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

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◆

The robots have:

• Specific, useful functions
• Some emotional intelligence

◆

Robots take our jobs

• Get smarter over time, then run amok

Helpful? Harmful?

2

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AGE GENDA NDA

1.

What is AI?

2.

The Economics of AI

3.

Implications of AI

• For business and investing
• For society

4.

Nexus Update

3

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.

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AI AI

WHAT AT IS IS AI? I?

4

AI is unlike other compute ter systems ms

ATM Computer Program Factory Automation

• “AI applies computer systems to tasks that
• nce required human intelligence” (1)

(1) Andrew Burgess, “The Executive Guide to Artificial Intelligence: How to Identify and Implement Applications for AI in Your Organization”, 2017.

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WHAT AT IS IS AI? I?

5

AI is essentially pattern recognition… an extraordinarily difficult task for a computer

9 4

Chihua uahua hua?

Prediction is at the Core of AI

Data Prediction

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VOICE IMAGE TEXT XT

WHAT AT IS IS AI? I?

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AI is already ady in broad daily y use Pattern Recognition / Prediction

• Remove objectionable YouTube

videos, social media images

• Assisted driving
• Legal review
• Virtual Assistant (Siri / Alexa)

Everyday AI Applications

Data Application

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WHAT AT IS IS AI? I?

Tech chno nolo logic gical l advance nces have facil ilit itate ated d AI devel velop

• pme

ment Digitization of Data Computing Power Data Storage Data Communications

• Faster
• Cheaper
• More volume

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WHAT AT IS IS AI? I?

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Neural Networks

Data Neural Network Prediction

Neural Network = Black Box

• Neural networks enable AI to learn and improve predictions

Data “Black Box” Prediction Recent breakthroughs in “neural network” technology have quickened the pace of innovation

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Prediction Judgement Action Outcome

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Unders rstan andin ding g how people ple make deci cisio ions ns helps ps us understa tand nd the value ue of AI

ECO CONO NOMICS ICS OF OF AI

Feedb dback ack Loop

• Drive prediction

 More comfortable,

more $

• Subway prediction

 Less comfortable,

less $

The Deci cisi sion

• n Makin

ing g Process Decision Input Data

• Comfort
• Cost
• Trade-offs
• Drive?

OR

• Take subway?

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• Trade-offs

 Risk and reward

• f various actions

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Simil ilarly rly, , this can be applie ied d to breas ast t cance cer r screeni ning ng using AI

ECO CONO NOMICS ICS OF OF AI

Prediction Judgement Action Outcome Decision Input Data The Deci cisi sion

• n Makin

ing g Process

Feedb dback ack Loop

• Abnormality

 Likelihood of

cancer vs. benign

• X-ray

mammogram

• Biopsy?

OR

• No biopsy?

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Prediction Judgement

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There re are simple, , but fundame ament ntal al econo nomic ics-ba based sed implica cation ions

ECO CONO NOMICS ICS OF OF AI

Value More Use



Value

  Cost

Input Data

Better Cheaper er Predict ctions ns

• Improved products & services
• New applications
• Breakthroughs

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IM IMPLI LICAT CATIO IONS NS OF OF AI

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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

Better Cheaper er Predict ctions ns

Business Opportunities Societal Benefits Societal Issues

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IM IMPLI LICAT CATIO IONS NS OF OF AI

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AI will l reshape pe strategy y for compan anies ies

◆

Opportunity to do new things and improve current processes

• Data will provide new insights

◆

Organizational strategies will evolve

• Humans, robots and AI working together

◆

Regulations will change, requiring adaptations

◆

Scale and “first-movers” rewarded

For Busine ness

Better Cheaper er Predict ctions

• ns

Business Opportunities

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Error Rate Time First-Mover Follower

IM IMPLI LICAT CATIO IONS NS OF OF AI

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With AI, there re is a f first-mo move ver r advant ntage age

Error Rate Over Time (Illustration)

For Busine ness

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IM IMPLI LICAT CATIO IONS NS OF OF AI

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AI has implic icatio tions ns across all industries ies

Technology Auto Defence Agriculture Energy Utilities Real Estate Mining Healthcare

For Busine ness

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IM IMPLI LICAT CATIO IONS NS OF OF AI

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In health lthca care re, , there re are many exci citi ting ng applic icat ation ions for AI Heal althca thcare re Drug Discove very ry

◆

Biological & genetic profiling

◆

Treatment viability testing

Diagno nosi sis Care

◆

Analysis of abnormal growths

◆

Disease detection

◆

Mental health

◆

ER staffing

◆

Companion care robots

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Autonom

• mou
• us driving

ing is one of the most advanced ced applic icat ation ions of AI today

IM IMPLI LICAT CATIO IONS NS OF OF AI

◆

Fully integrated decision process

◆

Instantaneous decisions required; highly complex

◆

High cost of error

◆

Better solution “wins”

• Fewer accidents
• Lower costs
• Spend time “better”

Autonom

• mou
• us Drivin

ving

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0.06 0.12 246 246 427 427 1,630 400 800 1,200 1,600 Waymo GM Cruise Toyota Mercedes Benz Uber

IM IMPLI LICAT CATIO IONS NS OF OF AI

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Google’s Waymo and GM are leaders, and illustrate the first-mov

• ver

r advanta tage ge Autonom

• mou
• us Drivin

ving

Source: State of California, Department of Motor Vehicles.

(1) Tesla did not release data for this study.

Disengagements Per 1000 Kilometers (1)

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IM IMPLI LICAT CATIO IONS NS OF OF AI

Autonom

• mou
• us Drivin

ving

Waymo Technology in Action

• YouTube video: “Waymo self-driving car at a crowded school

crossing”

Waymo User Experience

• YouTube video: “Experiencing driverless Waymo rides”

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IM IMPLI LICAT CATIO IONS NS OF OF AI

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AI is “at work” in a number of our investments

◆ Autonomous driving ◆ Autonomous fleets ◆ Credit approval ◆ Medical research ◆ Virtual assistant ◆ Detecting objectionable content

Nexu xus Portfo foli lios

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Increases productivity

• Better services
• Lower costs

◆

Changes the nature of work

• Less tedious work
• More skilled work

◆

Scientific breakthroughs

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AI will lead to key societal benefits…

IM IMPLI LICAT CATIO IONS NS OF OF AI

Societa ietal l Bene nefi fits ts

Better Cheaper er Predict ctions

• ns

Societal Benefits

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…but also raises fundamental societal issues

IM IMPLI LICAT CATIO IONS NS OF OF AI

Societa ietal l Issues Privac acy

High Less data Low More data

Better Cheaper er Predict ctions

• ns

Work

Protect low skill jobs Innovate & retrain

Equality ity

More equality Less equality

Regu gulat lation ion / Liabil ility ty

No errors permitted Allow errors

Nation

• nal

l Strate ategy gy

EU China

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CO CONC NCLU LUSI SION ON

◆

Scientific breakthroughs

◆

Better quality lives

◆

Job losses / inequality

◆

No privacy

◆

Mega companies

◆

Destructive robots

Great at Leap ap for Humanit nity Dystopia pian n Future re Where re does s this end? d?

23

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CO CONC NCLU LUSI SION ON

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◆ 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

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IN INSID IDE E NE NEXU XUS

We have two addition ions to the Nexus us team in 2019 Team am Update te

Brad Weber Karrie Cheng

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IN INSID IDE E NE NEXU XUS