Investment Advisors Pay the Price For Selling What Looked a Lot Like AI Fairy Tales (theregister.com) 15
Two investment advisors have reached settlements with the US Securities and Exchange Commission for allegedly exaggerating their use of AI, which in both cases were purported to be cornerstones of their offerings. From a report: Canada-based Delphia and San Francisco-headquartered Global Predictions will cough up $225,000 and $175,000 respectively for telling clients that their products used AI to improve forecasts. The financial watchdog said both were engaging in "AI washing," a term used to describe the embellishment of machine-learning capabilities.
"We've seen time and again that when new technologies come along, they can create buzz from investors as well as false claims by those purporting to use those new technologies," said SEC chairman Gary Gensler. "Delphia and Global Predictions marketed to their clients and prospective clients that they were using AI in certain ways when, in fact, they were not." Delphia claimed its system utilized AI and machine learning to incorporate client data, a statement the SEC said it found to be false.
"Delphia represented that it used artificial intelligence and machine learning to analyze its retail clients' spending and social media data to inform its investment advice when, in fact, no such data was being used in its investment process," the SEC said in a settlement order. Despite being warned about suspected misleading practices in 2021 and agreeing to amend them, Delphia only partially complied, according to the SEC. The company continued to market itself as using client data as AI inputs but never did anything of the sort, the regulator said.
"We've seen time and again that when new technologies come along, they can create buzz from investors as well as false claims by those purporting to use those new technologies," said SEC chairman Gary Gensler. "Delphia and Global Predictions marketed to their clients and prospective clients that they were using AI in certain ways when, in fact, they were not." Delphia claimed its system utilized AI and machine learning to incorporate client data, a statement the SEC said it found to be false.
"Delphia represented that it used artificial intelligence and machine learning to analyze its retail clients' spending and social media data to inform its investment advice when, in fact, no such data was being used in its investment process," the SEC said in a settlement order. Despite being warned about suspected misleading practices in 2021 and agreeing to amend them, Delphia only partially complied, according to the SEC. The company continued to market itself as using client data as AI inputs but never did anything of the sort, the regulator said.
The Ferengi would probably say (Score:3)
"You'd have no investors if you weren't allowed to embellish the capabilities of your company's product!"
Let's be honest, if the product isn't being hyped up, then it's the business model itself that gets touted as new and revolutionary. "We're gonna buy Chinese scooters and leave them on the streets and let people rent them with an app!" "We've implemented a way to flush your toilet through a blockchain network!" "We're gonna sell a portable fire pit through direct social media marketing!" "Invest today, researching the company you're investing in is for suckers who don't get rich!"
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Re:The Ferengi would probably say (Score:4, Informative)
I can go to the drug section of Walmart right now and there's a whole aisle of "supplements" (basically a legal loophole allowing companies to legitimately sell placebos) right next to the real medicines with efficacies backed by actual scientific data. It's a very fine line between lying and caveat emptor.
I'm not defending the practice, but merely pointing out that overhyping a shoddy product isn't anything new.
Re:The Ferengi would probably say (Score:4, Interesting)
I'd argue overhyping is inherent in any kind of marketing and sales. I mean you never see a Ford commercial that says "Yeah, our F150 has four wheels, pretty much performs within the same parameters as our Dodge and Toyota counterparts, mileage isn't really any better, and our heated seats have about the same likelihood of malfunctioning and burning you alive as your neighbor's brand new Ram."
Everything in capitalism is one degree of fairy tale or another. It's how you beat out competition that are selling essentially the same product as you are. Am I the only person that watched the "It's Toasted" sequence from Mad Men? I don't actually think I'm going to have an orgasm if I chew minty gum, but the implication is kind of there.
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I like the car analogy, but the example I had in mind was how early versions of Windows and MacOS originally had no memory protection and frequently crashed. These were machines sold as a means of getting productive work done and they'd regularly just crap themselves and we just sort of accepted it as normal. Could you imagine if old computer ads were like "You better save frequently, because... and it's gone!"
Nope, the promotional material was always about how wonderful these marvelous machines were, whi
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I'd argue overhyping is inherent in any kind of marketing and sales. I mean you never see a Ford commercial that says "Yeah, our F150 has four wheels, pretty much performs within the same parameters as our Dodge and Toyota counterparts, mileage isn't really any better, and our heated seats have about the same likelihood of malfunctioning and burning you alive as your neighbor's brand new Ram."
Everything in capitalism is one degree of fairy tale or another. It's how you beat out competition that are selling essentially the same product as you are. Am I the only person that watched the "It's Toasted" sequence from Mad Men? I don't actually think I'm going to have an orgasm if I chew minty gum, but the implication is kind of there.
I believe the film Crazy People took a humorous approach to truth in advertising back in 1990. Things like "Volvo: they're boxy but they're good".
In this case, it seems the companies in question didn't just advertise ambiguously (particularly outside the US where outright lying in advertising is not permitted, they tend to use ambiguous terms like feelings, "well being", "natural" and "good" without qualifying them to avoid making a statement that can be challenged in court) but sold products deliberate
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Well, the AI assholes have used clever manipulation, playing to the fantasies and desires of a lot of people. That seems to work well. Also remember that only about 20% of all people can be convinced by rational argument. The rest believes whatever they feel best with and simply ignores evidence. Easy pickings for the manipulators.
AI? How about human I? (Score:3)
Next do âoeOpenâAI (Score:2)
We still have no real AI, nobody does, OpenAI promises to be well, Open, and led investors to think they would be good open source stewards leading the charge towards actual real AI, instead they decided to close everything up and advertise how their langchains were reaching new levels of intelligence while hovering up user content and their products are growing crappier by the day.
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We can’t even succinctly define plain old regular intelligence (https://en.wikipedia.org/wiki/Intelligence), let alone define it sufficiently to allow us to distinguish between Natural and Artificial intelligence. AI is clearly an advancement but calling it intelligence was a bad idea from the beginning that is now being exploited as the latest snake oil.
Looks like the bubble is starting to deflate (Score:2)
A lot of people have already called it after some exposure to the artificial morons, pretty much at the start of the hype. That these assholes could keep this crap going for so long just shows how easily most people can be manipulated.
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Yes and no. The hype cycle is slowing, but practical applications of machine learning and GPT are permeating more specialties. There are some cool practical applications out there which don't need someone who can visualize vast amounts of data to identify patterns and act on them.
Re:Looks like the bubble is starting to deflate (Score:4, Insightful)
There are some specialized applications out there, agreed, and there is some limited potential for more. But, as with any AI Hype, 95...99% of the promises will not pan out. The "AI" field is the all-time champion of overpromising and underdelivering and this time is not different.
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Yes and no. The hype cycle is slowing, but practical applications of machine learning and GPT are permeating more specialties. There are some cool practical applications out there which don't need someone who can visualize vast amounts of data to identify patterns and act on them.
True. But your UID is low enough that you would remember the first dot-com bubble. There were lots of decent products and services that came out of it, but there were plenty of over-hyped, derivative ideas that went bust (and rightly so). In a parallel with today's story, there were also plenty of dotcom businesses in the late 1990s that blatantly lied about what "the internet" would do to make their products and services the best in the world and you should totally invest right now.