Picture this: it’s late-2021 and the price of Bitcoin has broken A$80,000. Every social event poses a risk of getting embroiled in a conversation about NFTs or altcoins or decentralised finance. Everywhere you look there’s an article about another highly improbable application of blockchain with absolutely no technical detail. People keep saying “hodl”; you have no idea what that means.
Three years on, the hype around blockchain has cooled substantially, while the hype around artificial intelligence (AI) seems to be peaking. With organisations in superannuation and wealth — including Novigi — making or considering substantial investments in AI, we thought it was worth reflecting on what we can learn from the rise and (brace for the hate mail) fall of blockchain.
Speculation
One of the interesting features of peak blockchain hype was its coinciding with a rich (if obnoxious) meme culture. Phrases like “hodl” and “when lambo?”, and the existence of meme coins, as epitomised by Dogecoin, don’t really have an equivalent in AI. We believe this is indicative of structural differences between blockchain and AI:
- Technologist’s target audience
Blockchain technologists were primarily focused on the creation of new cryptocurrencies, and the sale of coins to retail investors. Cutting edge AI — with the notable exception of ChatGPT — is generally a B2B proposition. Even where the ultimate service, say a superannuation fund’s chatbot, is consumer facing, the paying customer is most likely to be a business. - The nature of speculation
Much of the hype around blockchain was driven by the skyrocketing short-term price of cryptocurrencies. Holders of those assets were motivated to perpetuate that hype in the hope of drawing in new buyers, in turn sending prices even higher. Speculation on the success of AI is also widespread, but the vehicles for this tend to be more conventional (and less volatile) financial instruments, like shares in Microsoft or Nvidia. - Establishment vs. anti-establishment
Blockchain has its roots in a revolt against centralisation and institutions, banks and governments principal among them. Many of its key proponents are self-described outsiders. AI, on the other hand, is a firmly establishment affair, due in large part to the massive amounts of capital needed to develop and train AI models.
These differences have led to very different tones in the hype surrounding AI and blockchain. The discourse around AI could reasonably be described as more mature and less volatile. Softer, more measured voices in support have also made room for significant criticism from the general public, worried about the impact of AI on jobs and creativity. This cooler climate should make it easier for business leaders and decision-makers to avoid getting caught up in hype and focus on identifying use cases that benefit their organisations and customers.
Use cases and uptake
At its buzziest, blockchain was being touted as the solution to a broad range of problems, including:
- Replacing fiat currency
- COVID-19 vaccine passports
- Replacing the ASX’s CHESS share registry
- Real estate title
While there are a handful of places in Australia where you can buy a pizza using Bitcoin, it’s unlikely we’ll see the dollar dislodged anytime soon. COVID-19 vaccine passports have been and gone with nary a blockchain in sight. The ASX’s CHESS replacement, potentially “one of the most significant applications of blockchain-based systems in a mainstream corporate setting” according to Reuters, cost the ASX A$250m and delivered nothing. And to date, no one has ever used blockchain to transfer ownership of physical real estate. Arguably, we are still waiting for a commercially viable use for blockchain to materialise.
A glance at media coverage about AI reveals a similarly diverse assortment of use cases. The key difference this time around is that some of these have been implemented and are yielding results. Pre-generative AI, machine learning algorithms (which are considered AI) were being used widely in financial services to detect suspicious and anomalous transactions, and to provide customers with facial and voice recognition methods of authentication. Now, organisations are adopting AI assistants and copilots, like Microsoft’s Copilot for Microsoft 365.
AI has one-upped blockchain by merely having working tech deployed in industry. The question is not: “Can organisations find uses for AI?”, but “Can organisations find uses for AI that deliver significant return on investment?”. A few months back we wrote that — outside of the tech giants — we are not yet seeing the private sector investment required for AI to truly transform the economy. Microsoft, Google, and Nvidia are frantically producing shovels, but the rest of the economy is yet to mine any gold. A recent report from Goldman Sachs raised doubts about whether AI will ever earn an adequate return on the ~US$1tn spent in developing and running the technology, arguing that to do so it “must be able to solve complex problems, which it isn’t designed to do.” The report also included scepticism about the likelihood of AI costs declining enough to make automating a large share of tasks feasible.
There are definite benefits to using existing AI tools, like ChatGPT and Microsoft Copilot. But we think it’s safe to say that AI’s golden use cases — those that make the technology truly transformative — are yet to reveal themselves, particularly in sectors like superannuation and wealth management. In the meantime, leaders and decision-makers would do well to treat new applications with a healthy dose of scepticism, and a clear-eyed appraisal of return on investment. And although blockchain didn’t measure up to its own hype in financial services, we hold out hope that AI may just succeed where blockchain failed.
This article was produced as part of The Quarterly – Data and Technology in Superannuation, Q4 FY24
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Key Contributors:
Kevin Fernandez is General Manager, Market Strategy and Propositions at Novigi, and is based in the Melbourne office.
Sophie Bowen-James is an analyst in the Market Strategy and Propositions team at Novigi, and is based in the Sydney office.