I resisted downloading ChatGPT until last week because I’m increasingly skeptical about the benefits of technology.
Don’t get me wrong; I love technology. I use my iPhone more than I care to admit and have to be mindful about not using it too much (and I still do).
The problem isn’t technology – it’s people. It’s like food – we need it to live, and the right foods in the right amounts can lead to a happy and healthy life.
Unfortunately, we don’t always eat the right foods in the right quantities, making us sick. It’s not the food; it’s how we use it. Same with my iPhone, Instagram, and, soon enough, ChatGPT.
A few people suggested I could use ChatGPT to write these Insights, so I tried this weekend. For the market summary, it told me, “I’m sorry, but as an AI language model, I do not have access to real-time information beyond my knowledge cutoff date of September 2021.” It suggested I go to Bloomberg, Reuters, CNBC, or the Wall Street Journal.
Then I asked for an interesting investment topic, and it suggested that I write about environmental, social, and environmental (ESG) investing. I wrote about that and was shocked by how controversial people found it, even though I concluded that we don’t do ESG unless a client requests it.
I asked for another topic, and it said that bitcoin and cryptocurrencies could be good. I’ve spilled some digital ink on that too, but since we won’t do it anytime soon, I asked for a ‘boring’ topic that is still interesting.
It suggested index funds and ETFs. Cha-ching! That’s right up my alley, and it did give a nice primer on the topic.
Over the last week, I did ask it questions about residual volatility, above-the-line vs. below-the-line deductions, and the contribution limits for SEP IRAs.
All of the answers were helpful and better than what Google provides, in my opinion. It gives me one answer, whereas Google gave me 11.8 million for residual volatility, and the first half-dozen weren’t helpful, so I didn’t look at the other 11.8 million.
From my limited experience and what I’ve read, ChatGPT and other artificial intelligence natural language processing programs will likely be helpful tools.
I suspect the hype will cool down with time, just as it did with driverless cars, 3D printing, the metaverse, and many other technologies.
I thought text messages were pretty impressive at first, and now they drive me crazy—the same with video conferencing. We went from living out of Dick Tracy comic books to a grind where I mostly stare at myself.
At this point, I’m not afraid of chatbots. Well, a little scared – didn’t anyone see The Terminator?. I’m nervous about the unintended consequences, like the connection between social media and teen depression.
From an investment standpoint, I’ve heard pitches for AI-powered strategies for years.
I asked ChatGPT for a list of AI-powered ETFs, and it gave me five, although I know the list isn’t current from the earlier request. The performance of the first one on the list isn’t great.
This fund has been live for over five years, and the results are pretty bad. The return is less than half of the S&P 500, with double the volatility and a much bigger drawdown.
It’s incorrect to judge the entire concept of AI and investing with one lousy ETF, and I don’t mean to do that. It does show that just having AI in the name or running something in the background doesn’t mean it’s better.
I have a friend who works for a large, well-known hedge fund that has experimented with AI. He said they can’t use it for decision-making because the humans don’t understand the risks the computers are willing to take. He did say that it’s useful for trade execution, and everyone does that already, so there isn’t much gain there.
Years ago, I read a quote from Ken Griffen, one of history’s most successful hedge fund managers. He said that the only people afraid of AI are those who haven’t tried to use it.
As I noted earlier, I think AI will likely be a useful tool, like a calculator (or the slide rule before that). I suspect it will integrate into our lives, like smartphones, e-commerce, streaming, the cloud, and social media. There will be pluses and minuses, just like with everything else.
In the meantime, I am going to keep writing these Insights. I might lean on ChatGPT for answers to questions, but to paraphrase Joan Didion, I write to figure out what I think.
Well, ChatGPT said it was Joan Didion, but Google said Steven King.
A website that Google suggested said it could be attributed to Flannery O’Connor, Graham Wallas, E.M. Forster, Inger Stevens, August Heckscher, Paul Samuelson, Shirley McClean, and at least a dozen more. It was a thoughtful article replete with references.
Score one for the humans.
Postscript: A few hours after I finished the Insight, I asked ChatGPT to analyze it, and here’s what it said:
The article discusses the author’s experience using ChatGPT, an AI language model, for investment research and analysis. The author acknowledges the benefits of technology but also expresses concerns about the potential unintended consequences of its use.