Page 23 - DIY Investor Magazine | Issue 39

CR: You mentioned those use cases, are there certain sectors or areas where it has particular application?
MS: Yeah, great question. Images have a lot of people talking - specifically a medical use case. No matter how good you are as a radiologist, using technology to augment your decision
by looking at multiple images of a PET or a CAT scan may identify something not perceptible to the human eye; artificial intelligence allows that. If we extrapolate that, earlier diagnoses lead to better outcomes, so that’s a good use case.
In the advertising space, it may ensure that the correct image is being served to the customer, right? Really allowing the personalization experience and you’re going to see companies doing really clever things to market to folks like me, and you.
In oil and gas, making better decisions as to where you might put a water injector in an oil field to increase production. Stuff like that, it really runs the gamut; you’re hearing me talk about various verticals, but interest in AI is across all businesses seeing applicability, and creating use cases that really open the horizon for their business.
CR: Yeah, part of the excitement since the start of the year, is that there are so many applications for it. But Microsoft and possibly Meta, spooked markets in their results statement, saying there’s a lot to gain out of AI, but at considerable cost. Where are we on that cycle? Is considerable investment needed to realise its potential?
MS: Absolutely. Like a lot of things in technology, the cost curve comes down over time as more and more people use it, and we’ve seen this time and time again. If you’re in this business, allow customers to use the technology, establish use cases and as you create scale, costs come down. As Microsoft alluded, forward investment is needed and that shouldn’t be terribly surprising. The chief operating officer of one of our holdings, recently talked about the importance of making the equation between the customer pain and the value his company was providing, a positive one, right? You want charge a price where companies, or customers, really feel they’re getting great value. He did a really good job of articulating that value, and had a great use case supported by simple math; I was just like, yeah, I’d buy this, if I were running a business, because it was a positive net present value - a positive return - and it was really interesting to hear him think about that.
Historically, great businesses create value for their customers in using the product; if you don’t you go by the wayside.
So, I think that business models will be figured out over time, but there is a required investment early on as we think about artificial intelligence, and the applicability that we’re seeing.
CR: From an investment perspective, presumably there are two sides to it - companies that are beneficiaries of AI, who will make money from it, and then disrupted companies who were kind of on the wrong side. So, I wonder, can you talk me through companies benefiting and those that might be disrupted, that you’re keeping an eye on?
MS: Yeah, we are living in a very quickly changing dynamic world, right? If your business foregoes using certain technologies, you can get left by the wayside. We’ve seen it with the movement of digital and previously with the internet, etc.
Artificial intelligence is another example; the key point is having data really creates an advantage, so, thinking about whether businesses built their systems with data in mind from the get-go. I’ll use Netflix for an example - an amazing merchandiser of content, and a system designed from day one, with data - with the backend in mind, right? Like, what do they do with the data, that Mike Seidenberg grabs a piece of content to watch?
How do they take that information and replicate it or use
it across lots and lots of users in a very agnostic way, but
make sure they understand not only how to get me to watch things, but also how should they purchase? What should they purchase? Again, in artificial intelligence, having that data and being data centric, is going to be really important to businesses, and if you’re not, you’re at a competitive disadvantage. So, we’re spending lots of time as a team, thinking about companies that basically have that data to leverage it into the AI realm.
CR: Share prices getting ahead of the likely growth trajectory seems to be a perennial problem with any fast-growing technology area. How do you manage that in the portfolio? And make sure you’re not overpaying for that growth?
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Nov 2023
DIY Investor Magazine ·