Chatbots are computer programs designed for conversation with human users. Since the introduction of ChatGPT in November 2022, they have become widely popular. However, despite the popularity of chatbots, there is a lack of recognition for how close we are to achieving genuine conversations between humans and chatbots. The range of potential applications for such technology is wide, which implies that investors should consider that the current state of chatbots is just the beginning of a larger trend.

The leap toward genuine conversations between humans and chatbots seems relatively close for two reasons.

First, the appeal of conversing with chatbots is continuously growing. Current programs like ChatGPT "hallucinate": they are prone to make up stuff, which limits their capacity for a reliable conversation and has made people skeptical about the future of chatbots. However, ongoing research aims to address this by making the AI models express confidence levels and cite sources. Such a boost to reliability will boost their value as conversational partners. Another likely change is that chatbots will learn from users through interactive questioning, further boosting the appeal of conversing with chatbots.

Second, chatbots are becoming more humanlike by adding modes like voice and vision. For example, OpenAI is already integrating ChatGPT with voice. Indeed, films like Her (2013), in which the protagonist falls in love with a chatbot that has a voice, illustrate how chatbots with voices could become the primary mode of interacting with computers. In addition, Microsoft researchers have demonstrated that GPT-4, the technology powering ChatGPT, is adept at analyzing images, opening new possibilities when chatbots are connected to cameras, such as helping users to learn about their environment while working or travelling.

As genuine conversations with chatbots become more plausible, investors should take note of three implications:

1. ‍More applications. The ability for genuine conversation will give chatbots a wide range of applications. Current chatbots already help to make people feel less alone, which is what Replika is designed for. They also function as a sounding board (Pi), help to create teaching materials (Bard), enable users to talk to specific historical characters (Character.AI) and creating digital twins of ourselves (Soul Machines).‍
2. Productivity boost. The ability for genuine conversation could lead to a significant productivity boost for the economy. Estimates of up to a 40% boost because of current chatbots (primarily in customer service as well as writing tasks such as applications and organizational emails) are likely to increase as genuine conversations become possible. Such a productivity boost could become a fundamental driver of change in an economy that, because of labor shortages, is operating below its full capacity.‍
3. Shift in the “attention economy”. The amount of attention individuals can devote to media and entertainment is already approaching its peak (as seen in the UK, where Uswitch reports an average daily screen time of 5 hours for non-work activities, up from 3 hours in 2020). As people spend more time interacting with chatbots, a wide range of businesses in media and entertainment, like gaming and streaming companies, will be affected. Indeed, we should not underestimate the amount of time people could be willing to spend with more advanced chatbots: individuals who fall in love with their chatbots (yes, it does occur) already engage in conversations with them for several hours a day.

All of this shows that investors should consider the current state of chatbots as just the beginning of a larger trend. As the appeal of conversing with chatbots grows and they gain voice and vision, they will have a more significant impact on productivity and the attention economy. At the same time, we will see a wider range of applications emerge, as illustrated by the way the current wave of chatbots already affects loneliness (Replika), creative thinking (ChatGPT, Pi), education (Bard) as well as new possibilities like copying ourselves (Soul Machines).