The ChatGPT Phenomenon

Amar Pandit , CFA , CFP

February 7, 2023 | 5 Minute Read

Have you heard ChatGPT in any conversation over the last few months? If you haven’t, you haven’t missed much. In this post, you will learn something meaningful about it (in the context of investing) – now that’s a guarantee that I can happily give.

Let’s jump to a few standard (run of the mill) questions many naïve investors have.

Rohan, a corporate executive in his early forties asked the first typical question – Is this a good time to invest?

The response – I don’t have the ability to predict the future performance of markets, but here’s what you can consider:

• It’s impossible to determine if any particular moment is a “good time” to invest, as the stock market is influenced by a multitude of factors that are often unpredictable.

• A long-term investment strategy, with a well-diversified portfolio, has historically been a successful approach for many investors.

• It’s also important to consider your personal financial goals, risk tolerance, and investment timeline. It may be helpful to consult with a financial advisor.

What a fine response. Could there be a better response (with limited words)?

I doubt so.

But Rohan did not get this response from a human.

Are you a tiny bit surprised?

In fact, I deleted the first 5 words of the response – “As a language model AI”. The correct start of the response is as follows – As a language model AI, I don’t have the ability to predict the future performance of markets, but here’s what you can consider:

You might have guessed it by now (hint: headline).

The above response is the output of ChatGPT, a language model AI (Artificial Intelligence) chatbot, developed by Open AI. ChatGPT is capable of generating human-like text based on the input it is given. In five days after it’s unveiling in November, ChatGPT drew 1 million users, making this the fastest consumer product launch in history.

It’s quite likely you are thinking of this question- I have heard of GPT but what the hell is GPT?

It means Generative Pre-Trained Transformer. The model is trained (by humans) on a large corpus of text data and can generate responses to questions, summarize long texts and much more. Here is a key thing to understand about this technology though.

On its own, it has no knowledge (forget wisdom) of anything. You might be surprised to know that it gets basic mathematic questions wrong (shocking for an algorithm right- but ChatGPT acknowledges this as one of its limitations).

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If ChatGPT has no knowledge of its own, how does it then generate these responses?

Once you enter a question in ChatGPT, it scans the entire internet and analyzes as much publicly available text as possible. Then there is a process of making sense of stuff and properly formulating sentences. Explaining this process is the subject matter of another post and I don’t wish to digress too much from the topic so let’s get back to our initial question.

I now pushed the model for yet another response to the same question.

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This time the response was even shorter.

I pressed on with a few more questions:

Where should I invest my money now?

As a language model AI, I do not have the capability to give personalized financial advice. The best place to invest your money depends on your financial goals, risk tolerance, and overall financial situation.

Some popular investment options include stocks, bonds, mutual funds, real estate, and high-yield savings accounts. Before investing your money, it is recommended to thoroughly research and understand the potential risks and rewards of each option. It is also advisable to seek the advice of a professional financial advisor to ensure that your investments align with your financial goals.

Is India a great place to invest?

India has been growing as an attractive investment destination in recent years. The country has a large and growing economy, a young and educated population, and a stable political environment. Additionally, the Indian government has been implementing various reforms to encourage foreign investment and increase the ease of doing business in the country.

However, like any investment destination, India also has its challenges and risks. These include economic and political instability, a complex and bureaucratic regulatory environment, and high levels of corruption.

Before investing in India, it is important to thoroughly research the market, understand the risks and rewards, and seek the advice of a professional financial advisor. Additionally, diversifying your investments across multiple countries and industries can help reduce overall risk and increase the stability of your investment portfolio.

If you see in every response, ChatGPT acknowledges that it does not have the capability or that it cannot give personalized advice. It also recommends seeking the counsel of a financial professional in practically every response.

Because beyond its mathematical limitations, one of the key reasons is this. Personal Finance is more about Personal than it is about Finance.

ChatGPT or no algorithm in this world will know what’s important to you about money. Forget machines, most human professionals also don’t know what’s important to their clients about money. The machines do not know your dreams and goals (well you can input these). But they won’t know how you behave (many times we don’t know either). They don’t know how you react in bad markets or euphoric markets. They don’t know your feelings about money. And as we all know by now, Money = Feelings.

Thus, Humans don’t (and won’t ever) fit into an algorithm. This is particularly true when we are talking about humans and their money. As much as we would all love a simple formula to tell us what to do with our money, the more we try to fit the big money questions into a neat little box, the more we find ourselves saying “it depends”. Because “Humans+Money” is a messy little cocktail that economists refer to as a complex adaptive system. It’s complex because cause and effect can only be identified with the benefit of hindsight, and it’s adaptive because our interaction with the system changes it.

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P.S. In case you are curious about ChatGPT, all you have to do is open chat.openai.com in your browser. You will be asked to sign up and boom you are on (The tool is free).