Patience, Scepticism and Caution: Three Timeless Tools to Counter AI Hype and Wrongdoers

Apparently, it is the best of times and the worst of times when it comes to artificial intelligence (AI). The best, because it seems each week we read articles in publications we follow about some neat new thing an inventive company is doing with generative artificial intelligence technology to improve quality of life for ill or impaired people. And the worst, because it seems each week we find about as many stories in major press about some horrid new thing fraudsters are doing with generative AI to steal money or personal information. The latter, in our experience, gets the most attention, and we think all investors benefit from knowing about the latest tricks. Yet, in our view, the former is a reminder technology isn’t inherently good or evil, and despite AI’s nefarious uses, there are benefits and opportunities for investors. To us, it all points to keeping a measured view.

We would love to focus on the good parts here, but for now, the bad parts are probably most important, because people risk losing a lot of money if caught unaware—risks we think are detailed very well by an extensive Bloomberg report this summer.^[i] The new tricks mainly involve so-called deepfakes, where criminals use generative AI to clone people’s voices and images. One is an evolution of a widespread scheme where criminals send a text or email purporting to be from a loved one in trouble and in need of money in a pinch. Now, scammers can plug an audio clip into a program that can synthesise the voice to create an entirely new message—audio they can easily rip from social media or hacked voicemails. You could get a call that sounds like a child, grandchild or other loved one in distress, making it vital, in our view, to remain calm, ask questions only that individual could know the answer to, and not let the purported urgency override your scepticism and defenses.

Investment frauds are also getting more sophisticated thanks to deepfakes. A big one garnered attention amongst publications we follow in the UK recently for using deepfake videos of Elon Musk and a popular BBC presenter to hoodwink investors. In the promotional clip, Antiques Roadshow host Fiona Bruce appears to be reporting that Musk has developed new trading software that will generate huge windfalls, and it then cuts to a video of Musk apparently boasting users can reap £5,700 daily from his new program, which happens to pick the correct stocks 91% of the time.^[ii] Whilst the AI angle is new, we think the old standard warnings of fraud—unrealistic returns, little negativity and fancy, complex language to describe the strategy—all remain. But to see those factors, it seems to us people would have to get past the inclusion of Bruce and Musk, which seems designed to make otherwise credulous people let their guard down. The lesson, in our view: Seeming celebrity endorsements aren’t a sign of an investment’s validity.^[iii]

Yet it seems to us there is a silver lining: AI is also assisting the battle against fraud. For instance, according to Bloomberg, scammers are using image-generating AI and 3D printing to create fake IDs, which they then use to open accounts in their victims’ names—next-level identity theft.^[iv] Yet there are now AI-powered programs banks can use to verify IDs and root out fakes.^[v] AI technology is also improving the systems that detect suspicious transactions. In our view, some of it seems a bit frightening, like tracking if the user’s computer mouse behaved unusually for them. Some of it is less so, like using machine learning to compare a transaction to the user’s historical patterns. In both cases, the technologies are designed to happen so quickly that the company can block the transaction. Not foolproof, but encouraging, in our view.

So what can you do to reduce your risk? Whilst AI is new, all the normal things are still valuable, in our view. If you are concerned, we suggest watching your bank and credit card accounts and statements closely. Monitor your credit. Consider establishing code words your family and loved ones will need to use if they are actually calling you in a legitimate pinch. We think it always helps to remember investments that sound too good to be true usually are. If you see what looks like a good investment opportunity in the sponsored results on your search engine of choice, be sceptical. If you are interested, we think it is important to do independent research to make sure it is real—no matter how glossy the website and purported return history are.

And again, take heart, because AI is also bringing some good things. Over the summer, Financial Times columnist Patti Waldmeir introduced readers to her friend “Pearl,” which is the AI-supported insulin pump that constantly adjusts and regulates the dose. “She controls my blood glucose better than I can myself, partly by predicting when it is set to shoot up or plummet, and taking action — even if I am asleep. Without her, I have to make dozens of dosing decisions a day, each with potentially life-threatening consequences.”^[vi] As Waldmeir goes on to report, the US National Institute on Aging is funding a number of AI-powered projects aimed at detecting cognitive impairment and sending early warning signals regarding those at risk of falling or fainting. And in another story we found interesting, Stanford researchers successfully implanted tiny chips into a voiceless woman’s brain, trained an algorithm to recognise the signals her brain sent when she wanted to talk, and converted it all into text at 62 words per minute.^[vii] Whilst we are admittedly a bit unsettled at the thought of turning semi-robotic, we still find this amazing.

Lesson the second: We frequently find the big long-term winners from new technology aren’t those who develop the tech at the root of it, in this case, generative AI. Rather, in our experience, they are often the creative users who deploy the technology to do new things, solve problems and make life better—reaping profits and generating earnings for investors along the way. We aren’t arguing any of the developments profiled here will be the big investments of tomorrow. Far-future winners are always unpredictable, in our view. But we think they are emblematic of how these trends typically, gradually unfold.

To us, they are a reminder that whilst AI brings challenges, it also brings opportunities.