Ren Zeping on Wu Xiaobo: artificial intelligence, Silicon Valley Bank and China's economy

In the early morning of March 15, artificial intelligence research company OpenAI officially launched the GPT-4 text generation AI system, and it is hard to imagine that only 105 days have passed since the launch of ChatGPT based on GPT3.5 on November 30, 2022.

Before he had time to sigh at the amazing results of GPT-4 in a number of human general tests, on March 16, Microsoft announced the launch of Microsoft 365 Copilot, and on the same day, Baidu held a press conference to announce the official launch of a generative AI product based on Baidu's new generation of large language models - Wen Xin Yiyan, Baidu founder Robin Li personally demonstrated the five capabilities of Wen Xin Yiyan: "literary creation, commercial copywriting, mathematical logic calculation, Chinese understanding, multimodal generation".

Artificial intelligence is gradually entering our lives with an increasingly powerful attitude, so for us, how should we view artificial intelligence?

On the evening after Wen Xin's words were released, Dr. Ren Zeping connected with Professor Wu Xiaobo and had an in-depth long talk on hot topics such as artificial intelligence, Silicon Valley Bank, and China's economy.

Big coffee drawing room

  artificial intelligence

Wu Xiaobo: Before I start today, I have to express a sentiment. The two press conferences of Open AI and ChatGPT 4.0 shocked me to watch.

The Open AI engineer took a piece of paper and drew a sketch of a website, and as soon as the photo was taken, it was able to generate a website. I've found that many of the abilities we used to think of, such as writing code, songs, or drawing, may be replaced by generative robots in the future. At that point, each of us may need to re-develop our abilities.

The most precious thing in the future is not knowing exams and memorizing words. The most valuable thing in the future is the independent and free people who can resist the existing knowledge system. So I posted a circle of friends today and said that after watching the conference, "I" became more and more precious, we really have to be an independent person, a person who can think independently, a person who can break through many existing knowledge systems and frameworks. This is the future, otherwise you will just memorize words.

You see, Open AI, ChatGPT got high scores on the SAT and GRE, and I felt like the world was back to individualism.

Ren Zeping: Teacher Wu, let me tell you about my experience of this world. I think people's skills are actually not so important, people's creativity is more important. The reason why people are great is not that they can be like robots, doing it for a long time a day. The greatest thing about people is two places, one is creative and can do things from 0 to 1, and robots and intelligent people can never do things from 0 to 1. But what can intelligent people and robots do? 1 to n.

ChatGPT is big data based on the Internet to answer your questions. But who created it first? It's people. This is the first one, creativity is irreplaceable. Second, as you just talked about values, I think it is love, whether it is robots or intelligent people, it is impossible to have love for the world.

The reason why human beings are great, and the reason why human beings have lived for thousands of years, is not only because they are intelligent, but because they are full of love for others and society. We have experienced countless wars, plagues, depressions, and humanity has almost destroyed itself. But people can get to this point because people have creativity and people have love. I feel that these are two irreplaceable conditions.

Wu Xiaobo: Yes, let me add one more point. I learned to spread, and after today's headlines came out, something called an information cocoon appeared. You like to constantly brush a certain news, the background continues to push relevant news to you, you are directly trapped in an information cocoon.

This time, after ChatGPT and Wen Xin's words come out, we will fall into the second trap, that is, you will become a lazy person. You will ask the machine: what is a skyscraper? Why is Lujiazui better than Manhattan? Does Hong Kong have a future? Is Ren Zeping a good person? Wu Xiaobo must be a bad person, right? The machine will tell you the answer, and then you think that's the truth of the world.

But in reality this is a victory for mediocrity, and the problem big data tells you is a victory for the majority. But the truth is often in the hands of a few. So ten years ago we were going to rebel against the information cocoon, and today we're going to rebel against the answers that chatbots give us. In the future, there will be a situation that any thing happens, such as whether the house price in Shanghai will rise or fall? If I ask the machine, it is 50 billion pieces of data that tell me whether housing prices in Shanghai are rising or falling.

We are already having difficulty breaking through the information cocoon, and now we have to face ChatGPT and Wen Xin, which is too difficult. Independent people in the future are becoming increasingly important.

Ren Zeping: You just said ChatGPT, and I especially want to talk to you. I used to study mathematics as an undergraduate, and I think science is very great, but don't be superstitious about science. For example, today's headlines and data algorithms that Mr. Wu talked about just now lead to an information cocoon. I think it's that people can be manipulated easily. Whatever you like, it pushes it to you. For example, after ChatGPT comes out, you ask whether house prices are going up or down, what is the future economy, it will give you the opinion of most people on the Internet, and then you are manipulated.

Technology is just a tool, never a substitute for people. I think one of the great things about people is creativity and independent thinking. The other is the great kindness of people to this society, that is, love. Whether it is intelligence, technology, or any machine, it is irreplaceable.

To prevent manipulation, we must maintain the ability to think independently. Don't be manipulated by data algorithms and so-called artificial intelligence, be sure to maintain your ability to think independently. I don't think you need to learn repetitive things in the future, but you must be able to stimulate your genius. Everyone is a genius, and as long as it inspires your great passion, there will be creativity in this field.

The second is because people have values. People have kindness to other people, including society, so people can harness these machines and harness artificial intelligence. It must not be technology to control, it must be to use values to control these technologies. If there is no sense of morality and values to harness these things, then this society is the law of the jungle and will become very scary. I think that's what people need to do. Of course, like now that ChatGPT has come out, I personally feel that I also need to organize an ethics committee. For example, like search engines, the search cannot be all Putian Hospital, and it must be realistic and objective.

In addition, let me tell you that one of the detours I used to take was superstition in science. Because I came from a computational mathematics background, I thought that everything could be mathematicized, but this is actually wrong. For example, in the era of the planned economy, there was a very famous book called "The Road to Serfdom". It is wrong to argue that we can organize socialized mass production by designing a very elaborate model by elites, and that everyone becomes a screw. What is it actually? Modern economics: Market economics gives a huge answer.

The answer is: through the definition of property rights and some incentive mechanisms to mobilize people's enthusiasm, and then through people's enthusiasm to achieve efficiency improvement. The market economy promotes the optimal allocation of resources, and this incentive mechanism mobilizes people's love and motivation, which all science cannot achieve.

So I don't think we should be too superstitious about these things, don't be manipulated, use the power of these technologies, and use morality and values to control it. Technology is not good or bad, like a coin, is it good or ugly? Use it in good places and it is good, and use it in bad places is bad. This is my personal opinion.

Wu Xiaobo: What Zeping just said is what we need to reconstruct in terms of values. I really have a lot of feelings about the changes in my abilities today. When you look at ChatGPT, you will find that many white-collar jobs may disappear. Or rather, we didn't need so many draftsmen, so many people who wrote code, so many translators.

Let me tell you about one thing, I went to Yunnan Baiyao toothpaste factory last week, and its current toothpaste market share is 24%, and one of the four toothpastes in China is from Yunnan Baiyao. How much business do you do in a year? Do six billion in business. A factory that does six billion operating income, do you know how many workers he needs? Fifty people are needed.

Fifty people bought and sold five or six billion yuan, a quarter of China's toothpaste. Then you think about it, under extreme circumstances, the blue-collar workers in the toothpaste industry only need two hundred people in China.

So on the one hand, ChatGPT products are robbing us of some of the skills of white-collar workers. The machines that make toothpaste on the production line, the machines that make washing machines, are depriving our blue-collar workers of jobs. What about young people? This is really a very serious problem.

  Silicon Valley Bank

Wu Xiaobo: I heard you this afternoon that you want to talk about the Silicon Valley Bank, and when I went to Silicon Valley, many people told me about this bank. It's not big, but many startups in Silicon Valley, like Facebook, lent money to it or got investment in it.

Originally very healthy, it can be said to be a benchmark for global technology banks, and many city commercial banks in China now have a technology branch, Bank of Hangzhou and Bank of Nanjing have technology branches. They imitated Silicon Valley banks, and the bank collapsed, which should have a lot to do with the Fed's continued interest rate hikes, right?

Silicon Valley Bank Visual China infographic

Ren Zeping: I think there are some laws in economics, just like the conservation of energy in physics and gravity, that is, everything must respect the law. In fact, the collapse of Silicon Valley banks is not unusual at all, and even now, the market still does not realize that the collapse of Silicon Valley banks is not a case. We often say that if you find a cockroach in the kitchen, you must be careful of more than one cockroach.

Why? In fact, notice that three banks in the United States have recently failed. Bank stocks in the United States plummeted, and even the shares of Wells Fargo, the oldest bank, plummeted, and even thundered. The recent fall in Credit Suisse's share price has not even been as good as Luckin Coffee, and he has asked the state to intervene to save him.

If the failure of a bank is an isolated case, why is there a chain of crises in the global banking industry, mainly in the United States? What is the reason behind this?

At that time, the epidemic had just broken out, and the United States adopted unlimited QE, helicopter throwing money and overissuing currency. To what extent? Over the past two to three years, the Fed's balance sheet has inflated by more than 110 percent. The Fed prints too much money. In 2021, the US stock market was a big bull market, and the national home price in the United States rose by 18.7%.

One thing you have forgotten is what happens to the excess liquidity in the United States in bank accounts? At that time, because the economy was not good, so much excess liquidity could not be digested, banks could not lend out, and the excess liquidity on the account could only buy bonds. Buy treasury bonds, buy all kinds of corporate bonds, and so on. But what's the problem? At that time, the economy was poor and liquidity was abundant, which meant that interest rates on bonds were extremely low.

There is a law in economics that inflation is a monetary phenomenon at any time and place.

After there is more money, it is inflation. Ordinary people do not feel the change in macro liquidity, but they can sense the rise in prices, that is, inflation. By the second half of 2021, and especially to the beginning of 2022, inflation in the United States was very high, almost double digits. This led to the Fed starting to raise interest rates in March last year because inflation was too high.

Even now, inflation in the United States is still more than six points, and China has only one point. Seven consecutive economic rate hikes, three of which were 75bp each, are very rare in history, and only such violent hikes were made during the Volcker energy crisis in the eighties.

The problem is, the price of a bond is the inverse of the interest rate. The continued surge in interest rates led to a collapse in bond prices, which directly led to huge losses in the bonds held by the entire U.S. banking sector.

This is not the crux of the matter, but what is the point? Because the Fed's continued interest rate hikes have led to less liquidity in the market, corporate residents have begun to have to withdraw liquidity from banks.

On the one hand, the bank's assets have shrunk heavily, and on the other hand, the liquidity of the liability side has been greatly accrued. If this enterprise is particularly imprudent, it will collapse in an instant. And it's not that Silicon Valley Bank is alone, many banks in the United States face similar problems. I think the essence is the whole banking crisis and liquidity crisis in the United States. The reason behind it is the big enlargement of the US currency.

Wu Xiaobo: In layman's terms, the US economy is relatively poor, and I hope everyone will take out their money, so its interest rate is very low, so everyone will buy bonds and buy securities portfolios, and there are many asset packages at home.

As a result, in the past year or so, in order to stimulate economic development, the United States has continuously raised interest rates, raising them seven times. In the past week, deposit rates in the United States could reach about 5% and in Australia 5.2%. The deposit interest rate has become so high, the interest rate of the bond portfolio is only 2%-3%, and the people take out the money of the bond portfolio into a deposit.

So the biggest problem for Silicon Valley Bank this time is that many of his depositors and tech companies redeem their bond portfolios. How much to redeem in a day? More than 30 billion US dollars. Then the bank can only do one thing, technical bankruptcy. In fact, in the process of economic fluctuations in the United States, in order to suppress inflation, the deposit rate was raised. As a result, people took money out of the bond portfolio and turned it into deposits, and the bank went technically bankrupt.

Will this matter be a cyclical node for the Fed's interest rate hike?

Ren Zeping: The Fed is embarrassed now. Because at the beginning of this year, Powell also vowed hawkishly that he would raise interest rates once or twice, and he must dry inflation back. Now that the banking industry is in crisis, these banks are dying faster. This means that the Fed has reached an inflection point in raising interest rates, the end of its strong crossbow. But that's not the point of the matter.

If the other side of the ocean does its own thing, writes and acts by itself, what impact will that have on us? First, the US economy has since declined, and our foreign trade has been miserable. Looking at the financial risks, the people immediately became cautious, enterprises did not dare to invest, residents did not dare to consume, they were worried that the money could not be withdrawn. After the expectation changes, the interest rate itself is high, which is a tightening effect. Now the European energy crisis, the economy is already very poor, now the US economy can not bear, which means that the world's main source of demand can not bear, this year's foreign trade situation will be more tragic.

I hope that more and more people will do something useful for social progress together, so that our country will become more and more prosperous, society will become more and more stable, everyone will become more and more happy, and we readers will do research with warmth, feelings, and responsibility. This is my opinion.

  Chinese economy

Wu Xiaobo: We just talked about the Silicon Valley Bank in the United States, we talked about chatbots, and then we talked about the Chinese economy. Because you do macroeconomic research, I do empirical research, run companies and run places. I'll tell you a couple of the research data that I've just done, and the simplest thing is that you have to go back to the scene and see what's going on. One of the things that you have discovered? It's that the city is stuck in traffic again.

We have several data, the first is the store data, and our colleagues went to Shanghai and got that the shops in Shanghai are 70%-80% of what they were in June 2021. Then I asked the traders who traded second-hand houses in the shops, and they thought that the Shanghai shops would rise by 10% this year.

The second figure is factory rent. We went to Dongguan, there is a Songshan Lake in Dongguan, in 2021 it was 40 yuan a square meter, this month it is 35 yuan. In other words, compared with the peak, it is down about 10%. In the past eight years, starting in 2015, factory rents in this area of Songshan Lake have increased by 5%-8% per year. But this round still fell a little, about 10%, and now the factory rent has stabilized.

Third, hotels in Hangzhou. There is an Atour in front of our house, I just went to ask at noon, Atour Hotel before the epidemic about 360 to 400 yuan a room. Do you know how much it will cost tomorrow? It's 800, more than doubled.

Looking at these three data, I think the basic situation now: First, shops in central cities will rise. Second, factory rents in China's most important industrial cities have largely stabilized. Third, tourist cities like Hangzhou have seen their hotels rise even more. Therefore, first, residents' consumption should recover first, and tourism consumption should recover first. Second, shop expectations have increased, and millions of people have gone in Shanghai this round, and now everyone is coming back to open stores. Third, everyone's confidence in the factory workshop part of the factory has basically stabilized.

After listening to this data, what do you think?

Ren Zeping: I think it's pretty good. In fact, China's economy has indeed seen a small spring. As you just said, consumption, tourism, hotels, catering, airports, our domestic demand-related factories, including real estate sales, have all appeared to varying degrees.

Wu Xiaobo: There is another data, many students who care about the economy have hesitation, including the academic circles are also very speculated. Our broad money in February was $275 trillion, up 12.9%. This is the highest monthly growth since 2008. But the CPI is only 1%. Money is increasing, but prices are not rising. So now there are two schools of view in the academic circles. One school of opinion is that there is so much M2, so inflation. The other group believes that the price level is so low that deflation. This kind of scene seems to be rare in history, right?

Ren Zeping: There have been in history, but it has never been so extreme. Because in general, social finance is ahead, inflation and employment are lagging. The soldiers and horses did not move, and the grain and grass went first. First put money, after the money comes, consumption invests, and then employment improves and inflation rises. It has leading indicators, there are lagging indicators.

But this time, as you just said, so extreme, the currency is twelve points, and inflation is only a little, a dozen points worse. I think the very important reason here is that everyone has insufficient confidence in the sustainability of economic recovery, and a lot of money is deposited, either lying on the bank account or lying on the deposit account of the people.

Wu Xiaobo: I use facts to support your point. I have just returned from the northeast, and there is a city commercial bank, which is not big, and it is probably ranked in the sixtieth or so in the country. When the president saw me, his left face was happy and his right face was distressed. Why? From January to February this year, the deposits of residents in such a local city commercial bank increased by 40 billion yuan. I'm glad to have money. However, city commercial banks have limited loans out of the province, and 80% need to be in the province, who to lend to? That's what you see today. There are few good assets, and ordinary people dare not consume, and residents' savings have increased significantly. Then the bank's money idles through the financial system, do you think this problem can be solved this year? What will happen to the policy, what will happen to the people?

Ren Zeping: I think so, it is still a matter of confidence, people do not have enough confidence in the sustainability of economic recovery. If you affirm, for example, after one quarter, two quarters, three quarters, China's economy continues to improve, and spring comes, then employment income will continue to improve, because it will change expectations, and preventive savings will become less. Why is the money lying in the bank? It is preventive. Worried about losing jobs or layoffs tomorrow, if not only will there be no layoffs, but there will be a salary increase next month, everyone will definitely come out to consume, dare to borrow money, dare to borrow money to buy a house and a car. Therefore, we need to continue to give confidence to the market and let the economy continue to recover.

This is only one quarter, so it is not advisable to be blindly optimistic. In the second quarter and the third quarter, everyone can rest assured that if China's economy continues to recover, our prices and employment will rise.

Here are a few key points, that is, the three engines of the Chinese economy, point to it. The traditional is the house. It's not that everyone speculates on the house, everyone has the right to pursue a better life, or they just need to improve sexual demand, after all, the epidemic has suppressed for three years in the past. Then there is the new infrastructure and new energy. We must not rely solely on real estate, we must let new growth momentum rise. The third is to revitalize the vitality of the private economy, which is the so-called market entity.

Why do companies invest? Businesses invest because they have good expectations for the future. Opening a restaurant is definitely thinking that opening a restaurant makes money. Why make money? Property can be protected, and China's economy is improving for a long time. I think these three points are more critical. Old economy, real estate just need to improve the demand for sex on the car; The new economy, ChatGPT, artificial intelligence, big data, cloud computing, new energy, etc. are growing rapidly because it represents the future. Not investing in new energy at the moment is like not buying a house for 20 years, when the proportion of the new economy exceeds that of real estate, China's economic transformation is successful.

Who is doing this? by market entities. There is no problem in the areas where state-owned enterprises do the foundation, but in the fields of market-oriented competition, the private economy is efficient. But how to boost confidence in the private economy? The spirit of the rule of law, the protection of the market, create some good environment. and the timely control of incorrect arguments, so that entrepreneurship can be mobilized. I think everyone should pay attention to the fact that many people do not understand entrepreneurship, if there is no enterprise, where do you get employment? How can income improve without employment? It is a system of shared prosperity.

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