Renowned author, philosopher, and history professor Yuval Noah Harari delivered a thought-provoking speech at the Bank for International Settlements (BIS) Innovation Summit, warning of the potential dire consequences of the uncontrolled implementation of artificial intelligence (AI) in the financial system. Harari emphasized the need for strong institutions to effectively regulate and monitor AI’s influence.
According to Harari, the financial system thrives on trust, as it enables millions of individuals who are essentially strangers to collaborate towards common objectives. However, the problem arises from the fact that financial regulations are often incomprehensible to the average person. Harari pointed to the 2007-2008 financial crisis as a prime example of the negative consequences stemming from the lack of understanding and regulation of complex financial innovations.
Harari asserted that AI represents an entirely different form of intelligence that is still in its infancy. Unlike humans, AI does not reason in the same way, making it capable of creating financial instruments that surpass human imagination. This, in turn, could shift power dynamics away from politicians and regulators, placing it in the hands of algorithms. Under such circumstances, trust relationships would be established between AI systems rather than between individuals. Consequently, during a financial crisis, politicians and regulators may be compelled to rely on AI for guidance.
The erosion of trust relationships, as suggested by Harari, could potentially lead to social instability. He highlighted the already declining trust in politicians and institutions as evidence of this trend. Therefore, Harari emphasized the crucial role of institutions in regulating AI, stating that the responsibility should not be entrusted solely to exceptional individuals or charismatic leaders. Institutions, he argued, are essential for maintaining human involvement and oversight.
However, even with institutional involvement, there are inherent risks. History has shown that groundbreaking innovations often require multiple failed attempts before achieving success. Harari drew attention to past failed attempts at constructing industrialized societies, such as imperialism, communism, and Nazism, which resulted in the deaths of millions. In the case of AI, Harari warned that it possesses the potential to generate ideas on how to utilize itself, further complicating the regulatory landscape.
To ensure a stable and human-friendly future financial system, Harari stressed the importance of regulators prioritizing the establishment of trust between individuals. By fostering trust, regulators can create a foundation for a financial system that prioritizes the well-being and interests of humanity.
In conclusion, Harari’s thought-provoking discourse at the BIS Innovation Summit serves as a powerful reminder of the need for responsible and thoughtful integration of AI in the financial system, with strong institutions playing a pivotal role in safeguarding the interests of humanity.