Why AI Will Never Replace Great Investors

Creativity will always be the edge that sets great investors apart

The skill of being a great investor is half art and half science and people within the industry know this. The science—advanced math, economics, and financial modeling (among other examples)—is less than half of what’s required to be a good investor today. With recent advancements in AI, the emphasis on science continues to diminish.

I believe investing is very much like entrepreneurship in how opportunities are assessed based on risk/return scenarios, especially in early-stage investing. The initial screening and assessments are similar; however, the execution is where the two diverge. Investors back the jockey, while entrepreneurs back the horse. Both play in the same race, aiming for the same outcome: achieving outsized non-normal returns on their capital. Since entrepreneurs take on more risk, they should expect a much higher return.

That said, I believe the skills needed to be a great investor are essential to being a great entrepreneur. These include knowing who to partner with (or who to back), understanding markets (and knowing how to size them), and having a strong grasp of unit economics (including financial statements). All these skills are a must for both entrepreneurs and investors alike.

What drives financial models?