SEC Chair Gary Gensler Warns Vendors Against False AI Claims

In high tech, there is an old practice of the newest in technology suddenly appearing in virtually every product, no matter how little time has passed between its creation and when a company claimed to incorporate it.

It was the case with the paperless office in the 1980s, Internet capabilities and various types of enterprise management software in the 1990s, mobile in the 2000s, social media in the 2010s, and now artificial intelligence.

Securities and Exchange Commission Chair Gary Gensler, in a conference last week as reported by the Wall Street Journal, warned companies against making false claims of artificial intelligence.

“Don’t do it,” he said. “One shouldn’t greenwash, and one shouldn’t AI wash.” That is, a company shouldn’t make unfounded claims of being environmentally friendly, and neither should a business make marketing claims about the benefits AI provides that ultimately can’t be substantiated.

But that view doesn’t go far enough. Virtually every business package claims to include artificial intelligence. And many actually might, but AI is an old software category going back to the 1950s and including so many things that one might wonder what isn’t AI these days.

Rule-based systems, which take actions depending on pre-defined conditions, were considered AI. If X, Y, and Z were true, an application would take specific action J. Expert systems had information about a specific body of knowledge built into the software, making it available. National language processing was at one point considered AI and still is. Spellcheck features could be considered a form of AI.

If a software application’s capabilities are something that have been around for decades, is it fair to call them AI and make general claims about what the package could do as a result?

The issue isn’t trivial in commercial real estate because so many vendors looking to make sales claim to employ AI. However, the details are often left off. Machine learning is a common claim. It is also a technology first introduced in the 1950s. Developments since then have been distinctive, but there is also the argument that many vendors could just as easily argue their incorporation of computer code of any type.

CRE companies should push back on vendors and ask some questions, such as what does a vendor mean by AI? What does this supposedly add to a software product? How long has the technology been incorporated? What are the benefits to the user and how can they be directly demonstrated?

There are likely many companies that are happy to AI-wash. Push to find out what they’re really selling and how it can help in ways other products might not.