Concerns surrounding Artificial Intelligence (AI) about data security, training and ‘hallucinations’ were adeptly dealt with in a lively presentation from Nikodem Szumilo, director at The Bartlett Real Estate Institute, at this year’s IPE Real Estate Global Conference in Copenhagen.
Szumilo said: “Three years ago, [data security] was a real issue in the industry. It no longer is. All of the major AI providers, especially the Western AI providers, will have solved that problem. They no longer train on your own data, especially if you have an anti-enterprise license – you will be able to opt out of any type of training on your own data, which means that you will get the same security protocol that you get with Microsoft emails.
“The only challenges that concern data security are not AI specific, they’re internet specific. They’re the same challenges we have with cloud storage or cloud applications or communicating over over the internet, nothing specific to AI.”
The next question tackled by Szumilo was about so-called hallucinations, when AI confidently asserts something that is demonstrably untrue, or just makes things up.
He said: “AI does do that. It’s been designed to do that. You have to remember that the latest models have a hallucination rate of less than 1%, which I would say is less than an average human. The way I like to describe this is: look, yes, you can get AI to say something stupid. It doesn’t mean that it’s useless. If you know how to manage hallucinations, they work. Those systems are supposed to hallucinate.”
As to whether AI can create an accurate discounted cash flow (DCF) analysis to value real estate assets, Szumilo said he had been using a simple AI platform to teach his students financial modeling for the past 10 years.
He said: “Last week, I asked [AI] to give me a DCF of this bill, and what I got in return was a fully interactive spreadsheet. The formulas are there… and the cool part is that it even created an assumptions tab. And in order to make the assumptions, it looked at market research on the internet. So it pulled reports from Savills, from JLL, from CBRE, looked at the reports, asked: what discount rate do I need to use? What exit here do I need to use? And then implemented that into the question.
“So this is where we are at the moment. It’s not perfect in my valuation class. It wouldn’t do extremely well, but it would be a pass in my MSc level valuation class.”
Using AI in this way has been termed “vibe strategy”, he explained, adding: “If you use AI with humans for something more strategic, something a little bit harder, you will not only get a better solution – but you will also be more creative. And again, there is research that shows that humans with AI seem more creative than humans without AI.
“I think this is really profound. If you use AI for everything, and you can pair it with a human not only will it will be faster, better and more efficient, but also you’ll be happier. You will enjoy your work more, and if nothing else convinces you, then the fact that you will have more job satisfaction hopefully convinces you that you should start using AI.”
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