Consumer Financial Protection Bureau Director Rohit Chopra has raised concerns about the rapid advancement of artificial intelligence (AI) technology, warning that it may lead to the formation of oligopolies with far-reaching implications for the economy. Chopra’s comments come in the wake of the recent removal of Sam Altman, co-founder and CEO of OpenAI, and his subsequent hiring by Microsoft, OpenAI’s largest investor. Chopra emphasizes that the future of AI is likely to be dominated by a few large companies and their boards.
According to Chopra, there is currently a race to develop foundational AI models, which are expected to have applications across various sectors. The fact that major tech companies are now intersecting with these foundational models raises concerns about their potentially outsized power. This worry is shared by other policymakers, including SEC Chair Gary Gensler and Rostin Behnam, chair of the Commodity Futures Trading Commission, who believe that over-reliance on a limited number of AI platforms by Wall Street firms could result in sudden market volatility.
To address these concerns, Sen. Mark Warner is working on legislation that would assign the task of responding to AI-related risks to the Financial Stability Oversight Council, an interagency body of top regulators. Chopra, who has been critical of tech companies’ handling of privacy and competition issues, is also focusing on the use of AI by lenders to automate credit decisions. The bureau is developing rules to regulate data broker practices related to AI and prevent abuses.
While the need for AI-specific regulation has been widely discussed, formulating comprehensive rules will take time. Internal discussions regarding the future of OpenAI have further highlighted the urgency to tackle the existential challenges that AI technology presents to the economy. The rapid evolution of AI necessitates approaching the concept from high-level principles such as risk management and governance, according to Christy Goldsmith Romero, a regulator who serves on the CFTC.
The potential abuse of generative AI in financial markets is another concern. AI programs with automated trading and lending capabilities at financial institutions could greatly amplify market volatility. If these programs make independent decisions based on incoming data, it could lead to significant financial disruptions.
In summary, the proliferation of AI technology raises concerns about the formation of oligopolies and the concentration of power in the hands of a few major companies. Policymakers are increasingly cognizant of the potential risks and are working to develop regulations and guidelines to mitigate them.
What is an oligopoly?
An oligopoly refers to a market structure where a small number of large firms dominate the industry and have significant control over prices and market conditions.
Why are policymakers concerned about the concentration of AI power?
Policymakers are concerned that the concentration of AI power in a few companies could lead to negative implications for competition, innovation, and fairness in the economy. Additionally, the potential for AI to cause sudden market swoons and financial disruptions raises the need for regulatory measures to mitigate these risks.
What is generative AI?
Generative AI refers to AI systems or algorithms that have the ability to create new content, such as images, text, or music, that is similar to or indistinguishable from human-created content. In the financial markets, generative AI programs could potentially automate trading and lending decisions.