AI boom could expose investors’ natural stupidity
reuters.com
reuters.com
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> As a field, artificial intelligence has always been on the border of respectability, and therefore on the border of crackpottery. Many critics <Dreyfus, 1972>, <Lighthill, 1973> have urged that we are over the border. We have been very defensive toward this charge, drawing ourselves up with dignity when it is made and folding the cloak of Science about us. On the other hand, in private, we have been justifiably proud of our willingness to explore weird ideas, because pursuing them is the only way to make progress.
> Unfortunately, the necessity for speculation has combined with the culture of the hacker in computer science <Weizenbaum, 1975> to cripple our self-discipline. In a young field, ,self-discipline is not necessarily a virtue, but we are not getting any younger. In the past few years, our tolerance of sloppy thinking has led us to repeat many mistakes over and over. If we are to retain any credibility, this should stop.
> This paper is an effort to ridicule some of these mistakes.
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[0]: Drew McDermott. 1976. Artificial intelligence meets natural stupidity. SIGART Bull., 57 (April 1976), 4–9. https://doi.org/10.1145/1045339.1045340
This paragraph concludes the section titled "Benediction." Ouch.
> Natural stupidity beats artificial intelligence every time.
Some of the use cases are certainly of dubious benefit to the actual product.
The use cases I've seen that actually make a ton of sense to me are anything with rules engines with cumbersome steps or syntax.
It's so much easier to allow input like 'block traffic from outside the US this weekend from the hours of x to y' or 'junk emails that come from a different smtp server than the domain name indicates' and so on.
But sometimes it's annoying to create such rules either due to having to click through multiple screens, or not remembering the exact syntax offhand.
Locally, something like iptables comes to mind. I've used it hundreds of times, but never regularly enough to remember how to write more complex rules without consulting the manual or Google each time.
This would be like writing email filters in gmail or smart playlists in iTunes.
Possibly, you could ask the LLM for the examples and counter-examples that look most likely to be a bug?
If you need to know that the output is perfect then you need to check it, and if you need to check it then maybe it's better to just get an expert to do it in the first place.
Yeah but also maybe an expert gets a shipload more done using an AI? Huge productivity increase? Dunno!
As long as the mad dash translates into healthy 8-hour work days - have fun!
Investors get a nice presentation. Executives get to be part of the trend for marketing. Employees learn about the latest technology
Note no one is proposing replacing management with AI, just the rank and file.
So far what we’ve been able to build feels brittle. But, LLMs are fun to play with though
- doing a baseline check for submitted abstracts - summarizing / listing out key points of abstracts - creating visa letter drafts for international travelers - creating invoice documents for large groups - abstract submissions are done via an optional upload > extract > form filling workflow with an LLM, where it just fills in the form for you (things like author names, correspondence, abstract text, etc.) which saves a bunch of time
Basically I have code (sometimes AI, sometimes not) doing the heavy lifting here, instead of bossing around a bunch of undergrads. Undergrads are also prone to getting distracted, hallucinating facts, making mistakes, etc. so it's not so different than before, except we save gobs and gobs of time.
I think it’s more likely the boot camp type that are over saturating the market. Just supply and demand.
The big firms aren't getting rid of huge numbers of devs, most of the cuts are coming in HR, marketing, and administrative roles.
Start-ups have less funding, so there is going to be less hiring there. We may also see less start-ups in general.
I doubt the boot camps have created an over-supply. There aren't that many boot camps, and from what I understand, the majority of the graduates do not go on to become software engineers. They market based on a few successful grads, but those may be the stand-outs.
Bragging about "engagement", telling (self-inflicted) war stories about your overcomplicated engineering playground at the next AWS conference, churning through the latest languages and frameworks for no pragmatic reason, or virtue-signalling about "diversity and inclusion" used to yield endless VC money which is how a lot of companies and entire careers started, but nowadays it's back to good old "deliver things someone finds valuable enough to pay for, or die trying".
I don't think the software industry is in a recession.
“Market can stay stupid longer than you can stay solvent.” -> Yeah, that is called cope.
You had me at the start but lost me here. That’s not speculation, that’s a fact. Some big shorters of the 2008 crisis almost went broke waiting for the market to catch up.
> Some big shorters of the 2008 crisis almost went broke waiting for the market to catch up.
At what point are you a successful predictor of the 2008 crisis vs. a guy who just shorted the economy in 2006?
[0]: https://www.econlib.org/archives/2015/08/recessions_ofte.htm...
But never discount the possibly of spherical cows in a vacuum.
soo now we've moved from "take advantage of investors being stupid by trading against it inidivudally" to "accomplish a FAR HARDER task by modeling the whole market". Cool cool, moving goalposts for days.
Calling certain investors stupid is hardly contradicting the idea that the market as a whole will sort itself out in the end.
Like on a linked list, you can only "point" to the next big disaster!
In reality, it's nowhere near this simplistic. You have to time it. Timing is impossible. Manipulation happens.
No that is something anyone shorting needs to understand fully and deeply.
e.g. the dotcom bubble was clearly a bubble with most dotcoms absolute garbage investments. People looked at it and correctly saw it as such and decided to short. They were 100% correct and still lost big money because it took too long to be proven so.
Dotcoms as they were in 2000 were ridiculous investments that have gone badly south. You couldn't buy google, you could buy Looksmart, repeat that pattern for basically every company that ended up successful. Social media was not a thing. Internet advertising was an utter joke from every level of analysis (is it still? No clue). The thing was clear and obvious and did pan out as expected but man alive it took some time.
If everyone knew it was clearly a bubble, it would not be a bubble.
At the time people showed the necessary cashflows & growth required for profitless doctcom companies to justify their price and nobody could make it make sense. You'd have to be pretty stupid to think greater fools buying can go on forever.
I'm sure some people in finance "believed" in it and others claimed to. Not many in the circles I moved in even paid lip-service unless they were in the IPO business. Plenty played. Did your experience differ?
If there is societal pressure to not invest in something it is, by definition, undervalued.
Reuters was the first news agency to use NLP to automate news generation back in the early 2000s. They have always had a pretty robust NLP/ML group and the author of the article is an ex-Fund Manager who is writing an op-ed aimed at other Fund Managers/PEs/less technically knowledagble investors.
Tiger Global and SoftBank made similar mistakes in the Deep Learning revolution because they were Fund Manager types with a lack of domain experience, compared to say A16Z, Sequoia, Greylock, etc.
An Investment Associate at BVP or an MLE or ML PM looking at making their own Generative AI startup with YC isn't the target audience - institutional investors who lack techncial domain experience are the target audience of this article
And: https://www.1167capital.com/bio-felix-martin/
He sounds like the real deal.
The fact that investors are constantly chasing new and risky ideas, instead of just zero sum assets, is why the US has the best jobs market in the world.
If investors and consumers were responsible and conservative with their money, dev wages would be much much lower. So enjoy it, because you have it good.
Of course, none of them ever do.
Investing your own money is a heluva lot different, and it's where the rubber meets the road.
I'd prefer multiple fashions in play at once.
Nobody is forcing you to work at FAANGs or other hypergrowth companies that have redundancies, there's older established companies that didn't have redundancies which of course, pay much less than FAANGs do.
Places that only have safe employment options, without hypergrowth, also have massively lower wages for everyone.
When market contractions hit even "safe jobs" aren't necessarily safe.
Competition is important. But there are limits, after which it's better for everyone if the business-creator comes up with a novel idea and pursues that instead of iterating on everyone else. This is very difficult. It might be a bit less difficult if the culture didn't encourage followership in its leaders and funders.
The Duke of Westminster for example was the youngest billionaire in the UK with an estimated net worth of £10bn at 35. His family's land includes 100s of acres of the most valuable real estate in London. Their ancestor was granted these lands by William the Conqueror in 1066.
Of course, neither are European investors, but that's not the point. The point is a dinamic jobs market where the money goes on ideas and businesses, insted of assets, pushes all wages up and benefits the middle class.
Investors living off land and other such rentseeking endeavors destroys the middle class as it's just feudalism with extra steps.
>There is little benefit to be gained from disposing of that wealth to speculate on the latest fad and facing taxes.
Of course, but this is the fault of our tax system which incentivizes land hoarding and rent seeking by those already afluent, at the expense of the have-nots looking to buy in.
I let out a family house. The rent is the greater part of my pension. I used to live there, until I was divorced (it was too big for one person). It's been clear to me for decades that freehold land was a better investment (here) than investing in a conventional pension; and I lived through the outright theft by Robert Maxwell of the whole of his staff's occupational pension fund. So I paid off my mortgage as quickly as I could.
Regarding the chores, that someone mentioned upthread: I have a long-term tenant, a family. Their kids go to school around the corner. They mow the lawn. They always pay the rent by bank transfer. I hire tradesmen to deal with the gas, plumbing and electricals. I visit twice a year to check that everything's OK. These aren't really problems.
And rental housing is scarce where I live. It's a university town with several important hospitals, and surrounded by a no-development green belt. I'm providing a social benefit.
I'm not sure when this kind of "rent-seeking" turns into the kind of rent-seeking of which people disapprove.
Where I live there are individuals owning entire apartment buildings, >10 houses, in fact, 80% of the entire country's wealth is owned by the top 300 richest individuals.
Single individuals renting out their spare home, doesn't even register on the radar compared to what the rentseeking of the truly wealthy looks like.
An example of rent seeking would be if you lobbied the local council to restrict new building or additional rental units in the area leading to artificially higher rents. It has nothing, directly, to do with receiving income for renting a housing unit
There are many sides to this. Over a decade ago, Apple colluded with other tech companies to artificially suppress wages by crafting "no-poaching" agreements. Facebook refused to play ball.
Nope.
There's:
1. property tax
2. insurance
3. maintenance
4. upgrades
5. dealing with the lawn
6. 6% commission taken by the real estate agent
7. inflation
8. all the time spent dealing with it
9. mortgage interest
10. the costs from having it sit empty on the market waiting for a buyer
11. and the most neglected cost, the time value of money
Properties here are sacred and the tax incentives, tax breaks, basically zero inheritance taxes, make it one of the safest kind of investments.
And that's without the scummy practices of the central banks and governments who manipulate the market to keep prices going up.
If you just let the property rot without a tenant, then, yeah, this punishes you. I'd recommend against letting a property rot without a tenant, just like I'd recommend against buying 500 barrels of crude oil, and letting them rot away into worthless sludge in your cellar over twenty years. All things that we buy have a limited shelf life, you need to use and maintain them before they expire. Structures built on a property are no different.
#6-11 are real costs of investing into property, and I agree - they cost a hell of a lot more time and money than buying an index fund and sleeping on it for 40 years.
But the real problem with real estate "investment" is that the return doesn't come from doing something productive but rather is predicated on preventing someone else from doing something productive, namely making more buildings.
Generative AI is very useful for creating rigged demos, which are particularly useful when people want to believe. Widespread skepticism might have some effect, but there are always skeptics, and no particular reason to believe there won’t be any winners to make venture capitalists happy with a few of their bets, enough to pay for the failures.
The only access investors have to outsized gains are through investing in the companies that invest in these companies. What small investors need are private equity index funds.
Someone else mentions Netflix vs. Blockbuster. Small investors would have been doubly screwed if they could only invest in Blockbuster because Netflix was still private.
The number of (legitimate) publicly-traded internet-related companies in the late 90's that were accessible to the average investor was also incredibly small. Legitimate small companies are rarely traded on exchanges in general, as they have no reason to solicit investment from the general public. It's the same phenomenon behind crowdfunding; if you have a legitimate product in development, you can simply convince a conventional lender to loan you the initial capital.
The really big winners were those which were undervalued because nobody expected them to grow as much as it would. Back in the 90s: "A mail order rental service growing bigger than Blockbuster? Get real." Being rational would filter the successful outliers along with the vast field of bad ideas. Usually going unfiltered is a losing proposition like playing the lottery. However, if the wins are outsized enough it perversely "pays to be stupid" assuming you have enough capital to win once and of course that similar market conditions emerge again.
That said useful applications of AI which may be implemented relatively easily are clear big winners as investments but that is pretty tautological and unhelpful for actually figuring out if say, an "AI love letter writing service" would be a terrible idea or not.
For every company that hit the niche and made billions over it there is few that were too early, and few that were not lucky enough to get the opportunity that made the winner win.
OpenAI is selling pickaxes. It's also selling fear in every color. Fear for your future. Fear for humanity's future. Fear for the future. It's selling hope - of new profits, new discoveries, new futures. It's selling prophesy and it's selling religion.
It's also selling entertainment. To be honest, I bet that majority of use of ChatGPT still classifies more as fun than work. I pay for GPT-4 twice (ChatGPT+ and pay-as-you-go API access), and I use it daily, and 90% of my use is... exploratory in nature. I still consider it money well-spent. The problems may be real, and the outputs may be useful, but the choice of using GPT-4 is still dictated mostly by... playful curiosity.
(Also, it's the first tech thing in almost a decade that broke through my layers of cynicism and got me excited again. There's lot of cool things to play with, lot of discoveries to be made, and the progress is real.)
Whether or not LLMs are intelligent, OpenAI won. Financially, for now, but they'll have a spot in world history (for as long as history is a thing). The genuine technological jump they introduced... I can't remember any tech company in my life making this big a change in one step.
How old are you?
Google for example could have really invested in Google Fiber or taken a similar capital intensive project instead of returning 100's of billions of dollars.
Alternatively could be growing inorganically through acquisitions. The largest acquisition Google has done is only for $12.5B of Motorola in 2011. Only one of top 5 acquisitions is in this decade ( Mandiant) and top 5 combined they spent only $25B
Compare that to say Microsoft who are spending $70B on Activision, $10B on OpenAI, also bought Github($8B), Nuance($20B) just in the last 5 years.
Google simply doesn't seem to have any ideas on how to spend money.
[1] Buybacks give you the same choice as well, but they are not increasing the total value through investments to do so, just reducing the number of shares in circulation.
Some days it's wisest to wait until you're ready.
In a sibling post I talked about Google's inability to spend, this is also true for old school Blue chip companies like say Oil& Gas, they have had enormous record profits last couple of years and while they have for good reasons not doing lot of new wells[1] they have not not also done much green energy investments either.
[1] Financially sound not do so, given the long term prospects of oil are not great, and short term price fluctuations are not good decision basis for 30+ year projects new drilling entails.
The only practical difference is you pay taxes on the dividends when you receive them, and taxes on the capital gains when you sell.
Investors expecting a return on their investments? How awful!
There's a bill in Congress to "add more accountability" to stock buybacks by imposing taxes (https://www.congress.gov/bill/117th-congress/senate-bill/275...), but it's clear congress has no interest in curtailing this practice unfortunately.
And why would anyone invest in a company that will never pay dividends/do buy-backs?
The result of buybacks is that the number of shares drops. E.g. Berkshire's stake in Apple raised from 5.2 to 5.5 % merely as a result of Apple's buybacks.
Obviously shareholders benefit from having a larger piece of the cake while not requiring to pay any tax on this operations.
It depends entirely on whether it is an ordinary or a qualified dividend. This is true in the US, other jurisdictions vary
It's simply not a tax dodge.
If I bought a stock yesterday and they issued a dividend today, there is no way for me to avoid the higher tax rate.
If I bought it yesterday and they decide to do a buyback today, I can hold it until the lower capital gains rate kicks in, thereby avoiding the higher tax rate.
See how I can avoid paying the higher tax rate?
Play some more games with tax loss harvesting, and the buyback option gives you a lot more ability to pay lower taxes. With the dividend there is a limit to the amount of loss you can offSet with short term losses.
Simply put, in any given situation capital gains is likely to give you a better option to pay lower taxes.
In other words, buybacks are a way of paying way less tax.
Not way less, just choosing _when_ to pay a tax (say, during retirement years instead of working years of one's life).
I don't see anything wrong with doing this.
Buybacks work very well for executives paid in stock who diversify out of their company stock with suspiciously convenient timing, and speculators.
> and speculators
Everybody who invests is a "speculator".
Investors on the other hand are not necessarily interested in price fluctuation but owning their share of the cash flow through growth or dividends.
A (sufficiently rational) investor's willingness to sell is mainly a function of current price vs. expected future returns compared to other viable alternatives - which of course includes the dividends paid and any other benefits they might gain from ownership. And yes, there's also changes in personal need for currency, psychological reasons, etc. but I'd consider these special cases.
Even in your case if you had any good indication towards the stock you're owning being severely overpriced, the likely optimal thing to to would be to sell and dump the money into the next best alternative.
I'd also suggest to be careful in the assumption that "holding a stock forever" is a good idea. Very few companies have existed forever so far.
I still haven't seen the actual argument for what would make a difference when it comes to Dividends vs. Buybacks.
to some people, it's a psychological difference, not a financial difference.
Could you explain why you said "nope"?
It's very different. In a dividend payout those holding the shares and staying with the company get the money. In a buyback those selling the shares and leaving the company get the money.
When you crunch the numbers buybacks almost always overpay for stock. From an investor's point of view they'd be better with the cash money.
It's another one of those situations where there is a comfortably theory of equivalence that the finance industry loves, that is unfortunately contradicted by the hard facts on the ground. Economics in a nutshell...
It's a stubborn belief in 'efficient markets'.
May 5th, 2023: http://www.threepanelsoul.com/comic/new-paradigms
This kind of Cambrian explosion of copycats and wannabe is simply accelerating the hype cycle, we won’t have to wait a decade to find out if this tech is actually good.
An investing payout sometimes creates something of value for society: when the thing invested in turns out to be useful to people.
Gambling: the expected ROI is negative
Investing: the expected ROI is positive
Even without any gambling I have a quite back track record of getting back the money I gave away as loans.
Its like the system truly needs to meltdown and actual VCs and POEs need to lose their shirts to get a hint.
Actually, the trick is getting out before everyone getting out before everyone else does before anyone else does. (And so on for higher values of recursion.)
Look at the real estate bubble that happened in China. They were literally building uninhabitable houses, but people invested in them with the knowledge that someone else would still buy them.
It doesn’t take a genius to realize uninhabitable houses don’t have real underlying value.
1. dumb
2. ignorant
3. crazy
4. hateful
5. violent
6. biased
7. indoctrinated
8. flaky
9. dishonest
10. fabulists
11. bored
12. lazy
13. conspiring
And usually an ever-churning mix of many of them, all at once.
Therefore, to make a human-equiv AI its not necessarily "incorrect" to give them those traits too. NOT saying that would be useful, or a desirable ideal to strive for. But it WOULD make an AI act more like an authentic human!
I walk the talk too.
How so? For years now I've been writing a little story serial (DSPR) featuring an AI character who has all those qualities. Sometimes all evidenced in the same single conversation. And lately have been building a game featuring the same kind of insights, and shenanigans. (Slartboz -- see my bio if curious for more details.)
however, chatgpt and heypi have answered the question of learning syntax at scale. i am impressed.