As the world becomes increasingly reliant on artificial intelligence (AI), the financial industry is also embracing the technology to streamline processes and improve efficiency. However, a Goldman Sachs partner has raised a crucial concern that the over-reliance on AI could lead to a significant loss of reasoning skills among bankers.

Chris Churchman, who leads Marquee, Goldman’s digital platform for institutional clients, warned that if employees rely solely on AI models to do their analytical work, it could lead to cognitive atrophy and hinder the ability of the next generation of financiers to reason from first principles themselves.

‘There’s a huge danger here that in the era of AI, we outsource our reasoning to these models, and we have cognitive atrophy that stops us being able to reason from first principles ourselves,’ Churchman said in an interview on the firm’s ‘Exchanges’ podcast.

Churchman emphasized that reasoning is still an essential skill for bankers, and they need to be able to reason about problems and structure them into an argument. However, with AI taking over more of the routine work that has traditionally taught young bankers and traders how to think and make decisions, firms risk sacrificing the culture that turns junior employees into seasoned Wall Street talent.

The Apprenticeship Culture of Wall Street

Wall Street’s push to enmesh AI into all of its trading and banking processes could be a kind of devil’s bargain. It will make the industry more profitable today while potentially eroding the talent it needs for tomorrow. With AI taking over more of the routine work, firms risk reducing the need for junior bankers in the first place.

Last year, CNBC reported that Wall Street firms were examining ways of using AI to lower the ratio of junior bankers to senior employees. This could lead to a significant loss of skills and knowledge that are passed down from experienced bankers to their junior colleagues.

The Challenge of Ensuring Accuracy in AI

One of the biggest challenges with generative AI is around accuracy. Goldman Sachs is still figuring out how to balance AI with human involvement. Churchman shared lessons from implementing AI into Marquee, which is used by hedge funds and other institutional clients to access Goldman’s market data, research, risk analytics, and trade execution services.

According to Churchman, the toughest challenge from a technical standpoint is ensuring that AI answers are 100% factual and can be audited. While consumer AI chatbots warn users of possible mistakes, in high finance, the tolerance for errors is low. Churchman said that in developing the firm’s AI platform for clients, the software made a startling admission.

‘When we challenged it hard, at least it was honest,’ Churchman said. ‘It was like, ‘Look, in the end, I’m better at sounding thorough than being thorough.’