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..your scientists were so preoccupied with whether or not they could that they didn't stop to think if they should.
-Dr. Ian Malcolm, Jurassic Park
Hollywood has gotten a lot of milage out of stories where the super intelligent machines take over and try and destroy, enslave, or expel mankind. From HAL to The Terminator to The Matrix to Ex Machina – movies stoke the fear that Artificial Intelligence is going to grow beyond our control and destroy humanity. Unlike zombies, aliens and vampires, artificial intelligence machines are real, and being “improved” day by day. But in reality a lot of what is being called “Artificial Intelligence” (AI) are just computer programs, very similar or identical to what has existed for years. By using the AI buzzword, it makes that product or service seem more advanced or better somehow so that’s the term that’s getting thrown around – like when everything was “cyber” back in the 90’s. For example, there was an advertisement masking as a news article that was talking about some company’s use of AI to help farmers use less water by targeting only the areas that needed water. What they’re talking about is moisture detectors in the ground that turn the sprinklers on only when the soil reaches a certain level of dryness – the golf course I worked at when I was in high school in the 80’s had this advanced technology. It’s not AI, its just a machine. True AI are programs, like Chat GPT, that are designed to learn on their own and so far the biggest uses of this technology has been in writing columns and news stories. Sports Illustrated, which used to employ some of the best writers of the Twentieth Century, Willaim Faulkner and Carl Sandberg wrote features for it over time, was recently found to have published AI generated stories, they even went so far as to make up fake profiles for the “authors” who didn’t exist. The real danger from AI isn’t that a bunch of robots are going to overthrow us or take over the nuclear launch codes – the danger is the loss of jobs and of course, scams.
Scams come in different forms of course. There are out and out scams, somebody trying to take your money by pretending to be your recently arrested grandson, or that online girlfriend who needs money to buy a plane ticket so she can finally visit you – we’ll revisit those types in a minute. On the other end of the scale, are people simply exaggerating or overhyping something to get your investment dollars into what is a legitimate but probably less impressive business than is being described. These types of scams can take on a life of their own, because often the people involved really believe in the business, system or product, so they don’t think they’re trying to scam you – they think they’re trying to help you. We saw this more recently with certain digital alternatives to more traditional money and computer-generated art products that I’m not really allowed to talk about because they’re unregulated investments – but hopefully you understand what I mean. The new frontier is saying everything is AI and that’s why you must get in on it now. AI is probably going to make a lot of people a lot of money – the problem is there is really no way to exploit AI on its own. Unlike the early days of the internet when one person in his garage could come up with a better computer code to run an internet search engine and suddenly goodbye Ask Jeeves, hello Google, AI requires computing capacity that costs millions if not billions of dollars. Regardless of how smart a person may be – getting access to the hardware required to build an AI engine means that almost all of what is going on is embedded in already existing, very large, very highly valued companies or is being funded by them in return for the use of that technology. For example, Open AI which developed ChatGPT has been funded and is 49% owned by Microsoft – and Microsoft has first dibs on any technology they develop – you and I can’t invest in Open AI. There are other AI projects either funded by or actually part of Google, Apple, Amazon, Tesla and other existing tech companies. The semiconductor space is another one where AI gets called out constantly; you’ll see headlines “X company’s profits improve thanks to new AI chips.” Of course, that’s not untrue, but these chip companies provide chips for everything, desktops, laptops, TV’s, Refrigerators, cars, cell phones etc. So, while the AI space may be the future, there’s no direct way to invest in it and not also invest in the 99% of things these various companies make most of their money from doing.
Now on to real scams, because AI – or at least what’s being called AI – is changing that landscape. As you know, we cannot take trade or distribution instructions via email. We get scam emails all the time, sometimes they’re just generic (pretending to be from Amazon or the IRS like everyone else) and sometimes they’re from the actual email of a hacked client. They’ve also traditionally been really bad and very easy to spot as fake. Misspellings, addressed to Sir, grammatical errors that are common when translating from a different language etc. But they’ve been getting much better. Language translation software has been improving dramatically and scammers are using AI software that reads all your past emails and mimics how you write. We have not gotten any of these emails ourselves as of yet, but it has been happening across the industry. What’s even more alarming, is the voice mimicry software. Developed for Hollywood so we can keep getting Darth Vader after James Earl Jones passes away – these software programs can listen to your voicemails, Instagram videos etc. and with enough input mimic your voice. These programs still sound kind of stilted and with a little skepticism it’s pretty easy to see through the ruse, and that’s why so far these types of scams have been used mostly on those who may be losing some mental acuity, claiming to be their grandchild or child who needs money. As they get more and more sophisticated, we may find ourselves in a world where even if you call our office, we may have to send a code to your cell phone to verify it’s actually you – or have a list of security questions like when you call the 800 number of your credit card or bank. It’s terrible to think that may come to pass – but it’s probably only a few years away.
What AI does not seem to yet be able to do, is predict where the stock market is going to go – so it joins a long list of people in that respect. For the last month we’ve seen quite a “Santa Claus” rally in the stock markets. What was unique about November’s rally was the investments it affected the most. Small Company Stocks (as measured by the Russell 2000 index) actually outperformed Large Company Stocks (as measured by the S&P 500.) This is not in and of itself strange, small company stocks often outperform large company stocks especially over a short-time period. But we’re supposed to have slowing economic growth and small companies tend to be affected more by slowing growth and possible recession than larger, more well capitalized companies. I don’t know specifically what this means, but while everyone is still talking about a coming recession – the people actually putting their money into the markets are investing like that possibility is pretty far off. At the same time, gas prices have come down quite a bit. You may not know it if you live on the Cape or right over the bridge, but you can find gas for under $3 a gallon all over Massachusetts. That’s an over 15% reduction in the gas price over the past year. All in all, things have been pretty good in 2023 unless you had to borrow money; markets are up, inflation is down, and fixed income earnings are the highest they’ve been in 20 years.
We hope everyone has the Happiest of Holidays this year. It was nice having my kids home over Thanksgiving and I’m looking forward to them being back in the house over the Christmas / Winter breaks from their respective schools. Hopefully you will also get to spend time over the next few weeks with the ones that you love. As always, let me know if you need anything, and we will be looking for a handful of new clients in 2024 if you know anyone who may need our services.
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