Here's why this global CEO states artificial intelligence should be called artificial "guidance" instead…
| From the desk of Miles Everson: Happy midweek! I hope you’re all having a great day. I’m excited to share with you another insightful and relevant coaching comment by my friend and colleague, Professor Joel Litman. I believe this is something we all have to keep in mind. Ready? Continue reading below to know more about this topic. |
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Here's why this global CEO states artificial intelligence should be called artificial "guidance" instead… Is artificial intelligence (AI) as smart as it claims to be? Back in midyear of 2024, Professor Joel Litman, Chairman and CEO of Valens Research and Chief Investment Officer of Altimetry Financial Research, shared a surprising story that underscored the pitfalls of relying on AI. He said this is why investment professionals must tread carefully when using it. The story began with a seemingly simple task: Navigating the unfamiliar terrain of Montenegro. As a first-time visitor, Professor Litman sought insights into the country’s cultural norms, infrastructure, and history. Like many, he turned to AI tools such as ChatGPT for assistance. However, what unfolded during his preparations revealed deeper lessons about the limitations of today’s AI.
Initially, Professor Litman focused on understanding the basics, like local customs and key landmarks. Confident in his resources, he assumed there was no need to double-check airport details. After all, Tivat Airport was said to have only one terminal—information verified by trusted travel sources. Yet, out of curiosity, he asked ChatGPT how many terminals the airport had. The answer? Two. This contradiction puzzled him. So, to investigate further, Professor Litman opened a fresh instance of ChatGPT. This time, it gave the original answer: One terminal. For him, the inconsistency was alarming, given that the second terminal at Tivat Airport has existed for nearly 20 years. What’s more? The discrepancy highlighted a critical issue: Many resources on the web are outdated, and AI, far from being infallible, merely reflects the data it’s been trained on. According to Professor Litman, this wasn’t just a travel hiccup—it was a cautionary tale about AI’s broader implications. Think about this: If AI struggles to provide accurate travel information, can it be trusted to guide investment decisions? The Illusion of Artificial “Intelligence” Professor Litman said that while AI appears intelligent, it isn’t truly “intelligent” in the human sense. Its capabilities lie in pattern recognition, but without guidance, it can produce contradictory or incomplete information. For example: AI tools marketed as financial advisors claim to offer investment strategies, stock predictions, and retirement planning. The thing is, many rely on oversimplified rules like “100 minus your age” for asset allocation—advice devoid of the personalized context that real financial planning requires. Finance Wizard and similar AI investment tools promise to predict stock prices—a feat that’s inherently impossible. These AI models don’t assess market conditions, risk tolerance, or individual goals. Furthermore, they merely regurgitate patterns from historical data, often leading to misleading or overly generic advice. So, why should investment professionals or investors like you proceed with caution in terms of using AI? Professor Litman’s experience at Tivat Airport in Montenegro serves as a metaphor for how investors should approach AI. Just as outdated travel resources created confusion, relying on AI without critical oversight can lead to missteps in financial decision-making. Investment professionals and individual investors alike must recognize that AI is best used as a supplement—not as a substitute—for sound judgment. This means if you want to make AI work effectively, you must provide precise context and evaluate its outputs critically. For instance: Asking an AI tool a nuanced question such as, “Based on the most recent data, how would you allocate a portfolio for someone retiring in five years?” might yield better results than generic inquiries. The bottom line? While AI has potential in becoming a tool in the investing toolbox, its current limitations are significant. Professor Litman warned that investors should approach AI-generated advice with skepticism, remembering that the best advocate for their financial well-being is themselves—or a trusted human professional. As he aptly puts it: “True intelligence isn’t about recognizing patterns—it’s about asking the right questions and seeking deeper understanding.” Sure, AI might guide you to Montenegro, but when it comes to navigating financial markets, there’s no replacement for critical thinking and informed decision-making. Hope you’ve found this week’s insights interesting and helpful.
Stay tuned for next Wednesday’s The Independent Investor! When Fred Reichheld joined Bain & Company in 1977, the firm was in a period of massive growth. Learn more about how loyalty turns brands into legends and what this means for investors in next week’s article! |
Miles Everson
CEO of MBO Partners and former Global Advisory and Consulting CEO at PwC, Everson has worked with many of the world's largest and most prominent organizations, specializing in executive management. He helps companies balance growth, reduce risk, maximize return, and excel in strategic business priorities.
He is a sought-after public speaker and contributor and has been a case study for success from Harvard Business School.
Everson is a Certified Public Accountant, a member of the American Institute of Certified Public Accountants and Minnesota Society of Certified Public Accountants. He graduated from St. Cloud State University with a B.S. in Accounting.
