You Asked, We Answered

CIO Global Blog

12 Dec 2019

As we enter a new decade, technology continues to advance at a rapid pace. Looking forward to the next 10 years, mega-trends like smart technology, automation, and artificial intelligence, will have an outsized influence on the investment landscape. Overall, investors are feeling positive about the future, with nearly 70% of respondents to the UBS Investor Watch Survey saying that they are optimistic about investment returns in the coming decade. At the same time, these technological shifts carry a new set of risks and uncertainties to consider. To help address some of these concerns, we compiled responses to this year's most-asked questions relating to technological change.

How close are we to a real-life "Terminator" situation?

For years the idea of a machine with humanlike consciousness seemed like little more than science fiction, but recent advancements are bringing these concepts closer to reality and leaving many of us wondering when the robots will take over. We believe that we are far from a "Terminator" situation as certain aspects of human intelligence, such as the ability generalize knowledge and apply it to new situations, remain difficult to replicate in the lab.

There are three phases of AI's development – artificial narrow intelligence (ANI), artificial general intelligence (AGI), and artificial super intelligence (ASI) – and they all have very different capabilities. ANI's intelligence is restricted to one functional area, focusing on single tasks and using large sets of data to identify patterns. AGI is slightly more advanced, able to build on single tasks and solve more complex problems. The final stage of intelligence, ASI, is the stage in which AI surpasses human intelligence – far more advanced than the AI we typically encounter. In the near term, ANI will be the most widely used and adopted form. Most applications we come across daily fall into this category, such as "chatbots" and maps navigation.

Getting to the point of ANI has taken several decades, and achieving ASI is a much more difficult feat. According to a report by the Center for Governance of AI, 54% of survey respondents (American adults age 18+) predicted high-level machine intelligence would likely arrive within the next decade.1 While estimates vary, this seemingly contradicts with the view of most experts. Several studies show those in the computer science field expect the transformation to take much longer. In our view, the transition to ASI will likely begin closer to 2050. It's hard to say with certainty when the next breakthrough will come, but the future of AI seems less apocalyptic when imagining the benefits to be had. To help ease your mind, consider a world with less car accidents, greater energy efficiency, and where rare diseases are more easily diagnosed. The positive applications of AI are just a few of the reasons why we expect industry revenues to grow at an average annual growth rate of 25%. We discuss these opportunities and the related risks further in our Longer Term Investment (LTI) Themes: Enabling Technologies and Automation and Robotics. To summarize, we shouldn't have to worry about time-traveling cyborg assassins anytime soon.

Can cars really drive themselves, and can someone hack my Tesla?

The short, and admittedly oversimplified answer, is yes. Fully autonomous vehicles are already being tested all over the world, and that does create an opportunity for them to be hacked without the proper security systems in place, regardless of the make and model. In Las Vegas more than 50,000 passengers have already hailed a Lyft ride in an autonomous vehicle with a human present, and elsewhere, Waymo has begun offering fully automated rides with no attendant to select users of its robo-taxi service. If that's not futuristic enough for you, there are companies testing flying taxis too. Regulatory hurdles will prove challenging though, and there could be more failures along the way as the technology is tried and tested.

One of the most prominent speed bumps to overcome is security – even a small hack of automated cars could lead to catastrophic accidents. Cyber security will be a key component of the transition towards autonomous vehicles. At a recent conference in Vancouver, Tesla offered up cash prizes to those who could successfully find a bug in their vehicles' systems. Two participants won a cash prize and a new Tesla for doing so.2 We see significant opportunities in the Smart Mobility space, but advanced cyber security will be necessary for autonomous vehicles to become the mainstream. For more, please read the full LTI reports: Smart Mobility and Security and Safety.

Bitcoin or blockchain or both?

Although blockchain is the core technology powering cryptocurrencies, it's important to separate the two when it comes to investing. Bitcoin has several characteristics that, in our view, make it much more of a speculative investment than a currency. Given its high volatility, high processing costs, and long processing times, Bitcoin fails to act as a store of value or a medium of exchange, two definitive characteristics of a currency. First, Bitcoin is not widely accepted, and cannot be used to pay taxes – the largest single payment in most economies. Further, companies have little incentive to accept Bitcoin for goods sold, and employees would likely be unwilling to accept wages in Bitcoin due to the accompanying exchange rate risk. For example, consider the unfortunate tale of a man who once bought a couple of pizzas with 10,000 Bitcoin. Reasonably priced at the time, the pizzas were eventually worth several million dollars. Finally, the potential for supply and demand imbalances undermine Bitcoin's ability to act as a store of value. While the supply of individual cryptocurrencies such as Bitcoin cannot be readily changed, the supply of cryptocurrencies overall can be easily increased. Should a new cryptocurrency decrease demand for an incumbent, the excess and stagnant supply of the incumbent would create a supply and demand mismatch, and potentially collapse the value of the original cryptocurrency.

Blockchain is the technology that underpins Bitcoin and most other cryptocurrencies, but it's not dependent on Bitcoin for its survival. Blockchain is an irrevocable secured ledger, shared by multiple parties in a distributed network, that records and stores transactions. We've identified four key use cases of blockchain and six industries that will most likely be impacted by the technology. Blockchain could potentially secure records, improve provenance, enable the sharing economy, and automate smart contracts. Across the six industries (financials, manufacturing, healthcare, public services, utilities, and the sharing economy), we expect blockchain to generate annual economic value worth USD 300-400bn globally by 2027. To read more on blockchain, see our report Exploring Blockchain: Reimagining Trust. For more on the Fintech space overall, see the LTI report: Fintech.

We realize this list barely scratches the surface of questions pertaining to thematic investing and future technologies. Stay tuned throughout 2020 for more insight on disruptive technologies, rapidly evolving industries, and the relevant investment implications.


Michelle Laliberte, CFA, Thematic Investment Associate, UBS Financial Services Inc (UBS FS)
Laura Kane, CFA, CPA, Head Thematic Research Americas, UBS Financial Services Inc. (UBS FS)

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