The release of OpenAI’s ChatGPT in 2022 sparked an explosion of news and a surge of interest in generative AI, leading to a continuing hype cycle with each new model or feature. Tech companies and startups are now marketing AI products, promising to revolutionize consumer behavior.
Rise of AI Mentions
A study by an investment fund for new tech firms highlighted a significant rise in AI mentions in startup pitches, from 10% in 2022 to over 25% in 2023. Moreover, over 50% of S&P 500 companies referenced AI in their earnings calls last year, as reported by NBC News.
Reality Check on AI Adoption
Despite the hype, a survey by the US Census Bureau in November last year revealed that only 4.4% of American businesses were using AI to produce goods and services. Similarly, a 2019 survey by London-based venture capital firm MMC found that 40% of European AI startups didn’t use any AI at all. This discrepancy between claims and actual use forms the basis of ‘AI washing’.
AI Washing Explained
AI washing is analogous to greenwashing, where companies exaggerate their environmental friendliness. Businesses claiming to have integrated AI into their products, while using less sophisticated technology, are accused of AI washing. Overstated advertisements about AI capabilities also constitute AI washing.
Regulatory Actions
The term AI washing gained prominence when the US Securities and Exchange Commission (SEC) fined investment advisory firms Global Predictions and Delphia for making false AI-related statements. These fines totaled $225,000 and $175,000, respectively.
Examples of AI Washing
- Google: Unveiled Gemini with a video demonstrating its multimodal AI chatbot capabilities. However, it was later revealed that the video was not shot in real time but created using text prompts and still frames.
- Amazon: Removed cashier-less checkout systems after reports that the technology relied on employees in India to review transactions.
- McDonald’s and Coca Cola: Faced scrutiny for their AI-related claims. McDonald’s ditched its AI technology at drive-thru restaurants due to inaccurate order taking. Coca Cola’s AI-generated flavor failed to impress customers.
- Ola’s Krutim AI: Claimed to be a homegrown ChatGPT rival but was suspected to be a ChatGPT wrapper.
- Kolibree: Marketed an AI-powered toothbrush that used sensors and algorithms for personalized recommendations but was criticized for overhyping its capabilities.
Impact of AI Washing
AI washing can divert resources from genuine AI innovation, complicate decision-making for businesses seeking valuable AI solutions, and pose risks to consumers. Misleading AI claims can slow technological progress and undermine trust in AI.
Avoiding AI Washing
The US Federal Trade Commission (FTC) advises businesses to avoid exaggerating AI capabilities and ensure transparency in AI product claims. The Securities and Exchange Board of India (SEBI) also warned against AI washing in financial products.
Multiple Choice Questions (MCQs):
- What sparked the surge of interest in generative AI in 2022?
- A. The release of OpenAI’s ChatGPT
- B. The launch of Google’s Gemini
- C. The introduction of Amazon’s cashier-less checkout systems
- D. The rebranding of Long Island Iced Tea Company
- Answer: A. The release of OpenAI’s ChatGPT
- What percentage of S&P 500 companies referenced AI in their earnings calls last year?
- A. 10%
- B. 25%
- C. 50%
- D. Over 50%
- Answer: D. Over 50%
- What is AI washing?
- A. Using AI to clean products
- B. Exaggerating the capabilities of AI products
- C. Using AI to improve environmental friendliness
- D. Developing AI-based consumer goods
- Answer: B. Exaggerating the capabilities of AI products
- Which regulatory body fined Global Predictions and Delphia for false AI claims?
- A. US Federal Trade Commission
- B. Securities and Exchange Board of India
- C. US Census Bureau
- D. US Securities and Exchange Commission
- Answer: D. US Securities and Exchange Commission
- Why did McDonald’s ditch its AI technology at drive-thru restaurants?
- A. Due to inaccurate order taking
- B. To improve environmental friendliness
- C. Because of regulatory fines
- D. To focus on blockchain technology
- Answer: A. Due to inaccurate order taking
- What did Amazon rely on for its ‘Just Walk Out’ technology in some stores?
- A. Advanced AI and sensors
- B. Employees in India
- C. Blockchain technology
- D. Google’s Gemini AI
- Answer: B. Employees in India
- What was the issue with Ola’s Krutim AI?
- A. It was a homegrown ChatGPT rival
- B. It was suspected to be a ChatGPT wrapper
- C. It was fined by the SEC
- D. It replaced cashier-less checkout systems
- Answer: B. It was suspected to be a ChatGPT wrapper
- What recommendation does the FTC give to businesses to avoid AI washing?
- A. Ensure transparency in AI product claims
- B. Invest in blockchain technology
- C. Avoid using AI in products
- D. Increase environmental friendliness
- Answer: A. Ensure transparency in AI product claims