THE WAY FORWARD

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[SYRIL SMITH GARSON]

We know that technology is moving so fast. It's going to look very different in six months or a year from now. How do you adapt?

Lance. I'll just start with you. How do you think about it?

[LANCE BRAUNSTEIN]

I think it starts with a bit of design thinking. I think we always need to keep our client at the center of our thinking. So, how do we adapt? We adapt to the needs, the desires, the pressures of our client. We are mindful of the technology landscape in which we're navigating. So, all of the megatrends of AI, blockchain, quantum, cloud, elasticity, all of these things inform the landscape of solutions that we could then integrate to address client need.

But I think if you keep the client at the center, that becomes your compass, and you think about ways in which you can serve your clients better, more efficiently, use the user provider model of BlackRock, the world's largest asset manager, to inform those decisions and solutions. I think that creates a compass that will cut through the fluidity and the incredibly rapid pace of change of technology. That, I think has been an important ethos for us in the Aladdin business, but importantly at Blackrock.

[SYRIL SMITH GARSON]

And I think really interestingly, as you talk about using our clients as a North star, one of the big things that we need to think through is also how do we make sure that we continue to have a resilient, stable and performant platform while adapting to this new technology? Kunal, how do you think about that?

[KUNAL KHARA]

Yeah, it goes back to something Lance was saying. When you think about the North star of our clients, the design decisions you make around the solutions you want to ultimately deliver. First, it's making sure that you keep innovating, and innovation is as simple as every time you decide to build something new, on some level, you're adding more tech debt.

But at the same time, you have to do that as a function of the innovation you need to develop and deliver to clients as industries evolve. I think the second thing to think about is to be able to do that, you've got to make sure that you're applying modern technology and modern thinking in the way you do that and ultimately that will drive stability, resiliency, performance and everything else.

The two other things I'd highlight one is in the context of clients, our goal is to first, meet them where they are, but ultimately to take them where they need to go. So, it's not just about how we adapt to change, but it's actually how we drive the change as well.

Which fundamentally then brings us back to how do we innovate. And the innovation is not just responding to things, but it's actually setting things in motion and potentially, in certain cases, having everything else to respond to that as well.

[LANCE BRAUNSTEIN]

We've always had this principle, in building and operating Aladdin of stability being our first feature. We actually described stability, resilience, scale, performance, security, as a feature. When we think about innovation, innovation happens with that foundation of if you don't have a resilient and performant and scalable platform, everything else doesn't matter.

So, I think innovation sometimes could be like the next feature function. But the way in which we think about our product evolution is very much founded on the foundation first, mindful of the tech debt that over time you naturally accumulate. And then importantly, meeting clients where they are addressing those next generation needs.

[SYRIL SMITH GARSON]

And that's the number one thing that our clients would notice is if it's not stable, it's not performant, we're getting a call. When it's working, then we can start to focus on the innovation from there. So, actually we talked a little about the client being our North star here. How do you think about the topic of the moment, AI, and that in its remapping or transforming of the client journey over the next year or two? Maybe, Tarek, I'll pull you in for that one.

[TAREK CHOUMAN]

I think leveraging what Lance and Kunal have been saying, because AI is part of innovation, obviously, it's part of what adapting to new trends is and ultimately what is going to be extremely important is everything we do, and being aware of those innovations is the value we are going to create for our clients. And this is how our clients will recognize that AI is important or interesting for them.

If it's just to follow a trend, it's not going to lead us anywhere. This is how we look at AI in particular – where and how can we help our clients scale, grow, become better, more efficient, less costly, etc.? And this is really the prism through which we look at AI.

[SYRIL SMITH GARSON]

And do we think, Kunal, that the workflow that Tarek is talking through now, is that going to look different in a year from now?

[KUNAL KHARA]

AI not a panacea in and of itself. The way you look at in our industry, when you look at investment management and you think about this being a regulated industry, the role that every stakeholder plays in there is ultimately for the financial security of their end client. There is a rhythm and a process that has to be followed in managing money.

So, workflows to me absolutely will be revolutionized by AI. But it's not as simple as saying that if something today takes 14 steps, we're going to make it take three. What it still means is some of those core components that drive investment management as a process, human in the loop, control points, all those are then well integrated into a modernized, automated experience, very much navigated and driven by AI.

And I think that is the future we all want to be able to see. I think that the cool thing about this technology is we're seeing changes in front of our very eyes. And I do think that those changes are going to come at us to some extent faster than we expect. But it goes back to my earlier point.

As long as we drive the change and we continue to make the experience for clients really, really positive, I think we're going to end up being collectively as a community of users and an industry very, very successful together.

[SYRIL SMITH GARSON]

Yeah. And we had a really interesting conversation two weeks ago where we said, how fast is the financial industry going to move to adopt these technologies? And a Pew study just came out, I think last week, that said 30 plus percent of employees have tried to use AI at work. How do we put those two things together? How do we think about the fast-moving nature of our industry? Or maybe not so fast, right? And the fact that we're seeing this sort of quick adoption of this technology.

[TAREK CHOUMAN]

Well, I'm optimistic about the ability of our industry to adopt new technologies and evolve, to accept disruption. And for the human aspect of it, because the whole conversation started from with respect to the fear and concern that those technologies can bring. I think we need to be transparent and honest, and if we do it this way, and we have done it at multiple occasions in the past, it's part of the history of the evolution of our industry and of the tech landscape. But it gives opportunity, like every single tech revolution or evolution that has happened in the past, to move to somewhere else, do something different, do it better, in a more efficient way. , I think saying no, this is not going to happen is the wrong answer.

[LANCE BRAUNSTEIN]

Look, to me, few things allay fear and anxiety more than education. So, I think this begins with education teaching people the concepts. AI should not be some mystical, magical black box. It should be a transformer model. You should understand the notions of walled garden. What is a copilot versus a chat? How do you think about hallucination? How do you think about interoperability?

These are concepts that all of us at BlackRock and beyond should just understand. We should all be trained on prompting. We should all understand how to be good prompt engineers. That will not be a profession in the future. That will be like what we all do for a living, in every job family. And so I think education will allay all of the concern and fear. And like I hate to say this, but the people who choose to stay out of the informed AI arena will likely be left behind. And I do think that is a choice that we all make at this point.

[TAREK CHOUMAN]

I agree, prompting should be like someone knowing how to use a mouse.

[SYRIL SMITH GARSON]

Kunal, are there other risks that we should be thinking about within data or AI? Digital assets? How do you think about that?

[KUNAL KHARA]

I think coming back to my earlier point of the work we do today on behalf of our clients, ultimately for their end stakeholders, that entire process, again, is a regulated process. And so, from our perspective, there are risks. There are abundant risks that exist inherently, things that we just need to be aware of, manage thoughtfully, and ensure that our clients understand how we're doing that.

Obviously AI is not new. It's been around for a long time. So, I think it's first making sure you understand what those risks are and understanding the role that AI plays and potentially magnifying them. I think the other interesting part of risk management for AI is you might find that there is going to be a very interesting industry of AI technology that is going to be built specifically to offset the risks that AI is creating.

And I think that's going to be an interesting trend to look at over the next 2 or 3 years. Another big one, I think of, data and AI must be inextricably linked and obviously there it's all about the notion of your data being used to drive a certain set of decisions. Well, it's your data, it needs to be appropriately protected.

And I think this notion of how you manage data risks, privacy and security, probably become the most important and most front of mind. However, and in the spirit of making this a bit more of an optimistic conversation, I think of the risk honestly around things like AI, both as a company, as a business, probably as an industry, is a risk that we don't move fast enough because there's definitely an excitement, but also really tangible applications of this technology that could ultimately drive really incredibly positive outcomes for our end clients, for BlackRock, and ultimately for the communities we serve.

And I think while the groundswell to move quickly, being aware of all these things and being thoughtful and measured, but at the same time innovating, to me is one of the most exciting things we can think about from a risk perspective.

[LANCE BRAUNSTEIN]

We talk a lot about our tech optimism and our tech pragmatism. I think this is a moment where staying grounded in what is possible today, not being clouded or confused by some dystopian vision of the future of AI, but being grounded in what can we do for our clients today? How can we work more efficiently as BlackRock today? Being optimistic about these technologies, I think the spirit of that optimism, pragmatism really is critically important, especially as these megatrends, which are like moving super fast, kind of wash over you.

[SYRIL SMITH GARSON]

Yeah, absolutely. I think this idea of AI or any of these technologies being the silver bullet to solve all of our problems just isn't the reality. And I think one of the things we throw out a lot here also is, human in the loop. So we're not going to end up in a situation where we're seeing decisions are being made for you, on behalf of you, through the technology, which I think is really important.

[LANCE BRAUNSTEIN]

And Kunal said that earlier when you think about investment workflows, we're still going to have the same control framework that we have today. We're still going to have the same compliance checks. And ultimately, at least in the current state of the art, we're going to have a human in the loop. We're going to have somebody supervise that investment decision. And this isn't going to be automated away to an AI that could potentially hallucinate or come up with an non-explainable answer.

[TAREK CHOUMAN]

This being said, a human in the loop, I subscribe to this, but I'm not sure that the human in the loop will be at the same place in the loop as it is today.

[LANCE BRAUNSTEIN]

That's right.

[TAREK CHOUMAN]

Yeah, I think that this is something that's worth highlighting too.