Will Continual Learning Trump Experience?

A new technology called continual learning (CL) enables computers to apply accumulated knowledge to make better decisions in the future and is considered “one of the hottest threads of artificial intelligence (AI) research.” This according to an article in CFA Institute.

“It may prove to be the single most disruptive technology for investment management,” the article says, adding that CL may be better able to apply objectivity to the investment decision-making process than humans do. “Persistent synthetic knowledge,” it reports, “could thus outlast corporate succession or provide a body of objective experience for all, thereby disrupting the businesses of traditional passive and active investment managers alike.”

A CL-driven system, the article explains, is able to learn which events are worth remembering, then recalling that knowledge to enhance stock-selection decisions:

While deep learning and other forms of artificial intelligence focus on isolated snapshots of information, the article explains that CL can be “directed at a continuous stream of information from which it extracts knowledge over time. Typically, in machine learning, once time steps on and a new model is learned, the old model is forgotten. Deep learning it may be, but intelligent it is not,” the article says.

Explaining that both human analyst-driven and AI-driven investment strategies should “approach each investment decision from multiple perspectives, adapt and evolve as realities change over time, and provide understandable explanations for each decision,” the article argues that CL has the advantage of more objectivity and consistency, as illustrated below (fundamental investing represented in blue):

The article concludes: “While we are still a long, long way from a general artificial intelligence singularity, AI as a driver of fundamental investing has come of age. Few industries are more ripe for disruption than equities investment management in 2019.”