Why Chatbots May Cause Software to Disrupt Itself... and How to 'Play' the Crisis Du Jour| By Herb Greenberg |  |
 With the advent of sophisticated chatbots like ChatGPT, there was an immediate sense of fear in the creative community...
The initial reaction by the likes of journalists, graphics artists, photographers, copywriters, and others was that artificial intelligence ("AI") was coming for their jobs. And for mankind, maybe it is... and maybe there's reason for concern at some levels. But here's a group you probably didn't have on your bingo card: software engineers. And it's kind of ironic... In a sense, software engineers are creating the disruptive technology that very well may cause their own disruption – and in the process are doing what technology has done to every industry but technology: make things, in this case software, cheaper. That's the opinion of my friend Paul Kedrosky and his business partner Eric Norlin of SK Ventures in an essay last week headlined, "Society's Technical Debt and Software's Gutenberg Moment." I call it an essay, but it's more like an academic paper... And as I joked to Paul, they buried the lead, which is the subhead: "Software is at the Epicenter of its Own Disruption." Or as Paul and Eric put it... We have nothing against software engineers, and have invested in many brilliant ones. We do think, however, that software cannot reach its fullest potential without escaping the shackles of the software industry, with its high costs, and, yes, relatively low productivity. A software industry where anyone can write software, can do it for pennies, and can do it as easily as speaking or writing text, is a transformative moment. It is an exaggeration, but only a modest one, to say that it is a kind of Gutenberg moment, one where previous barriers to creation – scholarly, creative, economic, etc. – are going to fall away, as people are freed to do things only limited by their imagination, or, more practically, by the old costs of producing software. This will come with disruption, of course. Looking back at prior waves of change shows us it is not a smooth process, and can take years and even decades to sort through. If we're right, then a dramatic reshaping of the employment landscape for software developers would be followed by a "productivity spike" that comes as the falling cost of software production meets the society-wide technical debt from underproducing software for decades. Just this week, the New York Times ran a story on several studies showing the effect of ChatGPT on productivity – confirming what Paul and Eric wrote. According to the Times... A third study– using a program developed by GitHub, which is owned by Microsoft – evaluated the impact of generative AI specifically on software developers. In a trial run by GitHub's researchers, developers given an entry-level task and encouraged to use the program, called Copilot, completed their task 55% faster than those who did the assignment manually. Those productivity gains are unlike almost any observed since the widespread adoption of the personal computer. "It does seem to be doing something fundamentally different," said David Autor, another MIT economist, who advises Ms. Zhang and Mr. Noy. "Before, computers were powerful, but they simply and robotically did what people programmed them to do." Generative artificial intelligence, on the other hand, is "adaptive, it learns and is capable of flexible problem solving." When the software starts writing itself, what could possibly go wrong? Moving on, now that the dust seems to have settled from the latest crisis du jour, this one being the banking blowup, what's an investor to do... next time? When it comes to your money, unless you're a trader, maybe the best thing to do is... nothing. Unless, of course, you see a stock you like that has been crushed and your cash isn't locked up in long-term U.S. Treasurys. That's the message in a recent column by the New York Times' Ron Lieber, who wrote... As unsettling as the financial world may seem right now, the overall U.S. stock market rose this week. Sure, financial stocks bounced up and down, but if you have most of your stock investments in plain-vanilla index funds that own thousands of different company shares – and you should – your net worth may be higher than it was a week ago. Even so, it is natural to wonder if the prospect of more bank failures is the sell-everything sign that you've been waiting for. Wouldn't you feel better if all of your money was in cash and not in gyrating stocks? It might, for a bit. But consider these numbers that Nejat Seyhun, a professor at the Ross School of Business at the University of Michigan, generated this week. Imagine that you held a giant basket of just about every U.S. stock and left it alone from 1975 to 2022. The return on that portfolio would have been 1,426%. Now, imagine that you sold everything here and there when things felt iffy. If you missed just the 10 best days of stock performance out of those 12,106 trading days, your return would fall to 602%. That's one potential price of trying to time the stock market, and those lost returns could mean having to work years longer than you wanted to. Not surprisingly, that has been a theme in our promotions at Empire Financial Research... But as marketing driven as that may seem, it's also true. It's just that human nature sometimes gets in the way. As always, feel free to reach out via e-mail by clicking here. I look forward to hearing from you. Regards, Herb Greenberg
March 31, 2023
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