DEER ISLE: Insights, Flows & Investment Trends
The Five Stages of AI Acceptance
You’ve likely heard of the five stages of grief that end with acceptance. AI adoption follows a similar pattern.
- Denial: “AI doesn’t work and even if it does, I don’t need it.”
“I can do what AI does, and if I can’t, I don’t need it.” “Only people who don’t want to think use AI.” “My spreadsheets and my brain have gotten me this far.”
This stage is comfortable. It’s also the most expensive since competitors are leveraging AI to make themselves more productive.
2) Amazement: “Wait… this thing does everything.”
“It wrote a better email than I could have.” “It actually understood my variance commentary.” “I’m going to vibe-code a billion-dollar company and replace a SaaS provider this weekend.”
For a moment, AI appears capable of replacing analysts, consultants, coders — and possibly civilization itself.
3) Anger: “Why do I have to keep asking it to do the same thing?”
“I corrected this three times and it’s still wrong.” “It just invented a footnote reference that doesn’t exist.” “The numbers tie — except they don’t.”
Reality arrives. AI “hallucinates” details, forgets instructions, and confidently produces flawed output. In the financial sector, details are important and an AI created mistake can be a career limiting event.
4) Offense: “It costs money?”
“I spent 45 minutes asking AI to fix its own mistakes, and every redo costs me.” “I was in the middle of a project and the paywall hit — now I can’t finish without paying more.”
Just as dependence forms, the usage limit appears.
5) Acceptance: “It does some things extremely well — and that’s valuable.”
Eventually, expectations normalize. AI is neither omniscient nor useless. Acceptance for finance professionals also means accepting the governance piece — which models are approved, what data can go into them, who reviews AI-assisted output before it goes external, and how the prompt, model, and version get documented for SOX, audit, and reviewer sign-off. Transformative technologies usually become a highly valuable tool for specific tasks.
Until the next model release sends everyone back to Stage 2 again.
Listen to the Podcast to learn more
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| Capital Provider Interest: Continued buyer in equity and junior debt tranches of structured fund investments. Real Estate: The sector remains under pressure as interest rates stay elevated. For example, hospitality assets in primary locations within high-growth markets can still be acquired at approximately 7% cap rates. Private Credit: Market participants are increasingly skeptical of private credit valuations. One frequently overlooked factor in technology-oriented credit funds is the embedded value of warrants and other equity-linked positions. A single liquidity event can materially impact fund NAVs, suggesting that many technology-focused credit funds carry sufficient equity upside to partially offset underlying credit risk. Special Situations/Opportunistic: Despite the potential equity upside discussed above, cracks are beginning to emerge across portions of the credit markets. Weaker middle-market companies, venture-backed businesses, and select European issuers are increasingly evaluating liability restructurings as operating performance and growth expectations soften. |
