Artificial intelligence is supposed to make us smarter. There is, however, a lurking danger that it could make us intellectually lazier instead.
A new Gallup survey in the US has an interesting finding: about one in five Americans who sought financial advice in the past year turned to AI. Yet only about three in 10 Americans overall said they had at least some confidence in AI’s expertise when it came to managing money. Only 3 per cent had a great deal of confidence in it.
The survey also reveals something more interesting. While about 80 per cent of Americans have at least some confidence in financial advisers, only about a third of those seeking financial advice actually consulted one.
A whopping 73 per cent preferred doing their own research on the internet. AI is increasingly becoming another convenient extension of this do-it-yourself financial culture.
AI as the new-age astrologer
There is nothing wrong with using AI to understand something. In fact, it can be an excellent teacher. Ask it what a mutual fund is, how an index fund differs from one, what a P/E ratio means or how compound interest works, and it can save us from wading through a forest of financial jargon.
The trouble starts when we confuse an explanation with advice and advice with wisdom.
Putting one’s hard-earned money into a stock because an AI chatbot sounded convincing is not very different from asking an astrologer which horse will win the seventh race and then putting the month’s salary on it.
In both cases, the machine or the man can give you an impressive explanation. In both cases, the money lost is entirely yours.
When the stars seem to know everything
This reminds me of a colleague at a newspaper where I worked a few years ago. He had taught himself astrology and, like most of us whose stars are not perpetually aligned in our favour, I once met him out of curiosity.
He told me, with considerable confidence, that he bought and sold stocks based on his astrological calculations. He also bet on racehorses using the same celestial intelligence. And, according to him, his predictions were successful most of the time.
It sounded fascinating. Who needs Dalal Street analysts when the planets are willing to disclose the next multibagger?
Much later, I learnt that my astrologer-colleague was actually steeped in debt. Then, one fine day, he quietly sneaked out of the host country. Perhaps that, too, was an auspicious day according to his horoscope.
Free advice can become expensive
The irony is difficult to miss. His stars apparently knew when to buy shares, when to bet on horses and when to leave the country. They had somehow failed to warn him about the one thing that mattered most – his own financial condition.
AI can suffer from a somewhat different but equally dangerous problem. It can sound authoritative and confidently lead us down a wrong path. And because the answer arrives instantly and lucidly, we may forget to ask the most important question: how do I know this is true? That is where due diligence comes in.
If AI tells us that a particular stock looks attractive, we should not immediately reach for the trading app. Instead, we should compare what AI says with reliable sources and seek professional advice.
In other words, put your money where your mouth is only after putting your doubts where your due diligence is.
Let AI explain, not decide
There is another problem. AI does not know our life unless we tell it everything relevant. A professional financial adviser has responsibilities that a chatbot does not. If the investment goes horribly wrong, we cannot summon AI to court and demand compensation for following its advice.
The machine will probably apologise. It may even explain why the loss was an unfortunate consequence of market volatility, geopolitical developments and Trump’s whims and fancies.
The Gallup survey found that younger Americans are particularly inclined to use AI for financial guidance. About a quarter of Gen Z and millennials [I don’t mean cockroaches of the CJP] who sought financial advice used AI, compared with 16 per cent of Gen X and just 7 per cent of baby boomers.
That is understandable. Professional advice can be expensive, while the internet and AI are available at almost no cost. But free advice could become expensive when acted upon without verification.
Intelligence still needs intelligence
The real value of AI, therefore, may not be in telling us where to put our money but in helping us understand why we should – or should not – put it there.
Use it as a research assistant. Ask it to explain unfamiliar concepts. Talk to people who understand the subject. And finally, make the decision yourself.
Otherwise, there is a danger that artificial intelligence will achieve the exact opposite of what its name promises. It will not make us more intelligent. It will merely make our ignorance more efficiently organised.
