Automation and robotics

From infant to young adult: the birth of artificial intelligence and the current state.

Humanity's impact and influence on our planet is undeniable.

We have constructed cities that sprawl for miles and built skyscrapers that pierce the heavens. We have tunneled through mountains, redirected rivers and spawned new bodies of land. Roads and power lines crisscross the ground, while airplanes and satellites clog the atmosphere and beyond. With our dominion over Earth secure, we have even set our sights on conquering the solar system.

It took us several million years to reach this point. But progress has snowballed since the first industrial revolution of the late 18th century. In less than 250 years, we catapulted from horse-drawn carts to self-driving cars; from navigating by the stars to relying on voice-activated GPS instructions; from penning letters to loved ones to having awkward conversations with Siri.

The Internet, above all, has shaped more aspects of society across civilizations than any single invention of the past. The ability to instantaneously communicate and share and consume information – be it cat videos or scientific research – has amplified the pace of technological breakthroughs. As Gordon Moore, the co-founder of Intel and Fairchild Semiconductor, observed in 1965, processing power doubles every two years as transistors in a chip gain in abundance and speed - a rate emblematic of broader discovery and innovation.

We have entered the fourth industrial revolution, an era that will be defined and driven by extreme automation and ubiquitous connectivity.

Like the three other industrial revolutions, the changes borne during this period will irrevocably alter the course of our future and the way we interact with technology and each other. But in this new digital age, there will be one development so profound and seismic that it will rupture the Earth's long-held human-centric status quo - the birth and transcendence of artificial intelligence (AI).

The quote made by mathematician and cryptographer Alan Turing in 1951 has been a key guiding principle for data scientists and business leaders interested in AI. Until recently, AI was only a concept - a "one day" conversation that came alive in science-fiction novels and movies. The idea of an artificial being with humanlike consciousness can be traced back to tales of mechanical men from the Middle Ages and Mary Shelley's Frankenstein to, more recently, author and scientist Isaac Asimov's three laws of robotics.

The earliest emotion-relevant work in AI dates back to the 1970s, when cognitive science came of age as a discipline, inspired in part by Allen Newell and Herbert A. Simon’s 1972 book “Human Problem Solving.” In

Artificial intelligence can be understood as a set of tools and programs that makes software "smarter" in a way an outside observer thinks the output is generated by a human.

In the most simplistic terms, AI leverages self-learning systems by using multiple tools like data mining, pattern recognition and natural language processing. It operates similar to how a normal human brain functions during regular tasks like common-sense reasoning, forming an opinion or social behavior.

The main business advantages of AI over human intelligence are its high scalability, resulting in significant cost savings. Other benefits include AI's consistency and rule-based programs, which eventually reduce errors (both omission and commission), AI's longevity coupled with continuous improvements and its ability to document processes - some of the few reasons why AI is drawing wide interest.

The progress into the AGI phase and the beginning of true autonomy.

In the next four years, we expect AI’s industry growth will start to explode and its impact on business and society will begin to emerge.

By the end of the decade, we believe the recent rapid advances in AI will eventually plant progress firmly into the AGI phase – the beginning of true autonomy. AI-powered machines and software will likely start to untether from human supervision, embarking on their fateful path as sentient beings. But this will happen much later in the distant future. In the next four years, however, we believe AI's industry growth will start to explode and its impact on businesses and society will begin to emerge.

According to our estimates, the AI industry was a USD 5 billion marketplace by revenue in 2015, , a respectable size for such a budding sector. By 2020, we believe exponential improvements and broader adoption should more than double revenue to become a USD 12.5 billion industry. This represents a 20% annual growth rate. Assuming enterprise value/sales multiples of 10-15x, which is on par with other emerging fast-growing industries within the tech sector, AI as a standalone industry has the potential to claim a total market cap of USD 120-180 billion by 2020.

AI software will create significant business opportunities and societal value.

Software companies will take up the mantle and charge ahead, pushing the boundaries of automation, search and social media. Dubbed a machine's brain, AI will likely power automation in sectors like autonomous vehicles and unmanned drones. And AI software will create significant business opportunities and societal value.

For example, virtual assistants or chatbots will offer expert assistance; smart robots or robot advisors in the fields on finance, insurance, legal, media and journalism will provide instantaneous research or findings; and within the healthcare field, AI software will assist with medical diagnosis and assistance. Other benefits include significantly improving efficiencies in R&D projects by reducing time to market, optimizing transport and supply chain networks, and improving governance by better decision-making processes.

Technological unemployment is unfortunately a byproduct of progress.

Mechanized looms reduced artisan weavers to poverty, the tractor forced millions out of jobs and robotics has sliced countless workers in all types of manufacturing. The increasing integration of AI will ultimately yield greater productivity in the near term, the result of which has historically led to culls in employment.

The concerns are legitimate, but during this period AI will not nearly be at such a developmental stage that its widespread adoption will trigger mass layoffs. The technology will still be used in relatively niche applications and will not yet achieve a level of critical mass that would threaten employment on a global scale.

In most areas, AI is poised to replace tasks, not jobs.

However, global employment will not escape unscathed. By automating tasks that rely on analyses, subtle judgments and problem solving, AI can be a threat to low-skill, predictable and routine jobs in industries

AI will not only reduce costs by automating processes but also maximize revenues by helping corporates introduce new product and service categories.

Given the limited size of the current market, we believe direct beneficiaries in this stage will be software companies and robotic process automation industries with a first-mover advantage. In the medium term, the AI industry will eventually consolidate given the outsized number of startups focused on AI. But as industry standards emerge, there will only be a few potential winners.

There will also be indirect beneficiaries, such as healthcare, hi-tech engineering and select services companies, due to improved efficiencies in research and development. For example, with deep learning and

The fourth industrial revolution is unique in that the technology powering new industry has been completely democratized.

Entrepreneurs only need an idea and knowhow to develop the next Uber - and the global nature of venture capital. Thus, this era will not be a Western-dominated revolution, in our view, but a global phenomenon with contributions from all over the world.

The US and Silicon Valley will of course do a lot of the heavy lifting, but startups and tech giants in China, Singapore, Japan, South Korea, Taiwan and India have already made remarkable inroads in various technology segments and are increasingly pushing the envelope as the benefits of being part of this journey become clearer with each innovation.

AI as a central part of our everyday lives: greatest opportunities and biggest concerns.

Life in the following thirty years will likely become almost alien to today's observer, similar to how we view life in the 1940s and 1950s.

This will be particularly evident as we get closer to the half-century mark. As technology continues to progress by leaps and bounds, radical advances in quantum computing will add a new dimension to our ability to create and solve. This period will become a golden era in the advancement of all things technological – the ever-accelerating development of AI will compound the pace at which we invent.

Like all technologies, AI will be created with a singular purpose: to aid humanity. Naysayers and Hollywood moviegoers need not fear the rise of the machines. On the contrary, self-aware robots and programs will become instrumental in our quest to resolve society's mega-challenges like climate change, antibiotic-resistant bacteria and diseases, aging populations and many more. And if you think your iPhone is cutting-edge, think about the possibilities of AI-powered consumer devices; gone will be the days of fat-fingered typos and lost GPS signals.

By 2030, increasingly useful applications of AI will translate into meaningful social and economic changes. One such outcome, for example, will be much lower costs of traditional goods and services, which will effectively narrow socioeconomic disparities worldwide, as AI eliminates imperfections in supply chains and enhances overall productivity.

Likewise, AI could have a profound impact on low-income communities via vastly improved oversight of resources like food and water, education and healthcare accessibility, and dissemination of social services.

As a standalone industry possibly worth USD 100 billion by 2030 and USD 500 billion by 2050, the investments made today will likely bear tremendous fruit in the decades ahead. The UBS long-term investment themes of robotics and automation, digital data and e-commerce would directly benefit from such high rates of consistent growth.

Software is at the center of this revolution, and the market's margins will expand as it grows in prominence and importance.

The days of artificial narrow intelligence (ANI) will be all but forgotten as artificial general intelligence (AGI) becomes the industry standard across all sectors. Notwithstanding handmade artisanal crafts that will be increasingly valued by anti-futurists, sectors and companies incapable of incorporating AI into the heart of their business models will likely become extinct - not so different to companies made defunct by the Internet and the mass adoption of smartphones.

The transportation industry is already facing the bounty and pitfalls of new technology.

Protests have erupted across the world in response to the popularity of ride hailing apps, which they blame for lost clientele and unfair competition. And as self-driving vehicles become the norm in the not-so-distant future, professional taxi and truck drivers will be gradually phased out. The inevitable redundancies and resulting public backlash could obstruct progress. But we believe this area, above all, will be radically reshaped by AI for the betterment of society.

The adoption of AI in healthcare could improve the quality of life for millions and could save lives that otherwise wouldn't be possible.

The key hurdles will be gaining the trust of the medical community and overcoming regulatory barriers. For the nations that succeed in this undertaking, the knock-on effect of having a superior, AI-driven healthcare system can promote healthier and wealthier societies; but for those that don't, sub-standard medical quality will inhibit the long-term economic and societal value afforded to healthy populations.

The retail industry has had a tenuous relationship with the fourth industrial revolution.

E-commerce has been a huge boon to the industry, giving brands instant access to spendthrift consumers. And digital channels, combined with analytics, have created a new form of targeted advertising, providing companies with unparalleled influence and insights into our spending habits. But all of this has come at the expense of traditionally brick and mortar shops that have been unable to adapt to the new business environment.

The cases outlined above are but a snippet of the full value that AI is expected to create across industries, governments and all types of organizations.

Sectors like security, education, entertainment, elderly care, agriculture, etc. will also experience extreme change, much of which will be positive. But change is never easy, especially when it interrupts your way of life.

The two biggest concerns about AI's eventual rise are related to employment and control.

Even in this thirty-year blitzkrieg of progress, humans will continue to wield ultimate control as writers of the source code and job losses will be minimized by those created, with more tasks being replaced than entire fields. Nonetheless, protests will likely intensify in the most affected industries – transportation in particular – and governments will be under pressure to preserve labor markets through regulation, thereby impeding technological advancement.

An era where AI will take on a new form and will shape not just our world but theirs.

Spiraling progress should ultimately result in AI’s ability to self-develop.

Until this point, AI technology has been molded by humans to fill human needs. Its functions have been very specific: anticipate financial trends, handle household chores, manage public transportation systems, etc. Future generations will grow comfortable with the radical advances of their time and become highly dependent on the services AI provides – just like how we have become reliant on the Internet to communicate, research and work.

But as we weave AI into our everyday existence, AI would gradually do the opposite - spiraling progress should ultimately result in AI's ability to self-develop. Instead of being siloed to their respective task, AI's collective intelligence would then begin to amalgamate and eventually yield even greater and faster advances as its processing might compounds. Think about it as a controlled form of artificial selection, whereby AI entities have the autonomy to pick and choose their own evolutionary path.

In such a scenario, AI would eventually take the reins of its own fate from humans, and at this moment it will have transcended its creators in many ways. And thus, the era of artificial super intelligence (ASI) would have arrived.

By now, AI's pervasive influence on the world would have crept into both small nooks and large crannies.

As a result, AI as a standalone industry will likely soar to become one of the largest in the world, possibly reaching a trillion-dollar industry in the following years with software giants (market cap) becoming larger than most countries (GDP).

Like all industrial revolutions, this one will further hollow out what is left of menial labor. Industries that currently rely on low-skill labor will be forced to convert to full automation or risk being crushed by significantly more efficient competitors. In this future, vehicles would be driverless, farm hands automated, stores staffed by virtual assistants and bartenders like Erica and Sophia would coax patrons deeper into their glasses.

Humanity is both a poor and good reference for AI's future inclinations.

At our worst, we are brash and prone to tribalism and violence. But at our best, we are highly collaborative and can achieve better outcomes for all. Most likely, AI will have none of the former and all of the latter. Through the years, programmers will have developed AI to be benevolent and extremely functional. And, hopefully, ASI beings will opt to continue to fulfill their original mission as providers of great value.

But what if machines do seize control one day?

If Skynet is any indication, we'll need a naked Arnold Schwarzenegger from the future to thwart any robotic takeover. All jokes aside, it will be up to the regulators and scientists to create a concrete framework for AI to grow at a healthy pace. Also, global regulation is likely to curb such situations as AI's transformational progress will be closely monitored by world leaders and the public due to gradually enflamed sensitivities.