In this week's blog, we look at a topic of interest in both the media and the financial technology sector, A.I, and how the rollout of this kind of technology may alter the decision-making processes in both the construction and real estate industries across the globe. We will be looking at the JLL report "Artificial Intelligence - implications for real estate", as well as a smattering of our opinions and thesis. Now, to caveat this piece with some context, if you are a technology aficionado looking for a deep dive into generative language models, you are in the wrong place; this is simply a look at the fundamental changes that sort of technology 'could' bring in as the exponential rate of development accelerates, some predictive musings, on predictive modelling.
Before we attempt to go any further, we will explain the confusing but hopefully fascinating title of this blog. Your stance on A.I, in the future of any industry, will more than likely come down to which argument you choose to follow; the "stochastic parrot" metaphor in machine learning essentially concludes that all scalable language models we see being deployed today are simply generating text they don't understand. Still, they have assimilated enough data to produce a human-like response. A language model, for instance, if you ask, "Would I need an umbrella to visit the north of England?" may tell you "It rains a lot at this time of year in the north, so you may want to take an umbrella". It provides that information through the vast amounts of weather data and questions that have come before; it has no experience of walking in the rain or the north of England or opinion of its own; it's just a chain of words, an illusion of consciousness.
The second argument, arguably the more fantastical and exciting, is rooted in the story of AlphaGo, where artificial intelligence beat a grandmaster in the game of Go, a Chinese strategy-based match. It did so in a way that wasn't replicated by anyone that had come before; it came up with a way of playing the game all on its own; it took the information and created something new of its own accord, which is the second argument, A. I will eventually be able to develop A.I, accelerate its own development, and have a compounding effect on technology that will accelerate human development at a rate where Neolithic man to the present day could be achieved in decades, not millennia. Interestingly, when Einstein famously referenced compounding as a wonder of the mathematics world, he was probably talking about this sort of abstract exponential development, as opposed to, well, advertising savings accounts.
Now, all of this sounds very exciting, but how does this relate to the fintech industry today? To ground this thesis in something palatable, we must focus on the first argument as the probable immediate future, as the second would change the face of entire industries to an unrecognisable extent. The first argument, the use of machine learning in the real estate world, comes from access to information and information interpretation, looking for new markets and revenue models, the planning of developments, the financial modelling, and the use of "Proptech". So much of our sector's value is embedded in information and knowledge; a developer planning a project may sit down and think, "Well, this company understands the local areas' requirements; this person understands that areas demand for housing, what kind of houses will sell there, what the likely valuations will be, what the labour market is like, this company will understand the council's specific appetite for planning, what kind of contractors operate in that region, and on and on. Smaller developers pay a premium to access knowledge from a vast array of specialists and third parties, and even then, rarely receive enough detail to make financial decisions accurately.
What if A.I is taking us down a route where barriers to entry are reduced because it reduces the value of information to almost nothing? This is an entirely speculative hypothesis, but the information age thus far has been grounded in the commodification of data and the hoarding of information for commercial ends; what if the age of A.I is moving further towards information being free or at least substantially devalued?
The upheaval to industry would be ginormous, but the acceleration of development would require all industries, including fintech and lending, to move to a place of harnessing the power of the technology to benefit our clients; it would be our responsibility as custodians to ensure that the technology was integrated rather than damaging. JLL talk in depth in their report about Generative A.I and how developers will be able to use this technology as "co-pilot" products as opposed to automation, to see opportunities in the market, to fine-tune decision-making, which our team naturally provides our clients today, a depth of knowledge that goes beyond the surface level, and we feel that embracing these huge concept technology pieces as they come along, will only enhance our industry, rather than detract from it.
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