Knowledge in the Age of Artificial Intelligence: Why Trust Cannot Be Copied
This year, listed companies that make their living from specialised knowledge had a hard time of it. Publishers of legal, tax and medical information, consultancies and providers of business software saw their share prices fall by half or more in some cases. The fear was easy to summarise: if a computer program can answer a legal question or prepare a tax return within seconds, who still needs expensive professional information?
An understandable fear
That fear is not unfounded. Artificial intelligence can summarise texts, compare documents and answer questions in a way that would have been unthinkable a few years ago. Work that once took hours now goes much faster. For professions built around looking up and organising information, a great deal is changing, and some tasks will largely disappear.
Yet history shows that new technology rarely makes all existing knowledge redundant. When search engines emerged, it was predicted that encyclopaedias, trade journals and reference works would disappear. Some of them did. But the providers that delivered reliable, verified information that professionals had to be able to rely on remained in place, and often went on growing.
The difference between an answer and a reliable answer
A doctor choosing a treatment, an accountant signing off on a set of annual accounts or a lawyer reviewing a contract needs more than an answer that is probably right. A mistake can mean harm to a patient, a fine or a lawsuit. In such professions, speed is not the only thing that counts; certainty matters above all. Is the information current, has it been checked by experts, and can someone take responsibility for it?
Artificial intelligence is only as good as the data it works with. Systems trained on general internet sources still regularly make mistakes that sound convincing. Companies that hold carefully maintained, specialised knowledge, and that connect that knowledge to the new technology, can therefore emerge stronger. The technology then becomes a tool that improves their own product, rather than a replacement for it.
Where the market can get it wrong
Financial markets tend to tar every company in a sector with the same brush when a new technology arrives. Those that are vulnerable fall, but those that are well positioned often fall alongside them. That sometimes produces share prices that say more about sentiment than about actual prospects. It is striking that many providers of professional information, in the very year their share prices fell sharply, simply went on growing their revenue and profits, and received the bulk of their income from recurring subscriptions.
That does not mean every company in this sector will come through the change well. The differences will be considerable. Companies that merely pass on information available free of charge elsewhere face a real risk. Companies whose knowledge is deeply embedded in their clients' daily work, and that are themselves investing heavily in the new technology, are in a far better starting position.
A lesson for the long term
Every major technological change produces winners and losers, but rarely exactly as the market expects at the outset. The first reaction is often fear about what will be lost. Only later does it become clear what remains valuable. In a world where information keeps getting cheaper, reliability may well become scarcer, and therefore more valuable. Patience and a level-headed view of the facts remain the best guide.
Disclaimer. This article is published by Lunar Asset Management N.V. for general informational and educational purposes only. It reflects the personal views of the author at the time of writing and does not constitute investment advice, a recommendation, an offer, or a solicitation to buy or sell any security or financial instrument. References to specific companies are illustrative and should not be interpreted as buy or sell recommendations. Investing involves risk, including the possible loss of principal. Past performance is not a reliable indicator of future results. Readers should consult a qualified financial advisor before making any investment decision based on their personal circumstances. Lunar Asset Management N.V. is supervised by the Centrale Bank van Curaçao en Sint Maarten (CBCS).
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