Morning Coffee: Morgan Stanley banker says AI is more competent than his colleagues. Goldman Sachs promotes the ...

When ChatGPT first came out, a lot of people in the investment banking industry felt that one of the most human and relatable things about it was its tendency to make something up when it didn’t know the answer.  Knowing when to admit ignorance and when to waffle is one of the higher level skills of the industry, after all.  A banker who never says “I don’t know; I’ll research it and get back to you” like Patrick Biggs at Morgan Stanley, is almost certainly a BS merchant who will blow up in the long term. 

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But on the other hand, if that’s all you ever say then people will eventually mistake you for the ordinary kind of ignoramus.  And a little bit of “fake it until you make it” isn’t always a bad thing. Particularly in fast moving markets jobs, a quick answer that’s nearly right is much more useful than a slow answer that’s exactly right, and top bankers are often very good at the “scientific wild-ass guess”.

Consequently, sell side trading operations have always been in a bit of a technological arms race to develop systems that let their traders and salespeople look up the answers in real time, rather than interrupting the flow of conversation and admitting ignorance.  From the first days of the Bloomberg Terminal, the dream has always been to have a helpful virtual colleague who can feed you exactly the right piece of information.

Jeff McMillan, the head of wealth management tech at Morgan Stanley, thinks that the next step forward is going to be something like “AIMS” (short for “AI at MS”), which is a model like ChatGPT, but with the fun taken out. It’s only trained on internal Morgan Stanley data, it has strict rules preventing it from giving anything that looks like an investment recommendation, and it “can't use metaphors or analogies”.

All it can do is look things up, really quickly, and put the answers into a form that can be read out down the phone or typed into a messaging system.  Nearly every team in Morgan Stanley’s wirehouse operation has at least one member who uses it, and McMillan claims that it’s a more reliable source of information than “asking colleagues, or drawing on employees' own knowledge”.  Which is, of course, something of a double-edged sword – it’s either a really good fact about AIMS or a really bad fact about the colleages. 

Or is it? It sounds bad to hear that a chatbot can outperform human beings on things like interpreting economic research or knowing how to route wire transfers. (Patrick Biggs says that AIMS saves him measurable time every week by summarising data releases, while Jeff McMillan says that since its launch, calls to the help desk have fallen dramatically).  But this kind of information is the sort of thing that good bankers have always left to their juniors and support staff.

One of the secrets of the industry is that technical investment information is not the most valuable information in the wealth management business.  Employees only ought to worry when they hear that Morgan Stanley brokers are using a chatbot to look up facts about their client’s hobbies, sports allegiances or favourite steakhouse.

Elsewhere, has there been some tangible result from David Solomon’s dinner party?  Back in February, the Wall Street Journal reported that top management were concerned that Goldman wasn’t hanging on to senior female employees; one of the things which brought this to a head was the departure of Beth Hammack.

Now Casey Halio, the chief strategy officer and head of investor relations, is being promoted to Global Treasurer, one of the jobs which brought Beth Hammack to prominence.  She’s replacing Philip Berlinski who’s going to Millennium. This is bound to raise interesting speculation about whether this was a conscious effort to address gender balance, or just one of those things.

Both possibilities are plausible.  If Berlinski had got a sense that as a white middle-aged man, he might be a problematic candidate to be Goldman’s next CFO, it would be natural for him to start looking around for hedge fund jobs.  But alternatively, people in jobs like Berlinski’s don’t usually have to look around, and Co-Chief Operating Officer of Millennium isn’t what you’d normally think of as a consolation prize.

Whichever is true, Goldman has got the chance to address a sore point of diversity, and once more it’s been demonstrated that if you want to get to the top, a very important skill to have is that of sticking around.

Meanwhile …

The pandemic seems so long ago; return-to-office rates in New York City have now reached 80%.  Banks are among the main sectors driving the trend, and the same thing is happening in Miami. (Bloomberg)

“A principle isn’t a principle until it’s cost you money”, as the saying goes. Citi apparently turned down seven transactions last year over issues related to Indigenous people’s rights. (Responsible Investor)

South African bankers can be found all over the world, and some of them may be taking an interest in the fact that Nedbank, the national champion back home, aims to expand its markets and advisory businesses. (Bloomberg)

A JPMorgan banker had a hobby buying nice cars, which turned into a side-hustle selling them after he’d driven them for a while, and now he is a car dealer and his biggest regret is not having made the change years ago. (Car Dealer Magazine)

If you want a career change, but not a very big one, then a new exchange scheme will allow you take your experiences of being a lawyer at UBS, and apply them to a new set of challenges being a lawyer at Zurich. (The Lawyer)

Couples who have similar drinking habits not only have a better chance of staying together, but actually seem to live longer. (BPS Digest)

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