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Unless you’ve been hiding under a rock, you probably noticed the excitement, hype, and borderline panic when ChatGPT from OpenAI was released in November 2022.
The technology behind it is too complex to explain fully here, but it uses supervised/reinforcement learning and all the data on the Internet (as of 2021) to generate text based on statistical probabilities (Wikipedia has a good summary).
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Some people have predicted that ChatGPT and similar artificial intelligence technologies will destroy all white-collar jobs, others have predicted massive changes but no job destruction, and others are still unconvinced by the technology.
I’ve used ChatGPT over the past few weeks as I’ve been working on a macro package for a new version of our PowerPoint course (now available!).
So, I’ll take a “centrist” approach here and explain my findings and predict how it might affect recruiting, the job itself, and even education at all levels:
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It was useful to create a “rough draft, ” but it kept making obvious errors that a human could detect in a second.
It functioned as a refined/faster version of Google search because I could type in natural questions and get the answers directly in text rather than poring through search results.
This code is incorrect because it doesn’t check for various errors, such as the user not having 2 shapes selected, but it’s a decent start.
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I won’t paste in the full dialogue and code here, but, in short: I was having some trouble with a “Copy and Paste Table Formatting” macro and asked ChatGPT for help.
I then asked it to build a full Excel model, which it could not do, but it did offer a simple outline:
Again, it misses some critical factors, such as the relationship between CapEx, cash flow, and production capacity, but it’s decent if you have no idea where to start.
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On the other hand, it cannot scan an investor presentation and 10-K and tell you what to do, and it cannot produce anything outside of text/code.
As they’ve rightly observed, ChatGPT does not “understand” concepts in the symbolic/abstract way humans do; it simply predicts the next word in the sentence.
In other words, even if you ask it to write code for you, it can’t insert the code into a production environment, run it, test it, find bugs, and tell you what needs to change.
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It also can’t interview customers, find sources on the ground, or call a friend who knows the obscure details of a specific technical problem you’re facing.
Future versions of these tools might improve these integration issues, but I don’t think AI will be capable of “interviewing” humans in real life anytime soon.
First, it may become harder to contact people and get responses because they’ll be even more inundated with email spam generated by these tools.
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Many finance professionals already get a lot of requests for informational interviews and advice, but most of these requests are poorly written and impersonal.
I predict that banks and PE firms will move to more in-person, on-site tests and evaluations where Internet and phone use is disallowed.
The irony is that banks pushed to “automate” everything and make recruiting impersonal, but due to the advancement of technology itself, recruiting will become more personal.
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But if Microsoft ends up investing $10 billion in OpenAI, you can bet that Office integration will be on its way soon.
That said, I’m not sure it matters because almost everything in banking is already based on templates and existing slides and models.
In other words, these AI tools do the same thing your VP or Associate does when outlining a presentation: combine content from other sources.
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But in IB roles, most time is consumed not by the “outline” or “rough draft” but by the 78 revisions your presentation goes through as different people make changes.
And the current tools are bad at these types of refinements and small changes; it’s often faster to make the changes yourself than to explain what you want.
Even if they get to the level where they can cross-check every single detail and footnote in a 100-slide presentation, you can bet that bankers will still make humans review it manually.
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In terms of IB work products, these tools will probably be the most useful for the confidential information memorandums (CIMs) and “teasers” used to market companies to potential buyers.
AI tools could reduce drudgery by setting up the basic document and letting the human bankers focus on how to “sell” the company rather than finding all the boring parts.
At the senior levels, it’s still a relationship-driven, client-facing business in which the clients pay banks millions of dollars for their full attention.
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I don’t think the CEO of a $50 billion company would be satisfied if he asked for advice on an acquisition and the MD brought in a chatbot to answer his questions.
For example, if the content in a CIM or teaser is generated based on leaked documents or random comments on Reddit, can banks be held liable if the information is wrong? Would OpenAI be subject to a lawsuit?
The bottom line is that AI and language models will impact IB and other finance roles, but I expect less of an immediate impact than in areas like the news, marketing/copywriting, digital art, and even routine programming.
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I was listening to a podcast last week where the hosts predicted that ChatGPT would change the world more in the next 5 years than the Internet has in the past 30 years.
But I don’t think you should avoid industries or careers due to AI because there’s no telling how everything will play out.
No job is “safe” from AI, and all industries will be affected by ChatGPT and its successors, but it’s premature to conclude that
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On the bright side, these tools might reduce investment banking hours and let you handle those 3 AM emergency requests more easily…
…but they could also do the same thing Excel did decades ago: allow senior bankers to request more work in the same amount of time.
Either way, I’ll be eager to accept the new AI overlords if they can format Excel files more efficiently than my current macro.
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If you liked this article, you might be interested in reading Technology Investment Banking: Take Over the World with Zero Earnings and Negative Cash Flows?
Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.
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