ARTIFICIAL INTELLIGENCE AND THE FUTURE OF

APPRAISAL –

A TALE OF TWO TESLAS

Mark R. Linné MAI, SRA, AI-GRS, CAE, CDEI, FRICS

WE NEED TO THINK ABOUT THE FUTURE

Changes in the professions in the aggregate

Changes in our profession

Changes in financial services

Changes in technology

Changes in Agricultural Process and

Technology

Changes in data

Change, change, change

Artificial Intelligence ties it all together

ITS ALL ABOUT PERSPECTIVES:

WHAT DO YOU THINK OF WHEN YOU HEAR A.I.?

A CORNUCOPIA OF VIEWPOINTS

ValueScape Analytics, Inc., proprietary and confidential information, all rights reserved

The Trends Today

How you can use AI in your favor

Embrace the future without fear

Actively engage with trends and enthusiastically accept change

AI, REAL ESTATE AND APPRAISAL

THE TECHNOLOGICAL REVOLUTION IS HERE

Breathtaking in scope and speed

Data

Devices

Interconnectivity

Like a turbine-its only going to get faster

Dealing with Valuation Risk, Information

Overload and Artificial Intelligence

Tools to Organize and Stratify the Data Explosion

THE BIG PICTURE

BIG DATA

More data on virtually everything

How is the data analyzed?

What is the benefit?

Data availability will only accelerate - Big Data 2.0

Where are the tools to analyze?

What you need to look for

What you need to do

PUTTING THINGS IN PERSPECTIVE

Adding Intelligence to

a Dumb Device or

process produces an

exponential outcome

A FUNDAMENTAL TRUTH

OUR PRIMARY ANALYTICAL TOOL

THE WISDOM OF CHILDREN

The Tale of Two Teslas

HOW DID THIS START?

Tesla

I HAVE A FASCINATION WITH…

NIKOLA TESLA’S LEGACY

Alternating Current (A/C)

Wireless Technology

Radio

Fluorescent Lighting

Television

Remote Control

Personal Computing

Wireless Transmission of

Electric Power

Particle Beam Weapons

SUDDENLY TESLA IS EVERYWHERE

Tesla Car Company

Developing AI

Fast Moving

Level 2 (Turing) Now

Level 5-Late 2019

Cars can be retrofit

(650,000)

Potential for mis-use

War

Lack of Privacy

ELON’S PERSPECTIVE

WHO IS RIGHT-WHO SHOULD WE BELIEVE?

The Potential

The Concern

LOOKING AT A.I.

Starting at the

beginning:Books

Scientific Method

The Internet

Neural Networks

The Cloud

Big Data

Machine Learning

The Internet of Things

Natural Language

THE PROGRESSION

A set of technologies that

enable machines to perform

sophisticated tasks such as

judgement

evaluation

problem-solving

decision-making

pattern recognition

comprehension

recognition of language

WHAT IS AI?

The Internet

Big Data (BD)

Machine Learning (ML)

The Internet of

Things(IoT)

FOUR BUILDING BLOCKS

The Internet

Highway

Connectivity

Enough Said

Big Data

Its just data now

LOOKING AT THE BUILDING BLOCKS

Machine LearningAimed at making computers learn from

the data they are exposed to by

themselves without being explicitly

programmed

The Internet of Things(IoT)Imbuing inanimate items with moderate

amounts of intelligence: 50 billion

connected trucks, refrigerators, cars,

washing machines, heart monitors,

devices galore…..

THE TWO KEY ELEMENTS

World Economic

Forum:We stand on the brink of a

technological revolution that

will fundamentally alter the

way we live, work and relate to

one another. In its scale,

scope and complexity, the

transformation will be unlike

anything humankind has

experienced before”.

WHAT ARE THE RAMIFICATIONS?

By 2022-50% of all of our

interactions will involve A.I.

Deep Learning accelerates

everything

Software that writes itself

AI that can analyze volumes of

texts and make decisions

Everything can ultimately be

automated to one degree or

another

THINGS TO THINK ABOUT

HYPE OR REALITY?

Siri

Alexa

Self-Driving Cars

ChatBots

AI IS ALL AROUND US

Today

Search (Sergei’s

Thoughts)

Content

Recommendations

Data mining

CAPTCHA

Education

Chatbots

Gmail…even

Powerpoint

TODAY, TOMORROW, NEXT WEEK, NEXT MONTH

Augmented Reality

Self-driving cars/trucks

Sensory Chips in

Everything

TOMORROW

Intelligent AgentsKnows what you (want it to) know

Knows what you like (if you want)

Knows how you do things

Interacts naturally with you

Is both responsive and proactive (without being

intrusive)

Is always on (but can be turned off)

The collection of all of your professional

experiences

Available with a few words and a click

Learns from you as well as others (via their digital

assistants)

NEXT WEEK

A Digital You

Avatars

Speed Dating

Speed Interviewing

Shopping

Interacting

Socializing

Monitoring

Giving up the notion of

privacy

NEXT MONTH: A DIGITAL YOU

Health Care and medical monitoring-wearable tech

IntelligentX wants to introduce the world’s first AI- brewed beer.

DeepFish in Russia is using neural networks to identify, well,

fish. It merges radar technology with AI to differentiate between

fish and noise in radar images.

Hoofstep raised VC money to bring deep learning-based

behavioral analysis to horses.

AI EVERYWHERE

AI is also coming to cannabis tech

DeepGreen uses computer vision to identify

the gender and health profile of cannabis plants.

More out-of-the-box “AI for X” in 2018.

Prevalence of this trend and increasingly absurd-

seeming examples reveal that machine learning is not

an exotic technology. Rather, it is one of the building

blocks for modern software and applications.

AI BECOMING COMMONPLACE: THE TRENDS

ARTIFICIAL INTELLIGENCE IN AGRICULTURE

ANALYZING SATELLITE IMAGERY

Crop Distribution Patterns

Impact of Weather Changes

Machine Learning and Computer Vision Algorithms

permit

Classification of data

Extraction of meaningful data from millions of sat

images

Predictions of crop yield

IN-FIELD MONITORING

Data capture by drones

In-field camera capture

Site inspection for construction surveying

Monitoring crops in real time

PREDICTIVE ANALYTICS

Machine learning for

Agricultural R & D

Seasonal analysis

Modeling commodity market scenarios

Optimization of business costs

IOT IN AGRICULTURE

Crop Dusting

Drones (MG-1 from DJI)

Spray crops from above with extreme precision

Monitor crop data

Soil moisture and crop growth

Smart Equipment with

Irrigation systems that can

respond accordingly

ARTIFICIAL INTELLIGENCE APPLIED TO AG BIG DATA

Robotic harvesting equipment

Using machine vision and sensor fusion

Mimics human cognition

Eliminates repetitive & difficult jobs

Drone can identify

Stunted crops

Pest or weed damage

Soil moisture

Pest and Weed control

Precision agriculture

See & Spray

AI excels in Image recognition

Computers that can “see” as well as humans

Farmers can find weeds & spray to eradicate

rather than blanket spraying an entire crop

Yield-Boosting Algorithms

What is best for a crop

Maximizing crop yield

THE FARMER’S ALEXA

Robotic lens zoom into the yellow flower of a tomato

seedling

Images flow to an AI algorithm

Predicts how long it will take to become a ripe tomato

Sensors monitor fruit’s progress towards perfect

ripeness

Adjusting to slow or accelerate the pace of maturation

Determines the right time to pick, pack and deliver

THE BOTTOM LINE?

AI will help to deal with

Less water availability

Two billion additional

mouths by 2050

Challenges of climate

“Agriculture will be fundamentally transformed by data science,

machine learning and artificial intelligence-allowing farmers to

have the tools to get the most from every acre”

-Gayle Shepperd, SVP Intel

THE BOTTOM LINE:CONNECTING AI TO REAL ESTATE

The old order changeth, yielding place to the new…”

HISTORIC INVESTMENTS IN AI ACROSS INDUSTRIES

Some of the most remarkable innovation is occurring in real estate technology…..

Except its for brokers!

HOW DO WE AVOID BEING RELEGATED TO AN A.I. BACKWATER?

Buyer experience

Matching buyers to properties

more effectively

Broker vs. Bot

Recommendation engines

Real Estate firms emphasizing

their use of AI: Rex Real

Estate

Augmented Agents

IN REAL ESTATE-AI HAS FOCUSSED ON BROKERS

Two RICS White Papers:

4th Industrial Revolution

Billions connected by mobile

devices with access to

information

Changes coming to

information workers

Disruptive changes to

appraisal

THE RISKS AND OPPORTUNITIES FOR APPRAISAL

Real estate will

change to compete on

a level playing field

with other asset

classes

Securitized

Dynamic

Flexible

Transparent

Real Time

WHAT ARE THE RISKS TO APPRAISAL?

The more likely that AI

can replace the process

of examination,

interpretation and

analysis

THE GREATER THE AMOUNT OF DATA..

General Data Acquisition

Broad Market Overview

Specific Data Acquisition

Sales/Income/Cost

Narrative Description

What/When/Why

Property Inspection

In person/Drone

Unusual Properties (No two alike)

Applying market data to subject

Interaction with Client

Reasoned Conclusion

LOOKING AT APPRAISAL SKILLSETS

General Data Acquisition

Broad Market Overview

Specific Data Acquisition

Sales/Income/Cost

Narrative Description

What/When/Why

Property Inspection

In person/Drone

Unusual Properties (No two alike)

Applying market data to subject

Interaction with Client

Reasoned Conclusion

LOOKING AT APPRAISAL SKILLSETS

Lawyers: Intelligent assistants to digest legal

documents

Wealth Management: Sophisticated asset analysis

augmented recommendations

Accountants: Intelligent assistants for routine data

analysis

Teachers: Intelligent agent-lead class presentation

Journalists: AI writes 50% of stories; 80% of online

content

Researchers: Intelligent assistants to sift through

and summarize data

Consultants: Intelligent assistants to digest data

and make recommendations

HOW HAVE OTHER PROFESSIONS

DEALT WITH THESE CHALLENGES?

Gaining data-driven actionable

insights:

AI can be leveraged to perform

Market demographic studies

Environmental research

Financial analysis

USING AI TO AUGMENT APPRAISAL SKILL-SETS

Discern patterns in

data

Turn reams of data

into actionable

insights

Spot trends (the next

popular

neighborhood)

Help Decisioning

MACHINE LEARNING/INTELLIGENT ASSISTANTS

CAN….

Awareness of relevant

technologies

Real-time understanding of

market trends

Understanding data

aggregated, summarized,

analyzed and specifically

applied for our subject

property

A series of “what if” analyses

Beginning the move to

predictive valuation-what will

the value of my property be?

THINK WHAT THAT COULD MEAN FOR

APPRAISERS…

Scenarios to consider

APPRAISAL WILL CHANGE

Change will be driven by

clients-we are a service

profession

The greater the data the

more likely that

automation can/will

prevail

Valuation is extremely

vulnerable from this

perspective

A CHANGE IN SKILLSETS

Market Insight will continue to be valuable

Looking at the property will likely still be required in the short-term

Augmented analysis bringing together expert systems/intelligent agents makes the most sense

“Augmented” Intelligence is the key

Differentiate yourself with real-time and complete market knowledge

Become a Data Valuation Scientist

THE BEST STRATEGY FOR APPRAISERS

Good-bye desktop, good-bye

lap-top

Hello tablet and iPad

This changes everything

Three monitors is not the

solution

Going smaller and going

mobile

Completing the appraisal in the

field

TAKE ADVANTAGE: MOBILE TECHNOLOGY

TAKE ADVANTAGE: AUGMENTED REALITY

Not just what you can see

But what you cannot see

Linked together based on

geography

Think layers of a cake

The Landscape of Valuation

EVERYTHING about a

property

Demographics

Economics

Trends

Legal

Zoning

TAKE ADVANTAGE: NEW ANALYTICS

Regression Analysis

Geographically-Weighted Regression

Monte Carlo Analysis

Non-Linear Modeling

More Data-Better Models

What to do?

Why to do it?

What’s the point?

CONCLUDING THOUGHTS

Think of it as electricity

It will be everywhere, in every

device and process

You can buy it today on

Amazon

It will be everywhere and in

everything

WHERE DOES AI GO FROM HERE?

Sift-through relevant market data

and analyze adjustments in a

fraction of the time

Reinvest the time savings in

analysis and prediction

Execute better analysis of risks

and opportunities, real-time

monitoring, advanced models and

predictive analytics

Integrate and monitor data and

identify what is important and

relevant

Personalize predictive analysis

AI-BASED TECHNOLOGIES WILL ENABLE

APPRAISERS TO

Continue to be open to change

Look for opportunities to

analyze data more effectively

When intelligent agents

become widespread-adopt!

Keep up to speed on every

technological advantage that

you can

MAKING THE RIGHT MOVES

Data is the new gold

Its interpretation is critical

AI-Human intervention

becomes all about enhanced

data-data about data

The real promise of data-what

makes the world tick?

THE TRANSFORMATIONAL ASPECTS OF AI

It is here today

It will be all around us

It can help us as appraisers

Over the course of the next

several years is will subtly and

not-so-subtly be the driving

force in redefining how we live

and work

AI offers amazing

opportunities to empower

appraisal-be prepared!

AI IS NO LONGER A SCIENCE FICTION TOPIC

THAT ALL SOUNDS GOOD - SO WHY THE

URGENCY???

That is your decision

I believe more in the promise

of AI than I do in the risks

Shovels and tractors augment

physical abilities

AI is no different

Prudently applied-it presents

an horizon of unquestionable

abundance and opportunity

WHICH TESLA VIEWPOINT IS MOST RELEVANT?

WHAT DO OUR CLIENTS THINK?

Joint Banking

Conference:

Illinois, Michigan, Ohio

Walking to my

presentation

The best prop EVER

Even presenters should

learn to

accommodate Artificial

Intelligence

THINKING ABOUT THE FUTURE

THANK YOU!

Mark R. Linné

MAI, SRA, AI-GRS, CAE, CDEI, FRICS

Chief Executive Officer

ValueScape Analytics, Inc.

mlinne@valuescape.com

www.valuescape.com