Dreams of Replacing Humans in Finance May Come True

ChatGPT is the fastest growing app of all time, gaining more than 100 million users just two months after its launch in November. It allows users to have human-like conversations that include reasonable-sounding and often correct answers to all sorts of questions. Like humans, it can ask for more information and explain reasoning.

We’re now seeing the first academic research about the use of ChatGPT in finance. Two recent studies make GPT seem like a promising technology both to improve investment decision making and to explain its decisions. Perhaps the long-held dream of replacing humans in finance is coming true.

In December I wrote that “a tireless machine able to digest all information and immune to biases should be clearly superior to humans when it comes to investing. Except it's not.” Financial management was one of the earliest goals of artificial intelligence, or AI, research because it seemed like an easy and highly rewarding task. But so far, AI has succeeded only in niche applications in finance.

GPT stands for Generative Pre-trained Transformer, a five-year-old idea that may be a game-changer in AI applications. Very broadly, there are three approaches to extracting useful information from data. With structured data, like accounting numbers or price histories, you can apply statistics and formal models. With completely unstructured data — series of bits that could be photographs or physical measurements or text or anything else — there are algorithms that can extract patterns and predict future inputs.