Big Data, Algorithms, Robo-Advice and AI – Why are we so easily submitting?

Managing Director of national broking franchise MoneyQuest, Michael Russell, is calling upon the inquisitive minds from across the country to question, scratch beneath the surface and illuminate what we are not being told about living in a world of Big Data, Algorithms, Robo-Advice and AI.

“In recent months hordes of financial analysts & market commentators have jumped on the bandwagon to exclaim how bright our futures will all become when we willingly submit to a life of automation.

And who’s to say they’re wrong as Big Data scientists and technologists have convinced even the biggest companies across the globe to invest millions of dollars into this at the expense of upskilling their own people.

My question is: “Why are we submitting to what we are simply being told and don’t really understand?”

Consider this for just a minute:

Myth 1 – Big Data allows businesses to make better decisions.

This must be true as our major banks are diverting hundreds of millions of dollars away from their front-line customer service into Big Data.

Sadly what is not well understood is that Big Data only has relevance in predictive decision making if nothing changes. That is, when past trends and behaviours simply repeat into the future.

What we are not being told, is that today more than ever before in our history, past trends and behaviours are actually proving to be quite unreliable in predicative modelling.

The simple reason for this is that technology is evolving at such a rapid pace and delivering so many unknowns, that our consumption behaviours are themselves becoming unreliable.

This extends to our workplaces, our employment types, our housing situations, our relationships, how we communicate and so on.

Big Data as we know consists only of quantitative inputs and not the crucial qualitative inputs that make up our individual DNA – our propensity to change and our individual stories – past, present and future.

Let’s not forget that it wasn’t too long ago that Nokia relied on Big Data to ascertain that smartphones would only ever be a fad.

Nokia had become so dependent on Big Data that it had lost all respect for the unknown and what was actually changing around them.

Myth 2 – Algorithms facilitate businesses to make really fast decisions that are always right.

The one thing we know for sure about an algorithm is that we know nothing about that algorithm!

And that’s just the way the gatekeepers of code like it.

You see, unlike our math’s teachers from years ago that made us show our workings to make sure our answers were based on truths, we are always prohibited from checking the truths in today’s algorithms.

This will never change as all algorithms are based on the personal subjectivity and bias of their authors.

Take Google for example.

Their algorithm has become so powerful across the globe in ranking businesses online – yet most of us know it’s not an objective ranking as to the true competency and service proposition of these businesses.

What about the banks?

Today, almost all banks and non-bank lenders deploy a credit-scoring algorithm to determine someone’s credit-worthiness.

These are also subjectively engineered using only quantitative data and increasingly we are seeing many credit-worthy applicants fail lenders’ auto credit-scoring, only to be salvaged once their story can be shared human to human.

For in these stories we as mortgage professionals can properly assess an individual’s true character, capacity and credit risk. In the case of mortgage applicants, we know that someone’s past is not always an accurate indicator of their present or future and if left unchecked, auto credit-scoring has the potential to be unwittingly unfair, unethical and discriminatory.

There is already enough evidence of algorithms across a number of industries making decisions with a clear quantitative bias and it’s imperative we need not only be a smart generation but more than ever before, an inquisitive generation – otherwise as George Orwell feared “the truth will be one day hidden from us”.

Myth 3 – People will soon prefer to self-serve via Robo-Advice & AI for their mortgages & other financial needs.

The jury remains out on this one – albeit I’m reasonably certain that the 50% of home loan customers presently using the services of a mortgage broker might disagree.

The real issue I have with Robo-Advice and AI is the absence of any qualitative inputs again within their algorithms which can foster subjective bias and consequently, an assessment that is unfair.

While their owners readily admit, both will be best suited to simple loan requirements or as we refer ‘vanilla loans’, these are now few and far between in a world where no two clients are ever the same and where our legislative obligations require us to thoroughly assess each client’s individual needs and circumstances today and into the foreseeable future. During this human to human interaction much is learned from a combination of both closed and open questioning – the latter of which remains a significant shortcoming within Robo-Advice & AI.

I won’t even start on proposals to make AI smarter than human beings, suffice to say that we who still have an inquisitive mind really need to use it today more than ever before”.

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