I Keep Hearing about Artificial Intelligence (AI). Should I Know More?

We are usually in favor of KNOWING more, so we are sharing what little we have learned about AI in our investment advisory and personal investing world. 

First of all, just what is AI?  The simple definition is that AI is the ability of a computer to do tasks which are commonly done by (intelligent?) people.  It combines computer analysis with huge data sets to solve problems.  Got it?

Which begs the “so why should I care” question. 

We have all experienced very simple forms of AI when we have purchased from Amazon and seen the “people who purchased what you bought also bought xxx”.  Or when you have searched a vacation spot on GOOGLE and then started getting ads for that location on Facebook.  We can debate how useful any of that is, but it’s certainly there.  Some experts believe that AI will be the most disruptive influence of our lifetimes!

AI is used today in the financial advisor and retail investor space, although LFS is not currently using AI for anything related to our advisory business.  We did try ChatGPT – more on that below.  Large financial services firms are using AI to analyze historical market/company date to build portfolios for clients or for their own managed funds.  Some brokers are using it to automatically buy and sell stocks.  And some are using it to enhance fraud detection capability – which is a great application in our minds.   

Outside our world, there is work to use AI to improve cybersecurity, to enhance self-driving vehicles and to aid drug research and manufacturing scale-up.  And of course, to deliver increasingly tailored recommendations to us on Amazon, whether we want them or not.

Now let’s talk about ChatGPT which is one of the most visible signs of AI in our everyday lives.   ChatGPT is a “chatbot” or digital assistant which is capable of conversing with people.  It follows directions given in a prompt and provides a detailed response.  If you have used SIRI or Alexa or a customer service online chat feature, you have interacted with a digital assistant.  The promise is that the technology is evolving rapidly and that these experiences will improve quickly too.   

For those of you that are curious about ChatGPT,  I want to share our experience, albeit limited. 

If you are a faithful Bernie’s Blog reader, you may remember that April was Financial Literacy Month and as usual, we provided questions designed to test our collective financial literacy and have a little fun.  We do actually write Bernie’s Blog – it’s not a ChatGPT creation – but I thought it would be interesting to ask ChatGPT to provide some financial literacy questions for us to consider.  What I discovered is that the detail provided in the prompt is critical and it took me three tries to get anything even remotely usable.  See attached.  You can see that by the third try,  I requested multiple choice questions and answers although I did not use the answers ChatGPT gave me since ChatGPT doesn’t do fun.  Apparently.

For those of you who are interested in investing in AI, there are ways to do that.  In many cases, you probably already have some exposure via ownership of Amazon, Microsoft, NVIDIA, Alphabet, or any of the numerous funds which own these stocks.  There are no “pure play” AI companies today BUT there are some ETF’s designed to give investors more concentrated exposure.  We can help!