How to achieve competitive advantage with Generative AI?

In the ever-evolving world of technology, generative AI stands out as a game-changer. But what exactly makes it so special, and how can businesses harness its power to gain a competitive edge?

Let's delve into the insights shared by Goldman Sachs CIO Marco Argenti to unravel the mysteries of generative AI.

Understanding Generative AI

Generative AI, at its core, is distinct from traditional AI.

True to its name, Generative AI is a subset of AI, whose super-power is to generate text, audio, video or images based on the prompt (i.e. user input).

While it's easy to lump all AI forms together, it's essential to recognise that certain tasks are better suited for traditional machine learning models.

For instance, regression problems might be better addressed by non-generative AI.

However, generative AI shines in three primary areas:

1. Summarising Unstructured Information: Generative AI can take vast amounts of unstructured data and distill it into coherent summaries. This capability is invaluable in an age where data is abundant but often lacks structure.
2. Filling in the Blanks: One of the most intriguing abilities of generative AI is its knack for filling gaps. Whether it's an incomplete image or data with missing pieces, generative AI can 'imagine' and complete the missing parts with astonishing accuracy.
3. Connecting the Dots: Generative AI excels at pattern recognition, drawing connections between seemingly unrelated data points. This ability is particularly beneficial for alpha generation, where the goal is to identify correlations that aren't immediately apparent.

The Future Triad of AI

As we look to the future, a compelling model emerges, consisting of three integral components:

• Humans: The irreplaceable element that brings wisdom, intuition, relationships, and the unique human touch.
• Large AI Models: These serve as reasoning assistants, helping to make sense of vast amounts of data and drawing connections.
• Specialised Smaller Models: These are adept at specific tasks, whether it's financial calculations, opinion generation on commodities, fraud detection, or any other specialised function.

Together, this triad promises a harmonious blend of human intelligence and AI capabilities, offering businesses a robust framework for decision-making and innovation.

The Keys to Success in the AI Race

While access to AI technology has become more democratic in recent years, merely having the tools isn't enough. For a business to truly stand out and gain a competitive advantage, three critical factors come into play:

1. Quality of Data: The better your data, the more accurate and valuable your AI's outputs will be.
2. Access to Clients or Feedback Loops: Having a system where hypotheses can be validated and refined is crucial. This continuous feedback loop ensures that the AI system remains relevant and effective.
3. Smart Human Resources: A team of intelligent individuals who can create a reinforcement loop, refining the AI's learning and ensuring it aligns with the company's goals.

In conclusion, while generative AI offers immense potential, its true power is unlocked when combined with quality data, continuous feedback, and human intelligence.

Businesses that can master this blend will undoubtedly be at the forefront of their industries, reaping the rewards of a truly competitive advantage.