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A 30-minute article using OpenAI … and there goes my job

It usually takes me a few days to write a comprehensive lead article. I will give myself 30 minutes to complete this piece including establishing an account with OpenAI, asking six common investing questions and giving a short introduction.

I originally intended to write a summary about how OpenAI works but then I thought, what the heck, it can do the job itself (and ChatGPT is similar).

To keep to my time limit, I’ll let you be the judge of the quality of the answers with only a brief comment from me.

My overall verdict? Impressive. There’s a bit of rambling which the editor in me would remove, with too much use of redundant phrases such as "It's important to note ...". It often wastes space by repeating the question in the answer. The advice on how to select a fund manager was especially verbose. OpenAI can’t even work it out, so what hope the rest of us. 

I also asked a couple of questions that required a forecast, such as how will the stock market perform over 2023, and it refused to answer:

“I'm a language model AI, I don't have the ability to predict future events such as the stock market's performance.”

All the analysts, fund managers, economists and tea leaf readers out there are safe for now. You can pontificate all you want without an AI threat.

Here are the responses from OpenAI, and as I write this sentence to complete the article, 30 minutes is up.

How does OpenAI work?

OpenAI is a research laboratory focused on artificial intelligence (AI) and machine learning. OpenAI develops and runs a range of projects and programs to advance the development of artificial general intelligence (AGI) and deep learning. OpenAI researchers create and study algorithms that can learn to solve complex problems, such as recognizing speech or playing games. OpenAI also works to bring together the best minds in AI research, including those from academia, industry, and the public, to work together on breakthroughs in the field. In addition to its research activities, OpenAI also develops and deploys products and services that help people use AI technologies safely and ethically, including building and sharing open-source libraries and tools.

Six investment-related questions

1. How does an investment strategy of a 20-year-old differ from a 60-year-old?

An investment strategy for a 20-year-old may involve taking on more risk in order to potentially earn higher returns, as they have a longer time horizon to weather market fluctuations. This may include investing a larger portion of their portfolio in stocks and other growth-oriented assets. On the other hand, a 60-year-old's investment strategy may focus more on preserving capital and generating income, as they may be nearing retirement and have a shorter time horizon. This may include investing a larger portion of their portfolio in bonds and other income-generating assets, as well as potentially reducing exposure to stocks. It's important to note that everyone's situation is unique, and an investment strategy should be tailored to an individual's specific goals, risk tolerance, and time horizon.

2. Why do most active fund managers fail to outperform an index or benchmark?

There are several reasons why most active fund managers fail to outperform an index or benchmark. One reason is that the markets are generally efficient, meaning that most publicly available information is already reflected in the prices of securities. This makes it difficult for active managers to find undervalued securities that they can buy at a discount and then sell for a profit.

Another reason is that there is a lot of competition among active managers. With so many professionals trying to beat the market, it becomes increasingly difficult for any one of them to consistently find mispriced securities. Additionally, the cost of active management is usually higher than passive management, and these costs can eat into returns.

Lastly, active managers tend to underperform in bear markets, as they tend to sell their positions, and also they tend to have higher turnover, which results in higher transaction cost and taxes.

It's important to note that, while the majority of active managers underperform, there are some who do outperform their benchmark, but it's difficult to predict in advance which ones will be the successful ones.

3. Should the Australian superannuation system be abolished?

The question of whether the Australian superannuation system, also known as the country's mandatory retirement savings plan, should be abolished is a complex and highly debated topic.

On one hand, the superannuation system has been successful in helping many Australians save for retirement and build a nest egg for their golden years. The system has also helped to diversify the country's economy by channeling funds into investments such as infrastructure and real estate.

On the other hand, some argue that the superannuation system is too complex and that the fees charged by funds are too high, which can eat into returns. Additionally, the system has been criticized for not providing enough flexibility for individuals to access their funds in times of need.

In any case, abolishing the superannuation system would require a significant overhaul of the country's retirement savings infrastructure and would likely have major implications for the economy and for individual Australians.

It's worth noting that, the Australian government has made some changes to the superannuation system in recent years to make it more efficient, fair and sustainable.

4. How much can a person spend in retirement and not run out of money?

The amount that a person can spend in retirement without running out of money depends on several factors, including the size of their nest egg, their expected lifespan, the rate of return on their investments, and the rate of inflation.

A commonly used rule of thumb is the "4% rule," which states that a retiree can safely withdraw 4% of their nest egg in the first year of retirement and then adjust for inflation in subsequent years. For example, if a retiree has a nest egg of $500,000, they could withdraw $20,000 (4%) in the first year, and then increase that amount each year to keep pace with inflation.

However, this rule of thumb is not a one-size-fits-all solution, and the actual amount that an individual can spend in retirement will depend on their unique circumstances. Factors such as the retiree's age, health, and lifestyle will affect the amount that they can safely withdraw. Additionally, unexpected events such as a recession or a prolonged period of low returns on investments can also impact the amount that a retiree can spend without running out of money.

Ultimately, it's important for retirees to have a plan in place that takes into account all of these factors, and to also be prepared for unexpected events. It's also a good idea to have a safety buffer to provide a cushion in case of unexpected events.

5. How do you select fund managers who will outperform?

Selecting fund managers who will outperform is a complex task, as past performance is not always indicative of future returns. However, there are several factors that can be considered when selecting a fund manager:

  1. Track Record: A fund manager's past performance can provide some insight into their abilities, but it's important to look beyond short-term returns and consider the manager's long-term track record.
  2. Investment Philosophy: A fund manager's investment philosophy and strategy can also be an important factor to consider. It's important to understand how the manager views the markets and how they make investment decisions.
  3. Risk Management: A fund manager's approach to risk management can be a critical factor in determining their ability to generate consistent returns over time.
  4. Experience and Qualifications: The fund manager's experience, qualifications, and professional accreditation can also be relevant when evaluating a fund manager.
  5. Cost: It's important to consider the fund's expense ratio, management fee and other costs, as these can have a significant impact on the fund's returns over time.
  6. Process and People: The fund management team, their process, the resources they have and the alignment of interest with shareholders are important factors to consider.

It's important to note that, even with due diligence and analysis, there's no guarantee that a fund manager will outperform in the future, and even the best fund managers may underperform at times. Diversification and regular monitoring of a portfolio will help to mitigate risk and increase the chances of achieving long-term investment goals.

6. Do fund managers need a macro view to select company stocks?

Fund managers typically use a combination of both top-down and bottom-up analysis when selecting company stocks.

Top-down analysis, also known as macro view, involves looking at the overall economic and market conditions to identify sectors or industries that are likely to perform well. This approach focuses on the big picture and can help fund managers identify trends and opportunities that are not visible at the individual stock level.

Bottom-up analysis, on the other hand, involves analyzing the financials and fundamentals of individual companies to identify those that are likely to perform well. This approach focuses on the micro-level and can help fund managers identify companies that are undervalued or have strong growth prospects.

While both approaches have their advantages, a good fund manager will likely use a combination of both, in order to make a well-informed decision. This can help them to identify companies that are well positioned to perform well in the current economic and market conditions, while also taking into account the long-term potential of individual companies.

It's important to note that, a fund manager's approach can vary depending on the fund's investment strategy, the fund's mandate and the fund's objective. Some funds may focus more on growth, others may focus more on value, and others may focus more on dividends.

Final thoughts

Let us know what you think in the comments section.

As a footnote, I continued asking questions after my 30 minutes was up, and found some of the answers superficial and even wrong. For example, it struggled to define the meaningful differences between ETFs and Listed Investment Companies. Maybe my job is safe for now, but for technology in its infancy, it's surprisingly clever.  

 

Graham Hand is Editor-at-Large for Firstlinks, at least until AI replaces him. He is not responsible for any of the answers to these questions, and people should seek advice from OpenAI (sorry financial advisers) for any further information.

 

25 Comments
Michael
January 31, 2023

On the bright side, it isn’t google (yet) and it isn’t using data past 2021 (yet).

It’s a chat bot that is very clever but it isn’t always using facts to back up the information it hands out. Version 4 of GPT Chatbot is going to be even more powerful than 3.5 which we are all playing with now.

I have been using GPT3 on a paid app and GPT3.5 on the open ai playground. The different is night and day, chalk and cheese. Which makes me think that GPT4 coming out later this year is going to possibly remove all of our negative feedback we are talking about now. It probably will reference sources from the net and eliminate a lot of the mistakes it’s making now.

My vision of the future with this looks like we either adapt and start using it or we become unemployed . White collar workers are going to come under pressure but on the flip side, this will drive more people back into the blue collar trades where AI can’t compete.

It all does start me wondering what’s the point of sending our kids to expensive schools and university as AI it going to take a lot of white collar jobs in the next 10 years

gene
January 30, 2023

Good generic answers, no specifics which is fair enough. Any answer is dependent on the question asked.

Conclusion: do not ask dumb (specific) questions about yourself, the machine doesn't know you (yet!)

Colin
January 29, 2023

Probably as good as most of the free-to-read financial stories in about 90% of the media, including some big names. Even the AFR has stories that GPT could have written (click bait for sure) - oh, for the days of serious financial journalism. Firstlinks aside :-)

John
January 29, 2023

Yep I agree; the answers are superficial, lack insight and even wrong. Your job is safe for now and a very long time into the future. The answers are not even really complete for first week students.

Mal
January 29, 2023

I believe Mark's comments are appropriate. OpenAI, chatGPT and others will continue to develop and may become extraordinary services. Unfortunately, along the way there will be disasters because even the creators cannot know how their programs will evolve. At some stage David's questions might elicit responses that comment on the use of algorithms in the investment decision and implementation process'. With the understanding, that, already the vast majority of investment activities are kissed by an algorithm it is surprising that OpenAI was unable to provide some feedback on their significant impact. (Without having to ask more questions to delve deeper).

Alex Stitt
January 28, 2023

Like quite a few others, I found the answers anodyne and not really helpful, certainly no insight. As one commentated, good first year student stuff, but hardly more than that. Although I did note the few who observed that it could be used as a tool to home in on a specific technical issue. Sure AI will improve with time. On the broader front of AI and Big Data, I mentally bought into the benefits of both some time ago (and I'm now long-retired so it's not important to me) but again, and again, and again, as a consumer, I am more than underwhelmed at what these tools actually produce in practice for me. My two main touch points are the rewards schemes of Coles and Woolworths and the advertisement feeds in eg my Facebook. For the former, they are so facile that they end up just being vectors for Coles and Woolies to throw money at me, which I gladly accept. The best is when my personalised weekly specials include regularly the sort of item I only ever bought once or which I buy once a year. Both have at least 5 years data on my shopping in their store, so their whole offer is a clear "fail" in my mind. Has Coles algorithm not noticed that I only ever shop with them when certain "staples" in my trolley are on deep discount? Apparently not. For Facebook, I am constantly amazed at how I can search for something on google today, and then for the next 5 to 6 weeks be inundated with advertisements for the product or merchant I searched (and which I was either never going to buy or which I bought there and then). The lack of discrimination is utterly astounding. I search something about a motor vehicle and I get endless ads for motor vehicles. How many motor vehicles does the algorithm imagine I might buy? I get endless ads for a merchant I use regularly. Does the algorithm not notice that I don't need the vendor to waste money advertising to me? And so on ad infinitum. Endless really dumb outcomes that a human operator would instantly say "Nah!" to offering me. So clearly AI and the utilisation of Big Data have a looooong way to come yet.

Nerolie BOWDEN
January 28, 2023

A friend and I were discussing this yesterday. She has a nutrition degree and is a Vegan. While watching a Vegan cooking show, an advert came on for KFC!!! Clearly the algorithm needs tweaking!!

Mark
January 28, 2023

I've been reading the same, or similar answers to the questions asked by Graham for 20+ years. OpenAI's answers are not much more then a rehash of information readily available. Good for first year students I guess but not to any one with a keener mind, who thinks more deeply, and has a thirst for learning.

Trish
January 29, 2023

I would suggest this is information rather than analysis. The text has no personality or energy. Probably part-plagiarism and part-summary of existing knowledge, and assumes all knowledge collected is accurate - wrong assumption. I prefer your writing Graham. It will be a race to the bottom. I fear for my old age when doctors rely on AI, rather than intellect and hard work.

PeterJ
July 08, 2024

RE "...a rehash of information readily available....." Is EXACTLY what this so called AI is

James Gruber
January 27, 2023

US media company Buzzfeed announced overnight that it will use ChatGPT to create content instead of writers. The stock was up 92% on the day!

Andrew Rowan
January 27, 2023

I have been using it for content in SoA's as well as blog posts. It's great. I usually have to tool open on my desktop as it also can save time in helping write email replies. In fact, Missive now has an Open Ai add in.

There are other Ai Tolls that I use in the office as well.

As long as you fact check then it is a tool that advisers can use. Remember that it only has content up to 2021.

Bring it on.

Don Beattie
January 27, 2023

I tried it out on a weed control issue and was impressed with the result. When it started by giving a broad brush answer I followed up with a more specific question. This ongoing "dialogue " proved very useful in narrowing down the information I was seeking. The technical details of the final answer looked convincing as if having been collated from reliable scientific sources. I think ChatGPT could be particularly useful in quickly drawing together data from disparate sources, which I find very time consuming using Google, for instance (especially given its current seeming obsession with prioritising answers that benefit it financially).

Mark
January 27, 2023

ChatGPT was released in November 2022...
No-one can imagine what this and similar AI products will be capable of in 10 yrs time.
Google started off as a library indexing algorithm... then it was monetised.
Its somewhat akin to "a solution looking for a problem", but I recall talking to someone at CSIRO developing WiFi years ago and that was exactly the dilemma ! Fast forward.... anybody out there NOT using WiFi?
My humble suggestion is... embrace it.

DANNY
January 27, 2023

interesting that, in Graham's 6 questions, not once did chatGPT suggest seeking advice from an appropriately qualified professional Adviser. Maybe chatGPT is so good, it does not consider that advice to be necessary, in which case I feel very sorry for those needing it. We have a long way to go before letting AI rule our world.

Brian
January 26, 2023

Still in infancy and only going to get better - probably quicker than we can imagine.
BTW, the database it uses is current to 2021, so answers to queries like Superannuation will only be based on data up to that point.

Brian
January 26, 2023

Let us know what you think in the comments section.
Well, what you think is it’s been nice knowing you and good luck.
Happy Australia Day, for now.

Goronwy Price
January 26, 2023

When I asked Chat GPT about me it said I passed away in 2016. Apart from that “minor” error I have been amazed by it. My daughter did not understand a concept from her law lecture and asked it to explain it. She still did not get it so she asked it to dumb it down. Then she understood perfectly. So knowing how and when to use it will be important, but overall a huge advance for humanity even at this early stage.

Tony S
January 26, 2023

It's a fully automated BS generator. It's going to work in some places where generating BS is the game but will never develop new ideas or insights as it's completely backward looking. Potentially free writers from the mundane and repetitive but conversely will drown readers with large volumes of plausible sounding but hollow texts. Think I will need some sort of AI assistance to quell the tsunami of BS about to to be unleashed.

Just this guy
January 26, 2023

“It's worth noting that, the Australian government has made some changes to the superannuation system in recent years to make it more efficient, fair and sustainable.”

Borderline semantics but can’t imagine any decent investment analyst or reporter (excluding columnists) writing this…

Keith Suter
January 26, 2023

This is only the beginning. As Moore's Law continues to kick in, not only will you be redundant but your computer will have all your data. What will computers do with us after the Year of Singularity (around 2050)? Will they keep us on as pets - or simply discard us?

Ian
January 26, 2023

I've done a lot of playing around with ChatGPT and some other LLMs, and they have an unfortunate tendency to sometimes be "confident, but wrong". But then, so do people.

AlanB
January 26, 2023

Yes, they are impressive answers with minor flaws easily corrected in later improved versions.
Please ask OpenAI how to distinguish between original work submitted by a human and work created by OpenAI. Are we penalising honesty, initiative, originality and human creativity, particularly in students, by favouring and rewarding those who utilise OpenAI answers without acknowledgement? We would not trust a doctor, or anyone else, who gained their qualification by cheating, so the challenge will be to stop future abuse of AI in ways we can only guess at now. With the inevitable dumbing down of humans.

Dave Roberts
January 26, 2023

From a teacher's exam viewpoint I would ask AI the same questions I set for the exam.. Any student's answers that are very similar or verbatim would be marked down and the student asked to give oral answers.

michael
January 26, 2023

1. It is boring, & therefore difficult to read.
2. It hasn't ventured an opinion. Much like a politician.

 

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