Man vs Machine PART I

Movies tend to show a hyper-sensationalized depiction of our wildest dreams — and our deepest fears. When it comes to artificial intelligence technology, we see it as either utopic or dystopic; i.e. a tool that advances humanity and affords it to flourish or, conversely, one that will serve as the catalyst of its demise.

We all use artificial intelligence, though. It’s a fancy term for, essentially, a series of calculations that can predict what users want/need, and serve it up. It’s what powers features such as Siri and Alexa in our smartphones, laptops and other devices; it’s the ‘driver’ in driverless cars. AI is integral in the long strides humanity has taken in terms of quality of life over the past several decades, and whether we like it or not, it’s here to stay. For the record, we happen to like it.

Skeptics may say, however, that AI is perfectly fine for making broad predictions and suggestions — but what about the highly individualistic choices that make up our everyday? Could AI predict and advise effectively when it comes to decisions such as which neighborhood to buy a house in, what school to send our children to, and the million little decisions that make up our own financial management? In this first of two articles, we’ll take a closer look at that last question — specifically dissecting AI’s shortcomings compared to human financial advisors.

Aren’t Personal Finances… Personal?

If you’ve ever attempted to dole out financial advice on a friendly level, you’ve probably heard the following: “It doesn’t work that way”, “I can’t do that, though” and our personal favorite, “that doesn’t apply to me”. Sure, there are odd emotional factors that go into how and when we spend money, and there is no one-size fits all financial success plan. This is why (human) financial advisors are perceived as having an advantage — they take a look at one’s personal circumstances, and work back from there before producing suggestions.

That said, there are, undeniably, financial best practices that can and should be applied by everyone not fortunate enough to enjoy limitless wealth. These include habits such as monthly saving, not letting housing costs exceed a certain income percentage, and consciously monitoring regular spending to detect and address anomalies calmly. In fact, these generalized best practices would suit most people — and relevant suggestions can be customized to suit specific users based on existing financial data.

Score: Advisor = 1, AI = 1.

The Human Factor

So, if AI is so great, how have humans made it this far without it? Great question. Our humanness lies in our reason, our ability to take multiple variables into account and apply common sense to come up with compromises that may not necessarily be the best scenario, but a realistic one. To illustrate this point, a financial advisor may search for creative ways to help a family of four decide where to cut back on daily expenses in favor of yearly travel — an expense a pre-programmed machine may deem unnecessary.

If you think a financial advisor would be the only one who could do this successfully, you’d be wrong. AI has made great headway in both accounting for the volatile objectives set out by ‘imperfect’ humans (in other words, all humans), as well as their personal financial history, in order to predict their choices and help steer them correctly. While one can be selective about what past data to expose to a financial advisor, as well as about their own goals and behavioral patterns — one cannot do this with AI. Therefore, AI is able to exercise more ‘reason’ and assign predictions that have a tighter grip on reality.

Score: Advisor = 0, AI = 1.

Originally published at gochange.co on September 19, 2016.

Change develops an Invisible Service that links to bank and credit card accounts, analyzes money transactions and discovers bad financial behavior (symptoms). It then matches those symptoms with behavioral treatments that are executed through smart sms messages (nudges).

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