The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has expressed concerns about the potential risks posed by artificial intelligence (A.I.) technology. Gensler believes that A.I. could become the next systemic risk to the financial system. In a paper co-written by Gensler in 2020, it was concluded that a few A.I. companies would build the foundational models that underpin various tech tools, leading to interconnectedness in the financial system. This interconnectedness could increase the likelihood of a financial crash due to herding behavior, where everyone relies on the same information and responds similarly. Gensler expects that the United States will end up with two or three foundational A.I. models.
Another concern raised by Gensler is whether companies using A.I. prioritize user interests over their own. The recent meme stock frenzy and rise of retail trading on apps showed the power of nudges and predictive algorithms. The SEC has proposed a rule that would require platforms to eliminate conflicts of interest in their technology. Gensler emphasizes that companies have a duty of care to their clients, regardless of whether they use algorithms or not.
The question of liability when it comes to faulty financial advice generated by A.I. is another topic of debate among policymakers. Gensler believes that companies should take responsibility for creating safe mechanisms, and users should not delegate responsibility solely to the technology. He argues that humans build the models and set up parameters that guide A.I. systems.
In other news, the movie “Barbie” has reached the $1 billion mark in revenue faster than any other film in Warner Bros.’ history. This success challenges the notion that women-focused movies have limited appeal. Saudi Aramco, the state-controlled oil giant, reported a 38% drop in quarterly profit due to declining global crude prices. The United Auto Workers has made bold concessions including a 40% wage increase and guarantees for workers hired at new electric-vehicle battery plants in negotiations with automakers. Berkshire Hathaway, led by Warren Buffett, reported an increase in earnings due to improving performance in its insurance arm and strong stock holdings. U.S. researchers at the Lawrence Livermore National Laboratory achieved net gain in a fusion reaction, a step forward in the pursuit of clean and cheap energy.
In the business world, trucking giant Yellow filed for bankruptcy protection after shutting down, resulting in the loss of 30,000 jobs. The company had struggled for years, with failed acquisitions and onerous debt. Taxpayers could potentially face losses as a result of Yellow’s bankruptcy, as the company had received a $700 million loan from the federal government during the pandemic. The president of the New York Fed, John Williams, expects interest rates to start coming down next year, signaling a potential shift in the Federal Reserve’s monetary policy.
Overall, Gensler’s warning about the risks of A.I., along with the latest updates in various sectors, highlights the dynamic and evolving nature of the business and financial world.