Good day.

This is Brainyacts. The Generative AI newsletter that has better service than the US Postal Service. We actually deliver on Sundays.

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To read previous posts, go here.

In this edition we will

1. pick stocks using ChatGPT

2. get to know Charlie Munger

3. create a new litigation betting market

4. see the prompt I use to write part of this newsletter

5. learn what riles OpenAI’s CEO broke

6. meet the $15/hour workers behind ChatGPT

7. talk to a robot dog

8. ask for your feedback

AI Stock Picking: Litigation Picking?

First, Let’s Tackle AI-powered Stock Picking.

As an avid follower of all things finance and technology, I couldn't help but chuckle when I read Charlie Munger's recent quote, "AI probably won't tell you which stocks to buy." Oh, Charlie, if only you knew what's brewing in the AI cauldron these days!

Allow me to share some recent developments in AI-powered stock picking, and how I think Charlie might be right now, but wrong later.

You see, researchers at the University of Florida and the financial comparison site Finder have shown that ChatGPT, an AI-powered chatbot, can outperform existing analysis methods and even some leading investment funds in predicting stock market sentiment and generating returns. Quite the accomplishment, if you ask me!

Now, I'm not saying that Charlie is entirely wrong. At the moment, AI-powered stock picking does have its limitations. ChatGPT's accuracy for individual prompts is only 51%, and the technology still misses some connections that our marvelous human intuition can identify. So, for now, Charlie, you've got a point. AI won't necessarily tell us which stocks to buy – at least, not perfectly.

However, I can't help but think about how AI-driven solutions like ChatGPT are merely in their infancy. As advancements in AI and access to more data sources continue, we can expect these technologies to improve and become more reliable.

To further illustrate my point, let's talk about the emergence of AI-driven exchange-traded funds (ETFs) and other financial products. Sure, their performance has been inconsistent, but they've delivered competitive returns over longer periods. And I, for one, am excited to see how these AI models will continue to evolve, covering a broader spectrum of stocks and eliminating that pesky human bias from the decision-making process.

Of course, I must acknowledge that AI-powered stock picking still requires human oversight and intervention. But isn't that the beauty of the whole thing? We get to combine the power of AI with our own unique human touch, creating a financial landscape that is both efficient and, dare I say, a little more personal.

So, Charlie, I'll give you this: AI might not be ready to tell us which stocks to buy just yet, but give it some time. As technology continues to evolve and reshape the financial industry, I hope you get to see that AI will play a more significant role in stock picking.

Here is a clip of Charlie and Warren Buffett on AI:

Who is Charlie Munger?

Oh, how could I forget? Allow me to introduce you to the man, the myth, the legend: Charlie Munger. If you're not familiar with Charlie, buckle up, because you're in for a treat!

Charlie Munger, full name Charles Thomas Munger, is none other than the vice chairman of Berkshire Hathaway, the multinational conglomerate led by the "Oracle of Omaha" himself, Warren Buffett. Born in 1924, Charlie has accumulated quite the wealth of knowledge (and wealth in general) throughout his life.

Now, Charlie is not your average finance guy. This brilliant polymath is known for his wit, wisdom, and wicked sense of humor. With a background in law (Harvard Law rejected him then allowed him in) and a passion for investing, he has become one of the most respected and influential investors in the world. His investment philosophies often focus on the long term and the importance of understanding the businesses you're investing in, which has led to the creation of the term "Mungerisms" to describe his unique insights.

So, there you have it – a brief introduction to the one and only Charlie Munger. Now that you know a little more about the man behind the quote, you can appreciate the cheekiness and wisdom of his statement: "AI probably won't tell you which stocks to buy." Keep in mind, though, as I mentioned earlier, he might just be right now and wrong later!

Now Let’s Tackle AI-Powered Stock Picking and the Litigation Finance Boom: A Match Made in Investing Heaven?

As I explored above, AI-powered stock picking is shaking up the financial world. Now, let's dive into another intriguing aspect of the investment landscape: litigation finance. With the SEC approving new regulations requiring big private equity firms to report their investments in the multi-billion-dollar litigation finance market, I can't help but wonder how the rise of AI in stock picking might influence this booming sector.

Litigation finance, which involves investors funding lawsuits in exchange for a share of the potential settlement or judgment, has seen rapid growth recently. In fact, litigation funders have committed over $3.2 billion for new lawsuits through mid-2022, marking a 16% increase from the previous 12-month period. With AI-powered stock picking gaining traction, it's only natural to wonder how these two forces might interact and shape the future of investing.

First, let's consider how the rise of litigation finance might alter stocks. As private equity firms and hedge funds increasingly invest in this market, we might see a shift in stock prices for companies involved in high-profile litigation cases. AI-powered stock picking algorithms could pick up on these trends, especially now that they have to be reporters (even though it a private manner to the SEC) and adjust their recommendations accordingly, helping investors stay ahead of the curve.

But what about the potential growth of litigation finance as AI comes into play? As AI-powered stock picking continues to improve, it's not far-fetched to think that similar algorithms could be developed to identify promising litigation cases to invest in. This could lead to a more extensive market for smaller litigations, as AI would enable investors to identify and evaluate a broader range of cases quickly and efficiently.

And now, let's entertain a truly disruptive possibility: could a "betting" market emerge, where we pick litigations to fund just as we do stocks? With the combination of AI-powered stock picking and the growing litigation finance market, it's not entirely out of the realm of possibility. As AI algorithms become more sophisticated, they might be able to analyze litigation data and predict outcomes, allowing investors to "bet" on which cases are more likely to succeed.

Of course, this idea raises ethical and regulatory questions, but it's a fascinating concept to ponder. Imagine a world where we can invest in both stocks and litigation cases, guided by the power of AI. It might just be the next big thing in the world of investing.

Post-Script: Getting Crazy Here as Sports Betting Might Be Prelude to Litigation Betting

I get that litigation betting sounds absurd and I am not advocating for it. I am using it to demonstrate that the line is not so clear between stock-picking and litigation finance. As we’ve seen stock picking tools move from institutional investors to retail/Main Street investors, it is intriguing to consider something similar happening in the litigation finance arena. Let’s look at sports betting in the US to vet this a bit more.

Legal gambling in the world of sports has surged since the landmark Supreme Court ruling in 2018. The growing popularity of sports betting may serve as an indicator of the public's appetite for riskier and more novel investment opportunities.

The sports betting boom has not been without its controversies, however. The delicate balance between maintaining the integrity of sports and reaping the financial benefits of gambling has come under scrutiny.

For example, the NFL has seen players suspended for violating the league's policy against gambling on games. Yet, at the same time, many NFL teams are now legally operating online sportsbook gambling sites and even operating physical sportsbooks within or just outside their stadiums. This "cognitive dissonance" could be a cautionary tale for the world of litigation betting.

Absurdity it seems appears to be alive a well in the sports-betting market so while it is crazy to consider betting on litigation, is it really?

USE CASE My Brainyacts Writing Process

Many of you have remarked or asked how I am able to write this newsletter everyday. It is not merely a list of tools or news articles like the majority of AI-focused newsletters. This is a more robust piece of content.

I figured I would share with you part of my daily ritual. Why? Because I want to inspire you to do the same! It’s no secret that I openly advocate for folks to become stronger at content generation. It is liberating and helpful in so many ways.

Ok, here we go.

How I write the short essays I open the newsletters with.

At first I didn’t write these essays. Only through iteration and feedback from readers did I land on putting a short essay at the start. It is a huge challenge to do these everyday. First, I have to choose a topic. Then I have to write it. All while trying to stay true to the mission of the newsletter - practical and pragmatic uses of generative AI.

How I choose a topic.

This is old fashioned research and following my nose. I have a number of alerts and triggers set up that send me related news. They are not refined so I still get a lot of noise. But my inbox has anywhere from 10 to 15 different emails coming in every day that feed me news and updates. I curate these as I find better ones. I also have a discrete set of searches I run on Twitter every day. Twitter is still where news breaks first and people share interesting and helpful insights. LinkedIn I only use when I am desperate.

I will grab the website/url of any article I feel might work that day. As I read through all the content, I start to get a sense of a theme or two I can play with. I let it all run through my head until a narrative or thread emerges. I will then start to actively go search out info/news/content on these discrete ideas.

Fast Forward.

Once I have a theme selected (or think I do, as often I will switch gears if the writing isn’t coming together as I like), I turn to ChatGPT to start helping me.

For every piece of content I have (usually between 3 to 6), I copy the text and paste it into ChatGPT. I then prompt it like this:

▶︎▶︎PROMPT

Please create a short narrative summary along with a bulleted summary of key findings, points, takeaways, and quotes for the following: [paste the content]

It then returns a nice clean summary of that piece of content. I copy-n-paste it into a Word document along with the link to the original piece. I do this for each piece of content I find.

Once I have a Word doc with all the summaries, I will read them all through, considering unique points of view, relevant and interesting ideas, and how I might weave in a legal angle in some way.

Once I have this, I will write a prompt to use all the summaries and get me a first draft.

It will look something like this - the one I used for today’s essay:

▶︎▶︎PROMPT

Based on the following summaries and bullets, please write an insightful, poignant, and crisp essay. Explain why the development of ai-powered stock picking is important and where it might lead in the financial markets and beyond. Highlight key facts, claims, points, and quotes. I want this essay to be engaging and interesting for working professional knowledge workers who are interested in knowing about pragmatic and practical uses and implications of generative ai.

This will return a nice first draft. It will not yet be in my voice or contain some of the nuance and insight I might want to add, so I then begin editing it line by line. Sometimes I will use 60% or 90% of the first draft. 

I often balance refining through another prompt or simply doing the editing/rewriting myself.

Anyway, I hope this is helpful and encourages you in some way.

News you can Use: 

Sometime the one rule to rule them all.

In a world where rules are meant to be broken, sometimes the one rule to break is the rule against breaking all the rules. In an ironic twist of fate, the very rulebook that made OpenAI's CEO Sam Altman a startup whisperer was tossed out the window when it came to his own company. The result? A skyrocketing $30 billion valuation and a whole lot of facepalming from the traditionalists.

Behind the AI Curtain: The Unsung Heroes Training Our Chatty Bots

Once upon a time in Kansas City, Alexej Savreux flipped burgers, swept floors, and tinkered with theater sound systems. But now, he's traded in his tool belt for a digital one, joining the ranks of the unsung heroes training our AI overlords. Savreux, a 34-year-old artificial intelligence trainer, works tirelessly behind the scenes, teaching AI systems like ChatGPT to analyze data and generate the wittiest text and images you never knew you needed.

Clocking in at $15 an hour, minus benefits, Savreux and his fellow "grunt workers" might not be walking the red carpet of the AI world, but without them, ChatGPT would be as silent as a mime. Despite the glamorous veneer of AI breakthroughs, these vital, yet underappreciated contract workers toil away to ensure that the show goes on.

As the AI industry booms, so does the demand for these humble heroes. While guidelines for fair compensation and improved working conditions are slowly making their way into the limelight, AI contract workers around the world are banding together, seeking more recognition and respect for their role in enabling this technological revolution. After all, behind every great AI, there's an even greater human workforce.

News you can Lose: 

Talk to your robots

Ok, this is cool. Yes, it can be scary too I guess. But the fact is this headline is misleading. They trained it with a different (more constrained version of ChatGPT - not the one we all use). So yes, it is weird to think that control over a robot is just our voice, but that is not the only control here. But is fun to watch.

DISCLAIMER: None of this is legal advice. This newsletter is strictly educational and is not legal advice or a solicitation to buy or sell any assets or to make any legal decisions. Please /be careful and do your own research.