Posted originally on Sep 18, 2024 By Martin Armstrong |  

COMMENT: Mr. Armstrong, I’m blown away by your computer. How did it know about July and September of this year, which you told us about long ago!? We got assassination attempt and cyber attack in July. We got an assassination attempt in September. AND you said Trump Media was in danger week of Sept 16 specifically, giving you heart burn. Amazing!!!

-Scott

REPLY: Many people claim to have AI. ChapGPT has created a feverish bubble around AI without people understanding what it truly is or how to create it. Over 20,000 applications to the SEC claim they have AI models. I suppose they wrote them in three days, the time Kinzinger claims we can beat Russia.

But honestly, most of what is out there is NOT AI—it is clever expert systems with no original analysis. When a reader asked ChatGPT what the difference was between it and Socrates, it was correctly explained.

"Socrates Platform uses artificial intelligence, machine learning, and natural language processing to analyze data,
whereas I am primarily focused on natural language processing."

This is a forecast I pulled off of our old site from 1999 on the Wayback Machine, plotted with the chart showing the outcome. In 1999, Socrates forecast that there would be a panic in 2008 about 10 years in advance. When I wrote the code for Socrates, I put myself into the code. I did not use a neural net and hoped that something would come out all on its own by throwing in all the data. This idea of creating just Machine Learning and throwing in all the data, hoping it will suddenly become the most brilliant thing on the planet, is total nonsense. IBM’s Watson proved that fallacy.

There is a lot of misguided hope surrounding Artificial Intelligence and Machine Learning. All we need to do is look objectively at IBM project WATSON. Just over a decade ago, artificial intelligence (AI) made one of its showier forays into the public’s consciousness when IBM’s Watson computer appeared on the American quiz show Jeopardy. Watson’s debut performance against two of the show’s most successful contestants was televised to a national viewership across three evenings. In the end, the machine triumphed comfortably.

This was NOT actually AI. It is what I call a look-up program. Even ChatGPT is not capable of actually achieving independent thought. They can understand and go fetch the answer faster than a human.  The people I knew back then thought Watson would one day cure cancer. None of that was possible because they fooled themselves about AI.

IBM’s Watson could search the entire internet and gather every piece of information possible. That was the easy part. What IBM lacked was the expertise in research. How do you know that one piece of info is the key or more important than another? They lacked the ability to create an actual analysis capability. They hoped it would somehow acquire the skill to do original research all by itself.

Neural Nets were a great hope that somehow you throw in all this information, shake well, and out will magically appear the answer. The presumption was that our minds are just supercomputers, and they ignored perhaps the critical understanding of what makes one person brilliant at math and another a brilliant artist who can’t count beyond 1,000. They can go fetch and look up things and return with the answer faster than any human. But they are no capable of original thought.

Most of AI’s dangers are caused by its failure to comprehend what it is capable of doing—especially in trading. This all stems from the distorted idea that our brains are supercomputers and there is no God, for our consciousness is simply created by throwing in a bunch of data, shaking well, and out comes a person. Thus, the thrust to mimic the brain led to the creation of neural nets. But that effort also failed in actually creating original thought.

The San Francisco-based tech giant OpenAI has announced that a new AI model is capable of “reasoning” at the level of doctorate students. OpenAI has said its next model update “performs similarly to Ph.D. students on challenging benchmark tasks in physics, chemistry and biology.” The company continues to grapple with questions in Washington about the safety of AI. Meanwhile, some OpenAI competitors have appeared upset by their marketing hype ascribing human characteristics to technology. Look, this OpenAI Model does not help when they describe it as “thinking” when it is doing nothing of that sort. It is merely an AI system process that predicts in ways that are basic to classical computers and search engines. OpenAI is exploiting a false impression that technology systems are human, which appears to have come from movie plots like Terminator and Matrix. This is just a cheap trick that threatens the development of AI by raising this nonsense that it will come alive somehow. This is merely a marketing trick to fool people into believing that its ability is humanistic in solving issues.

When I wrote the code that made Socrates, I had international experience as a trader and programmer – that is a very rare combination. The number one problem is the person with experience has to relay that info to a coder who lacks that same know-how. This level of communication never works. It takes a coder with experience to figure out how to reach that end result, whereas the non-coder does not understand all the ways to reach a result. Coding is an art form. Two people can write a program to accomplish the same task, but they arrive at that differently in style.

Back in Stock Now – Sorry Has Been Sold Out for Months

I was named Economist of the Decade during the 1980s, Fund Manager of the Year in the Nineties, and FX Analyst of the Year in the 21st Century. A man cannot write a book to explain how it feels to give birth to a child. It takes experience! 

As the movie The Forecaster pointed out, I have traded against Soros and Goldman Sachs.

You have to be in the trading pit to understand even how to trade internationally. John Law traded on the Amsterdam Exchange and came up with the concept of supply vs. Demand. Thomas Gresham came up with Bad money drive out Good due to hoarding. Both were on the exchange and witnessed how markets moved. You have to see things live to grasp how they work.

When Milton Friedman (1912–2006) came to listen to one of my lectures on who the world really functioned in the new world of floating exchange rates in Chicago,  I was stunned. To me I was just a trader. Milton said it was best speech he ever heard, and said what I was doing was what he had just dreamed about.

Milton in 1953 in his Essays in Positive Economics, first proposed a floating exchange rate system that would put pressure on governments. Indeed, I ended up being dragged into governments around the world all because we forecasted currencies.

Only by entering the international arena of geopolitical economics and becoming one of the first international hedge fund managers could I see how the real world worked. This is the experience I had to code into Socrates. The first consideration one must make is country risk. You have to understand the politics of every country for that determines if you should even consider any possible investment. You then go down the list to approve or eliminate countries to consider. That is just the first step.

Most AI follows the idea that, somehow, the computer will figure everything out. They do not understand how the brain functions, nor do they consider what consciousness is. For centuries, many have tried to define it, yet have failed. Neural Nets are based on the idea that neurons interact. Yet, there is something much more. We have a pattern recognition-based system that is far more complex than simply neurons.

For example, looking at this drawing some see the old woman and other the young girl with the nose of the old woman forming her chin and the mouth of the old woman is the necklace of the your girl. We all do not see the same image at first glance. Our mind is a pattern recognition system that then will also fill in the gaps.

Here is a photo of a girl with a Trump T-Shirt. Your mind will fill in the gaps. Is she beautiful or homely? We will imagine what we want to see. The same will happen if we look at the clouds in the sky. Some will see a face, others will question your sanity. Our minds will see patterns and fill in the gaps.

We will also act in ANTICIPATION of the future. When Europe lowered rates to negative in 2014 to try to punish people for savings, they took their money out of the banks. The central bankers failed to comprehend that people will ONLY invest when they have confidence in the future and see a potential for profit. If they do not see the economy will even produce a 1% profit, they will not borrow even at 0.5%. This is why the stock market has NEVER peaked with the same level of interest rates twice in history.

Interest rates rose throughout Trump’s presidency, yet the stock market took off, and they called it the Trump Rally. Yet, these analysts call for lower interest rates and when rates decline, that is the market of a bear market and recession – not a bull market.

I have two French bulldogs. Yet, their personalities are different. What makes that unfold? We can see that the same indescribable character emerges in humans and animals. They have dissected Albert Einstein’s brain to no avail. Something else exists, which nobody has been able to replicate nor even define its origins.

Socrates is far more advanced than anything out there because I coded my experience and taught it how to analyze. Machine learning is fine for determining who may or may not default on a mortgage. That is rudimentary one-dimensional. But when you step into the global economy, this is not some simply one-dimensional relationship you have to deal with. It is far more complex than that, with millions of patterns and correlations on a worldwide scale. You must track everything from taxes and laws to climate, disease, and economic trends on top of capital flow analysis.

To do that film, the Forecaster had to be insured by Llyod of London. Everything in that film had to be documented right down to the non-public command that I had to turn over the code to Socrates, which I refused. It was not my word against theirs; they put it in writing to a lawyer.

Socrates would no more be able to discover the cure for cancer than I would. You cannot code into a system experience you do not have. But the AI being marketed is not really making analytical decisions, nor are they “thinking” and dreaming like a human or anticipating the future.  However, Socrates is focused on the world economy, not medicine. If we had another $1 billion and 50 top programmers, perhaps we could expand it into other frontiers. Socrates is gathering a knowledge base constructed upon its experience extending beyond just the programming. There are much deeper layers to this whole thing that will die with me.