THE WAY FORWARD – PART 2

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[SYRIL SMITH GARSON]

If we think about data, we think about the cloud, digital assets, are there two tech trends that you would pick that, when combined together, really are going to have sort of outsized impact for our clients?

[LANCE BRAUNSTEIN]

So, I think the foundation of everything that Kunal and Tarek both talked about is data. So, when you think about what informs workflow augmentation, automation, insight, productivity enhancements, it's all the data that you feed it. Is that a complete data set, a high-quality data set, a biased data set? I think that there is this duality between our data strategy and our AI strategy that we have to keep at the forefront of our thinking.

So, data to me is foundational to any AI work that we do. I think there is still a lot to be done in the cloud, especially as we think about elastic compute and as we think about our operating model evolving to be much more dynamic to our client needs. That again informs the earlier comments around scalability and performance.

And then I think importantly, blockchain, and I'm not talking about crypto. I'm not talking about a new kind of ETF. I mean, a token. The idea that we can create value, we can create tokens around different dimensions of value across asset classes – to me is foundational. I think that changes the industry over the next number of years. I know there's been an outsized focus on cryptocurrency to this point.

I really do think it's going to change the way we interact, the way we think about intermediaries, the ways we think about connecting sources of capital and demand for capital. I think that is going to be informed by blockchain in a way that we are just beginning to understand today.

[SYRIL SMITH GARSON]

One of the ones that you pulled out was the cloud, which it sounds like is really critical to underpinning a lot of what we want to do. Tarek, I'll ask you a question here, which is, should all of our clients be on the cloud? Should every business be on the cloud? How do we start to think about that trend in particular?

[TAREK CHOUMAN]

This question is entrenched with the sentiment of fear, sometimes concern, of people feeling that by giving their data, their assets, to someone else and outsourcing and getting the data that they are relying on on a daily basis and putting it outside of their walls is something that is risky. It takes time culturally to adapt to this concept. And you see it, if you look at how between different countries, different regions, it's not the same perception of the risk and of the threat that is related to being on the cloud.

My personal conviction is that it's a no brainer. We will operate everything on the cloud when it comes to future ability to upgrade systems, interact and integrate systems within the ecosystem of all those systems that our clients are operating. It's something that will happen. It will take time, it’s not totally understood yet. It's also a responsibility for the industry to make sure that from a security perspective, from a vulnerability perspective, we are doing the right thing to secure for our clients the access to the cloud and everything that is being done to secure their data.

This being said, this is the trend that nobody is arguing with today in the industry. This is where we are heading and this is what will allow us to do much more in a better way going forward.

[LANCE BRAUNSTEIN]

It's funny, Tarek, ten years ago we would have had this debate –should we put sensitive workloads in the cloud? That was a debate, a legitimate debate. I think what we've seen is the maturity of the cloud. More importantly, in cyber, infosec, operational stability has advanced to the point where it's not a debate anymore. Now it's a question of how do you enhance your security posture, you protect your data, your transactions in a way that doesn't entirely depend on the cloud provider? So, I think the question now is, how do I operate in the cloud in a way where I control my own destiny? This is not something that you defer to a provider and let them manage for you.

[SYRIL SMITH GARSON]

Yeah, absolutely. And Kunal, you had sort of said in one of your examples you were seeing really cool applications of these technologies. So, I actually want to ask all of you, but maybe Kunal, I'll pick on you first. What is a really cool application of any of these technologies you're seeing? You don't have to limit to just BlackRock, we can say more broadly.

[KUNAL KHARA]

I have experimented with a couple of these. I love the music AI apps. They're absolutely incredible. I dabbled as a DJ in college. I was not particularly good. There are some really, really awesome applications for music creation, and I think this is what I love about humanity in general. This notion of driving creativity and then finding applications of things like AI to really accelerate that creativity – it's fascinating.

[SYRIL SMITH GARSON]

That's really cool. Tarek, are you a music guy or are there other applications that...

[TAREK CHOUMAN]

Not at all. I am not into music. As many of you know, I am more into video games. But this being said, there is something that is way more dull than music and video games that I am thinking of, it’s the impact of AI on the way we design screens, basically UI and UX.

[SYRIL SMITH GARSON]

Yeah.

[TAREK CHOUMAN]

Because this is something that we usually don't mention ,because we are so conscious of the human in the loop, and we don't realize that a system with whom you are interacting through English, are you going still to need a scroll bar, a tab, a list, a combo?

Maybe it will change drastically the way we interact with a UI with a UX system and change drastically the way we design screens, dashboards, workflows. And then this is something that if you extrapolate this aspect and think forward about it, how are we going to be in a situation where there are firms, companies, people who are operating in a certain way that will have to operate drastically differently, let alone the UI and UX of a system because something is going to work differently.

We use several examples here at BlackRock, translation services, contracts and law firms, data scraping, multiple examples. All this is going to be looked at differently, will be really operating in a way that is significantly different from the way it operates today. And I find this quite exciting. Not as much as the music, but still.

[SYRIL SMITH GARSON]

And one of the things that we've talked about here is you have to make the computer work for you, and maybe in the future there's a space where you can just speak to it as you're saying, and it will do everything it needs to behind the scenes. Do you think that's true?

[TAREK CHOUMAN]

Definitely. And this is what will make companies and people at one point become better, is how much they are able to leverage this AI, this computer, to work for you. And it's happened to us in the past. It's not necessarily different from, and I don't want to be the old person on this podcast, but it's not totally different from what we have seen with the arrival of all the technologies that we have seen in the past, where it was always the same sentiment, excitement and fear.

The two sentiments are exactly the same with AI, just that it's in a different context. So, I think we should tame those two emotions and use them to the benefit of our business in general.

[SYRIL SMITH GARSON]

And Lance, you talk about the user experience quite a lot. How do you think about it?

[LANCE BRAUNSTEIN]

I love that example. And I'll tell you why. I actually think that the human/computer interface changes. This is a moment where we start to prompt more than click, navigate, pulldown. And I think there is a fundamentally different future of design than we've experienced over the last decade. And so, I think, Tarek, you are spot on. The ways in which we think about user design, information architecture, changes through prompts.

And I also think that it creates a democratization of complex models that perhaps you wouldn't have been able to access historically. But now you know what? Like a liquidity model, a mortgage model, these things become a prompt, like can you tell me my liquidity in this portfolio? And the risk of climate transition risk? Those things now become much more viable than having to navigate complex user interfaces, which perhaps didn't have the fullness of those capabilities.

So, I think you touch on a critically important point. And to be clear, there is an educational component to this, which is we all better get way, way more precise in the commands and the prompts that we provide than we have historically been through chat assistance.

[SYRIL SMITH GARSON]

That's a very important topic, and I think it'll be really interesting to see how it changes. So, I want you to pick any application, but I also maybe want to tilt you towards blockchain, tokenization, distributive ledgers. Is there a cool application of that that you're seeing?

[LANCE BRAUNSTEIN]

So, the AI example that I like to give, and the one that I've played around with most is what we call multimodal. The idea of taking images and text and creating something new. So, the idea that you could go from ideation to working code in many of these generative AI tools is like a magic trick to me. So, drawing a picture of a workflow on a whiteboard, and I mean doing it in a rudimentary way, and then asking your gen AI to create code, to run the code, to modify the code, to write a business requirements document based on that picture.

It largely just works. And when you see it in action and you go from ideation to a working app in the space of a couple of minutes, it's a profound moment. You realize that we are going to code differently. We're all going to be developers in the future, and the idea that we engineer solutions through this set of handoffs, that changes.

I think that changes over the next number of years. And I mean, like single digit years, not decade. And I think that will change how we work. That'll change how we create solutions for our clients. The blockchain and the notion of tokenization, I think, has tremendous promise across so many of our businesses. I think especially in our illiquid businesses, where there is not a public market for kind of exchanging value, I think there is a huge opportunity to exploit blockchain and the notion of a token, assigning a token to an element of value, whatever that value happens to be, a piece of a portfolio, somebody’s time. I think we are just scratching the surface now on figuring out where we can apply those technologies.

But I think this idea of an immutable ledger that is sort of public, that is not intermediated is an incredibly powerful concept. And again, I think in the exchange of value, this is something that's going to be important for the industry.

[SYRIL SMITH GARSON]

One of the things, Lance, that you said was around how everyone is going to start leveraging these technologies within their day-to-day job, right? Our workflows are going to fundamentally change. We're going to become more productive. I think, Tarek, you said this, the sort of fear aspect of it. How do we get ahead of it? How do we start to prepare and educate ourselves for these technologies? Kunal, I'll start with you. How do you think about that?

[KUNAL KHARA]

So first off, if you go back even 10 or 15 years and maybe you could start with something as revolutionary as the iPhone, that maybe changed the way we look at touching screens. I think each of those things had a certain element of behavior modification in the traditional ways that we, as a society and as a community, tended to interact with technology.

I think there are similar concepts that you could think about in the context of AI, as well as with my colleagues. We're talking about in the context of user experience and user interfaces. I think to me this is all about training, education and then rightly calling out what things are really, really problematic let’s say from a risk perspective and just getting ahead of them.

End of the day, I think we as a society will continue to thrive because we are excited about what these new technologies bring to us. And the one thing that, as Tarek and Lance were talking about, the UI, UX concept. Now, just imagine that if you're not even five years, like two years out, in fact, this may be in six months, you combine AI, this notion of multimodal prompting and multimodal interactions with speech driving action, in an interface that, first of all, is not limited to your desktop and second, doesn't require you to actually have a desk.

So, you think about things like augmented reality and spatial computing on top of then what is an incredibly rich potential experience of interaction with technology? One, it's the dream of all those people like me who watched Minority Report in the 1990s and said, “I want to be like Tom cruise and move my fingers around and have screens move in the sky.”

[SYRIL SMITH GARSON]

Yeah.

[KUNAL KHARA]

That's actually real. And you're seeing some of that happen in certain industries today, particularly the manufacturing sectors. It all comes back again to training, and how we make sure that we give all people everywhere.

And one of the things we've spent a lot of time talking about at BlackRock is what does this mean for our talent profile? What does it mean for the skills of the future, and how do you imbue those skills across the entirety of teams of different types of people at all levels and in a lot of cases, modify or augment the skills they already have to ultimately figure out how best to not worry that these things are ultimately driving away jobs or anything else. I think it's all about changing the dimensions of the way we are productive as a society.