GPT-4 & Microsoft Co-Pilot

This industry at the junior level is about to become automated away. The way we think about work is probably going to be radically transformed at a rapid pace, aligned with the rate at which generative AI is improving at every iteration.

A lot of work in IB for juniors are manual tasks which entail adhering to outdated ways to pull together materials that can be automated in seconds. For the most part, the juniors are not adding any value on the decision-making side of IB, which truly cannot be automated due to the relational nature of the business. So basically, in the next two years, I can foresee banks seriously cutting down the volume of heads at the junior level. I'm gonna go look for a different job.

This evil little AI bitch is the worst thing to come out of 2022/23

"Why would we need to keep the Analysts around to print, bind, and distribute the CIMs, when everything is digital now?"

"Why would we need to keep the Analysts around to track and update financial model calculations, if Lotus 1-2-3 can do all that?"

"Why would we need to keep the Analysts around to run messages over to our clients, if we can just call them on the telephone instead?"

I mean, MDs also have their own computers & Microsoft office programs and theoretically can schedule their own meetings, share their own screen on meetings, change their own color combos in the pitch deck, track their own changes in a MS word doc, etc. with a miniscule amount of effort. 

Will they though? Fuck no, takes too much effort. Just have some 20 year old do it and even if you fuck up the instructions he'll still figure out what you mean. These dudes never learned how to use Excel, they're not going to become ChatGPT wizards and fire all their underlings. 

Moreover, I think people realllllly underestimate how much the old finance boomers like having their asses wiped for them. Any future prediction which includes the premise that these people will give up their underlings and do things themselves is deeply improbable. 

Copied and pasted a fairly straight ahead technical question into ChatGPT 3 (or 3.5? unsure). Question asked for share price, AI returned EV per share (and there was positive net debt) . Clearly there is a ways to go. 

I'm not saying that it won't get much better and smarter (for lack of better term) - in fact I am confident it will make juniors' lives better and easier. Just like with all technology, our roles will change, and perhaps need fewer resource employees down the line, but it will allow us to be more efficient: thinking more and processing less. 

I work at a MM bank and ChatGPT is blocked on our web browser.

This AI thing is just insane. It’s gonna fundamentally change the world. It’s over. The only safe jobs are: plumbers, chefs, sport stars, anything physical. The white collar job and the office worker era will be over in the next decade …

Bank mid level execs using AI ? with my shitty bank compliance and shittier bank regulation ? your bank will change, but my banks associates and analysts will be secure in their broken IT infra.

AI will eat the jobs of those who created it though.

This shit really does scare me fr. The argument has always been “front office finance roles will never be automated because it’s a relationship business. You’re a salesman”. Sure this is true at the senior level but the truth is analysts are not client facing. We are there solely to do grunt work. The vast majority of which consists of taking numbers from client docs and plugging them into model templates, then taking those models and popping them into some pretty slides with a few bullets that describe them. If you don’t think this is something that an AI will ever be capable of doing you are delusional.

Sure it will make mistakes. It won’t be perfect. But neither are human analysts. That’s why we end up turning 10 rounds of comments from our associates/VPs before anything makes its way to the MDs desk. The difference is GPT can turn a round of comments in 10 seconds that might take an analyst 30 minutes. Let’s be very generous here and say the GPT fucks up 3x as much dumb shit as ur average analyst. It takes the associate 5 minutes to scroll thru and give more comments. It takes the GPT a total of 15 min 30 sec to go thru 3 rounds of comments vs an analyst taking twice as long to get through 1. Obviously these numbers are made up and this is purely a thought experiment, but i find it hard to imagine a scenario in which the vast majority of “analyst work” as we know it is not automated within a few years.

Am I saying we’re all going to get fired next week? Of course not. But if you told me a year ago about what GPT-3 can do I would probably laugh at you. Who the fuck knows where we’ll be in 3 years when current college freshmen hit the desk? The job is going to be radically different at the junior level and this is undeniable. Maybe clients will come to expect exponentially more detailed AI - powered analyses that we can’t even imagine yet, somehow keeping demand for juniors flat. Maybe analysts will increasingly do more “associate” work off the bat and headcount will be reduced. But the day to day of a first year from the class of 26 will look radically different from someone who graduated in ‘22 and there’s no way around it. And frankly I’m shocked that more ppl aren’t discussing it seriously

I feel people jump to the binary option of everyone simply losing their jobs. And then others who feel that this is just advent XLS 2.0 and that it will just mean we will do more deals in the same amount of time.

I feel it is somewhere between the two. But first we need to understand what MSFTGPT or BloombergGPT mean. 
 

Imagine if each bank was able to plug in their own drive / repository / library into GPT a la Bloomberg (google BloombergGPT), I think results could be quite interesting. With GPT having been able to ingest all this information and plugged into Microsoft Office, imagine typing: “Prepare a management presentation on X (private company whose PPT, PDF, XLS and other format information is saved on said bank’s drive and has been ingested by GPT) covering key investment highlights, market and industry overview, GTM strategy, personnel, financials, growth and M&A”. If you can get that very rough draft (i.e., 60-70% shell that is normally put together by a poor analyst using precedent decks over day or two or at least a few hours per section of CIM…* in 15 minutes*, I think that eases a huge pressure point. Imagine then being able to re-input this deck and saying, move certain pages around, add or subtract certain themes and so on. Huge game changer and the analyst’s time can actually be spent thinking how to structure it / narrative and checking key pieces of information instead of piecing the first cut of the poor deck together. Given how much times goes into making these vs how much time PEs spend reading these, this first step can be a huge time saver.

Similarly, if you are in a product team and often do decks on “Key Exit Considerations”, “Accelerated / Dual Track Timetables”, “Current M&A Environment and Mitigants”. Most such decks use precedents as starting points and are then iterated. 
 

With a GPT that is plugged in, this can mean the first hurdle is improved or reduced in terms of time. The analyst effectively becomes a junior associate who reviews, corrects and fills stuff and can get comments processed in real time.

BloombergGPT or GPT trained on financials:

This is where it gets interesting. BBG will no doubt be able to get GPT to put together initial drafts of financials (at least for public companies) and basic models just by typing the assumptions in simple English: LBO with c. 4-5x leverage, unitranche bullet, PIK, 5 year horizon, transaction date 31/03/2023, sensitise around 15x entry, no multiple expansion.

And viola, you have your initial draft LBO in an editable XLS and you can iterate your assumptions in simple English.

The reason for going for assumptions in simple English is 1) this is what MSFT and BBG are gearing towards and 2) this is how instructions are often communicated to Analysts in first meetings. And this is on top of stuff like Kensho etc. that S&P already had been chipping away at.

Obvious considerations:

- These things will provide first drafts. Someone will have the fun, glitzy, glamorous job of checking the numbers pulled out are correct. Doesn’t sound like a front-office job for a HYP grad. Sounds more like an ancillary back office job especially when this thing gathers steam (~5 years). 
 

Like another poster, absolutely do feel third-party vendors may start to specialise in selling GPT trained on certain relevant datasets which can then be sold to banks etc. 

All in all, if this thing continues on this trajectory for the next 3-5 years then in terms of IB ranks my key questions are:

- Will banks having additional capacity (if they don’t cull ranks) mean they do additional deals? But this is dependent on macroeconomic conditions not just capacity. So basically to what extent are banks turning away deals right now (or in a normal year) that they would otherwise not turn away. Would the number of incremental deals outweigh the freed capacity?

- Will banks cull ranks and deal teams go to being MD, VP (combo of D and VP) and Associate (combo of ASS and ANA)?

- What will be the key differentiators in terms of deal making? Most banks will be able to churn out bigger documents at twice the pace (most marketing materials are useless anyway and models too detailed or pointless) so will PE be looking to do more “data driven analyses” by feeding in the crap churned out by the banks? 
 

- What about fundemental L/S funds? Public equities. Public GPT. Analysts may have to wade through even more noise and crap. I feel like if anything it may even further depress the HF performances but I may be being pessimistic.

Banks still don’t have simple tools like logointern and you think they will integrate AI into workflow?

I mean the work of a junior in IB can be outsourced to India for 1/4 the cost already

Too many interns commenting in this thread

I saw the news about GPT-4 integration into Microsoft Office, and WOW, it's mind-blowing!  The thought of Co-Pilot transforming word docs into PowerPoint decks sounds like magic! 🪄 And imagine linking it to your bank's repository, what a game-changer for productivity! 

Saw a “mind blowing” (spoiler: it wasn’t) demo recently of chatgpt completing a dcf.

The human being identified the projection period, plugged in the revenue projections (almost certainly from a non-public source), made assumptions about the out years, made the assumptions and calculations to arrive at fcf, figured out the discount rate and perp growth rate, and supplied the share count, presumably using the treasury stock method.

The algo searched for the NPV formula and after several tries generated the price per share. There was no terminal multiple complement. And no stub first year. 

I’m sure the technology will advance rapidly, but it’s got a ways to go. Oh and find me the banker who isn’t going to check, and verify the sources, of all those calcs and inputs before handing it to anyone.