Artificial intelligence is dramatically changing industries, from banking to healthcare. When it comes to investing, it’s getting rid of one of the most burdensome human attributes: anxiety.
Doug Clinton, chief executive of Intelligent Alpha, an investment firm that uses AI to build strategies, told Quartz that “unemotional intelligence” is AI’s superpower — and is what will set it apart from traditional investors and strategists.
“What we’ve seen in terms of why AI seems to perform well, at least in our estimation from our tests, is that it doesn’t get hung up when the market’s going down,” Clinton said on the first episode of Quartz AI Factor, a new streaming video interview series filmed on location at the Nasdaq MarketSite (NDAQ).
“It doesn’t get nervous,” Clinton said, “or when the market is booming, it doesn’t feel like it’s missing out and doesn’t get FOMO.”
Intelligent Alpha launched a first-of-its-kind Intelligent Livermore ETF — named after famed stock trader Jesse Livermore — on the Nasdaq last month. It uses OpenAI’s ChatGPT, Anthropic’s Claude, and Google’s (GOOGL) Gemini to construct a global equity portfolio.
Firms that get on board with AI, and especially those that are native to AI, could gain an edge with a price tag in the trillions of dollars, similar to the shift to passive investing from active investing, according to Clinton.
“I think if we fast forward another two decades from now, the story will be about how AI powered investing took trillions of dollars of assets from passive funds and from active funds,” he said.
“What it does is it adds some intelligence to indexes, which are just definitionally sort of a set of rules that can’t be smart,” Clinton added. “And they also take that emotion out of the active side where human beings are still making decisions, but we get caught up. You know, we make mistakes and sometimes those compound. And so I think by fixing those two issues, AI has the potential to really capture a lot of value in terms of assets flowing to these new AI-powered funds.”
While concerns about the new technology aren’t unfounded, Clinton says we’re still a long way from an unsupervised version of AI that entirely loses the human layer.
“But I think really that human plus AI element, having that oversight layer will be how a lot of things get done, at least for the next decade,” he said.