Rob Donaldson

Written by: Rob Donaldson

Rob Donaldson

Partner, Head of Corporate Finance

Artificial intelligence is better than no intelligence

  • February 2018
  • 5 minutes

We hear much about artificial intelligence these days and the threats it might hold for our future (and little about the opportunities). Mass unemployment, artificial consciousness, the very destruction of human civilisation.  Scary stuff. However, like the most pernicious threats facing the world; global warming, resource depletion, the destruction of natural habitats it's all a few decades off so why, some short-sighted observers might say, worry?

Well, it's a view. However, forget maybe the threat of artificial intelligence, how about the nearer term threat caused by the reluctance of our political elite to apply their intelligence (it must be there?). Even by the usual standards of politics recent events across the Western World seem breathtakingly disappointing.

Take the US. I woke up last weekend. Here was the news. The US is developing a new range of smaller nuclear weapons so that it's more likely to be able to use them. The US 'government' (the quotes are deliberate) is about to run the largest budget deficit outside of wartime or recession ever. $1 trillion dollars or nearly 6 per cent of GDP.  Not in a downturn but when US unemployment is near record lows and the economy has grown for an almost unprecedented 102 months in a row. Oh, and the publication of a memo excoriating the FBI raised the prospect of a constitutional crisis in the US unseen since Nixon.

Wow.

Things are better at home, no? Well here in the UK we face the prospect once again of a Conservative party torn apart by the interminable wrangling over Brexit, that seemingly shambolic negotiation to extract us from our present relationship with Europe. As a verbal war rages about the likely impact on our economy its a shame to see a handful of our politicians so focused on their personal political prospects (never mind the country) that they sow confusion and weaken our negotiating position in order to enhance narrow self-interest. The chances of yet another election rise and the voters will then face a stark choice. A riven Conservative party or a Labour party led by leaders who but a few years ago would have revelled in their description as the hard left (not any more of course as they've been rebranded in GQ but, well).

Hey, it's all ok though because we're going to have a blue passport again so whilst we might not be able to afford to travel too far at least when we do we can admire our sovereign colour whilst we queue at passport control. Yes, that’s right. Control, we're taking it back.

Dismal.

In these times it would be understandable to view the future as quite dark. Reading the papers (I'm old fashioned like that), or plugging into the news anyway you choose (assuming it's not fake of course) it would be easy as maybe I did yesterday morning to shake your head, sigh and wonder whether it's maybe time to consider whether finding a quiet spot in Europe (better weather, better politicians, better currency (probably), better food and wine (definitely)). However, I'm kind of an optimist.  In the US there are checks and balances and we may well see them in action soon. In the UK there are still grown-ups out there (personally I'd vote for Carney as PM, who cares if he's Canadian) and anyway it's perfectly possible that this shambolic process will all end up achieving precisely nothing at some point. Europe's long sclerosis seems to be ending. Technology is still, overall, a force for good in our lives and the global economy is bubbling away.  

However maybe the clue to what to do is in that last sentence. We all know what happens to bubbles. Over the last 10 days or so we’ve heard the not so gentle sound of some bubbles popping.  As we enter the weekend (I’m writing this on Friday) nerves are on edge as the debate rages about whether this is just a 'correction' or something more significant.

It’s certainly true that the lack of volatility in the markets has been abnormal and a pullback was long overdue.  A correction, if that is what it is, is normal and should be welcomed. However, remember that markets are a discounting mechanism. They look ahead. The stock market rallied long before economic recovery took hold.  Maybe the downturn is a harbinger of things to come.

Whilst at the moment, and despite politician’s efforts, things seem set fair I'd be preparing for some rough weather economically in the next 12-24 months. A downturn is long overdue. When it comes it will be perfectly manageable if you're prepared. Don't overstretch, make sure liquidity is there in case of an economic blip and be ready to take advantage of the opportunities that a downturn, when it comes, will bring to rebuild. At least we can personally apply some intelligence to what is going on around us.

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