The share price of GOOGL, which has diversified revenue streams and many other things going for it, has since recovered. But investors in GOOGL remain focused on how the company can navigate its way through this ongoing paradigm shift in internet usage.
Smarter and faster
AI is rapidly redefining how we interact with the internet and how we get and use information.
Information is the lifeblood of an investor. At its core, investing is all about finding information and then processing it all in a way that allows you to make assessments about things that might happen in the future.
If these assessments end up being correct for the most part, the investment opportunities that come out of them can be quite profitable.
Success as an investor is as much about asking the right questions as it is about getting the right answers. This requires a good understanding of the process of investing as well as the specific investments you are making.
Web 1.0 revolutionized investing simply by putting an enormous quantity of extremely valuable information on the internet.
Before the internet, corporate filings of Securities and Exchange Commission (SEC) documents, for example, could not be readily accessed. One had to physically obtain them.
One of the original investment strategies of hedge funds was merger arbitrage. The strategy hinges on having a detailed understanding of the terms and conditions that apply when a public company gets acquired.
If you know the details of a deal before other investors, perhaps because you are among the first to obtain publicly filed documents like merger agreements that contain these details, you have a tremendous competitive advantage. You know what price to pay for the stock.
Before the internet, professional investors who specialized in this strategy (“arbs”) would physically go to government office buildings to obtain these documents and read them quickly once released. They would report back to the trading desk, perhaps by payphone (or an oversized Gordon Gekko-style cellular phone).
This was all perfectly legal. The money managers involved in these investment operations often made millions.
Democratization
The internet changed everything, because it made all sorts of valuable information available to everyone simultaneously. In the investment world, professionals no longer had as much privileged access to information as they once had.
It is not entirely a coincidence that active money management began its descent shortly after the internet took off. Professionals were losing their ability to add value and justify high fees.
Whereas Web 1.0 was basically just read-only content, Web 2.0 made the internet interactive, through various forms of social media.
It was no longer just about accessing static information on a web page. You could now interact with others yourself, or at least monitor these interactions.
To be fair, social media platforms are not always the best places to obtain high quality investment information and insight. But information flow was greatly enhanced.
Now, with Web 3.0, which includes machine learning and natural language processing, we have another major game changer.
Let AI teach you
When all we had was Google search, if we wanted to use the Internet to get up to speed on an investment-related subject, we would type in key words in the hopes of being directed to a good article or website.
While this is certainly still quite useful, the ability of AI tools to extract and manipulate information and accurately answer even extremely technical questions takes learning from the internet to a whole new level.
There is almost no subject that cannot be effectively distilled and clarified by AI. AI platforms should now be everyone’s first stop if they want to learn more about a specific topic.
AI truly excels when it comes to basic education on investing topics.
Many times, people are working off a vague and often imperfect understanding of a particular subject. Through AI, you have the opportunity to solidify your understanding of basic things that you are not totally sure about.
A great entry point is to ask AI to explain to you a confusing investment term that you come across.
No human flaws
When you interact with AI, as opposed to a knowledgeable human being, there truly are no stupid questions. There is no reason for embarrassment and no egos to protect on either side.
The information that comes back might not be 100% perfect, so caution is warranted, but in our experience it tends to be highly accurate, depending on the circumstances, with ambiguities in the responses highlighted.
As opposed to a human expert, AI is not affected by emotion, conflicts of interest, psychological bias or any other causes of cognitive error (excluding perhaps politically sensitive subjects for which it has been pre-programmed).
People like to appear smart and useful, even when they are neither. AI is not susceptible to overconfidence or the need to pretend it knows more than it does to protect its image.
Particularly when it comes to basic investing concepts and strategies, where there is an abundance of information on the internet from which AI can draw, AI does an exceptional job.
We urge investors if they ever have any questions or confusion to ask any of the widely available AI tools to provide explanations. They may be surprised with the quality and precision of the answers.
