Could Artificial Intelligence Help Stop The Next Recession?

AI has the power to change our worst business behaviors


There are things in our world that are seemingly inevitable. The world will continue to turn, the seasons will change, and every decade there will be some kind of man-made financial recession.

We can go back through every financial crisis from the great depression in the 1920’s through to the global recession in the late 2000’s and there is something that binds them together; they were entirely preventable. There are of course several different elements that caused theM, from the stock market crashing in the 1920s to the sub-prime mortgage market and nefarious lending practices of banks in the early 2000’s, but none happened in isolation and in each case there were those in the minority who saw it, exclaimed the risk, but were ultimately ignored.

The problem that the world has always had with the economy is that we have become accustomed to the boom and bust cycles, which in many ways, often subconsciously, makes us think we need to get everything we can before this turns bad, which only exacerbates the problem further. In a very basic way, the issues that we have with the economy are caused by human nature, whether that’s an unwillingness to change what’s there or greed to gain more, even if it is breaking the rules to get it. But could we see a future where AI takes the negative elements of human nature out of the equation?

A key part of AI is the ability to analyze a huge amount of information in a fraction of the time it would take a human. It will, therefore, allow decisions to be put into considerably wider context, something that is almost impossible for companies or governments to do today with any degree of accuracy. For instance, if the hypothetical CEO of a hypothetical bank decided to remove an internal regulation, an AI system would be able to quickly analyze the context around why the regulation was originally implemented and the impact it had after implementation. This isn’t simply about looking at the data pre and post regulation, but through text and sentiment analysis being able to look at media reporting and even internal emails around the subject to determine why it was implemented and whether it did anything to prevent or promote a particular behavior.

However, AI may have a part to play in identifying the subtle signs that betray the kinds of human behavior that can lead to these kinds of crashes. If we look at the crash of the late 2000’s it is clear that it was caused, in part, by people historically mis-selling mortgages to people who couldn’t afford them. AI and deep learning make it simple to avoid these kinds of mistakes, whether somebody knew they were making a mistake or not. Similarly, when looking at stock market crashes, AI is designed to incorporate data from a wide variety of areas and formats, which means that it should be able to determine whether a stock is over or undersold and the inherent risk of its purchase fairly easily. It has the potential to somewhat stabilize the often unpredictable and unrealistic rise and fall of the stock market, even if it’s through prompting behavior rather than stopping it altogether.

This prompting of behavior may be the real power that AI holds to avoid future disasters. Rather than trying to stop who humans inherently are, it simply prompts them to act in the correct way. This kind of prompt for good behavior has been shown to be considerably more powerful than simple well-established rules. A prime example is speed feedback signs, which show a driver the speed they are traveling rather than just dictating the speed limit through a static sign. In one Federal Highway Administration study in 2009, the average speed of traffic outside a school with a high number of accidents went from 48mph with static signs only, down to 15mph with this feedback, representing a 69% decrease in speed and significantly fewer accidents. People always knew the rules when they were driving, but the prompt and reminder of their behavior is what caused the change.

It will be the ability to quickly prompt based on a huge amount of information that may help to avoid the kind of behaviors that have done so much damage in the past. Whether that’s a prompt saying ‘Are you sure you want to sell a mortgage to this person? Their credit history suggests they will be unable to afford it’ or ‘We believe this stock is currently oversold and likely to lose value very quickly, are you sure you want to invest?’ just being prompted to take action has been shown to deter bad behavior.

AI has some significant advantages that we are just beginning to see today, whether that’s helping to maximize crop yields or developing the self driving cars. However, the single biggest impact it could have is the ability to warn us when we’re about the make a poor decision, something that everyone in the world makes occasionally, but some have considerably more impact than others. 

Looking small

Read next:

Expert Insight: 'An Effective Visualization Results From A Great Deal Of Curiosity And Exploration'