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During the past 50 years, the frequency of recorded natural disasters has surged nearly five-fold.
In this blog, I’ll be exploring how converging exponential technologies (AI, robotics, drones, sensors, networks) are transforming the future of disaster relief—how we can prevent them in the first place and get help to victims during that first golden hour wherein immediate relief can save lives.
Here are the three areas of greatest impact:
AI, predictive mapping, and the power of the crowd
Next-gen robotics and swarm solutions
Aerial drones and immediate aid supply
Let’s dive in!
Artificial Intelligence and Predictive Mapping
When it comes to immediate and high-precision emergency response, data is gold.
Already, the meteoric rise of space-based networks, stratosphere-hovering balloons, and 5G telecommunications infrastructure is in the process of connecting every last individual on the planet.
Aside from democratizing the world’s information, however, this upsurge in connectivity will soon grant anyone the ability to broadcast detailed geo-tagged data, particularly those most vulnerable to natural disasters.
Armed with the power of data broadcasting and the force of the crowd, disaster victims now play a vital role in emergency response, turning a historically one-way blind rescue operation into a two-way dialogue between connected crowds and smart response systems.
With a skyrocketing abundance of data, however, comes a new paradigm: one in which we no longer face a scarcity of answers. Instead, it will be the quality of our questions that matters most.
This is where AI comes in: our mining mechanism.
In the case of emergency response, what if we could strategically map an almost endless amount of incoming data points? Or predict the dynamics of a flood and identify a tsunami’s most vulnerable targets before it even strikes? Or even amplify critical signals to trigger automatic aid by surveillance drones and immediately alert crowdsourced volunteers?
Already, a number of key players are leveraging AI, crowdsourced intelligence, and cutting-edge visualizations to optimize crisis response and multiply relief speeds.
Take One Concern, for instance. Born out of Stanford under the mentorship of leading AI expert Andrew Ng, One Concern leverages AI through analytical disaster assessment and calculated damage estimates.
Partnering with the cities of Los Angeles, San Francisco, and numerous cities in San Mateo County, the platform assigns verified, unique ‘digital fingerprints’ to every element in a city. Building robust models of each system, One Concern’s AI platform can then monitor site-specific impacts of not only climate change but each individual natural disaster, from sweeping thermal shifts to seismic movement.
This data, combined with that of city infrastructure and former disasters, are then used to predict future damage under a range of disaster scenarios, informing prevention methods and structures in need of reinforcement.
Within just four years, One Concern can now make precise predictions with an 85 percent accuracy rate in under 15 minutes.
And as IoT-connected devices and intelligent hardware continue to boom, a blooming trillion-sensor economy will only serve to amplify AI’s predictive capacity, offering us immediate, preventive strategies long before disaster strikes.
Beyond natural disasters, however, crowdsourced intelligence, predictive crisis mapping, and AI-powered responses are just as formidable a triage in humanitarian disasters.
One extraordinary story is that of Ushahidi. When violence broke out after the 2007 Kenyan elections, one local blogger proposed a simple yet powerful question to the web: “Any techies out there willing to do a mashup of where the violence and destruction is occurring and put it on a map?”
Within days, four ‘techies’ heeded the call, building a platform that crowdsourced first-hand reports via SMS, mined the web for answers, and—with over 40,000 verified reports—sent alerts back to locals on the ground and viewers across the world.
Today, Ushahidi has been used in over 150 countries, reaching a total of 20 million people across 100,000+ deployments. Now an open-source crisis-mapping software, its V3 (or “Ushahidi in the Cloud”) is accessible to anyone, mining millions of Tweets, hundreds of thousands of news articles, and geo-tagged, time-stamped data from countless sources.
Aggregating one of the longest-running crisis maps to date, Ushahidi’s Syria Tracker has proved invaluable in the crowdsourcing of witness reports. Providing real-time geographic visualizations of all verified data, Syria Tracker has enabled civilians to report everything from missing people and relief supply needs to civilian casualties and disease outbreaks— all while evading the government’s cell network, keeping identities private, and verifying reports prior to publication.
As mobile connectivity and abundant sensors converge with AI-mined crowd intelligence, real-time awareness will only multiply in speed and scale.
Imagining the Future….
Within the next 10 years, spatial web technology might even allow us to tap into mesh networks.
As I’ve explored in a previous blog on the implications of the spatial web, while traditional networks rely on a limited set of wired access points (or wireless hotspots), a wireless mesh network can connect entire cities via hundreds of dispersed nodes that communicate with each other and share a network connection non-hierarchically.
In short, this means that individual mobile users can together establish a local mesh network using nothing but the computing power in their own devices.
Take this a step further, and a local population of strangers could collectively broadcast countless 360-degree feeds across a local mesh network.
Imagine a scenario in which armed attacks break out across disjointed urban districts, each cluster of eye witnesses and at-risk civilians broadcasting an aggregate of 360-degree videos, all fed through photogrammetry AIs that build out a live hologram in real time, giving family members and first responders complete information.
Or take a coastal community in the throes of torrential rainfall and failing infrastructure. Now empowered by a collective live feed, verification of data reports takes a matter of seconds, and richly-layered data informs first responders and AI platforms with unbelievable accuracy and specificity of relief needs.
By linking all the right technological pieces, we might even see the rise of automated drone deliveries. Imagine: crowdsourced intelligence is first cross-referenced with sensor data and verified algorithmically. AI is then leveraged to determine the specific needs and degree of urgency at ultra-precise coordinates. Within minutes, once approved by personnel, swarm robots rush to collect the requisite supplies, equipping size-appropriate drones with the right aid for rapid-fire delivery.
This brings us to a second critical convergence: robots and drones.
While cutting-edge drone technology revolutionizes the way we deliver aid, new breakthroughs in AI-geared robotics are paving the way for superhuman emergency responses in some of today’s most dangerous environments.
Let’s explore a few of the most disruptive examples to reach the testing phase.
Autonomous Robots and Swarm Solutions
As hardware advancements converge with exploding AI capabilities, disaster relief robots are graduating from assistance roles to fully autonomous responders at a breakneck pace.
Born out of MIT’s Biomimetic Robotics Lab, the Cheetah III is but one of many robots that may form our first line of defense in everything from earthquake search-and-rescue missions to high-risk ops in dangerous radiation zones.
Now capable of running at 6.4 meters per second, Cheetah III can even leap up to a height of 60 centimeters, autonomously determining how to avoid obstacles and jump over hurdles as they arise.
Initially designed to perform spectral inspection tasks in hazardous settings (think: nuclear plants or chemical factories), the Cheetah’s various iterations have focused on increasing its payload capacity, range of motion, and even a gripping function with enhanced dexterity.
Cheetah III and future versions are aimed at saving lives in almost any environment.
And the Cheetah III is not alone. Just this February, Tokyo’s Electric Power Company (TEPCO) has put one of its own robots to the test. For the first time since Japan’s devastating 2011 tsunami, which led to three nuclear meltdowns in the nation’s Fukushima nuclear power plant, a robot has successfully examined the reactor’s fuel.
Broadcasting the process with its built-in camera, the robot was able to retrieve small chunks of radioactive fuel at five of the six test sites, offering tremendous promise for long-term plans to clean up the still-deadly interior.
Also out of Japan, Mitsubishi Heavy Industries (MHi) is even using robots to fight fires with full autonomy. In a remarkable new feat, MHi’s Water Cannon Bot can now put out blazes in difficult-to-access or highly dangerous fire sites.
Delivering foam or water at 4,000 liters per minute and 1 megapascal (MPa) of pressure, the Cannon Bot and its accompanying Hose Extension Bot even form part of a greater AI-geared system to conduct reconnaissance and surveillance on larger transport vehicles.
As wildfires grow ever more untameable, high-volume production of such bots could prove a true lifesaver. Paired with predictive AI forest fire mapping and autonomous hauling vehicles, not only will solutions like MHi’s Cannon Bot save numerous lives, but avoid population displacement and paralyzing damage to our natural environment before disaster has the chance to spread.
But even in cases where emergency shelter is needed, groundbreaking (literally) robotics solutions are fast to the rescue.
After multiple iterations by Fastbrick Robotics, the Hadrian X end-to-end bricklaying robot can now autonomously build a fully livable, 180-square-meter home in under three days. Using a laser-guided robotic attachment, the all-in-one brick-loaded truck simply drives to a construction site and directs blocks through its robotic arm in accordance with a 3D model.
Meeting verified building standards, Hadrian and similar solutions hold massive promise in the long-term, deployable across post-conflict refugee sites and regions recovering from natural catastrophes.
But what if we need to build emergency shelters from local soil at hand? Marking an extraordinary convergence between robotics and 3D printing, the Institute for Advanced Architecture of Catalonia (IAAC) is already working on a solution.
In a major feat for low-cost construction in remote zones, IAAC has found a way to convert almost any soil into a building material with three times the tensile strength of industrial clay. Offering myriad benefits, including natural insulation, low GHG emissions, fire protection, air circulation, and thermal mediation, IAAC’s new 3D printed native soil can build houses on-site for as little as $1,000.
But while cutting-edge robotics unlock extraordinary new frontiers for low-cost, large-scale emergency construction, novel hardware and computing breakthroughs are also enabling robotic scale at the other extreme of the spectrum.
Again, inspired by biological phenomena, robotics specialists across the US have begun to pilot tiny robotic prototypes for locating trapped individuals and assessing infrastructural damage.
Take RoboBees, tiny Harvard-developed bots that use electrostatic adhesion to ‘perch’ on walls and even ceilings, evaluating structural damage in the aftermath of an earthquake.
Or Carnegie Mellon’s prototyped Snakebot, capable of navigating through entry points that would otherwise be completely inaccessible to human responders. Driven by AI, the Snakebot can maneuver through even the most densely-packed rubble to locate survivors, using cameras and microphones for communication.
But when it comes to fast-paced reconnaissance in inaccessible regions, miniature robot swarms have good company.
Next-Generation Drones for Instantaneous Relief Supplies
Particularly in the case of wildfires and conflict zones, autonomous drone technology is fundamentally revolutionizing the way we identify survivors in need and automate relief supply.
Not only are drones enabling high-resolution imagery for real-time mapping and damage assessment, but preliminary research shows that UAVs far outpace ground-based rescue teams in locating isolated survivors.
As presented by a team of electrical engineers from the University of Science and Technology of China, drones could even build out a mobile wireless broadband network in record time using a “drone-assisted multi-hop device-to-device” program.
And as shown during Houston’s Hurricane Harvey, drones can provide scores of predictive intel on everything from future flooding to damage estimates.
Among multiple others, a team led by Texas A&M computer science professor and director of the university’s Center for Robot-Assisted Search and Rescue Dr. Robin Murphy flew a total of 119 drone missions over the city, from small-scale quadcopters to military-grade unmanned planes. Not only were these critical for monitoring levee infrastructure, but also for identifying those left behind by human rescue teams.
But beyond surveillance, UAVs have begun to provide lifesaving supplies across some of the most remote regions of the globe. One of the most inspiring examples to date is Zipline.
Created in 2014, Zipline has completed 12,352 life-saving drone deliveries to date. While drones are designed, tested, and assembled in California, Zipline primarily operates in Rwanda and Tanzania, hiring local operators and providing over 11 million people with instant access to medical supplies.
Providing everything from vaccines and HIV medications to blood and IV tubes, Zipline’s drones far outpace ground-based supply transport, in many instances providing life-critical blood cells, plasma, and platelets in under an hour.
But drone technology is even beginning to transcend the limited scale of medical supplies and food.
Now developing its drones under contracts with DARPA and the US Marine Corps, Logistic Gliders, Inc. has built autonomously-navigating drones capable of carrying 1,800 pounds of cargo over unprecedented long distances.
Built from plywood, Logistic’s gliders are projected to cost as little as a few hundred dollars each, making them perfect candidates for high-volume remote aid deliveries, whether navigated by a pilot or self-flown in accordance with real-time disaster zone mapping.
As hardware continues to advance, autonomous drone technology coupled with real-time mapping algorithms pose no end of abundant opportunities for aid supply, disaster monitoring, and richly layered intel previously unimaginable for humanitarian relief.
Perhaps one of the most consequential and impactful applications of converging technologies is their transformation of disaster relief methods.
While AI-driven intel platforms crowdsource firsthand experiential data from those on the ground, mobile connectivity and drone-supplied networks are granting newfound narrative power to those most in need.
And as a wave of new hardware advancements gives rise to robotic responders, swarm technology, and aerial drones, we are fast approaching an age of instantaneous and efficiently-distributed responses in the midst of conflict and natural catastrophes alike.
Empowered by these new tools, what might we create when everyone on the planet has the same access to relief supplies and immediate resources? In a new age of prevention and fast recovery, what futures can you envision?
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2018 was bonkers for science.
From a woman who gave birth using a transplanted uterus, to the infamous CRISPR baby scandal, to forensics adopting consumer-based genealogy test kits to track down criminals, last year was a factory churning out scientific “whoa” stories with consequences for years to come.
With CRISPR still in the headlines, Britain ready to bid Europe au revoir, and multiple scientific endeavors taking off, 2019 is shaping up to be just as tumultuous.
Here are the science and health stories that may blow up in the new year. But first, a note of caveat: predicting the future is tough. Forecasting is the lovechild between statistics and (a good deal of) intuition, and entire disciplines have been dedicated to the endeavor. But January is the perfect time to gaze into the crystal ball for wisps of insight into the year to come. Last year we predicted the widespread approval of gene therapy products—on the most part, we nailed it. This year we’re hedging our bets with multiple predictions.
Gene Drives Used in the Wild
The concept of gene drives scares many, for good reason. Gene drives are a step up in severity (and consequences) from CRISPR and other gene-editing tools. Even with germline editing, in which the sperm, egg, or embryos are altered, gene editing affects just one genetic line—one family—at least at the beginning, before they reproduce with the general population.
Gene drives, on the other hand, have the power to wipe out entire species.
In a nutshell, they’re little bits of DNA code that help a gene transfer from parent to child with almost 100 percent perfect probability. The “half of your DNA comes from dad, the other comes from mom” dogma? Gene drives smash that to bits.
In other words, the only time one would consider using a gene drive is to change the genetic makeup of an entire population. It sounds like the plot of a supervillain movie, but scientists have been toying around with the idea of deploying the technology—first in mosquitoes, then (potentially) in rodents.
By releasing just a handful of mutant mosquitoes that carry gene drives for infertility, for example, scientists could potentially wipe out entire populations that carry infectious scourges like malaria, dengue, or Zika. The technology is so potent—and dangerous—the US Defense Advances Research Projects Agency is shelling out $65 million to suss out how to deploy, control, counter, or even reverse the effects of tampering with ecology.
Last year, the U.N. gave a cautious go-ahead for the technology to be deployed in the wild in limited terms. Now, the first release of a genetically modified mosquito is set for testing in Burkina Faso in Africa—the first-ever field experiment involving gene drives.
The experiment will only release mosquitoes in the Anopheles genus, which are the main culprits transferring disease. As a first step, over 10,000 male mosquitoes are set for release into the wild. These dudes are genetically sterile but do not cause infertility, and will help scientists examine how they survive and disperse as a preparation for deploying gene-drive-carrying mosquitoes.
Hot on the project’s heels, the nonprofit consortium Target Malaria, backed by the Bill and Melinda Gates foundation, is engineering a gene drive called Mosq that will spread infertility across the population or kill out all female insects. Their attempt to hack the rules of inheritance—and save millions in the process—is slated for 2024.
A Universal Flu Vaccine
People often brush off flu as a mere annoyance, but the infection kills hundreds of thousands each year based on the CDC’s statistical estimates.
The flu virus is actually as difficult of a nemesis as HIV—it mutates at an extremely rapid rate, making effective vaccines almost impossible to engineer on time. Scientists currently use data to forecast the strains that will likely explode into an epidemic and urge the public to vaccinate against those predictions. That’s partly why, on average, flu vaccines only have a success rate of roughly 50 percent—not much better than a coin toss.
Tired of relying on educated guesses, scientists have been chipping away at a universal flu vaccine that targets all strains—perhaps even those we haven’t yet identified. Often referred to as the “holy grail” in epidemiology, these vaccines try to alert our immune systems to parts of a flu virus that are least variable from strain to strain.
Last November, a first universal flu vaccine developed by BiondVax entered Phase 3 clinical trials, which means it’s already been proven safe and effective in a small numbers and is now being tested in a broader population. The vaccine doesn’t rely on dead viruses, which is a common technique. Rather, it uses a small chain of amino acids—the chemical components that make up proteins—to stimulate the immune system into high alert.
With the government pouring $160 million into the research and several other universal candidates entering clinical trials, universal flu vaccines may finally experience a breakthrough this year.
In-Body Gene Editing Shows Further Promise
CRISPR and other gene editing tools headed the news last year, including both downers suggesting we already have immunity to the technology and hopeful news of it getting ready for treating inherited muscle-wasting diseases.
But what wasn’t widely broadcasted was the in-body gene editing experiments that have been rolling out with gusto. Last September, Sangamo Therapeutics in Richmond, California revealed that they had injected gene-editing enzymes into a patient in an effort to correct a genetic deficit that prevents him from breaking down complex sugars.
The effort is markedly different than the better-known CAR-T therapy, which extracts cells from the body for genetic engineering before returning them to the hosts. Rather, Sangamo’s treatment directly injects viruses carrying the edited genes into the body. So far, the procedure looks to be safe, though at the time of reporting it was too early to determine effectiveness.
This year the company hopes to finally answer whether it really worked.
If successful, it means that devastating genetic disorders could potentially be treated with just a few injections. With a gamut of new and more precise CRISPR and other gene-editing tools in the works, the list of treatable inherited diseases is likely to grow. And with the CRISPR baby scandal potentially dampening efforts at germline editing via regulations, in-body gene editing will likely receive more attention if Sangamo’s results return positive.
Neuralink and Other Brain-Machine Interfaces
Neuralink is the stuff of sci fi: tiny implanted particles into the brain could link up your biological wetware with silicon hardware and the internet.
But that’s exactly what Elon Musk’s company, founded in 2016, seeks to develop: brain-machine interfaces that could tinker with your neural circuits in an effort to treat diseases or even enhance your abilities.
Last November, Musk broke his silence on the secretive company, suggesting that he may announce something “interesting” in a few months, that’s “better than anyone thinks is possible.”
Musk’s aspiration for achieving symbiosis with artificial intelligence isn’t the driving force for all brain-machine interfaces (BMIs). In the clinics, the main push is to rehabilitate patients—those who suffer from paralysis, memory loss, or other nerve damage.
2019 may be the year that BMIs and neuromodulators cut the cord in the clinics. These devices may finally work autonomously within a malfunctioning brain, applying electrical stimulation only when necessary to reduce side effects without requiring external monitoring. Or they could allow scientists to control brains with light without needing bulky optical fibers.
Cutting the cord is just the first step to fine-tuning neurological treatments—or enhancements—to the tune of your own brain, and 2019 will keep on bringing the music.
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Last year, a novelist went on a road trip across the USA. The trip was an attempt to emulate Jack Kerouac—to go out on the road and find something essential to write about in the experience. There is, however, a key difference between this writer and anyone else talking your ear off in the bar. This writer is just a microphone, a GPS, and a camera hooked up to a laptop and a whole bunch of linear algebra.
People who are optimistic that artificial intelligence and machine learning won’t put us all out of a job say that human ingenuity and creativity will be difficult to imitate. The classic argument is that, just as machines freed us from repetitive manual tasks, machine learning will free us from repetitive intellectual tasks.
This leaves us free to spend more time on the rewarding aspects of our work, pursuing creative hobbies, spending time with loved ones, and generally being human.
In this worldview, creative works like a great novel or symphony, and the emotions they evoke, cannot be reduced to lines of code. Humans retain a dimension of superiority over algorithms.
But is creativity a fundamentally human phenomenon? Or can it be learned by machines?
And if they learn to understand us better than we understand ourselves, could the great AI novel—tailored, of course, to your own predispositions in fiction—be the best you’ll ever read?
Maybe Not a Beach Read
This is the futurist’s view, of course. The reality, as the jury-rigged contraption in Ross Goodwin’s Cadillac for that road trip can attest, is some way off.
“This is very much an imperfect document, a rapid prototyping project. The output isn’t perfect. I don’t think it’s a human novel, or anywhere near it,” Goodwin said of the novel that his machine created. 1 The Road is currently marketed as the first novel written by AI.
Once the neural network has been trained, it can generate any length of text that the author desires, either at random or working from a specific seed word or phrase. Goodwin used the sights and sounds of the road trip to provide these seeds: the novel is written one sentence at a time, based on images, locations, dialogue from the microphone, and even the computer’s own internal clock.
The results are… mixed.
The novel begins suitably enough, quoting the time: “It was nine seventeen in the morning, and the house was heavy.” Descriptions of locations begin according to the Foursquare dataset fed into the algorithm, but rapidly veer off into the weeds, becoming surreal. While experimentation in literature is a wonderful thing, repeatedly quoting longitude and latitude coordinates verbatim is unlikely to win anyone the Booker Prize.
Data In, Art Out?
Neural networks as creative agents have some advantages. They excel at being trained on large datasets, identifying the patterns in those datasets, and producing output that follows those same rules. Music inspired by or written by AI has become a growing subgenre—there’s even a pop album by human-machine collaborators called the Songularity.
A neural network can “listen to” all of Bach and Mozart in hours, and train itself on the works of Shakespeare to produce passable pseudo-Bard. The idea of artificial creativity has become so widespread that there’s even a meme format about forcibly training neural network ‘bots’ on human writing samples, with hilarious consequences—although the best joke was undoubtedly human in origin.
The AI that roamed from New York to New Orleans was an LSTM (long short-term memory) neural net. By default, information contained in individual neurons is preserved, and only small parts can be “forgotten” or “learned” in an individual timestep, rather than neurons being entirely overwritten.
The LSTM architecture performs better than previous recurrent neural networks at tasks such as handwriting and speech recognition. The neural net—and its programmer—looked further in search of literary influences, ingesting 60 million words (360 MB) of raw literature according to Goodwin’s recipe: one third poetry, one third science fiction, and one third “bleak” literature.
In this way, Goodwin has some creative control over the project; the source material influences the machine’s vocabulary and sentence structuring, and hence the tone of the piece.
The Thoughts Beneath the Words
The problem with artificially intelligent novelists is the same problem with conversational artificial intelligence that computer scientists have been trying to solve from Turing’s day. The machines can understand and reproduce complex patterns increasingly better than humans can, but they have no understanding of what these patterns mean.
Goodwin’s neural network spits out sentences one letter at a time, on a tiny printer hooked up to the laptop. Statistical associations such as those tracked by neural nets can form words from letters, and sentences from words, but they know nothing of character or plot.
When talking to a chatbot, the code has no real understanding of what’s been said before, and there is no dataset large enough to train it through all of the billions of possible conversations.
Unless restricted to a predetermined set of options, it loses the thread of the conversation after a reply or two. In a similar way, the creative neural nets have no real grasp of what they’re writing, and no way to produce anything with any overarching coherence or narrative.
Goodwin’s experiment is an attempt to add some coherent backbone to the AI “novel” by repeatedly grounding it with stimuli from the cameras or microphones—the thematic links and narrative provided by the American landscape the neural network drives through.
Goodwin feels that this approach (the car itself moving through the landscape, as if a character) borrows some continuity and coherence from the journey itself. “Coherent prose is the holy grail of natural-language generation—feeling that I had somehow solved a small part of the problem was exhilarating. And I do think it makes a point about language in time that’s unexpected and interesting.”
AI Is Still No Kerouac
A coherent tone and semantic “style” might be enough to produce some vaguely-convincing teenage poetry, as Google did, and experimental fiction that uses neural networks can have intriguing results. But wading through the surreal AI prose of this era, searching for some meaning or motif beyond novelty value, can be a frustrating experience.
Maybe machines can learn the complexities of the human heart and brain, or how to write evocative or entertaining prose. But they’re a long way off, and somehow “more layers!” or a bigger corpus of data doesn’t feel like enough to bridge that gulf.
Real attempts by machines to write fiction have so far been broadly incoherent, but with flashes of poetry—dreamlike, hallucinatory ramblings.
Neural networks might not be capable of writing intricately-plotted works with charm and wit, like Dickens or Dostoevsky, but there’s still an eeriness to trying to decipher the surreal, Finnegans’ Wake mish-mash.
You might see, in the odd line, the flickering ghost of something like consciousness, a deeper understanding. Or you might just see fragments of meaning thrown into a neural network blender, full of hype and fury, obeying rules in an occasionally striking way, but ultimately signifying nothing. In that sense, at least, the RNN’s grappling with metaphor feels like a metaphor for the hype surrounding the latest AI summer as a whole.
Or, as the human author of On The Road put it: “You guys are going somewhere or just going?”
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Disruptive business models are often powered by alternative financing. In Part 1 of this series, I discussed how mobile is redefining money and banking and shared some of the dramatic transformations in the global remittance infrastructure.
In this article, we’ll discuss:
AI financial advisors and robo traders
Let’s dive right back in…
Decentralized Lending = Democratized Access to Finances
Peer-to-peer (P2P) lending is an age-old practice, traditionally with high risk and extreme locality. Now, the P2P funding model is being digitized and delocalized, bringing lending online and across borders.
Zopa, the first official crowdlending platform, arrived in the United Kingdom in 2004. Since then, the consumer crowdlending platform has facilitated lending of over 3 billion euros ($3.5 billion USD) of loans.
Person-to-business crowdlending took off, again in the U.K., in 2005 with Funding Circle, now with over 5 billion euros (~5.8 billion USD) of capital loaned to small businesses around the world.
Crowdlending next took off in the US in 2006, with platforms like Prosper and Lending Club. The US crowdlending industry has boomed to $21 billion in loans, across 515,000 loans.
Let’s take a step back… to a time before banks, when lending took place between trusted neighbors in small villages across the globe. Lending started as peer-to-peer transactions.
As villages turned into towns, towns turned into cities, and cities turned into sprawling metropolises, neighborly trust and the ability to communicate across urban landscapes broke down. That’s where banks and other financial institutions came into play—to add trust back into the lending equation.
With crowdlending, we are evidently returning to this pre-centralized-banking model of loans, and moving away from cumbersome intermediaries (e.g. high fees, regulations, and extra complexity).
Fueled by the permeation of the internet, P2P lending took on a new form as ‘crowdlending’ in the early 2000s. Now, as blockchain and artificial intelligence arrive on the digital scene, P2P lending platforms are being overhauled with transparency, accountability, reliability, and immutability.
Artificial Intelligence Micro Lending & Credit Scores
We are beginning to augment our quantitative decision-making with neural networks processing borrowers’ financial data to determine their financial ‘fate’ (or, as some call it, your credit score). Companies like Smart Finance Group (backed by Kai Fu Lee and Sinovation Ventures) are using artificial intelligence to minimize default rates for tens of millions of microloans.
Smart Finance is fueled by users’ personal data, particularly smartphone data and usage behavior. Users are required to give Smart Finance access to their smartphone data, so that Smart Finance’s artificial intelligence engine can generate a credit score from the personal information.
The benefits of this AI-powered lending platform do not stop at increased loan payback rates; there’s a massive speed increase as well. Smart Finance loans are frequently approved in under eight seconds. As we’ve seen with other artificial intelligence disruptions, data is the new gold.
Digitizing access to P2P loans paves the way for billions of people currently without access to banking to leapfrog the centralized banking system, just as Africa bypassed landline phones and went straight to mobile. Leapfrogging centralized banking and the credit system is exactly what Smart Finance has done for hundreds of millions of people in China.
As artificial intelligence accesses even the most mundane mobile browsing data to assign credit scores, blockchain technologies, particularly immutable ledgers and smart contracts, are massive disruptors to the archaic banking system, building additional trust and transparency on top of current P2P lending models.
Immutable ledgers provide the necessary transparency for accurate credit and loan defaulting history. Smart contracts executed on these immutable ledgers bring the critical ability to digitally replace cumbersome, expensive third parties (like banks), allowing individual borrowers or businesses to directly connect with willing lenders.
Two of the leading blockchain platforms for P2P lending are ETHLend and SALT Lending.
ETHLend is an Ethereum-based decentralized application aiming to bring transparency and trust to P2P lending through Ethereum network smart contracts.
Secure Automated Lending Technology (SALT) allows cryptocurrency asset holders to use their digital assets as collateral for cash loans, without the need to liquidate their holdings, giving rise to a digital-asset-backed lending market.
While blockchain poses a threat to many of the large, centralized banking institutions, some are taking advantage of the new technology to optimize their internal lending, credit scoring, and collateral operations.
In March 2018, ING and Credit Suisse successfully exchanged 25 million euros using HQLA-X, a blockchain-based collateral lending platform.
HQLA-X runs on the R3 Corda blockchain, a platform designed specifically to help heritage financial and commerce institutions migrate away from their inefficient legacy financial infrastructure.
Blockchain and tokenization are going through their own fintech and regulation shakeup right now. In a future blog, I’ll discuss the various efforts to more readily assure smart contracts, and the disruptive business model of security tokens and the US Securities and Exchange Commission.
Parallels to the Global Abundance of Capital
The abundance of capital being created by the advent of P2P loans closely relates to the unprecedented global abundance of capital.
Initial coin offerings (ICOs) and crowdfunding are taking a strong stand in disrupting the $164 billion venture capital market. The total amount invested in ICOs has risen from $6.6 billion in 2017 to $7.15 billion USD in the first half of 2018. Crowdfunding helped projects raise more than $34 billion in 2017, with experts projecting that global crowdfunding investments will reach $300 billion by 2025.
In the last year alone, using ICOs, over a dozen projects have raised hundreds of millions of dollars in mere hours. Take Filecoin, for example, which raised $257 million in only 30 days; its first $135 million was raised in the first hour. Similarly, the Dragon Coin project (which itself is revolutionizing remittance in high-stakes casinos around the world) raised $320 million in its 30-day public ICO.
Some Important Takeaways…
Technology-backed fundraising and financial services are disrupting the world’s largest financial institutions. Anyone, anywhere, at anytime will be able to access the capital they need to pursue their idea.
The speed at which we can go from “I’ve got an idea” to “I run a billion-dollar company” is moving faster than ever.
Following Ray Kurzweil’s Law of Accelerating Returns, the rapid decrease in time to access capital is intimately linked (and greatly dependent on) a financial infrastructure (technology, institutions, platforms, and policies) that can adapt and evolve just as rapidly.
This new abundance of capital requires financial decision-making with ever-higher market prediction precision. That’s exactly where artificial intelligence is already playing a massive role.
Artificial Intelligence, Robo Traders, and Financial Advisors
On May 6, 2010, the Dow Jones Industrial Average suddenly collapsed by 998.5 points (equal to 8 percent, or $1 trillion). The crash lasted over 35 minutes and is now known as the ‘Flash Crash’. While no one knows the specific reason for this 2010 stock market anomaly, experts widely agree that the Flash Crash had to do with algorithmic trading.
With the ability to have instant, trillion-dollar market impacts, algorithmic trading and artificial intelligence are undoubtedly ingrained in how financial markets operate.
In 2017, CNBC.com estimated that 90 percent of daily trading volume in stock trading is done by machine algorithms, and only 10 percent is carried out directly by humans.
Artificial intelligence and financial management algorithms are not only available to top Wall Street players.
Robo-advisor financial management apps, like Wealthfront and Betterment, are rapidly permeating the global market. Wealthfront currently has $9.5 billion in assets under management, and Betterment has $10 billion.
Artificial intelligent financial agents are already helping financial institutions protect your money and fight fraud. A prime application for machine learning is in detecting anomalies in your spending and transaction habits, and flagging potentially fraudulent transactions.
As artificial intelligence continues to exponentially increase in power and capabilities, increasingly powerful trading and financial management bots will come online, finding massive new and previously lost streams of wealth.
How else are artificial intelligence and automation transforming finance?
Disruptive Remittance and Seamless Transactions
When was the last time you paid in cash at a toll booth? How about for a taxi ride?
EZ-Pass, the electronic tolling company implemented extensively on the East Coast, has done wonders to reduce traffic congestion and increase traffic flow.
Driving down I-95 on the East Coast of the United States, drivers rarely notice their financial transaction with the state’s tolling agencies. The transactions are seamless.
The Uber app enables me to travel without my wallet. I can forget about payment on my trip, free up my mental bandwidth and time for higher-priority tasks. The entire process is digitized and, by extension, automated and integrated into Uber’s platform (Note: This incredible convenience many times causes me to accidentally walk out of taxi cabs without paying!).
In January 2018, we saw the success of the first cutting-edge, AI-powered Amazon Go store open in Seattle, Washington. The store marked a new era in remittance and transactions. Gone are the days of carrying credit cards and cash, and gone are the cash registers. And now, on the heals of these early ‘beta-tests’, Amazon is considering opening as many as 3,000 of these cashierless stores by 2023.
Amazon Go stores use AI algorithms that watch various video feeds (from advanced cameras) throughout the store to identify who picks up groceries, exactly what products they select, and how much to charge that person when they walk out of the store. It’s a grab and go experience.
Let’s extrapolate the notion of seamless, integrated payment systems from Amazon Go and Uber’s removal of post-ride payment to the rest of our day-to-day experience.
Imagine this near future:
As you near the front door of your home, your AI assistant summons a self-driving Uber that takes you to the Hyperloop station (after all, you work in L.A. but live in San Francisco).
At the station, you board your pod, without noticing that your ticket purchase was settled via a wireless payment checkpoint.
After work, you stop at the Amazon Go and pick up dinner. Your virtual AI assistant passes your Amazon account information to the store’s payment checkpoint, as the store’s cameras and sensors track you, your cart and charge you auto-magically.
At home, unbeknownst to you, your AI has already restocked your fridge and pantry with whatever items you failed to pick up at the Amazon Go.
Once we remove the actively transacting aspect of finance, what else becomes possible?
Extraordinary transformations are happening in the finance world. We’ve only scratched the surface of the fintech revolution. All of these transformative financial technologies require high-fidelity assurance, robust insurance, and a mechanism for storing value.
I’ll dive into each of these other facets of financial services in future articles.
For now, thanks to coming global communication networks being deployed on 5G, Alphabet’s LUNE, SpaceX’s Starlink and OneWeb, by 2024, nearly all 8 billion people on Earth will be online.
Once connected, these new minds, entrepreneurs, and customers need access to money and financial services to meaningfully participate in the world economy.
By connecting lenders and borrowers around the globe, decentralized lending drives down global interest rates, increases global financial market participation, and enables economic opportunity to the billions of people who are about to come online.
We’re living in the most abundant time in human history, and fintech is just getting started.
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