Startups are betting on AI to predict the future

Several startups are utilizing artificial intelligence (AI) to enhance predictions in a variety of fields, including stock market fluctuations, the reopening of the Strait of Hormuz, and the performance of Shakira's music on charts. Dan Schwarz, co-founder of FutureSearch, foresees a future where their decision-making methods will resemble "Stone Age thinking" by 2030.

AI forecasting models currently match the performance of elite "superforecasters" — individuals known for their exceptional predictive abilities — due to the availability of vast data from both public and private sources. In early September, two AI models claimed the top positions in the Metaculus Cup, a competition that included both human and nonhuman participants.

FutureSearch's chief human forecaster, Tom Liptay, acknowledges that he faces job insecurity in the near future as AI advancements surpass human capabilities. Theo Summer, co-founder of Preseen, transformed a $35 investment into $1.9 million in just seven months on the American prediction-making site Kalshi by employing AI tools.

The objective is not to guarantee outcomes but to estimate probabilities, allowing for the cross-checking of assumptions related to various interconnected events, such as fluctuations in oil prices and the ongoing Middle Eastern conflict. Initially, hedge funds dominated the market, but AI forecasting is poised to further automate financial markets.

Toby Shevlane, co-founder of another forecasting startup called Mantic, notes that algorithms have been shaping Wall Street for over a decade, and AI is already making a small impact on trading decisions. AI forecasting systems are expected to soon dominate retail investors' ability to profit from prediction markets like Kalshi and Polymarket.

AI forecasting models not only predict events but can also generate their own questions about the future and assign probabilities based on different possible outcomes. This influence extends beyond finance, with potential applications in government policy, corporate decision-making, scientific research, and insurance risk assessments.

Mantic partners with a large American company to provide likely scenarios of regulatory developments in its sector and has collaborated with the British government. While these tools offer valuable insights, concerns arise regarding potential misuse by countries like Russia or China.