Bob Homan: Artificial Warren Buffet, anyone?

November 7, 2023

By Bob Homan, Head of the ING Investment Office

As active investors, we love artificial intelligence. As long as it doesn't take our jobs.

Let me talk about artificial intelligence (AI) again. This time it's not about the consequences at a macroeconomic or portfolio level, but - instead - about the consequences at a microeconomic level: what does AI actually mean for my job? Will active investors still exist in ten years? Or has the work already been widely taken over by AI applications? Those are valid questions for members of our profession.

What is the nature of the work? At first glance, investors think linearly, according to fixed patterns. To what extent is the economy growing? How are corporate profits developing? What do interest rates do? What are the ratings? These things can be understood by looking at the market with common sense. And it is precisely this 'common sense' that implies that there is a set of simple, rigid rules that can be left to a computer with little imagination.

Still, I'm not too afraid of losing my job. And here's why: completely unexpected events are constantly occurring in the world that influence financial markets. The reaction of those markets is often counter-intuitive, or even seems completely against common sense. AI doesn't understand that at all.

Of course, it's always good to approach things sensibly, even if a market response actually makes no sense. Because not everything is what it seems. Some matters lend themselves to deeper research. And sometimes you just have to trust your feelings. For example, Warren Buffet bought all Berkshire Hathaway shares out of sheer recalcitrance because he felt he was being cheated when he wanted to get rid of them. The rest is history.

It seems to me that AI would have achieved the same, unconventional outcome. Nor do I believe that AI had correctly estimated the stock market year of 2023, with rising interest rates and the large growth stocks that support the market. Note the productivity promise of AI. Or am I relying too much on my common sense again?

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