The promise of artificial intelligence and what it means to BlackRock

Jody explains how BlackRock applies artificial intelligence to investing and helps improve the financial wellbeing of our investors.

Everyone is talking about the promise of artificial intelligence (AI). The question remains: will it meet, beat or disappoint expectations? It depends on who you ask.

Artificial Intelligence, and the family of technologies it represents—machine learning, natural language processing and optimization—is already shaping the way we interact with the world. We give voice commands to our phones, we shop via ads tailored to our most recent internet search, and our cameras can tell a husky from a malamute. In finance, the change may not be so visible, but the potential is equally if not more powerful.

There are many challenges in the world today, and high among them is the ability to build a secure financial future—one that enables us to send our kids to school, to tend to our health, to live comfortably and save for retirement, and to pursue life’s ambitions. It’s difficult to imagine a challenge more universal, more pervasive than financial well-being.

As the world’s largest asset manager, entrusted with $6.3 trillion* of our clients’ assets, we want to keep tapping into artificial intelligence to help us improve the financial wellbeing of the people we work for. And while AI alone cannot solve all of our financial challenges, it is a critical tool that nearly every company—from asset managers to ride sharing apps and the next startup in Silicon Valley—should use to improve the world around us.

At BlackRock, there are a number of ways artificial intelligence is already helping address the challenge of financial well-being:

1. Superior insights

Ninety percent of the world’s data was created in the last few years (source: IBM). This explosion of data is broadening the way asset managers view the world. But this data did not just fall from the sky in a perfect package. It is unstructured, unwieldly and extremely time consuming to digest. Machine learning and artificial intelligence techniques allow us to comb through this often messy data to glean insights never before thought possible—like the speed of construction in China, foot traffic into major department stores and sentiment picked up from thousands of online employee reviews. When combined with millions of other data points, these factors help asset managers make smarter investment decisions that impact our clients’ financial well-being.

2. Accelerate human learning

The real magic of artificial intelligence may be in its ability to accelerate human learning. Yes, computers are getting smarter, but so are humans as a result. This, after all, strikes at the core of our belief that to thrive in this new world requires the best people, the best computing systems and the best algorithms—all working together. Technologies like machine learning and artificial intelligence help improve efficiencies and reduce errors, freeing up precious human capital to focus more on investor needs.

3. Managing risk

So much of financial well-being is about understanding financial risk. This was a founding principle of BlackRock. How can we be confident in our well-being if we don’t try to understand the very things that threaten it? So we embarked on a multi-decade journey to build the most sophisticated risk management platform in the world—Aladdin®. The building blocks of artificial intelligence today—applied mathematics and data science—are embedded deep within Aladdin and are being applied in new, innovative ways across the platform. The result: a clearer picture into risk and its potential impact on our clients’ financial well-being.

The reality is that artificial intelligence is not new. It was born out of the natural progression of technology that dates back to the 1950s. This steady march has accelerated in recent years by unprecedented access to masses of data and improved computing power—the two ingredients necessary for AI to scale. How one seizes on this opportunity and for what purpose ultimately will determine our ability to deliver on its promise.

While we have made great strides, the industry is still in early phases of applying AI techniques. That is why we recently announced the BlackRock Lab for Artificial Intelligence and centralized our data science efforts in a new team called Data Science Core. The goal is to bring the benefits of these technologies to more people in more places across our business and all those that we serve.

Will artificial intelligence live up to its promise? Who is to say? At BlackRock, the answer ultimately comes down to its ability to help people live more financially secure lives. And we have only scratched the surface of what is possible.

Jody Kochansky is the BlackRock’s Chief Engineer and a regular contributor to The Blog.

*Source: BlackRock. Based on $6.288 trillion in AUM as of 12/31/17.

Investing involves risks, including possible loss of principal.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of March 2018 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

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