Could the artful use of AI boost charity income?

The subject of artificial intelligence (AI) has been discussed and debated in the media extensively for most of 2023. Clearly, a new technology with exciting potential has arrived – but how could it impact the day-to-day activities of charity trustees?

| 9 min read

When OpenAI’s ChatGPT first burst into the world with an early free offer of an artificial intelligence (AI) service it looked like a game changer. Dubbed large language model-based chatbot – its significance could be played down in several ways.

It could be argued that the AI chatbot was merely an enhanced search facility – and that would not change things that much in reality. The technology could be demonised by predicting scenarios of doom – more crimes, more mistakes, more fake opinions or even harmful actions by computers. Another way to dismiss its significance was the argument that it could only ever work as a free service, so those investing billions in developing these products would end up losing money.

However, these criticisms and controversies brought the AI discussion to the forefront of the media this year. Having so many critics and enemies from day one showed everyone was rightly taking it seriously.

Now rooted in our lives

The giant US technology companies have embedded themselves in our business, professional and private lives to a huge extent already. Most of us depend on Microsoft software to power emails and business systems. We naturally turn to a Google search when we want some fast information. Our computers may be stacking data and drawing on processing power in an Amazon web services Cloud warehouse. To “Google” has now become an active verb in our language. We use the name of a US corporation for an act we could perform numerous times every single a day.

Much of the service for individuals is apparently free, yet the software may be paid for as part of the acquisition cost of the electronic device we are using.

Business users and some individuals must pay licence fees for using software and systems. The US giants have also been good at attracting advertising revenues to augment direct user charges. Their recent profit figures demonstrate that, despite the element of free service, they can generate plenty of cash and profit from what they are doing. There is growing
interest in adding value to the services offered and charging users for these service enhancements. This model, which has driven the technological revolution so far, will be adapted as further AI developments and products emerge.

The US technology behemoths are promoting the idea of the AI “co-pilot” – and for good reason. It would seem threatening if people are told this new technology would take over functions they are currently employed to do – AI would be “taking people’s jobs”. It would also raise regulatory issues in investment and finance, where the law requires charity trustees and senior managers to take responsibility and account for their actions – and investments. Arguing that a “smart computer” had made bad decisions and investment mistakes with people’s hard-earned pensions pots would be no line of defence. Whoever delegated the functions and responsibility to the computer is still to blame for this hypothetical situation.

A model that should be welcomed

The co-pilot model will be welcomed by many charity trustees and employees. It means the computer will be able to hold and process large amounts of relevant data more readily than an individual. It should be good at processing pension payments and triggering communications with members and pensioners when needed. Much of the basic work is already done by a computer anyway.

AI will allow the computer to do more work to a higher standard. Individuals will still supervise these matters and will wish to guide the computer over the trustee responsibilities, including the overall approach to investment, the nature and purpose of communications with members and the treatment of individual beneficiaries.

AI, Big Data and the Cloud

Alphabet’s Google Cloud, Microsoft’s OneDrive and Amazon Web Services seek to build ever-closer business relationships with their company clients. Their products will be embedded in company systems and will make suggestions about how to improve what is currently done. It is easier to sell a new product or service to an existing client, and many employees will
be given the opportunity to use enhanced services from their existing provider.

Whilst these technology companies will need to reassure businesses about security of data and proprietary systems, there will doubtless be many cases where the service providers learn from a range of existing clients where there are problems and inefficiencies enabling them to enhance their product to tackle these. New challengers could emerge to
these well-placed incumbents.

Markets have recognised this by rapidly expanding the market valuations of the companies leading this revolution. Electric vehicle (EV) maker Tesla, iPhone and iPad developer Apple, leading semiconductor group Nvidia and Meta Platforms, the social media group formerly known as Facebook, have soared.

These companies – at the forefront of cloud and AI developments – have not just led the US stock market but the MSCI World index for many years. US businesses now dominate the top ten companies in this global benchmark index, with technology mainly responsible. Some worry that these market valuations are now ahead of reasonable expectations, whilst others look to the continuing rapid rollout and uptake of new technology as underpinning the expectations of “more growth to come”.

The US is building the infrastructure of tomorrow

The leading technology players have smashed through the $1 trillion valuation ceiling, with no apparent point of challenge to their upwards movement in sight. Trustees and their investment advisors need to have an opinion on this period of American exceptionalism, as it has been a crucial influence on markets in recent years. Part of the argument is over whether the success of the “magnificent seven” will damage the prospects and profits of other, older businesses with different business models.

Technology can transform everything from advertising to communications, from entertainment to retail. We have already seen the damage the rise of online shopping did to the high street and traditional retail businesses that did not adapt to the evolving world and grab the online opportunity themselves.

Pension trustees and managers will gradually adopt AI into their lives, whilst remaining in charge of the crucial decisions about investment, treatment of members and the pattern of benefits

We have seen media companies lose out to the new competition of digital download companies, and the internet has clearly led to problems for traditional newspaper publishers. It will be important for all investors to try and determine how their preferred equity investments can fare in an age of AI. Just like every senior executive will need to examine their company’s business model to see if it can compete with AI-enabled competitors.

The Chinese economy has grown significantly in the last couple of decades, but the Shanghai equity index – the SSE Composite – languishes well below its 2007 high. The Eurostoxx index has been unable to regain the level it hit as the millennium turned in 2000. America’s technology bourse, Nasdaq, is the second largest stock market in the world after the general US market in which it is encompassed. It reached an unsustainable speculative high in 2000 too – but it is now well above those level after a period of retrenchment.

The new digital era has been dominated by the US. Several enormous companies were created by offering people technology they wanted in affordable packages. In doing so, they attracted the many. AI has rekindled interest in that story and led some to think there is considerably more opportunities and growth to come. 2021 reminded investors that even the modern giants can stumble as share prices fell away to reflect a large increase in interest rates.

The bottom line

Clearly, AI is here to stay. The technology will likely spread widely, becoming a common aid to many things we currently do by computer. It will improve how we carry out the current computer-based functions and will increase the number of things we ask computers to do. The race is on to “adopt” the advantages of AI, whilst trying to ensure it is a force for good. This is a likely scenario. Pension trustees and managers will gradually adopt AI into their lives, whilst remaining in charge of the crucial decisions about investment, treatment of members and the pattern of benefits.

Handled well it will improve the quality and efficiency of the work being done, whilst allowing some more revenue to be paid to the “co-pilot”, the smart AI company working with you for a better outcome. Meanwhile, China is working away at a rival system, as the two superpowers seek to create more distance between themselves in these technology areas. Such competitive races usually lead to an acceleration in the rate of technological progress. This is arguably how man went to the moon.

Need help keeping up with the fast-paced technology markets? Explore our investment services for charities.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

Could the artful use of AI boost charity income?

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