Thu, Apr 13, 2023|Whitney Tilson

Artificial intelligence and ChatGPT; Paul Krugman columns; How to avoid a dreaded middle seat

1) I have a confession to make...

I've never used ChatGPT. (I feel like the last person on earth who hasn't!)

If you're in the same boat, let's go on this journey together – and please send me your feedback at: WTDfeedback@empirefinancialresearch.com.

I suggest starting by watching this 28-minute video: Complete ChatGPT Tutorial – .

As preliminary background reading, I suggest this five-part series in the New York Times:

For more in-depth insight, here's an op-ed in the Wall Street Journal by the authors of The Age of AI: And Our Human Future – Henry Kissinger (former secretary of state and White House national security adviser), Daniel Huttenlocher (dean of the Schwarzman College of Computing at the Massachusetts Institute of Technology), and Eric Schmidt (former CEO of Google): ChatGPT Heralds an Intellectual Revolution. Excerpt:

A new technology bids to transform the human cognitive process as it has not been shaken up since the invention of printing.

The technology that printed the Gutenberg Bible in 1455 made abstract human thought communicable generally and rapidly. But new technology today reverses that process. Whereas the printing press caused a profusion of modern human thought, the new technology achieves its distillation and elaboration.

In the process, it creates a gap between human knowledge and human understanding. If we are to navigate this transformation successfully, new concepts of human thought and interaction with machines will need to be developed. This is the essential challenge of the Age of Artificial Intelligence.

The new technology is known as generative artificial intelligence; GPT stands for Generative Pre-Trained Transformer. ChatGPT, developed at the OpenAI research laboratory, is now able to converse with humans. As its capacities become broader, they will redefine human knowledge, accelerate changes in the fabric of our reality, and reorganize politics and society.

Related, here's an 18-minute video of author Walter Isaacson interviewing Schmidt about AI's impact on life, politics, and warfare, as well as what can be done to keep it under control: Fmr. Google CEO Eric Schmidt on the Consequences of an A.I. Revolution.

Lastly, here's a WSJ profile of Sam Altman – the CEO of OpenAI, which is the company that created ChatGPT: The Contradictions of Sam Altman, AI Crusader. Excerpt:

Sam Altman, the 37-year-old startup-minting guru at the forefront of the artificial intelligence boom, has long dreamed of a future in which computers could converse and learn like humans.

One of his clearest childhood memories is sitting up late in his bedroom in suburban St. Louis, playing with the Macintosh LC II he had gotten for his eighth birthday when he had the sudden realization: "Someday, the computer was going to learn to think," he said.

In recent months, Mr. Altman has done more than anyone else to usher in this future – and commercialize it. OpenAI, the company he leads, in November released ChatGPT, the chatbot with an uncanny ability to produce humanlike writing that has become one of the most viral products in the history of technology.

In the process, OpenAI went from a small nonprofit into a multibillion-dollar company, at near record speed, thanks in part to the launch of a for-profit arm that enabled it to raise $13 billion from Microsoft, according to investor documents.

This success has come as part of a delicate balancing act. Mr. Altman said he fears what could happen if AI is rolled out into society recklessly. He co-founded OpenAI eight years ago as a research nonprofit, arguing that it's uniquely dangerous to have profits be the main driver of developing powerful AI models.

2) Whenever I include an article by Nobel Prize-winning economist and New York Times columnist Paul Krugman, I get some heated e-mails from readers who don't care for his politics.

But I think he's one of the smartest commentators out there... so when I think he has something interesting to say, I'll take the heat and include it.

Even Charlie Munger, who "can't stand his politics," agrees – saying during a speech in 2015:

Take Paul Krugman and read his essays, you will be impressed by his fluency. I can't stand his politics; I'm on the other side. But I love this man's essays. I think Paul Krugman is one of the best essayists alive.

With that, here are four of Krugman's recent columns on a range of topics:

The Meaning of an Awesome Employment Report (April 10). Excerpt:

But maybe the important point is that almost every measure of inflationary pressure I'm aware of has improved substantially over the past year, with no increase in the unemployment rate. And there's no hint at all of the much-feared self-reinforcing inflationary spiral, in which rising expectations of future inflation feed into current inflation. In fact, most measures of expected inflation have declined over the past year.

So there's good reason to believe that we can sustain the incredibly good job market we have right now, even while getting inflation under control. And it will be a real tragedy if exaggerated fear of inflation causes the Federal Reserve to push interest rates too high for too long, leading to a gratuitous recession that throws away many of the gains we've made.

The Internet Was an Economic Disappointment (April 4). Excerpt:

See the great productivity boom that followed the rise of the Internet? Neither do I.

True, there are a couple of excuses you can make for the gap between the numbers and the hype. One is to assert that the Internet really did do great things for the economy, but that they were offset by negative factors – a deteriorating work ethic, or the mysterious decline in construction productivity, or something.

The other is that official numbers on economic growth fail to capture many invisible gains. I get a lot of pleasure out of the ability to stream live musical performances on YouTube; as far as I can tell, those benefits aren't counted in gross domestic product. Indeed, official economic growth surely understates true progress in the human condition. But this has been true for a long time.

Before the Internet, official economic data didn't directly capture the benefits of, say, plunging infant mortality thanks to improved sanitation, or the huge improvement in air quality after 1970. Are those invisible gains bigger now than they were in the past? It's doubtful.

Maybe the key point is that nobody is arguing that the Internet has been useless; surely, it has contributed to economic growth. The argument instead is that its benefits weren't exceptionally large compared with those of earlier, less glamorous technologies. For example, circa 1920, only about one in five U.S. households had a washing machine; by 1970, almost everyone had one or access to one. Don't you think that made a big difference? Are you sure that it made less difference than widespread access to broadband?

For the fact is that while moving information around is important, we're still living in a material world: Most of what we consume is physical stuff or in-person services, which haven't been drastically affected by the Internet.

A.I. May Change Everything, but Probably Not Too Quickly (March 31). Excerpt:

Or to put it another way, the great boom from the 1940s to around 1970 seems to have been largely based on the use of technologies, like the internal combustion engine, that had been around for decades – which should make us even more skeptical about trying to use recent technological developments to predict economic growth.

That's not to say that artificial intelligence won't have huge economic impacts. But history suggests that they won't come quickly. ChatGPT and whatever follows are probably an economic story for the 2030s, not for the next few years.

Which doesn't mean that we should ignore the implications of a possible A.I.-driven boom. Large language models in their current form shouldn't affect economic projections for next year and probably shouldn't have a large effect on economic projections for the next decade. But the longer-run prospects for economic growth do look better now than they did before computers began doing such good imitations of people.

How Big a Deal Is the Banking Mess? (March 21). Excerpt:

So how does the current mess compare? It will definitely impose a drag on the economy. But how big a drag? And how much should it change policy, in particular the interest rate decisions of the Federal Reserve?

The answer is simple: Nobody knows.

Here's what we do know: Depositors don't seem to be demanding cash and putting it under their mattresses. They are, however, moving funds out of small and medium-size banks, to some extent into big banks, and to some extent into money market funds...

I wrote a couple of weeks ago that the Fed is creeping its way through a dense data fog, trying to steer between the Scylla of inflation if it tightens too little and the Charybdis of recession if it tightens too much (or maybe it's the other way around; input from Homer scholars is welcome). Well, the fog has gotten even thicker. But clearly the risk of recession has gone up and the risk of inflation has gone down. So it makes sense for the Fed to steer somewhat to the left.

What this probably means in practice is that the Fed should pause its rate hikes until there's more clarity about both the inflation picture and the effects of the banking mess – and it should be clear that that's what it is doing.

There doesn't seem to be much danger that the Fed will lose its inflation-fighting credibility if it takes time to get its bearings. Inflation expectations are looking very well anchored...

3) Here's another flying trick I just discovered...

I had a four-hour flight on Delta Air Lines (DAL) last month from JFK to Punta Cana and was quite unhappy to get stuck in a dreaded middle seat, which rarely happens thanks to my Gold Medallion status. So about 30 minutes before flight time, I went up to the gate agent and said, "I'm stuck in a middle seat. Do you have anything available or is there a paid upgrade?"

To my surprise, he said "We block off the last row, so if you're willing to sit there, I can reseat you." (I think other airlines do this as well.)

A whole row to myself?! "Absolutely!" I answered.

I didn't have a window, but was able to spread out, open my laptop, and get a lot of work done...

Sure enough, when I checked the Delta app when checking in for my recent flight home from Salt Lake City, where I was also assigned to a middle seat, this is what I saw:

Alas, this time it didn't work, as the gate agent said they reserve those rows for families and the flight was oversold.

But it's always worth asking!

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.