The stock markets are going crazy. But I’ve got a hot stock pick for you, one that’s guaranteed to make you a lot of money. If you want to know what it is, keep watching to the end of this video and and I’ll tell you or maybe not.
My name is Graeme Codrington and welcome to Throw Forward Thursday.
Every Thursday we jump into the future, we see what’s going on there and then we ask whether it’s of any value to us today. I want to suggest to you today, as part of our end of series, that sometime in the future we are going to live in a world where we don’t need investment brokers and fund managers. This is the world of people who try and analyse what’s going on in the stock market, make choices about where to invest other people’s money and then do those investments on our behalf. And we trust that they are very smart people who analyse the trends in the market carefully and then make very informed investment decisions. And ideally they make us a good amount of money and give us a good return.
Unfortunately, if you look back over the last 20,30, 40, 50 years, you’ll discover that very few fund managers and very few stock breakers brokers are able to consistently provide good returns. And by good returns, I mean better than the market index.
Yes, some funds have a good run for a few number of years and then something happens. And it would be a generalisation to say that there was only one cause of a fund that had been doing well, stopping to do well, but very often you can track it back and it comes down to a little bit of hubris, a little bit of the stockbroker believing their own BS, to be honest, believing that they are the smartest person in the room and making what, as we look back on it, became too risky a decision or too much of a leap into something that they thought was going to be brilliant. As I say, they kind of got baffled by their own brilliance, or at least their own thought of their own brilliance.
And here’s why I think we’re going to see the end of stockbrokers and the end of fund managers sometime in the distant future. Because what we really want is for the smartest of today’s fund managers to build algorithms, to build software that can take the process that they use, choose the best versions of those processes, apply those to the world of investments and make investments without human error and without human emotion, especially the emotions of hubris and overconfidence. I wonder if that’s going to be possible in the future.
I think, and I suspect that it will be. It might mean that we don’t get the fantastic growth rates that some funds achieve for a few years, but it probably will also mean that we don’t get the crash and burn that often happens after that, that we just get what some investors have been able to do over a long period of time, consistent, slightly better than market average and a few points better than inflation returns consistently over a long period of time.
And for many people, that’s exactly what we’re looking for. So it might be that a computer, a machine, an algorithm, some software that has machine learning and artificial intelligence capabilities, that can learn from its own mistakes, that can correct itself very quickly on an ongoing basis, that can continue to learn new approaches to investing, that that might be the very best that we can do in terms of investments. Now, if we go back 20 years, I might have been talking about a computer that could play chess, and you might have told me, it’s impossible. Chess is way too complex. There are way too many things involved.
A computer will never be able to play chess. Except today. Computers not only play chess, but they have found new ways of playing chess. And let’s go well beyond chess, because the most complex game that human beings have ever invented is the game of Go. And we thought that chess, we could understand how a computer might just learn all of the possible chess games that could be played and then just choose the best version of the game.
And so it’s more of a memory tool. And chess computers began consistently beating the world champions many, many years ago. But Go is beyond that. The number of options in a Go game is more than the number of stars in the universe, more than the grains of sand on every beach, on every planet, on every galaxy of the universe.
It just is literally the mostly insanely complex game and yet, with Google’s AlphaGo and now AlphaGo Two and others, we have discovered not only can AI driven technology play a very good game, these AlphaGo computers have actually learned how to play Go better than human beings have ever played it.
So they are playing a version of Go that no human being has ever played, and they are playing it better than any human being has ever played it. And if that type of technology can be brought into the investment world, I see no reason why the various investment strategies that fund managers and stock brokers use could not be the starting point for artificial intelligence learning different styles of investing. Because the actual rules of the game, the actual rules of investment, are actually very simple and the outcome is clear maximise earnings over time.
So, yes, as we jump into the future, I discover that the very best investment advice I can give you is to make sure that you don’t have any human beings involved in choosing your stocks in the future. How far in the future you need to go to get there? Well, it’s probably closer than we imagine. I would guess it’s somewhere in the early 2030s that you will discover that computers not only do a better job than humans, but that they do such a better job than humans that we will demand that we do not have any humans involved in the process. Sorry.
If you’re a stockbroker or a fund manager, contact me. I’ll tell you what I think you can do to make sure that the human element of investing is something that you can keep doing, but the actual decision making.
I’m sorry to tell you, I’d prefer a machine to do Throw forward Thursday always fun when we have a look at what the future holds.
Come back next week as we continue our end of series it’s, we look at how the world will change and how quickly that might happen.
See you next week.
For the past two decades, Graeme has worked with some of the world’s most recognized brands, travelling to over 80 countries in total, and speaking to around 100,000 people every year. He is the author of 5 best-selling books, and on faculty at 5 top global business schools.