One Critical Investing Rule AI Can’t Replace

When I was a U.S. Air Force pilot, the phrase “Trust but Verify” was used in negotiations with the USSR concerning nuclear arms control agreements. The term is originally a popular Russian phrase that President Ronald Reagan adopted. I was reminded of Reagan’s warning when I read a recent Advisor Update email from The Daily Upside. One paragraph in the email discussing artificial intelligence (AI) began with the opening headline: “ Trust the Smart Robots, but Verify.”     

Here is a paragraph from the email body:

“The CFP Board published an ethics guide on AI for advisors earlier this year, noting that advisors “must account for AI limitations and risks, including inaccuracies or ‘hallucinations.’” The technology has a lot of potential for investment-related research, such as aggregating information or pulling in data sources that an advisor wasn’t aware of, said Sara Cortes, assistant general counsel at the CFP Board. “The main consideration for advisors using it for investment research and selection specifically is to really understand what assumptions and estimates might be going into that AI and what the data set is, how the machine learns,” she said. “The thing they really need to keep in mind … is that they’re ultimately responsible for the investment selection in the client’s best interest.”

Recently on the Joe Rogan Experience podcast, episode number 2356, Rogan (who is deeply interested in AI and has had numerous guests covering the topic) expressed his belief that with the rapid growth of AI capability, within six months to a year, it will be impossible to differentiate whether written and video content is AI or human-produced.

A  recent Zerohedge article on artificial intelligence said this about the current state of AI:      

“…while instant lookup may work well for facts, it’s deadly for comprehension and worse for moral thinking.”

However, regular fact look-ups did not provide “why” answers until recently. The article continues:

  New AI systems—still less than three years old—are rushing to fill that gap. They already offer explanations and projections, at times including the motives underlying given decisions. They are beginning to push into moral judgments.…

  Of course, like all search and pattern-matching tools, these systems can only extrapolate from what they find. They thus tend to magnify whatever is popular. They’re also easy prey for some of the most basic cognitive biases. They tend to overweight the recent, the easily available, the widely repeated, and anything that confirms pre-conceived models.

The article concludes that those who rely too much on AI will lose the ability to produce a deep understanding on their own or even exhibit basic morality.

I believe that there will be no “Trust but Verify” with AI. As investors, we need to have reliable human sources for analysis and information. Don’t take anything you see or read online as truth, even if it comes from a real person. Look for bylines that are real names, not pseudonyms.

As we delve deeper into the AI phase, I am pleased that at Investors Alley, we have established open, live communications with our subscribers, allowing them to see us online and receive well-thought-out answers to their investing questions.