Lessons for AI from the financial system

In light of the AI revolution underway, which will enable many of the things we do today to be done exponentially faster and cheaper, let's take a moment to consider the financial system on which the global economy runs. If we consider the rules this system runs on currently, it would be uncontroversial to say that "the point" is to create profit, not to create well-being for people or sustainability for the planet's life support systems.

Where executives can automate away the people (or as the financial system sees it, the cost of human capital) in this system, they often do, with little regard for the toll that takes on people's well-being or society–?the legally required amount.

Playing this out, at a certain point AI could make it possible to have an entire global economy that doesn't involve people, other than the owners of capital. Goldman Sachs has observed that job losses due to GPT4+ will be in the hundreds of millions. Why should we think AI will not eventually enable an economy that surpasses even that?

The "algorithm" that the capital markets run on currently has one objective: profit maximization as soon as legally possible. In the United States, corporations are treated as people in the law and have been ever since legal ruling back in 1886 (coincidentally named for Santa Clara County,?the same county where AI arguably got started at Stanford University a century later). AI can help optimize for that sole profit objective. Eventually there is reason to think that it will do so across all formal social systems, including media, politics, and judicial.

Indeed we are quite a ways down that road already.

The algorithm will either need to be updated, very soon, to set the objective people's well-being, or we will see how little the capital marketplace needs us to be quite "healthy" by itself, largely without us.

This "update" cannot be accomplished by any individual, or, as we in the US have tried to do, by the business world voluntarily–?even the seemingly most powerful business leaders are literally without the power to change it because their mandate in a nutshell is to maximize profit or be ousted, as Larry Fink can attest. That leaves Congress, and regulators. Many legislators' independence from corporate lobbying and the wealth it produces is already highly questionable.

So it's down to regulators... and Dolly Parton.

I almost hesitant to state this aloud, because if regulators don't get on the stick soon there is reason to think they will be coopted by the current objective of the financial system which appears to have taken on a life of its own, at the expense of wrong and right. But there must be regulation and guidance at this point, supported by the political will to achieve it.

To arrive at this, without that regulation getting neutered before the ink is dry, all the business leaders and investors who admit to their kids or at work behind closed doors that they have "an equity agenda" or "a sustainability agenda" must step forward and... privately state to the regulators that this agenda is the only viable one. (Yes, that means you).

And also, publicly, as individuals if nothing else, hopefully with a little help from their friends. Modeling some useful language that transcends partisanship for this is now Dolly Parton, for example here.

Changing the objective of finance to advancing well-being for people won't mean abandoning the financial system as we know it. But it will and does mean accounting for the well-being of all those affected by business and investment activities, and incorporating their experience into the definition of return on investment. Valuation of these impacts is key to this, as is ensuring that stakeholders define for themselves what matters to them and how much. We do this with our clients every day and it is not only smart for their businesses, it's uplifting.

If we do not update the objective of the system to well-being, we – humanity–are headed for planned obsolescence.

If we do, we turn the global financial system into the most powerful tool humanity has ever invented for advancing our own well-being, and along with it, that of the whole planet.

Game on!