Firing lineJan 9 2019

AI shouldn't be seen as a threat since it makes society wealthy

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AI shouldn't be seen as a threat since it makes society wealthy

Mr de Gale says: “It’s essentially the way computers operate in the 21st century. The 20th century model is we look at the analogue world in which we live and come up with a problem and translate it to digital. 

“The computer would spit out the digital result and the human being would read that result and take action – we translate analogue to digital and digital to analogue. What’s happened over the past 15 years is that the computer interacts directly in the real world, such as the internet of things.”

This means that computing has become very reliant on sensors that can inform it about what to do instantly without having to follow a set of instructions that have to be written by an individual.

He says: “If you want the computer to work out for itself what’s going on, you have to have sensors and those sensors are sensing the analogue world. In the past we would have looked at the world and we might have told the computer what to do, whereas now the computer can sense what is going on.”

Any company that makes these sensors or has some role in determining what the computer should do is likely to have long-term prospects, and while perhaps not as apparently interesting as social media or artificial intelligence, the space is not affected by hype but underpins what he sees as the long-term future of technology.

Mr de Gale’s fund invests in Texas Instruments, which makes power management integrated circuits to help devices that use batteries have a longer charging life and charge faster.

Similarly, autonomous vehicles need sensors to operate in the way that works. Mr de Gale says: “AI is one element of this: you can have the best AI in your car, but if it depends on me sitting in the driver’s seat looking into the screen and typing into a keyboard and I’ve got to read the screen, the car’s going to crash because I’m slowing the process down. The AI could be as good as possible, but it will have no effect.” 

Mr de Gale’s fund has between 30 and 40 stocks. It has a management fee of 1 per cent, while net asset value is below $150m (£119m), and this goes down to 0.5 per cent once the fund reaches $200m.

Freeing up time and money

He admits that his fund is based on the philosophy that the whole world is becoming computer “enabled”, which is making the world more “fragile”. But adds: “You could say the technology is doing the boring stuff and we’re using our brains for the important stuff. We employ some of the least qualified people to drive for us. If you get a computer to do it, that’s something we should automate.

“AI shouldn’t be seen as a threat to human beings because it makes society wealthy and increases free time. The issue is that money and free time go to different people and creates enormous social issues, hence the rise of computer games offering some people the status they crave.”

Mr de Gale is invested in Activision and Tencent, but not Electronic Arts, as the latter is now a badly run company, he says, after an interlude of getting back on track following another long period of poor management. He also stays away from tech companies offering stocks instead of salaries to its engineers as this dilutes the investors’ holdings.

Mr de Gale set up BlueBox in March 2018 after leaving BlackRock, where he worked for 20 years and ran the BGF World Technology fund. This offering achieved 15 per cent annualised returns, while the tech sector was offering 13 per cent. He took the view that in 2012 it was time to get out of Apple completely, something that went against BlackRock’s own risk system, which said the fund had to hold 4 per cent in Apple.

But Mr de Gale decided that Apple was a non-starter long term. By 2012, suppliers who had been used to Apple throwing its weight around with factory exclusivity found they could get business from other smartphone customers, such as those with Samsung, and Apple customers could get just as good a phone with older Apple models. He therefore argued the case for selling Apple down to zero. 

He says: “It was not in investors’ interests to hold the stock that was going to go down. I persuaded them to allow me to go down to zero whatever the risk model said. If I’m being asked to invest in technology and beat the benchmark, my investors will be paying over the long term. Occasionally, you have to stick your neck out and that’s what you’re being asked to do.”

Mr de Gale has a military background, having served in Northern Ireland as an intelligence officer. Are there similarities from his past in his present role? “I was an intelligence officer in Northern Ireland and what I did was filter information. We had huge amounts of information coming in, and my job was to work out what wasn’t important and discard it and use the rest to spot patterns and predict the future. Another ex-army officer thought I should become a fund manager, and he was right, but no one’s trying to kill me and the pay is better.”

Melanie Tringham is deputy features editor of Financial Adviser and FTAdviser.com