Strategies to beat the AI bots

The writer is professor of finance at the Stern School of Business at New York University

A few months ago, I was teaching my classes at Stern, when my friend, Vasant Dhar, who teaches a range of classes from machine learning to data science, called me about the Damodaran Bot.

This is an AI creation, which had read everything that I had ever written, watched every webcast that I had ever posted and reviewed every valuation that I had made public. He told me that the Bot was ready for a trial run and ready to value companies. Those valuations could then be measured up against valuations done by the best students in my class.

The results of the contest are still being tabulated, I am not sure what results I would like to see. If AI values companies as well, or better, than I do, that is a strong signal that I am facing obsolescence. If it does so badly, that would be a reflection that I have failed as a teacher.

AI is the coming together of two forces — increasing (and cheaper) computing power and the cumulation of data, both quantitative and qualitative. As an AI novice, there are three dimensions on which I see it having an advantage over human beings: on mechanical/formulaic, as opposed to intuitive, work; in rule-based, rather of principle-based, disciplines; and on tasks with there is an objective answer, rather than subjective judgments. Bringing this down to the personal, the threat to your job or profession, from AI, will be greater if your job is mostly mechanical, rule-based and objective, and less if it is intuitive, principle-based and open to judgment. 

While AI, in its current form, may be unable to replace you at your job, it will get better over time, and it will learn more from watching what you do. So, what can you do to make it more difficult to be outsourced by machines or replaced by AI? I have four thoughts.

First, in a world of specialists operating in silos and exhibiting tunnel vision, AI will empower generalists, comfortable across disciplines, who can see the big picture.

Second, in investing and valuation, if your valuation technique has become mainly financial modelling, with extrapolation of past data, AI can do it quicker, and with far fewer errors than you can. If, however, your valuations are built around a business story, enriched with soft data, AI will have a tougher time replicating what you do. 

Third, we are victims of the “Google Search” curse, where when faced with a question, we are quick to look up the answer online, rather than try to work out the answer. While benign, if you are looking up answers to trivia, it can be malignant, when used to answer questions that we should be reasoning out answers to on our own. That reasoning may take longer, and lead you to the wrong answers, but it is a learned skill, and one that we risk losing, if we let it languish.

Fourth, an empty mind may be the devil’s workshop, but it is also the birthplace for creativity. The capacity to connect seemingly unconnected facts and have “Aha” moments is unique to humans, and AI will struggle to do the same.

If you were a conspiracy theorist, you could spin a story of technology companies conspiring to deliver us products, often free and convenient to use, that make us more specialised, more one dimensional and less reason-based, while filling our free time, as a precursor to unleashing AI as a weapon on us.

Since my life’s work is in the public domain and there is a bot with my name on it, my AI threat is here. The AI threat to you may not be as imminent, but as you consider responses, there are three strategies you can try. The first is to be so secretive about what you do that a bot will be unable to track you. The caveat might be though that your actions may reveal your work process, and AI can reverse engineer what you do.

The second is to seek out system protection, from regulators and the law, against AI disruption. Thus, even if AI can replace humans in the appraisal business, I will wager that courts and accounting rule writers will be persuaded that the only acceptable appraisals can come from human appraisers. The third is to build a “moat” — strategic defences that will make it more difficult for AI to replace you at your job. That, however, will require an honest assessment of what you do bring to your job.

If you believe that I am overreacting to the AI threat, I suggest that whether the threat is real or imaginary, the costs of it being real are so consequential that it behoves us all to act like it is, and act now, since those actions will make us all better at what we do, even if it turns out to be imaginary.