“We’ve seen time and again that when new technologies come along, they can create buzz from investors as well as false claims by those purporting to use those new technologies.”
Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), made this comment in announcing settlements against two investment firms over charges that they engaged in “AI (Artificial Intelligence) washing” and other unlawful practices.
In an article for techopedia.com, Margaret Rouse says that “washing is a strategy for aligning a product or service with current trends to make it more desirable.”
I’ve written previously about “greenwashing,” which the Environmental Protection Agency says occurs when companies make vague or generic claims about products such as “environmentally friendly,” “eco safe,” or “green” that they don’t deliver on.
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Rouse defines AI washing as “a deceptive promotional practice that exaggerates or outright lies about a product or service’s use of AI.” She cites a number of motivations for engaging in AI washing, including increasing consumer interest, justifying a higher price point, and staying competitive in a fast-moving market. It’s also been found to increase investor interest in companies.
Four things to look out for in deceptive ‘AI washing’ practices
In an article for Forbes, futurist Bernard Marr cites these ways in which companies attempt to AI-wash their products and services:
Overstate their capabilities – implying that their AI models and algorithms are more powerful, useful or flexible than they actually are.
Misleadingly use the term “intelligent” – when, in fact, the software doesn’t use algorithms capable of learning and making decisions without being explicitly programmed how to do so.
Offer very vague definitions – not specifically explaining which elements are “intelligent” and which rely on traditional software methodologies or human input.
Downplay the amount of human input involved – either on the part of the service provider or the user.
Consumers should start with a degree of AI skepticism
In August 2023, the FTC shut down a company that took in $22 million peddling a business opportunity that they claimed “integrates AI machine learning into the automation process, resulting in increased revenues and margins.” The FTC worries that jargon such as “machine learning” and “neural networks” makes AI seem almost magical and facilitates AI washing and AI scams.
The SEC settled the two AI washing cases in March. It alleged that Delphia falsely claimed to use AI and machine learning that incorporated client data in its investment process and that Global Predictions falsely claimed to be the “first regulated AI financial advisor.” Neither firm admitted to the charges but agreed to pay $400,000 in total civil penalties.
Most of us don’t have the expertise to thoroughly evaluate a company’s claims about whether its products or services are powered by AI. The FTC says that simply using an AI tool in the development of a product does not justify a claim that the product is powered by AI.
The advice of many experts is to start with a degree of skepticism about AI claims. Depending on how important the matter is to you, consider asking for evidence of how AI is used in a product or service. If you’re a business considering the purchase of an AI product, involve your IT department or an IT expert in evaluating it.
Randy Hutchinson is president & CEO of Better Business Bureau of the Mid-South.
This article originally appeared on Nashville Tennessean: Artificial intelligence (AI) ‘washing’ is a new type of deception
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