Causal Models and Artificial Intelligence

In many posts and articles, I claimed that causal models applied to firms and to finance are components of a global process that includes the creation of a new descriptive framework creating a true paradigm shift. The title of the last paper coauthored by Fabozzi, Focardi, and Simonian, forthcoming in the 50^th Anniversary Issue of the Journal of Portfolio Management is “Paradigm Shift: Embracing Holism in Causal Modeling for Investment Applications” to reinforces the notion that causal modelling is a global process.

Many might think that causal modelling is something very difficult to deploy and might be discouraged. But this is not true. Causal modelling in itself is an Artificial Intelligence technology that can be deployed in many applications with a modest investment.

I am preparing some illustrations of applications of causal modelling to business problems that will be posted on my site. Among the examples there are the analysis of sales, the analysis of a sales force, marketing plans and the discovery of causal factors for investment. These applications are practically useful.

But there are business problems that are not simple. A process of corporate reorganization is a complex process where managers need the ability to imagine the future of the firm. For complex applications such as corporate restructuring or complex investment processes then a holistic view is necessary. Causal models will be very useful but it is necessary to understand that after restructuring and innovation firms might be different in some fundamental sense.