Tech Trends: AI, Data Security & Algorithmic Battles

We have a terrible habit in finance and technology circles to wind up the year with what happened and then go onto predicting the next set of trends. A better idea is to look at trends as a continuum of shifts – so here’s my version of how 2022 will extend into 2023 and what the investment impacts might be.

AI

If anything it has shown us how important language is, it’s the recent deluge of large language models. Software like Chat GPT and Jasper AI have sent shockwaves around the internet. But this year will be less about the revelations of AI’s ability to create content, information and even insight based on prompts than about our ability to work with AI.

We’ll need to learn how to literally ‘train the AI’s’ like we might a dog. It will be about symbiosis of using the tools. From an investment perspective, our attention should be focused on industries which can cut costs through large language models and AI-generated imagery. The business of words and images will have production costs cut dramatically.

And as I’ve previously written, the ability to determine what was made by a human or a machine will be increasingly difficult to delineate. A new regime of democratised technology is about to arrive where those without the ability to write software code can create their own software. This will be more dramatic than the social web was, a world where anyone can create whatever they can imagine as we enter the mass market “no code” era.

Data Security

Every upside has a downside. And the downside risk with these emergent AI models is data security risk. If you thought spam was getting hard to decipher, this year we should expect exponential growth in hacking.

Post hack corporate apologies are getting harder for consumers and investors to swallow. This year we should hope governments take hacking as seriously as they do workplace OH&S and discrimination. Until they do, we are unlikely to see boards make the requisite investments to needed protect their consumers, and even our critical infrastructure.

Algorithmic Cyber War

Tensions in the geopolitical environment will continue to heat up. While the suite of Alphabet and Meta products are banned in China, Tik Tok has managed to amass well over a billion monthly average users. What is astounding is the difference in the algorithms across borders.

Log into the Chinese version of the app and the “For You” page is a very different experience to what we get in western markets. China’s version of TikTok celebrates athletic performance, academic achievements and scientific breakthroughs. It’s filled with educational videos to benefit their populace. It even has a ‘youth mode.’ This feature limits people under 14 from using the app for more than 40 minutes per day, and the shut-off time is 10pm.

Compare this to the algorithms powering the western version and you’ll see extreme left and right politics, divisive content, silly dance memes and large amounts of misinformation. Of course, we can’t be sure this is by design or the algorithms responding to local user feedback loops, but we can be sure that the CCP co-designs the algorithms in China to guide what is shown in their markets.

While the economic impact of TikTok today might be that it steals revenue from Meta and Youtube, the long range impact will be the advantage of a having a more unified populace and emerging generation of educated and curious kids. There’s a chance the US might respond shortly and either shut down TikTok in the USA or force a local version split and sell off. Seems fair, given China has no problem in blocking US internet giants.

Long Live TV

Free to air TV advertising is making a comeback, except this time it’s the streamers, not terrestrial channels. All the major streaming platforms (who are desperate to continue the growth of their subscriber bases) are offering lower cost advertising supported packages. This means we shouldn’t expect an uptick in Alphabet or Meta platforms share prices any time soon.

The one constant challenge digital advertising has faced is the inability to ‘pick’ the shows advertisers’ brands are placed around. Most chief marketing officers deeply consider the context of where their brand ads are placed and streamers have far more moderate content, with the added advantage of deep targeting that free-to-air channels lack.

We should also expect the content game to change with the streamers adding ‘live’ content to their offer as they can now be ad supported – think News, Morning Shows and Sports. As mentioned last year this will only increase the pressure on local TV broadcasters SevenWest Media and Nine Entertainment Co.

Energy

There is no reason to think that extreme weather will do anything but become more frequent and provide a constant reminder that climate action isn’t being taken quickly enough.

The election promise from the Victorian Government to bring back the SEC will be the start of the inevitable shift to infrastructure moving back into government hands. I can already see the comments to remind me how incompetent governments are. And while that may be true, the tenure of management in private industry and short-term profit focus means that the only path to a carbon-free economy is one in which energy is either tightly regulated or even better yet, government owned. This will enable the costly and longitudinal capital investments we need to be made.

It’s high time we remember the centuries-old economic lessons that natural monopolies, like energy, shouldn’t be in private hands. This shift is coming, and the voters will support it, all around the world.

Crypto

2022 reminded everyone that crypto is still not a currency. Two of the key missing factors for an effective currency are stability and acceptance. While crypto has the potential to become our next form of global currency, likely via Gov coins, unless the speculation is removed from the industry, it never will be.

On Bitcoin’s recent 14^th birthday the net gain since its inception was 1,690,706,971 per cent. But its yield is still zero and will be that forever. Given that crypto still has a direct access UX problem, and onboarding crypto platforms have a bad reputation of losing people’s ‘money’, it seems to me that the crypto winter will continue. As far as I can tell, the only way it we’ll ever enter a crypto “spring" is if simple uses of the underlying blockchain technology emerge. We can only hope.

When it comes to technology, we so often seem to be obsessed with what’s new and what just happened. But often the economic wins come from understanding what is happening over a period of years. Good luck in 2023.