Understanding Artificial Intelligence (AI)

What is Artificial Intelligence?

Artificial intelligence is an artificial system or machine that has human-like intelligence. AI refers to computers and software that perform tasks normally done by humans, such as learning, reasoning, or acting. AI can process data, identify patterns, and provide recommendations.

According to Stanford University's IT department, the goal of AI is to develop machines that operate independently, adapt, and improve over time, enhancing efficiency and productivity in healthcare, finance, and transportation.

Defining AI

There isn't one agreed-upon definition of AI, which sometimes causes confusion and makes regulating AI more difficult. A broad definition could include simple spreadsheet software like Microsoft Excel.

AI has been around for years, used for email spam filtering, language translation, music recommendations, and credit card fraud detection. As AI tools become commonplace, they often fade into the background.

Generative AI

The availability of generative AI is a revolutionary update. Generative AI creates content, including text, images, video, and audio. The tech advance emerged when OpenAI released its AI chatbot ChatGPT to the public. Generative AI can be a general-purpose AI with a wide range of knowledge, versus AI that performs narrow tasks.

Users simply type commands in plain English to use generative AI. These prompts give the AI chatbot and other tools what they need to start creating. Results can be continuously refined with additional notes and questions. Anyone who has used internet search or an online messaging tool can quickly grasp an AI chatbot.

Generative AI stems from AI systems known as large language models (LLMs), which are trained on data and computer power. These models learn language patterns to predict the next word, with results ranging from research reports to data crunching. LLMs can also be trained on images and video to create tools that generate photos, movies, or 3D games. Another use is debugging and generating computer code.

Tech giants are building AI data centers to train and run internal AI models and host AI cloud computing for customers. Many in the tech industry consider generative AI the next big tech platform.

AI brings benefits and risks. Good or bad outcomes depend on how humans and society use AI and what guardrails are put in place. Generative AI has sparked both excitement and fears over AI safety. It can boost economic growth, aid scientific discovery, and improve public health. Generative AI tools are helping businesses write emails, summarize documents, create presentations, and analyze data. Small businesses can create online video ads. There are positive uses of AI in medicine, including sequencing protein structures, analyzing medical images, and transcribing doctor visits. AI apps can organize family calendars and manage chores. There are AI voice assistants, tutors, and personal trainers.

AI Risks

Traditional AI brings risks, including the potential for bias or threats to privacy and security. Generative AI brings risks unique to the tech. AI chatbots can produce false content, known as hallucinations. Generative AI can leak private data, offer dangerous recommendations, or infringe on intellectual property. AI chatbots can be tricked into spilling a company's internal secrets. Companies building AI tools are trying to mitigate these risks, especially in high-risk settings. Criminals and foreign actors can use generative AI to mass produce online spam content, email phishing scams, propaganda, and misinformation cheaply.

There are free chatbots, but they come with limitations, such as limits on daily usage. Web search includes AI answers, and AI web search start-ups offer free AI results. Generative AI is being integrated into social media and messaging apps. Consumers are finding AI integrated into smartphones and PCs, with real-time translation or summarized articles. Paid chatbots have more features, work faster, and have fewer restrictions. Businesses are adopting paid tools to organize email, transcribe meetings, analyze data, create marketing copy, and do research. Pricing varies.

AI in Finance

Financial services companies use AI to process customer calls, fight fraud, create marketing material, forecast sales, interpret regulations, and understand tax law. Employees use AI to help with IT issues, health benefits, and client questions. Customer assistants have been used billions of times. Nearly half of consumers are considering using generative AI tools for personal finances. Those surveyed trust generative AI as much or more than human advisors. An investing app will launch an AI virtual assistant to subscribers on a plan. The CFP Board published a guide on generative AI for Certified Financial Planners, addressing ethical issues and noting that generative AI can be used for tasks such as summarizing client meeting notes, conducting initial research, and refining marketing materials. The guide highlights that generative AI can produce inaccurate information and that financial advisors are responsible for the final work product.

AI chatbots are being used to pick stocks. When it comes to personal finances, be wary of giving away sensitive financial information to AI chatbots and look out for inaccuracies.