MIT Economist on Finance, AI, and Human Behavior

Episode Summary: MIT professor Andrew W. Lo tackles AI-assisted financial advising, healthcare, and the effect of human behavior on financial markets. Episode Description: In this the first of two pilot episodes of Chalk Radio with VIDEO, Professor Andrew Lo, who teaches finance at MIT’s Sloan School of Management, knows that many people find financial matters perplexing and scary. Lots of us don’t have a good head for numbers, and besides, how can one get advice and make sound decisions when it’s taboo to discuss one’s finances at all? That’s where a financial advisor is useful–someone who understands the concepts, can crunch the numbers, and has a fiduciary responsibility to look out for your best interests. For many people, hiring a financial advisor might be a financial impossibility, but Prof. Lo and his colleagues are working to develop an AI financial advisor that not only gives ordinary people access to sound financial advice, but acts with real fiduciary responsibility. Large language models can’t do this yet, he says, but the technology is developing fast. Other topics he touches on in this episode include the outsized influence of finance on drug development and global decarbonization and the equally outsized influence of teachers on their students–he names many who changed his own life, from his third-grade teacher in Queens to his professors at college and graduate school. Subscribe to Chalk Radio on podcast platforms ➜ https://chalk-radio.simplecast.com Relevant Resources: MIT OpenCourseWare (https://ocw.mit.edu) The OCW Educator portal (https://ocw.mit.edu/educator) Professor Lo’s faculty page (https://mitsloan.mit.edu/faculty/directory/andrew-w-lo) 15.401 Finance Theory I on MIT OpenCourseWare (https://ocw.mit.edu/courses/15-401-finance-theory-i-fall-2008/) 15.481x Adaptive Markets: Financial Market Dynamics and Human Behavior on MIT Open Learning Library (https://openlearninglibrary.mit.edu/courses/course-v1:MITx+15.481x+1T2021/about) 15.482x Healthcare Finance on MIT Open Learning Library (https://openlearninglibrary.mit.edu/courses/course-v1:MITx+15.482x+1T2019/about) Music in this episode by Blue Dot Sessions (https://www.sessions.blue/) Connect with Us: If you have a suggestion for a new episode or have used OCW to change your life or those of others, tell us your story. We’d love to hear from you! On our site (https://ocw.mit.edu/contact/) On Facebook (https://www.facebook.com/MITOCW/) On Twitter (https://x.com/MITOCW) On Instagram (https://www.instagram.com/mitocw/?hl=en) On Linkedin (https://www.linkedin.com/company/mit-opencourseware/) 0:01 Intro 0:51 Why Finance Matters 3:02 Inflation, and practical finance applications to mitigate rising costs 5:19 Can ChatGPT reliably plan someone's retirement? 7:54 How to deal with AI hallucinations 9:14 Financial planning - why you need to start early! 9:58 Finances - a taboo topic? 11:07 AI Finance tools and ethics 12:31 Will AI take people's jobs? 13:18 Finance for positive impact on people & healthcare - Andrew's origin story 16:47 How Finance could help Climate 18:48 'It all comes down to money' 19:22 How human behavior affects Finance 19:47 How humans react to a market crash 21:12 Andrew's Adaptive Markets Hypothesis 22:02 How can we counteract irrational human tendencies? 24:00 How Andrew makes finance accessible through his teaching 24:55 Andrew's education and identifying different types of intelligence 28:31 Andrew's learning disorder and how teachers helped him manage it 35:08 Andrew's meaningful memento 38:17 Conclusion Stay Current: Subscribe to the free monthly "MIT OpenCourseWare Update" e-newsletter (https://ocw.mit.edu/newsletter/) Support OCW: If you like Chalk Radio and OpenCourseWare, donate to help keep these programs going! (https://www.youtube.com/redirect?event=video_description&redir_token=QUFFLUhqbkZsQWFIcWdoRzdTdUFuS2I2M2FqUWFDamRDZ3xBQ3Jtc0trLVdrRHdGa0FSdjNHMkNQUEdJVHhsTGdwMVJHWFVFT2N3WF94ZmxST2ZVLWR5REhubmpZckNmWHJyR3VaZFdGbE9LODNNeUQ5X25kNWtTaTFGSnVUYmo1dEFZY1hTWXdnUTctSlhBZXRpbnBsRVRvbw&q=https%3A%2F%2Fgiving.mit.edu%2Fgive%2Fto%2Focw%2F%3Futm_source%3Docw%26utm_medium%3Dpodcast%26utm_campaign%3Ddonate&v=SD-zfFTUzBs_ Credits: Sarah Hansen, host and producer Brett Paci, producer Jackson Maher, producer Dave Lishansky, producer Peter Chipman, show notes