The future of finance will involve generative AI, says an MIT researcher


Should CFOs consider how advanced technology like ChatGPT will impact their role and their companies? “I think, increasingly, we will see generative AI used for financial predictions and scenario generation,” Michael Schrage, a research associate at the MIT Sloan School Initiative on the Digital Economy, said.

Schrage was the guest speaker last night at the Fortune’CFO Collaboration Dinner, with Workday and Deloitte, at Mourad in San Francisco. He speaks to our community of finance leaders from across the Bay Area about technology trends and how digitalization is impacting capital allocation.

ChatGPT is a chatbot launched by OpenAI in November that can answer questions and write everything from complex computer code to an essay on parenting advice to a legal brief. Recently, a professor at the Wharton School of Business documented how ChatGPT is conducted in the final exam in a typical MBA core course, Operations Management. (The professor noted that generative AI would have received a B on the B-score.) And this week, Microsoft announced that it will do more $10 billion investment in OpenAI—increasing the investments it makes in 2019 and 2021, amounting to $3 billion.

“Basically, what we’re really moving on is the idea of ​​do we want to collaborate with generative intelligence?” Schrage told CFOs. “Do we want to coach it?” Generative intelligence powered by machine learning will be used for financial planning “to challenge the fundamental assumptions of numbers,” he said. It’s interesting how finance team members “bring you scenarios and forecasts that you need to engage in a way that you don’t expect,” Schrage told CFOs.

Generative AI and machine learning will become increasingly important and pervasive, calling for the importance of “interpretable, explainable, and transparent algorithms,” he said. (My colleague, Jeremy Kahn, in a cover story for luckexplains why ChatGPT concerns the biggest names in technology and how it is expected to change all aspects of business.)

Schrage also discusses the luck editor-at-large Michal Lev-Ram on how the definition and measurement of capital allocation is changing through the digitalization of companies and industries. CFOs are not just concerned about financial capital, but human capital, intellectual capital, and social capital, he said. Digitalization aimed at a company’s internal processes and customers requires more collaboration between departments and improved key performance indicators (KPIs) to determine the most effective use of capital allocation.

“What key performance indicator should your organization use in the next 12 to 18 months to reinforce and validate the strategic direction you want?” Schrage said.

Customer lifetime value and employee experience are among the modern KPIs that are increasingly being shared across organizations, he said.


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See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

Great thing

The number of M&A deals in the global banking sector will decrease 19.6% annually to 505 in 2022—the lowest number of deals in five years, according to a new analysis by S&P Global Market Intelligence. This is lower than in pandemic-hit 2020, the research found. The analysis includes whole bank deals, asset sales, and minority investments. North America, which accounts for the highest number of bank M&A, will have a 24.6% decrease in the number of deals in 2022 to 304, according to the report.

Courtesy of S&P Global Market Intelligence

deepened

Employment Trends, 1983–2022,” a new report by the Employee Benefit Research Institute (EBRI) found that over the past 40 years, the median tenure of all wage and salary workers age 25 or older has remained at approximately husband of five years. In 2020 and 2022, the share of workers with the shortest tenure level increased, while the share with the highest tenure level also increased. Those with mid-level tenure showed a decline, according to the report. EBRI also found that public sector employers are seeing a significant portion of their most experienced workers retire or otherwise leave their jobs.

LeaderBoard-

Brian Roberts named CFO of Splunk Inc. (Nasdaq: SPLK), a data platform for security and surveillance, effective immediately. Roberts will report to Splunk CEO Gary Steele. Roberts brings 30 years of financial expertise. He served as CFO for Ozone Networks, Inc. (DBA OpenSea) as well as CFO of Lyft, Inc. Roberts also serves as SVP of business development and strategy for Walmart Global eCommerce. Prior to Walmart, he served as senior managing director at Evercore Inc. and led the corporate development organizations of Microsoft Corporation and Inktomi Corporation.

Greg GravesEVP, and CFO of Entegris, Inc. (Nasdaq: ENTG), a supplier of electronic materials for the semiconductor market, will retire in 2023. The company has hired an executive search firm to conduct an internal and external search for the next CFO. Graves, who joined the company in 2002, will continue to serve as CFO until his successor is appointed. He is expected to stay with the company through a transfer window. “Over the past 17 years as CFO, Greg has built and strengthened our global finance and IT organizations,” Bertrand Loy, president and CEO of Entegris, said in a statement.

Heard

“I think it’s a good case [for A.I.] it’s unbelievably good that you’re such a crazy person talking about it. I think the worst case is turning off the lights for all of us. “

—Sam Altman, cofounder and CEO of OpenAI said during a venture-captial-focused event in San Francisco on January 12, luck reported.

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