Prediction Machines

Agrawal et al., Prediction Machines

Prediction Machines: The Simple Economics of Artificial Intelligence (Harvard Business Review Press, 2018) by Ajay Agrawal, Joshua Gans, and Avi Goldfarb, all chaired professors at the University of Toronto’s Rotman School of Management, is an excellent introduction to the opportunities and limitations of AI. Their thesis is that, as things now stand, AI is becoming an ever cheaper community that lowers the cost of prediction and will change how businesses operate. But it cannot replace judgment, so human beings will not be sitting around as unproductive idlers.

Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

We respect your email privacy

Q2 hedge fund letters, conference, scoops etc

Prediction Machines

Prediction Machines: The Simple Economics of Artificial Intelligence by Ajay Agrawal, Joshua Gans, Avi Goldfarb

One of the goals of enhanced prediction is to replace satisficing with more optimal solutions. For instance, airport lounges are “imperfect solutions to uncertainty” and “will be undermined by better prediction.” With traffic apps and apps tracking flight delays, the traveler has new options such as “unless there is a traffic problem, leave later and go directly to the gate” or “if there is flight delay, leave later.”

The authors explore various ways in which artificial intelligence enhances decision-making, especially in the business context, but in the end (at least so far) it cannot replace human beings. We have data that machines don’t, from our senses to data that we opt to keep private. Moreover, prediction machines are often stymied by rare events that are difficult to predict because of a lack of data, “including presidential elections and earthquakes.” (Not that human beings and their statistical models did such a great job with the last presidential election.)

The authors speculate about which countries might have an advantage in developing AI. So far the United States is the world leader in terms of both research and commercial application. But “the trend lines are changing.” The future of AI may be “made in China,” as the New York Times suggested. First, China is spending billions on AI. Second, it has more people—and therefore more data (the new oil). Third, China doesn’t regulate privacy, so easy data access is another advantage. And, I would add, a trade war focused on twentieth-century manufacturing is unlikely to derail China’s efforts to gain an advantage in the twenty-first century.

Article by Brenda Jubin, Reading The Markets

Saved Articles

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted & limited time offer for being a sophisticated and loyal reader.

ValueWalkPremium is a website and newsletter on the latest industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 2/29/2019 or after next 25 subscribers take advantage whichever comes first – please do not share this discount with others