What Would ChatGPT say?
Part I - What is investing?
The journey of our hypothetical SEC employee is over, at least for now. It started on June 1, when we first introduced them, culminating with the investor alert they drafted yesterday, on June 26. A ton of material is covered between these two bookends, and for anybody who wants to understand where the public stands on the word investing, we recommend that you check our archives.
We covered a lot of opinions, which we distilled into the draft investor alert of the hypothetical SEC employee. One thing we haven’t covered yet: ChatGPT. There is, of course, all the hype around it. So, we wondered: If we asked “What is Investing?” what would ChatGPT say?
We logged in and were greeted by the following message:
Ok, ChatGPT’s record to date is mixed. It aced the bar exam but failed at 6th grade math (though it got better afterwards). What are its finance capabilities? We typed in: “What is Investing?” This was ChatGPT’s answer:
Investing refers to the process of allocating money, resources, or time with the expectation of generating a return or profit in the future. It involves committing funds to an asset, venture, or project in the hope of earning a financial gain over time. Investing typically involves taking calculated risks in order to potentially grow wealth or achieve specific financial goals.
Investing can take various forms and can be done in different asset classes such as stocks, bonds, real estate, commodities, mutual funds, exchange-traded funds (ETFs), and more. Each asset class carries its own level of risk and potential return.
The primary objective of investing is to generate a positive return on investment (ROI), which is the profit or gain realized from an investment compared to its original cost. Investors aim to increase the value of their investments through various strategies, including capital appreciation (the increase in the market value of an asset) and income generation (such as dividends or interest payments).
Investing requires careful analysis, research, and understanding of the investment opportunity, market conditions, and potential risks. It also involves considering factors such as the investor's risk tolerance, time horizon, and financial goals. Different investment strategies and approaches exist, ranging from conservative strategies with lower risk but potentially lower returns to more aggressive strategies with higher risk and potentially higher returns.
It's important to note that investing carries inherent risks, and there is no guarantee of achieving the desired returns. Investors can experience losses, and the value of investments can fluctuate based on market conditions and other factors. It is advisable to seek professional advice and conduct thorough research before making any investment decisions.
Not terribly offensive. The answer was giving some clues that it was on an iffy foundation; it was leaning toward profits just a tad too much, but it wasn’t making any glaring mistakes. Is it possible that ChatGPT was even more advanced than we thought? We hit Regenerate response, and it happily obliged:
Investing refers to the act of allocating money, resources, or time into an asset, venture, or project with the expectation of generating a profitable return or achieving long-term growth. It involves setting aside funds or assets in the present to gain benefits or create wealth in the future.
Investing typically involves taking on some degree of risk, as the outcome is uncertain and can fluctuate based on various factors such as market conditions, economic trends, and the performance of the specific investment.
There are various types of investments available, including:
Stocks: Investing in individual company stocks, which represent ownership shares in a company.
Bonds: Purchasing fixed-income securities issued by governments, municipalities, or corporations that pay regular interest over a specified period.
Mutual Funds: Pooling money with other investors to invest in a diversified portfolio of stocks, bonds, or other assets managed by professional fund managers.
Real Estate: Investing in properties such as residential homes, commercial buildings, or land, with the goal of earning income through rental payments or appreciation in property value.
Commodities: Investing in physical goods like gold, oil, agricultural products, or other natural resources.
Exchange-Traded Funds (ETFs): Similar to mutual funds but traded on stock exchanges, offering diversification and the ability to buy or sell throughout the trading day.
Cryptocurrencies: Digital currencies like Bitcoin or Ethereum, which are decentralized and based on blockchain technology.
The specific investment choice depends on factors such as an individual's financial goals, risk tolerance, time horizon, and understanding of the investment opportunity. It is important to conduct thorough research and seek advice from financial professionals before making investment decisions.
Voila! We shook ChatGPT just once, upon which it dug deeper and found what we thought it would find: It characterized both gold and crypto as investment vehicles. It took a position on investing that is also in direct conflict with Warren Buffett, arguably the greatest investor of the last six decades, who, over the course of 57 years, generated twice the returns of the S&P 500. It took a position that is in direct conflict with Aswath Damodaran, who teaches corporate finance and valuation at the Stern School of Business at NYU and wrote 11 books, mostly on valuation and investment.
ChatGPT is a language model. Can we expect it to be accurate if society can’t agree on the language? If we can’t build consensus on definitions, how can we expect ChatGPT to rise above the inconsistencies and get to the truth?
This has broader implications. If ChatGPT is largely a mirror of society, and mostly something that parrots back popular opinion, can it be trusted? What are the implications for medicine, for example? Would it be wise to follow its advice?
Tomorrow, we intend to challenge ChatGPT some more and see how it responds.
