The Securities and Exchange Commission has a name for the ways some firms are abusing the hottest new trend in technology: AI washing. SEC chief Gary Gensler warned last month that some companies are making fraudulent claims that their products incorporate artificial intelligence to take advantage of buzz rather than reflecting a firm’s real capabilities. “Don’t do it,” Gensler said. “One shouldn’t green wash, and one shouldn’t AI wash.”
Like so-called greenwashing — the puffed-up promise by some on Wall Street that their investments will save the planet when they’re really just trying to make a buck — AI washers are attempting to exploit a fad. By slapping the letters “AI” on their offering, even if their product simply is gussied up software, some companies stand to puff up their valuations, sucker investors and mislead consumers.
The SEC isn’t the first regulator to sound the alarm. Last February, the Federal Trade Commission warned companies against using “AI” as a fraudulent marketing tactic. “At the FTC, one thing we know about hot marketing terms is that some advertisers won’t be able to stop themselves from overusing and abusing them,” a commission lawyer wrote in a blog post. “Before labeling your product as AI-powered, note also that merely using an AI tool in the development process is not the same as a product having AI in it.”
But calling out a problem isn’t the same as bringing it to a halt. And as with so much else about AI, it is far easier to identify its dangers than to rein them in.
One problem with artificial intelligence is that it’s a catchall term that doesn’t mean much to technologists. Its sub-disciplines such as “neural networks” and “machine learning” convey real meaning to academic and corporate scientists who study and develop it. The newer field of “generative artificial intelligence” — the technology behind ChatGPT’s breakout offering — has been in the public’s consciousness for barely a year.
Take the case of a Bay Area software company, C3.ai. It sells a host of AI-inflected products to businesses and listed its shares in a ballyhooed 2020 initial public offering that sported the catchy stock symbol “AI.” Yet, years earlier C3 had marketed itself as a purveyor of software to monitor sustainability efforts — the name stood for “measuring, mitigating and monitoring carbon reduction.” C3’s stock has soared and crashed with the ups and downs of the AI boom.
We’ve seen these tactics before. When it began to be commercialized in the 1990s, the internet was a genuine paradigm shift in technology that had massive impacts on everything from publishing to mail delivery. That didn’t stop charlatans from slapping the words “dot-com” on the end of ordinary businesses in an effort to sprinkle pixie dust on their valuations. In 1998, the SEC founded the now-quaint-sounding Office of Internet Enforcement to go after fraudulent behavior on the web. Then as now, regulators pursued cases of fraud and false claims that would have been illegal wherever they happened in the economy but appeared to be everywhere when the internet happened. The office eventually was disbanded.
The internet bubble was well on its way toward becoming fully inflated when the SEC stepped in. Today, Wall Street’s regulator is belatedly coming up to speed on the new technology. It reportedly has been conducting so-called sweeps of financial firms, asking oodles of questions about how the firms are using AI-powered programs in every aspect of their operations. Gensler also has warned that a “monoculture” of powerful AI in the hands of too few corporate players could create a dangerous overreliance on them by capital markets — another area that also interests the FTC.
Just because hucksters will capitalize on AI’s allure doesn’t diminish the real impact it will have on all corners of society, good and bad. The simultaneous fear and excitement are everywhere: Chief Justice John G. Roberts Jr. recently devoted the bulk of his annual report on the state of the federal judiciary to stroking his chin about the effects of AI on the legal profession. Anxiety over AI, particularly AI-powered misinformation, dominated conversations at the World Economic Forum’s recent annual meeting in Davos. But even that didn’t stop the well-heeled crowd from joining in the hype: An observer counted more than two dozen events at Davos that directly referenced AI in their titles.
And one of the world’s foremost authorities on AI and anxiety, Elon Musk, has repeatedly warned that robots might take over the world — even as he has stood up a new AI company, X.AI. (He also warned Tesla directors he won’t pursue AI advances within the carmaker if he isn’t given more company stock.)
In other words, AI is something like a perfect storm in the investment world and beyond: tremendous opportunity, both for progress and for being bamboozled into losing one’s shirt.
