ing g Process Unders rstan andin ding g how people ple make deci cisio ions ns helps ps us understa tand nd the value ue of AI Input Outcome Decision Prediction Judgement Action Data • Comfort • Drive prediction • Trade-offs • Drive? • Cost  More comfortable, OR more $ • Take subway? • Subway prediction  Less comfortable, less $ Feedb dback ack Loop 9

ECO CONO NOMICS ICS OF OF AI Portfolio Management & Financial Counsel The Deci cisi sion on Makin ing g Process Simil ilarly rly, , this can be applie ied d to breas ast t cance cer r screeni ning ng using AI Input Outcome Decision Prediction Judgement Action Data • X-ray • Abnormality • Trade-offs • Biopsy? mammogram  Likelihood of  Risk and reward OR cancer vs. benign of various actions • No biopsy? Feedb dback ack Loop 10

ECO CONO NOMICS ICS OF OF AI Portfolio Management & Financial Counsel There re are simple, , but fundame ament ntal al econo nomic ics-ba based sed implica cation ions Prediction Better Input Data Judgement Cheaper er Predict ctions ns  Cost   Value More Use Value • Improved products & services • New applications • Breakthroughs 11

IM IMPLI LICAT CATIO IONS NS OF OF AI Portfolio Management & Financial Counsel Cheape per predic ictio tions ns will l lead d to b busines ness opportun uniti ities, societa tal l benef nefits its and socie ietal al issues Business Opportunities Better Societal Benefits Cheaper er Predict ctions ns Societal Issues 12

IM IMPLI LICAT CATIO IONS NS OF OF AI Portfolio Management & Financial Counsel For Busine ness AI will l reshape pe strategy y for compan anies ies Business Opportunities Opportunity to do new things and ◆ improve current processes • Data will provide new insights Better Cheaper er Organizational strategies will evolve ◆ • Humans, robots and AI working together Predict ctions ons Regulations will change, requiring ◆ adaptations Scale and “first - movers” rewarded ◆ 13

IM IMPLI LICAT CATIO IONS NS OF OF AI Portfolio Management & Financial Counsel For Busine ness With AI, there re is a f first-mo move ver r advant ntage age First-Mover Follower Error Rate Time Error Rate Over Time (Illustration) 14

IM IMPLI LICAT CATIO IONS NS OF OF AI Portfolio Management & Financial Counsel For Busine ness AI has implic icatio tions ns across all industries ies Technology Healthcare Auto Mining Real Estate Defence Utilities Agriculture Energy 15

IM IMPLI LICAT CATIO IONS NS OF OF AI Portfolio Management & Financial Counsel Heal althca thcare re In health lthca care re, , there re are many exci citi ting ng applic icat ation ions for AI Drug Discove very ry Diagno nosi sis Care Analysis of abnormal ◆ Biological & genetic ◆ ER staffing ◆ growths profiling Companion care ◆ Disease detection ◆ Treatment viability ◆ robots testing Mental health ◆ 16

IM IMPLI LICAT CATIO IONS NS OF OF AI Portfolio Management & Financial Counsel Autonom omou ous Drivin ving Autonom omou ous driving ing is one of the most advanced ced applic icat ation ions of AI today Fully integrated decision process ◆ Instantaneous decisions required; ◆ highly complex High cost of error ◆ Better solution “wins” ◆ • Fewer accidents • Lower costs • Spend time “better” 17

IMPLI IM LICAT CATIO IONS NS OF OF AI Portfolio Management & Financial Counsel Autonom omou ous Drivin ving Google’s Waymo and GM are leaders, and illustrate the first -mov over r advanta tage ge 1,630 1,600 1,200 800 427 427 400 246 246 0.12 0.06 0 Uber Mercedes Benz Toyota GM Cruise Waymo Disengagements Per 1000 Kilometers (1) Source: State of California, Department of Motor Vehicles. 18 (1) Tesla did not release data for this study.

IM IMPLI LICAT CATIO IONS NS OF OF AI Portfolio Management & Financial Counsel Autonom omou ous Drivin ving Waymo Technology in Action Waymo User Experience • YouTube video: “Waymo self -driving car at a crowded school • YouTube video: “Experiencing driverless Waymo rides” crossing” 19

IM IMPLI LICAT CATIO IONS NS OF OF AI Portfolio Management & Financial Counsel Nexu xus Portfo foli lios AI is “at work” in a number of our investments ◆ Autonomous driving ◆ Autonomous fleets ◆ Credit approval ◆ Medical research ◆ Virtual assistant ◆ Detecting objectionable content 20

IMPLI IM LICAT CATIO IONS NS OF OF AI Portfolio Management & Financial Counsel Societa ietal l Bene nefi fits ts AI will lead to key societal benefits… Societal Benefits Increases productivity ◆ Better • Better services • Lower costs Cheaper er Predict ctions ons Changes the nature of work ◆ • Less tedious work • More skilled work Scientific breakthroughs ◆ 21

IM IMPLI LICAT CATIO IONS NS OF OF AI Portfolio Management & Financial Counsel Societa ietal l Issues …but also raises fundamental societal issues High Low Privac acy More data Less data Protect low Innovate & Work skill jobs retrain Better Cheaper er Equality ity More equality Less equality Predict ctions ons No errors Regu gulat lation ion / Liabil ility ty Allow errors permitted Nation onal l Strate ategy gy EU China 22

CONC CO NCLU LUSI SION ON Portfolio Management & Financial Counsel Where re does s this end? d? Great at Leap ap for Humanit nity Dystopia pian n Future re Scientific breakthroughs Job losses / inequality ◆ ◆ Better quality lives No privacy ◆ ◆ Mega companies ◆ Destructive robots ◆ 23

CO CONC NCLU LUSI SION ON Portfolio Management & Financial Counsel ◆ 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 24

IN INSID IDE E NE NEXU XUS Portfolio Management & Financial Counsel Team am Update te We have two addition ions to the Nexus us team in 2019 Brad Weber Karrie Cheng 25

IN INSID IDE E NE NEXU XUS Portfolio Management & Financial Counsel 26