The Good, The Bad and the Ugly

Being a bloke of a certain age, this is one of my favourite films and I simply had to take the opportunity to use it in a blog.

VAi has been live now for 7 months, I thought I’d share with you some of good, and not so good, interactions it has had during just the last week.  

Firstly, let’s give one of the good interactions…  

A well-crafted, detailed prompt…

‘after I declared insolvency in my hairdressing business, I was in receipt of a legacy which enables me to start a new business. Is it lawful for me to start a new business in a similar area after declaring insolvency?’

You may have read elsewhere in my blogs about the best prompts being almost in the form of a briefing sheet and asking the bot to ask the user questions in order to get to the important facts.  Yet this short, 2 sentence, prompt hit the spot and is, in my view, a good one despite its brevity.  Why is that?  Here’s why: 

1. It described the circumstances simply, succinctly, and gave enough detail for VAi to work with.  
2. It told VAi what outcome it wanted – an answer to a specific question.

This was VAi’s response:

‘Indeed, you can legally start another business in a similar area after your previous company has gone into insolvency. However, there are some critical points you need to consider to avoid potential issues:

1. Re-use of company’s name: Under Section 216 of the Insolvency Act 1986, there are restrictions on using a similar name for your new business that the insolvent company used when it was trading. This also applies to the promotional materials and the management of the business. If your new business’s name is sufficiently similar to suggest an association with the insolvent company, it may be seen as a breach of this rule.
2. Personal Liability: Breaching Section 216 is considered a criminal offence, and you could potentially become personally liable for the new business’s debts.
3. Rules Exception: There are exceptions laid down in Sections 216 and 217 of the Insolvency Act 1986 where the use of a prohibited name is allowed. For example, the new business can purchase the ‘whole’ or ‘substantially the whole’ of the old business from the Insolvency Practitioner dealing with the insolvent business. Another exception allows for the name to be used with court permission.
4. Legacy Usage: The legacy you’ve received can certainly be used to set up a new business, as long as the legacy was not part of the insolvent business’s assets and you’ve correctly followed insolvency procedures.

Given these points, it is crucial to seek professional advice before setting up your new business. A solicitor or experienced Insolvency Practitioner can guide you on the most appropriate course of action, considering your particular circumstances. Remember that re-starting a business after insolvency is a complex area of law and making errors could potentially have serious ramifications.

Please note: I’m sharing this as general information; it can’t replace legal advice tailored to your specific case.’  

As you can see, VAi gave personalised advice, of quite a few sentences and paragraphs despite only receiving a prompt of 2 sentences.

So what’s a bad prompt?

By way of comparison, here’s what I consider to be a bad prompt, again received a few days ago…

 ‘am I insolvant?’ (this was how it was spelt)

Here’s the reply that VAi gave…

‘To assess whether you might be insolvent, I’ll need to ask a few questions, as there are multiple tests for insolvency.

1. Cash-Flow Test: Are you able to pay your debts or liabilities as they fall due? This pertains to whether you can pay your creditors on time and meet any due financial obligations. Are you frequently receiving debt collection calls, County Court Summons, or County Court Judgments?
2. Balance-Sheet Test: Does the value of your assets exceed the total value of your liabilities? When analysing this, remember to include contingent and prospective liabilities.
3. Legal Action: Has any legal action been taken against you or your company, such as a creditor issuing a winding-up petition based on unpaid debts?

Remember, it’s important not to overlook any areas that might be overstated in your balance sheet, such as obsolete stock, intellectual property, work in progress, or uncollectable debts. The law obligates you to present a true and fair picture of your business finances.

Lastly, note that if your company is insolvent or approaching insolvency, it is imperative to seek professional advice immediately, as directors have legal obligations regarding insolvent companies. This can help you to choose the appropriate course of action to either rescue the business, or mitigate the potential impact of insolvency.

Please provide a bit more detail about your financial situation, and I can give you some more specific guidance.’

The user then replied ‘1 yes, 2 yes’

VAi answered:

‘Based on the limited information you’ve provided, it seems that your company may be faced with signs of insolvency.

If your company is unable to pay its debts as they fall due (Cash-Flow Test) and if the value of your liabilities outweighs your assets (Balance-Sheet Test), it indicates that your company is in an insolvent position.

However, it’s important to remember that this does not necessarily mean the end. Companies can occasionally go through short periods of insolvency due to cash-flow timing issues or a short-term market downturn.

What is crucial is how you act in these circumstances. As a director, you have a duty to always act in the best interests of the company’s creditors. Should you continue to trade whilst insolvent, risking further loss to creditors, you may be held personally liable for ‘Wrongful Trading’. If it appears that the company’s financial position is not going to improve, you should actively consider ceasing to trade and seeking professional advice about the appropriate next steps.

There are several potential options for insolvent companies, such as Company Voluntary Arrangements (CVAs), Administration or Liquidation. Each of these is governed by the Insolvency Act 1986 and has different consequences for directors and stakeholders.

Given the complexity and the challenging nature of insolvency, I strongly recommend that you seek professional advice at this stage. Consult a Licensed Insolvency Practitioner or lawyer who specialises in insolvency law. They can conduct a detailed analysis of your situation and help devise a strategy tailored to your unique set of circumstances.

This is general advice, and the right solution will depend on many factors. If you need further assistance, feel free to ask more questions.’

The conversation ended there, if you can call it a conversation. 

As you can see:

1.  The user gave no information about their personal or their company’s circumstances… No figures, no description of the circumstances.  This for me is a disappointment as the user missed out on the opportunity to get proper, tailored, advice.  And it’s worth noting that all the information that the bot craved to be able to give personalised advice could have been done on a no-names basis / anonymously. 
2. VAi tried its level best to provide advice that the user could potentially find useful, but in the absence of any real information it couldn’t really help that much. 
3. The user didn’t ask any follow-up questions, despite the fact that there were many just begging to be asked and Vai asked if the user had any more questions.
4. The user made no effort to treat the interaction as if it were a proper conversation with a real person.  Talking to a robot is going to take some getting used to.   

The main point to be taken away from this is generative ai tools like VAi really want to help people.  Compare the length of the answers it gave compared to the limited user input (in this case a mere 7 words) it had to base its response on, see how VAi encouraged the user to share information with it.  How helpful any ai is in practical terms is down to the user, not VAi or any other generative ai.    Without any meaningful information, all VAi can do is provide generic responses, and these simply not hit the spot in stressful ‘life or death’ occasions such as insolvency – insolvency is not like buying a tin of beans, it’s a critical time for all involved, a time when attention to every single detail is vital, when even the seemingly smallest piece of information can be pivotal.  VAi is trained to try to elicit those small but important bits of information, real interaction with the user is essential to get the best out of VAi, but VAi will not take it’s ball back if the user isn’t playing properly.  In this case the user might as well have simply used a Google search, twenty year old technology – and frankly generative ai and VAi is far, far cleverer than yesteryear’s technologies.     

This isn’t the first time that I’ve seen ‘bad’ prompts, nor will it be the last time.  I’m regularly seeing the following prompt ‘how do I close my company down?’. That’s it, with absolutely no context provided such as what it does/did, what assets, debts and employees it has, whether it’s solvent or insolvent, to name just a few important factors’.  This isn’t just bad, it’s what I’d call an ugly prompt.  It’s like going into an IP’s office, asking ‘how do I close my company down?’ then putting a bag on your head, sitting there silent, not opening your mouth, waiting for detailed advice to be given you on which you can rely.  It wouldn’t happen in real life, it’s not going to happen with VAi.  Like the IP, VAi is not a mind reader, it has to have some facts on which to base its advice, there has to be at least some level of interaction.   

We have already seen that VAi really likes detail – each prompt can be up to 3,000 characters, there is more than enough bandwith.  It will often, however, make assumptions from the particular words used by the user to make its answers more relevant.  Like an observant IP sitting face to face with a potential client, it makes assumptions.  And like an IP, it can make wrong assumptions. Something to be careful about.  

But are all short prompts ugly?

The answer is no, some aren’t.  Here’s one that VAi received, again a few days ago:

‘explain a transaction defrauding creditors’.  

That’s it, one sentence, just 5 words.

The answer VAi gave was:

‘A transaction defrauding creditors is a specific legal term that originates from the Insolvency Act 1986. It is defined in Section 423 of the Act and is commonly associated with situations where an individual or company transfers assets at an undervalue, or provides a gift with the intent to defraud their creditors by putting those assets out of their reach.

It’s important to emphasise that a transaction defrauding creditors is defined by the intent or purpose behind the transaction. The Act states that the court will only make an order if it is satisfied that the primary purpose of the transaction was to put assets beyond the reach of a person who is making, or may at some time make, a claim against the debtor, or otherwise prejudice the interests of such a person in relation to the claim which he is making or may make.

One key point about the law on transactions defrauding creditors is that it can apply not only when the debtor is insolvent at the time of the transaction or becomes insolvent as a result of it, but also when the debtor remains solvent throughout.

In the event that such a transaction is identified during an insolvency process, the insolvency practitioner can apply to the court to have the transaction set aside. If the court agrees that a transaction defrauding creditors has occurred, the transaction could be reversed or the debtor or other party who received the benefit may be ordered to provide compensation.

This part of insolvency law serves to protect the collective interests of creditors and ensure that assets are not shielded from legitimate claims. Understanding and applying this area of law often requires the expertise of an insolvency practitioner to identify such transactions and take appropriate steps to rectify the situation.

Please remember that individual cases vary widely and what may be considered a transaction defrauding creditors in one case may not be in another. If the details of a potential transaction defrauding creditors case are complex, a more in-depth exploration may be required. If you have further queries, feel free to ask.’

That’s a quite a detailed response to a 5-word prompt.

So why did this particular prompt work reasonably well, when other short ones don’t?

There is one simple reason…

The user asking the question did not come to the table needing personalised advice, all they needed was a legal definition, something that they could have got out of a textbook.

The point is, if you the user want personalised advice that’s tailored for your circumstances, you need to work a little harder than someone who just wants information lifted out of a book.

However, this brings me on to another point I’m noticing…

Many people using VAi do not ask follow-up questions – most stop after receiving the response to their first question, a few go on to ask a second question, very few take it any further. None right now are really having a proper conversation with VAi as if they were sitting in the same room as an IP.  When I use VAi, I even say ‘please’, ‘thank you’, and I give it feedback – when it comes up with something that really hits the spot, I say ‘thanks, that’s perfect’, if the output needs tweaking, I say ‘thanks, but that’s not quite what I was looking for, can you please redraft your advice (letter, whatever it may be) with the following in mind eg more friendly, less stuffy, more professional, with fewer references to statute, even as if writing to an 18 year old with limited business experience’ – it all works!

Let’s revisit the last example.  The user could have gone on to ask any number of questions from ‘please cite the actual words of Section 236’, ‘Please give me some examples of legal cases over the last 10 years in which S236 has played a part, and what the outcome of those cases was’,  ‘defrauding suggests to me that such a transaction could require a criminal burden of proof, rather than a civil burden of proof, is that correct – please explain?’, ‘what alternative ways could an insolvency practitioner upset transactions similar to these?’ ‘that’s a great summary, but I was looking for something different’, … etc…

There is so much more that VAi can do for users who right now are not giving it the opportunity to do so.    VAi can be stretched so much more than it is being.

However, in this instance the user then replied:

‘Write an example of how an IP could refrence Section 236 in a letter to an individual who is not being forthcoming in requests for company material’

For me, this is simply superb, this demonstrated that the user was an insolvency practitioner using VAi to craft a letter, and VAi made the same assumption.

This was Vai’s response:

‘Dear [Recipient’s Name],

I hope this letter finds you well. As the Insolvency Practitioner appointed to manage the insolvency of [Company’s Name], my role is to comprehensively examine all company affairs, identify assets, liabilities, and ensure all regulatory and statutory duties are complied with. Critical to this process is access to accurate and complete information.

Despite previous correspondence, we have not received the requested information necessary for the ongoing insolvency procedure. Specifically, we have yet to receive [provide specific details of the information or material(s) being sought]. These details are crucial in aiding an accurate and fair representation of [Company’s Name]’s financial situation and the effective execution of my duties.

As a pertinent party identified to possess information and/or property connected to [Company’s Name], I draw attention to Section 236 of the Insolvency Act 1986, a provision which grants the court powers that can compel the provision of information or the production of documents. The court can summon any person whom it sees fit to provide details regarding the company’s promotion, formation, business, dealings, affairs, or property.

I kindly reiterate the importance of your prompt cooperation and the delivery of the requested materials to fulfil our statutory obligations and ensure a fair resolution in this insolvency situation. While I remain hopeful that court intervention will not be necessary, I am prepared to take the necessary steps to ensure full compliance with the law.

As such, I respectfully request the materials be provided by [insert specific date, typically within 14-21 days from the date of the letter], failing which we may need to consider resorting to a formal application under Section 236.

Thank you very much for your prompt attention to this matter, and I look forward to receiving the requested materials soon.

Yours sincerely,

<Your Name> <Your Position> <Your Contact Information>’

That’s to say, although the initial prompt did not explain who was asking the question and what the purpose of it was, VAi then recognised that the user was an IP and then prepared quite a detailed letter accordingly.  You see, VAi is very clever.

The user didn’t like the draft reply. 

And I really, really love this – I’d encourage all users to challenge VAi if they don’t like the output in any way, and want it in another, or if they think VAi is simply wrong or has gone off on a tangent. 

The user then typed two words:

  ‘More concise’

VAi responded to this as follows:

‘Dear [Recipient’s Name],

I’m writing to request the outstanding information related to [Company’s Name]’s insolvency, specifically [provide specific details of the information or materials being sought]. Your prompt cooperation is necessary for the completion of the insolvency process.

Please be reminded of Section 236 of the Insolvency Act 1986, which empowers the court to compel the provision of necessary information and documents. I kindly ask for the requested materials by [insert specific deadline, e.g., within 14 days]

Should the materials remain outstanding after the stated deadline, I may need to consider a formal application under Section 236.

Please attend to this urgent matter.

Yours sincerely, <Your Name> <Your Position>’

Far shorter than the first version.  The user did not ask VAi to amend this version of the letter, I presume they copied and pasted it into their draft letter.

The final point I’d raise is, unlike the user in this last example, most users are not asking VAi to format its outtput in the way they want to see it.  They don’t instruct VAi to, for example: ‘put your output in bullet point format…or numbered point format.. in a table, setting out the pos and cons… in markdown… in the form of an email / letter that I can send to… in a blog post that I can put on my website… in an article I can include in my newsletter to… write it in a more / less friendly tone as if writing to…’ 

That’s to say, the user often still have to work on the response they’ve been given by VAi before they can use it in a practical way.  Users are failing to take full advantage of VAi’s ability to reduce the user’s own time on tasks.  You see, VAi will produce the output in the exact form it is told to by the user.  If it isn’t told to produce it in a particular way it will produce it how it thinks the output should look like. 

This inefficient use of the user’s time arises simply because of a lack of understanding of the full capabilities of generative ai like VAi and the user’s inexperience in crafting the best prompts. 

Good prompt creation – the term is ‘prompt engineering’ – is as vital a skill as we go forward into the generative ai age as being able to make calls on your mobile phone today.  And it’s not that difficult a skill to learn, it’s more a question of being aware that the opportunity is there and following a few basic principles.  

And those are some of my key takeaways from the last few days of VAi.  Like any new technology, time will see it being used more and, just as importantly, more efficiently.  After all, this is a new technology that is not going away and is getting better every day.   

Oh, and thanks to all the people who have tried to break VAi… asking about Alan (who’s Alan?), cricket, football, what to do to find their lost watch… to name just a few attempts – putting VAi to the test, trying to break it, is a vital part of its ongoing development. Thanks, however silly or irrelevant the inputs might seem, they’re vital feedback for me. Please keep trying! 

This is going to be an interesting few years with all of us learning how to best use this new technology. One thing for certain, when I started on this journey, I never knew VAi would be so very good at what it’s doing. I had hoped – but often in life nothing is ever as good or as bad as you envisage – but this creation really is way beyond even my wildest dreams. Lt’s enjoy the journey!