Philosopher Yuval Noah Harari warns of the risks AI poses to finance.
Author, philosopher and history professor Yuval Noah Harari told the audience at the Bank for International Settlements (BIS) Innovation Summit that unlimited use of artificial intelligence in financial systems could have dire consequences. He said strong institutions are needed to keep AI in check.
Financial systems create trust, Harari argued. Money, bonds, and other financial devices allow millions of strangers to work together toward a common goal. But no effort has been made to make financial regulation “humanly” understandable, he said.
“Perhaps only 1% of the population understands how the financial system works. What happens when that number drops to zero?”
Harari cited the 2007-2008 financial crisis as the result of incomprehensible financial innovation. Regulators did not understand new financial products well enough to regulate them.
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AI is an extraterrestrial form of intelligence that is only at the beginning of its evolution. It doesn’t reason the way humans do and can easily create financial devices beyond human imagination, shifting power from politicians and regulators to algorithms. Trust will be built between AI systems rather than between people, and in times of financial crisis, politicians and regulators will be forced to trust AI.
The breakdown of trust relationships can lead to social instability. Trust in politicians and institutions is already declining, Harari added.
“We need to prevent AI from becoming completely unintelligible. (…) We need the ability to understand and regulate this.”
Regulation should not be left to geniuses or “charismatic leaders,” Harari continued. Only institutions can “keep humans informed.”
Nonetheless, there are risks. World-changing innovations often succeed only after a series of failed attempts to use them. Harari described imperialism, communism and Nazism as failed attempts to build an industrialized society with tens of millions of victims. Meanwhile, AI can come up with ideas for how to use it on its own.
Harari said regulators should focus on building more trust among people to ensure the financial system of the future is stable and people-friendly.
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