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The COO at BlackRock explains why the $5.7 trillion investment giant is a ‘growth technology company’

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Rob Goldstein, Chief Operating Officer & Global Head of BlackRock Solutions
Rob Goldstein, Chief Operating Officer & Global Head of BlackRock Solutions. Photo courtesy BlackRock
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Rob Goldstein is the chief operating officer of BlackRock, the world’s largest asset-management firm with $5.7 trillion under management.

He heads BlackRock Solutions, the unit responsible for Aladdin, the firm’s signature operating system combining risk analytics, portfolio management, and trading.

Goldstein also leads the firm’s fintech effort, overseeing several recent acquisitions and investments.

They include:

  • BlackRock’s acquisition of Cachematrix, which simplifies the cash-management process for banks and their corporate clients.
  • A minority stake in Scalable Capital, a Europe-based digital investment manager.
  • A partnership with UBS on Aladdin Risk for Wealth Management, an adaptation of BlackRock’s institutional Aladdin platform.
  • An investment in iCapital, a fintech platform providing access alternative investments for high-net-worth investors and their financial advisers.
  • The acquisition of FutureAdvisor, a digital investment manager.

BlackRock is also a huge player in developing passive investment products – funds like ETFs that passively track benchmarks at a much lower cost than actively managed funds.

Business Insider recently met up with Goldstein in his Manhattan offices at BlackRock headquarters to get a sense of where he thinks fintech and passive investing are headed.

This interview has been lightly edited for clarity and length.

Rachael Levy: Do you think that the robo advice, or wealth-management space, in terms of using these new tools for risk management and transparency — do you think that it’s becoming crowded at all?

Rob Goldstein: No. Just so you know, I’ve never been asked that question before. I don’t believe it’s becoming crowded at all. I believe that — I don’t think we should underestimate how much opportunity there is.

The way I look at it, if you think about, who’s the best in the world at something? In today’s world, if you just said, who’s the best in the world at building portfolios? At managing money? The reality is, it will likely be institutions and the opportunity to democratize tools, democratize data, democratize capabilities; that’s what technology is all about. I think we’re in the bottom of the first inning or the top of the second.

When you look at these cycles, there are a lot of companies that get flushed out in every inning, but I don’t think it’s at all crowded relative to the opportunity — forget about the financial opportunity — just the opportunity to help really bridge that gap. It’s tremendous.

Levy: The reason I ask that is I know there are several that come across my radar. You know, there is Personal Capital trying to expand into that space; Ellevest is specializing in targeting women. There are others I could rattle off, but that’s why I wonder on the consumer side if there’s ever maybe confusion with “What are all these new brands coming to market?” and “Why should I choose FutureAdvisor versus Ellevest, which I saw on TV?”

Goldstein: I answered, “Is it crowded from a business perspective?” If I said from a consumer perspective, it’s confusing from a consumer perspective, and I believe the winners will be people who have both established brands and have other services.

It’s confusing from a consumer perspective, and I believe the winners will be people who have both established brands and other services.

And we shouldn’t underestimate the importance of, if you are managing your investment portfolio, it’s sort of helpful to get a checkbook type of thing as opposed to each of these are stand-alone.

The reality is, from a consumer perspective, this is all one thing, which is, this is your money and how do you leverage your money to both live and achieve certain outcomes you are striving for? And I think that the more the various elements of that can be brought together, the greater the value proposition from a consumer perspective.

Levy: How does active management fit into this? If more people — you know, mom and pop, Main Street, however you want to call them — have access to better tools now, is there any role for an active mutual fund or a bond fund and how is it going to play out for active money managers essentially?

Goldstein: I actually believe better tools make it better for both funds that are trying to generate alpha as well as people who are trying to use index products to try to generate alpha.

Risk transparency doesn’t favor one investment strategy. It’s a concept that extends across all investment strategies. What’s interesting is that, in many regards, if you look at something like an ETF, it is a technology to just give you very efficient, cost-effective exposures. But even the way that people use ETFs are in the context of making active decisions.

And as we look at these capabilities, we think it helps to build portfolios blending the two because we believe very strongly it’s not a one-size-fits-all model in sort of one direction or another. We actually believe that it’s a fund debate, but it’s not a portfolio-construction debate.

Levy: So this doesn’t necessarily change money flowing to one type of strategy over another necessarily?

Goldstein: I don’t believe so. I think that the nature of risk transparency and technology, what it should do — and this is a point in time statement — if you look at this unprecedented liquidity, the numbers are staggering. Seventy trillion dollars. I don’t know what the most recent number is, but the last I’ve heard is sort of $70 trillion in sort of cash. It helps people migrate that savings to investment and, again, it’s very hard to achieve most financial outcomes through keeping your money in cash.

And if anything, if you look at the period from the financial crisis, and you know next year will be the 10th anniversary, for example, of Lehman Brothers, if you look at those that put their money on cash for that period or those who kept in their investments, I’m not saying the risk taker who bought a bank the next day. I mean, just if you kept at it recognizing investments are a long-term game, and particularly for retirement savings, longevity in terms of being able to invest, being able to save and invest over a long period of time is your greatest asset. The people who stuck with it relative to the people who didn’t have dramatically different outcomes.

Levy: And all the losses they would’ve remade and more, right? If you look at 2008 forward.

Goldstein: But even if they wouldn’t have had such a good outcome, you know the outcome has been extraordinary, but it still would’ve been — over a 10-year period — it still would’ve been greater than keeping it in cash. So I picked a good 10-year period because it’s the most recent 10-year period, but at the same time, just relative to keeping it in cash, over a long period of time through a cycle, that’s the right thing to do.

Levy: Can you speak to how BlackRock views active versus passive more broadly?

Goldstein: Sure. It’s incredibly simple in terms of how we view it in that our goal is to construct portfolios that achieve our planned outcomes. And we believe that often, in building those portfolios, you’re blending active management and you’re blending index product. We actually believe one of the greatest misnomers is this word “passive” because we don’t believe any investment decision is a passive decision. You could buy an index fund but you’re not doing that passively. You are making a judgment about asset allocation and other things that impact your portfolio. So when we look at it, we look at it really from, “What is the objective the client is striving for and how do you build the most efficient portfolio to get him or her or the institution to achieve that objective?” Most of the time, you see a role for both active product as well as index product in constructing that portfolio.

Levy: So you don’t think there’s going to be a “death of active” necessarily?

Goldstein: Not only do we believe there’s not going to be a “death of active” but I think quite strongly, we’ve been investing in our active businesses and we’ve been quite transparent and vocal about some of the investments that we’ve made.

Levy: In the sense of expanding them?

Goldstein: So for example, we’ve been very focused on how we could leverage — funnily enough, this could be its own technology discussion — but we’ve been very focused on how we can leverage technology, big data, and other concepts to generate more alpha in portfolios. That’s been a huge thrust of what we’ve been focused on.

Levy: In actively managed portfolios?

Goldstein: In actively managed portfolios, and obviously technology has changed so many things. I mean, look, you’re recording this on your phone. The whole thing is amazing, where the world is. If I would’ve told you 10 years ago you would have a device that does all those things, you would’ve thought I was crazy. And the irony is that when you look at the devices on “Star Trek,” what you have is actually cooler than many of the devices on “Star Trek.”

When you look at one of the major changes, it is this combination of the data that’s now available, the technologies that are available to analyze the data, and access to computing power at the price points that you can access computing power and put them together, the opportunities that creates to identify themes, trends, market paradigms is just — it’s limitless.

My sales pitch is very simple: BlackRock is a growth company. BlackRock is a growth technology company and we’re growing our technology functions. We have a very ambitious plan that we call “Tech 2020.” And as part of that, we are looking to extend the 2,000-plus technologists we already have within BlackRock. And we’re really excited about the opportunity to take a company like BlackRock, which is already, I’d say, at the forefront of technology in its industry, and, if anything, keep expanding that.

Levy: Do you anticipate buying more wealth-management-type startups? How do you see that being implemented?

Goldstein: It’s a great question. I see it implemented in a variety of ways. First is, hiring and building the current capabilities that we have. Engineers, analytics, financial modeling. The second is we will continue to look at opportunities to expand our technologies through acquisition. And lastly, we have actually taken, made investments in firms that we believe have interesting technologies that we think the notion of having some sort of partnership with can accelerate client outcomes.

Levy: Are these asset-management firms?

Goldstein: No, these would be — I’m in fintech land — so, for example, we’ve taken an investment in a company called iCapital, which is trying to democratize access to alternative investments. We’ve taken an investment, we’ve made an investment in Scalable Capital, which is the leading digital advice platform by far in Europe, so leveraging all three of those capabilities or tools, I guess, leveraging all three of those tools in terms of continuing to accelerate our technology capabilities.

When we see interesting capabilities that we think we could help the capability and they could help us, that’s what’s exciting to us.

Funny enough, I wouldn’t call it diversifying. I would call it extending our capabilities.

Levy: And would the common thread be that they all somehow cater to the Main Street investors versus the institutional? Cash Matrix is institutional, but the other three?

Goldstein: The other three, yes. The other three would be more on the wealth-management side.

I would just say that the starting point on the wealth-management side is such that there’s so much more opportunity to help relative to the institutional side. I think they’re in very different parts in terms of what the starting technology point is.

Levy: And that’s just because historically retail clients have been underserved?

Goldstein: No, I don’t think it’s so much underserved. I always had this saying, which is, in my career, I saw on the institutional side risk go from a nice-to-have to a must-have to a must-have-the-best. I saw that cycle on the institutional side. I think that on the wealth-management side, risk, they’re sort of in that middle bucket. It went from a nice-to-have to now it’s becoming a must-have.

And to be clear, it’s a harder problem in many ways on the wealth-management side because there are many more objectives that people are trying to fulfill. There are many more portfolios. There are many more constraints that you have within the portfolios. So it’s just a harder problem. I believe the new technologies that have emerged over the past two or three years — you know, the ability to access compute power at different price points — just a variety of new technologies have really unlocked the opportunity to do it at scale in a whole new way. It’s just a different scale factor.

With assistance from Raul Hernandez. This article was originally published on Business Insider. Copyright 2017.

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How businesses can protect themselves from the rising threat of deepfakes

Dive into the world of deepfakes and explore the risks, strategies and insights to fortify your organization’s defences

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In Billy Joel’s latest video for the just-released song Turn the Lights Back On, it features him in several deepfakes, singing the tune as himself, but decades younger. The technology has advanced to the extent that it’s difficult to distinguish between that of a fake 30-year-old Joel, and the real 75-year-old today.

This is where tech is being used for good. But when it’s used with bad intent, it can spell disaster. In mid-February, a report showed a clerk at a Hong Kong multinational who was hoodwinked by a deepfake impersonating senior executives in a video, resulting in a $35 million theft.

Deepfake technology, a form of artificial intelligence (AI), is capable of creating highly realistic fake videos, images, or audio recordings. In just a few years, these digital manipulations have become so sophisticated that they can convincingly depict people saying or doing things that they never actually did. In little time, the tech will become readily available to the layperson, who’ll require few programming skills.

Legislators are taking note

In the US, the Federal Trade Commission proposed a ban on those who impersonate others using deepfakes — the greatest concern being how it can be used to fool consumers. The Feb. 16 ban further noted that an increasing number of complaints have been filed from “impersonation-based fraud.”

A Financial Post article outlined that Ontario’s information and privacy commissioner, Patricia Kosseim, says she feels “a sense of urgency” to act on artificial intelligence as the technology improves. “Malicious actors have found ways to synthetically mimic executive’s voices down to their exact tone and accent, duping employees into thinking their boss is asking them to transfer funds to a perpetrator’s account,” the report said. Ontario’s Trustworthy Artificial Intelligence Framework, for which she consults, aims to set guides on the public sector use of AI.

In a recent Microsoft blog, the company stated their plan is to work with the tech industry and government to foster a safer digital ecosystem and tackle the challenges posed by AI abuse collectively. The company also said it’s already taking preventative steps, such as “ongoing red team analysis, preemptive classifiers, the blocking of abusive prompts, automated testing, and rapid bans of users who abuse the system” as well as using watermarks and metadata.

That prevention will also include enhancing public understanding of the risks associated with deepfakes and how to distinguish between legitimate and manipulated content.

Cybercriminals are also using deepfakes to apply for remote jobs. The scam starts by posting fake job listings to collect information from the candidates, then uses deepfake video technology during remote interviews to steal data or unleash ransomware. More than 16,000 people reported that they were victims of this scam to the FBI in 2020. In the US, this kind of fraud has resulted in a loss of more than $3 billion USD. Where possible, they recommend job interviews should be in person to avoid these threats.

Catching fakes in the workplace

There are detector programs, but they’re not flawless. 

When engineers at the Canadian company Dessa first tested a deepfake detector that was built using Google’s synthetic videos, they found it failed more than 40% of the time. The Seattle Times noted that the problem in question was eventually fixed, and it comes down to the fact that “a detector is only as good as the data used to train it.” But, because the tech is advancing so rapidly, detection will require constant reinvention.

There are other detection services, often tracing blood flow in the face, or errant eye movements, but these might lose steam once the hackers figure out what sends up red flags.

“As deepfake technology becomes more widespread and accessible, it will become increasingly difficult to trust the authenticity of digital content,” noted Javed Khan, owner of Ontario-based marketing firm EMpression. He said a focus of the business is to monitor upcoming trends in tech and share the ideas in a simple way to entrepreneurs and small business owners.

To preempt deepfake problems in the workplace, he recommended regular training sessions for employees. A good starting point, he said, would be to test them on MIT’s eight ways the layperson can try to discern a deepfake on their own, ranging from unusual blinking, smooth skin, and lighting.

Businesses should proactively communicate through newsletters, social media posts, industry forums, and workshops, about the risks associated with deepfake manipulation, he told DX Journal, to “stay updated on emerging threats and best practices.”

To keep ahead of any possible attacks, he said companies should establish protocols for “responding swiftly” to potential deepfake attacks, including issuing public statements or corrective actions.

How can a deepfake attack impact business?

The potential to malign a company’s reputation with a single deepfake should not be underestimated.

“Deepfakes could be racist. It could be sexist. It doesn’t matter — by the time it gets known that it’s fake, the damage could be already done. And this is the problem,” said Alan Smithson, co-founder of Mississauga-based MetaVRse and investor at Your Director AI.

“Building a brand is hard, and then it can be destroyed in a second,” Smithson told DX Journal. “The technology is getting so good, so cheap, so fast, that the power of this is in everybody’s hands now.”

One of the possible solutions is for businesses to have a code word when communicating over video as a way to determine who’s real and who’s not. But Smithson cautioned that the word shouldn’t be shared around cell phones or computers because “we don’t know what devices are listening to us.”

He said governments and companies will need to employ blockchain or watermarks to identify fraudulent messages. “Otherwise, this is gonna get crazy,” he added, noting that Sora — the new AI text to video program — is “mind-blowingly good” and in another two years could be “indistinguishable from anything we create as humans.”

“Maybe the governments will step in and punish them harshly enough that it will just be so unreasonable to use these technologies for bad,” he continued. And yet, he lamented that many foreign actors in enemy countries would not be deterred by one country’s law. It’s one downside he said will always be a sticking point.

It would appear that for now, two defence mechanisms are the saving grace to the growing threat posed by deepfakes: legal and regulatory responses, and continuous vigilance and adaptation to mitigate risks. The question remains, however, whether safety will keep up with the speed of innovation.

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The new reality of how VR can change how we work

It’s not just for gaming — from saving lives to training remote staff, here’s how virtual reality is changing the game for businesses

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Until a few weeks ago, you might have thought that “virtual reality” and its cousin “augmented reality” were fads that had come and gone. At the peak of the last frenzy around the technology, the company formerly known as Facebook changed its name to Meta in 2021, as a sign of how determined founder Mark Zuckerberg was to create a VR “metaverse,” complete with cartoon avatars (who for some reason had no legs — they’ve got legs now, but there are some restrictions on how they work).

Meta has since spent more than $36 billion on metaverse research and development, but so far has relatively little to show for it. Meta has sold about 20 million of its Quest VR headsets so far, but according to some reports, not many people are spending a lot of time in the metaverse. And a lack of legs for your avatar probably isn’t the main reason. No doubt many were wondering: What are we supposed to be doing in here?

The evolution of virtual reality

Things changed fairly dramatically in June, however, when Apple demoed its Vision Pro headset, and then in early February when they were finally available for sale. At $3,499 US, the device is definitely not for the average consumer, but using it has changed the way some think about virtual reality, or the “metaverse,” or whatever we choose to call it.

Some of the enhancements that Apple has come up with for the VR headset experience have convinced Vision Pro true believers that we are either at or close to the same kind of inflection point that we saw after the release of the original iPhone in 2007.Others, however, aren’t so sure we are there yet.

The metaverse sounds like a place where you bump into giant dinosaur avatars or play virtual tennis, but ‘spatial computing’ puts the focus on using a VR headset to enhance what users already do on their computers. Some users generate multiple virtual screens that hang in the air in front of them, allowing them to walk around their homes or offices and always have their virtual desktop in front of them.

VR fans are excited about the prospect of watching a movie on what looks like a 100-foot-wide TV screen hanging in the air in front of them, or playing a video game. But what about work-related uses of a headset like the Vision Pro? 

Innovating health care with VR technology

One of the most obvious applications is in medicine, where doctors are already using remote viewing software to perform checkups or even operations. At Cambridge University, game designers and cancer researchers have teamed up to make it easier to see cancer cells and distinguish between different kinds.

Heads-up displays and other similar kinds of technology are already in use in aerospace engineering and other fields, because they allow workers to see a wiring diagram or schematic while working to repair it. VR headsets could make such tasks even easier, by making those diagrams or schematics even larger, and superimposing them on the real thing. The same kind of process could work for digital scans of a patient during an operation.

Using virtual reality, patients and doctors could also do remote consultations more easily, allowing patients to describe visually what is happening with them, and giving health professionals the ability to offer tips and direct recommendations in a visual way. 

This would not only help with providing care to people who live in remote areas, but could also help when there is a language barrier between doctor and patient. 

Impacting industry worldwide

One technology consulting firm writes that using a Vision Pro or other VR headset to streamline assembly and quality control in maintenance tasks. Overlaying diagrams, 3D models, and other digital information onto an object in real time could enable “more efficient and error-free assembly processes,” by providing visual cues, step-by-step guidance, and real-time feedback. 

In addition to these kinds of uses, virtual reality could also be used for remote onboarding for new staff in a variety of different roles, by allowing them to move around and practice training tasks in a virtual environment.

Some technology watchers believe that the retail industry could be transformed by virtual reality as well. Millions of consumers have become used to buying online, but some categories such as clothing and furniture have lagged, in part because it is difficult to tell what a piece of clothing might look like once you are wearing it, or what that chair will look like in your home. But VR promises the kind of immersive experience where that becomes possible.

While many consumers may see this technology only as an avenue for gaming and entertainment, it’s already being leveraged by businesses in manufacturing, health care and workforce development. Even in 2020, 91 per cent of businesses surveyed by TechRepublic either used or planned to adopt VR or AR technology — and as these technological advances continue, adoption is likely to keep ramping up.

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5 tips for brainstorming with ChatGPT

How to avoid inaccuracy and leverage the full creative reign of ChatGPT

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ChatGPT recruited a staggering 100 million users by January 2023. As software with one of the fastest-growing user bases, we imagine even higher numbers this year. 

It’s not hard to see why. 

Amazon sellers use it to optimize product listings that bring in more sales. Programmers use it to write code. Writers use it to get their creative juices flowing. 

And occasionally, a lawyer might use it to prepare a court filing, only to fail miserably when the judge notices numerous fake cases and citations. 

Which brings us to the fact that ChatGPT was never infallible. It’s best used as a brainstorming tool with a skeptical lens on every output. 

Here are five tips for how businesses can avoid inaccuracy and leverage the full creative reign of generative AI when brainstorming.

  1. Use it as a base

Hootsuite’s marketing VP Billy Jones talked about using ChatGPT as a jumping-off point for his marketing strategy. He shares an example of how he used it to create audience personas for his advertising tactics. 

Would he ask ChatGPT to create audience personas for Hootsuite’s products? Nope, that would present too many gaps where the platform could plug in false assumptions. Instead, Jones asks for demographic data on social media managers in the US — a request easy enough for ChatGPT to gather data on. From there he pairs the output with his own research to create audience personas. 

  1. Ask open-ended questions

You don’t need ChatGPT to tell you yes or no — even if you learn something new, that doesn’t really get your creative juices flowing. Consider the difference: 

  • Does history repeat itself? 
  • What are some examples of history repeating itself in politics in the last decade?

Open-ended questions give you much more opportunity to get inspired and ask questions you may not have thought of. 

  1. Edit your questions as you go

ChatGPT has a wealth of data at its virtual fingertips to examine and interpret before spitting out an answer. Meaning you can narrow down the data for a more focused response with multiple prompts that further tweak its answers. 

For example, you might ask ChatGPT about book recommendations for your book club. Once you get an answer, you could narrow it down by adding another requirement, like specific years of release, topic categories, or mentions by reputable reviewers. Adding context to what you’re looking for will give more nuanced answers.

  1. Gain inspiration from past success

Have an idea you’re unsure about? Ask ChatGPT about successes with a particular strategy or within a particular industry. 

The platform can scour through endless news releases, reports, statistics, and content to find you relatable cases all over the world. Adding the word “adapt” into a prompt can help utilize strategies that have worked in the past and apply them to your question. 

As an example, the prompt, “Adapt sales techniques to effectively navigate virtual selling environments,” can generate new solutions by pulling from how old problems were solved. 

  1. Trust, but verify

You wouldn’t publish the drawing board of a brainstorm session. Similarly, don’t take anything ChatGPT says as truth until you verify it with your own research. 

The University of Waterloo notes that blending curiosity and critical thinking with ChatGPT can help to think through ideas and new angles. But, once the brainstorming is done, it’s time to turn to real research for confirmation.

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