AI disruption, job losses, and investing

[entrep]

AI is coming fast and I don't think it's over-hyped. I think in maybe 5-10 years a lot of well-paying jobs are going to be wiped out. That's a huge structural risk.

It raises questions about how much leverage to take on, what kinds of assets make sense to hold, and whether to plan for inflation, deflation, or some kind of government intervention if things unravel.

I came across this Reddit thread that really captured the dilemma.

I'm interested in how other investors are actually thinking about it.

Is the prospect of AI disruption changing how you invest or borrow?
What's your long-term strategy in the face of potentially massive economic change?
How are you planning for it if normal workers all lose their jobs and there's a bunch of AI overlords?

PS: If you think AI is over-hyped and all this will amount to nothing, can you please make a new topic or post that elsewhere.

[Dolcile]

At my workplace AI adoption is moving forward at pace and I think mass disruption could be sooner than 5-10 years - possibly more like 1-2 years. 

I don't have the answer, but my current strategy is to remain heavily invested in the S&P500 for large tech exposure.  I hope that gives me time to work out my long term strategy. 

This is such an important topic - thanks for starting a thread for us to share ideas. 

[HAWKDOG]

Have a listen to this podcast - AI disrupting education.
https://podcasts.apple.com/us/podcast/joe-liemandt-building-alpha-school-and-the/id1154105909?i=1000723564395

[Shareguy]

Craig's suggest

From an investment perspective remaining overweight in the early enablers and in infrastructure providers. In the near term positioning to gradual exposure to software applicators and select end user platforms as adoption broadens and productivity gains begin to occur.

[entrep]

US tech gud.

At the most basic level, the only thing I've been able to come up with is trying to own as much US tech as possible that stands to benefit from the productivity gains as possible, but even with that, it's still a pretty scary scenario. What about the rest, the 99% of the population who don't have any meaningful exposure to our new AI overlords?

[Basil]

Great thread.  I will follow what others have to say with considerable interest.  I don't have much of an answer.

My view on investment.  Its not possible to pick who are going to be the main beneficiaries of the A.I. revolution.  Best way to incorporate exposure to this sector in my opinion is to buy into a S&P500 ETF.  Much of that is technology.  Interestingly and talked about on CNBC this morning, the S&P500 bottomed at 666, (notice the devils number), at the depths of the GFC on March 9 2009.  Last Friday it was 6,666.  Pretty spooky eh.  That's 10 times your money in 16 1/2 years.  Nothing shabby about that, (but you would have to have been incredibly lucky to pick the absolute bottom), but nevertheless, a good demonstration of the power of compound growth visible for all to see, right there !

Sorry, I don't have any other advice for the young ones facing massive disruption with A.I. other than to keep your debt down to a modest level and don't overleverage yourself hoping for massive gains in property.  The risks have never been higher, (rampant meth use in society these days to name just one of the risks additional to job loss disruption by A.I.).  I'm glad I am in the twilight of my career.

[HAWKDOG]

There is an option to add an AI-focused ETF.

here is a comparison article: https://www.justetf.com/en/how-to/invest-in-artificial-intelligence.html

[winner (n)]

Use of AI and robots certainly gaining momentum. As AI and robotics replace labour across white- and blue-collar domains, maybe we're entering the terminal stage of consumer capitalism, which is driven by waged labour in exchange for production, consumption, and taxation

And without toil, there is no wage, no mass consumption, and no broad-based taxation to fund the state or support debt service.

Consumption shrinks, not because needs vanish, but because purchasing power does

The collapse of the wage-consumption-tax loop that sustained the post-WWII model of growth. Gone

The end of industrial-era capitalism and the beginning of something else. But what replaces it?

And what do humans do once they fully realise the implications?

Interesting times ahead ..as Basil says especially for those younger ones amongst than us oldies but no doubt we'll be affected as well

[entrep]

Sorry, I don't have any other advice for the young ones facing massive disruption with A.I. other than to keep your debt down to a modest level and don't overleverage yourself hoping for massive gains in property.  The risks have never been higher, (rampant meth use in society these days to name just one of the risks additional to job loss disruption by A.I.).  I'm glad I am in the twilight of my career.

FWIW I recently sold my only rental property and paid off the mortgage on the family home in full, and agree with you on those points.

And yes @winner that is the big problem! As I said, the only thing I can think of is US tech ETFs etc...

Robotics + AI is going to be absolutely BONKERS next few decades.

[Basil]

FWIW I recently sold my only rental property and paid off the mortgage on the family home in full, and agree with you on those points.

Very good move in my opinion.

[BlackPeter]

AI is coming fast and I don't think it's over-hyped. I think in maybe 5-10 years a lot of well-paying jobs are going to be wiped out. That's a huge structural risk.

It raises questions about how much leverage to take on, what kinds of assets make sense to hold, and whether to plan for inflation, deflation, or some kind of government intervention if things unravel.

I came across this Reddit thread that really captured the dilemma.

I'm interested in how other investors are actually thinking about it.

Is the prospect of AI disruption changing how you invest or borrow?
What's your long-term strategy in the face of potentially massive economic change?
How are you planning for it if normal workers all lose their jobs and there's a bunch of AI overlords?

PS: If you think AI is over-hyped and all this will amount to nothing, can you please make a new topic or post that elsewhere.

Not sure. I was during the early eighties at university and people who understood electric cars told me in 5 to 10 years everybody is running an e-car, and they had already prototypes running.

That was 45 years ago ... and most of us are still running their old petrol or diesel cars.

Just trying to get an idea around how fast things are changing.

But yes, AI is increasing ... and there are a lot of things they can do or will do better than humans.

Health: GP's could better focus on the not so easy issues. Maybe some of the service solutions are solved as well by AI / Robotic. Wouldn't it be great?

Education: no doubt there will be a bit of support for teachers, but can anybody imagine an education system run by AI?

Jurisprudence: similar to medicine, some stuff can be done easier by computers, but no doubt, we will need afterwrds more people to review whatever the computer did - and catching criminals with AI? Only if our criminals don't understand software ...

Services: Sure - if I bring the car to the workshop, the technicians will still get more support about the issues. Do I expect the cars to be selfreparing? No.

Issues won't be too different from previous changes ... walk to wheel, printing books, steam engine, nuclear energy, internet. Jobs change and most people will find other (and better) jobs.  And hey - people still walk, write by hand and do things manually. Some are even paid for it.

The current biggies impacting us are: Climate change, political extremism, new technologies. AI is one of these new technologies and needs to be monitored ... but not sure it needs more effort than the other biggies. If climate change destroys the place you are lving, AI is not very useful. If TrumpXiPutin destroy your capital - whats the benefit of observing AI?

So, I guess we still need to keep a diversified portfolio. The only thing I am not so sure about is too much focus on the US. Its not AI, but the dummy at the top is currently working hard at destroying this system. Maybe he wont get there, but I think the possibility is open. Perhaps people want to move at least some of their money somewhere else?

[Plata]

Taking the assumption that AI causes major job losses etc, I think it is also safe to assume that the cost of production for many goods and services will decline.

IMO it looks like AI will be commoditised and widespread. I doubt many businesses outside of the tech sector will have meaningfully superior AI tech to their competitors, likely relying on general models made by tech companies that are tweaked for their specific applications.

The largest businesses with more money to play with may be able to get an edge by creating or commissioning their own specific models trained specifically for their application. They may have an edge as a result over their competitors.

However, most businesses will find that as their costs decline, so too do those of their competitors. I imagine that fierce price competition will result in very little profit growth from AI usage, especially given the backdrop of potential mass unemployment. You can imagine even the consumers who do still have jobs will become very cautious with spending.

Who does that leave to profit? The tech companies making the models, the implementers deploying/tweaking them, and our favourite kinds of businesses:

Monopolies - costs come down but little pressure to reduce prices beyond consumer price sensitivity.
Supermarkets, Sky TV, Gentailers come to mind.

Companies with strong IP protection/differentiated products - costs come down but they are effectively monopolies so long as people desire their specific goods/services.
Medical sector. Meta. Apple. Microsoft. NVDIA. AMD

Companies with high R&D burdens, money to develop specialised AI systems & IP protection - Recall the AI google developed to identify proteins recently. Imagine the same thing but with pharmaceuticals or in material science. It could be the next ozempic, or a solar panel design that is twice as efficient at the same price point. We could be approaching a time period of rapid innovation in these fields and I think the bigger companies are the best placed to take risks on AI generated prototypes AND have the legal teams to stifle competitors and defend their technology.

That is what I feel off of the top of my head so take any claims with a grain of salt.

[Sideshow Bob]

Interesting thread, and thanks for starting.

Been trying to advise my daughter on electives for NCEA level 1. Not particularly academic and more practical subjects spring to mind. But don't envy the uncertainty when looking at vocations and further training - trying to see into the future.

Bit of Moores Law with the exponential development in AI. 

[entrep]

This is a pretty interesting and scary read. I think the timeline in the article is far too aggressive, but could definitely see stuff like this playing out in one or more different ways or variations of what's described in the article over the next ten years.



https://www.citriniresearch.com/p/2028gic

Power companies seem like a pretty safe bet IMO + IFT + Gold/BTC. GOOG I like too. Maybe CNU also.

[HAWKDOG]

This is a pretty interesting and scary read. I think the timeline in the article is far too aggressive, but could definitely see stuff like this playing out in one or more different ways or variations of what's described in the article over the next ten years.



https://www.citriniresearch.com/p/2028gic

Power companies seem like a pretty safe bet IMO + IFT + Gold/BTC. GOOG I like too. Maybe CNU also.

Looks like a few companies tanked after this blog post and the scenario it layes out.
IBM and Amex stocks down big .