AI’s impact on wealth concentration … invest in AI, or else … the great AI race with China … how will public policy affect the race? … an AI event with our experts For as vast as the wealth gap is today, the next several years will widen that division to a level we haven’t seen in recent history. Artificial intelligence (AI) will drive this. Let’s talk about what’s happening, what to expect, and what to do with your money right now in preparation for what’s on the way. In 2020, our global macro specialist Eric Fry coined the term “Technochasm” This was Eric’s word to describe the stark – and expanding – wealth gap in the United States that, in large part, was being driven by technology. To be clear, this was taking place long before AI and ChatGPT arrived. Technology was already becoming a great wealth-sifting machine Here’s Eric with statistics through 2012: In 1980, the richest 1% of Americans owned about 30% of all household wealth in the country. At the same time, the bottom 90% owned about 24% of all household wealth. But by 2012, the share of all household financial wealth owned by the top 1% had skyrocketed to more than 60%… and the share owned by the bottom 90% had plummeted below 10%. 
Logically, this wealth shift makes sense… Cutting-edge tech products have simplified our lives, making them far more convenient. Americans have opened their wallets happily for all-things-tech – and this includes Americans who aren’t necessarily earning high incomes. An example I’ve used in past Digests comes from Pew Research, which found that the percentage of U.S. adults who make less than $30K a year yet still own a smartphone is a whopping 71%. If we bump that income level to between $50,000 – $74,999, the smartphone ownership percentage leaps to 90%. This is technology acting like a funnel, channeling wealth from the masses toward a select group of technology business owners, key employees, and investors. But with AI, this wealth concentration is accelerating and – if not managed – is potentially dangerous. Here at InvestorPlace, we have an internal Slack channel dedicated to AI From articles, to AI tips, to suggestions for more effective prompts, this channel is all things “AI.” Recently, a coworker posted a link to a paper from Chinese researchers titled “Analyzing Wealth Distribution Effects of Artificial Intelligence.” Funny enough, the person posting it included a “too long, didn’t read” synopsis created by – you guessed it – AI. Here’s part of the ChatGPT summary. Regular Digest readers will recognize many familiar themes here: AI is making the rich even richer. - If you don’t own AI-driven assets(stocks, businesses, real estate, something that makes money while you sleep), you’re getting left behind.
- The people who own the AIwill print money. The people who work for the AI will struggle.
Automation is a job killer. - AI doesn’t take jobs—it takes tasks. But when it takes enoughtasks, the job disappears.
- Companies that use AI to cut labor costs will boost profits—but that means fewer good-paying jobs.
AI creates a short-term wealth shock. - At first, AI adoption causes massive inequality spikes—higher stock prices, rising profits, but stagnant wages.
- Interest rates and wealth gaps jump in the short termbefore eventually stabilizing.
According to the research paper, after this initial short-term wealth shock, we’ll come to a critical fork in the road On one hand, if AI is embraced to increase productivity and eliminate less effective, error prone human workers, then the rich/poor divide will continue to expand. That risks ushering in the social chaos you likely envision when considering the dystopian version of how this grand AI experiment plays out. On the other hand, if AI enhances productivity for everyone (making workers more valuable instead of replacing them), it could reduce inequality over time. This could result in the wealth gap “stabilization” that ChatGPT just referenced. So, which path will our world take? The paper suggests the answer depends on government policy. Back to our ChatGPT synopsis: Policy choices will shape who wins. - Governments might tax AI profits, push for worker retraining, or create incentives for AI to benefit more people.
But for this to work, we would need to address some issues surrounding the incentive structure. Will we punish AI or reward advancements? The idea of taxing AI could bring massive problems. For context, let’s begin with EquitableGrowth.org: Scholars and policymakers alike have centered the fear of social costs flowing from large-scale automation through AI by contemplating a “robot tax” intended to disincentivize firms’ replacement of workers with machines… Yet increasing taxes on corporations’ incomes from AI risks reducing digital innovation. Today, corporations are investing billions of dollars into AI technology. In the coming years, that investment number will climb into the trillions. But why would these companies allocate a single dime to AI if the government is going to impose a punitive tax on the fruits of that investment? Let’s throw in a wrinkle… We’re in an AI race with China (Eric just put together a research video on the topic that you can check out here) that has enormous implications for the world economy. From Eric: AI is a technology that has the potential to create, or destroy, on a scale that humanity has never before encountered. That’s why the U.S. will be pursuing an all-hands-on-deck strategy to master AI’s capabilities before anyone else does. Is our government going to ask the private sector to pony up trillions so we can beat China in AI (or just quietly watch as that investment flows) …use the advancements to win AI supremacy over the Chinese…but then stop those companies from utilizing the same AI they’ve created to maximize their own profits? No private company with a focus on profit maximization would do this. But forget the space race. Consider just basic business competition in a global marketplace… A tale of two ports Remember last September when the International Longshoremen’s Association (ILA) went on strike? The heart of the issue was robots/AI replacing human workers. Dockworkers demanded protections that would ensure that ports wouldn’t turn to technology to replace human workers. Here was ILA President Harold Daggett: If foreign-owned companies like Maersk and MSC try to replace our jobs with automation, they are going to get a painful reminder that longshore workers brought these companies to where they are today… Don’t fuck with the maritime unions around the world, we will shut you down. The Chinese may have a different attitude. Yesterday, the Financial Times published a piece finding that Beijing policymakers see automation and robotics as imperative if China is to maintain is status as a global production leader. Here’s an illustration from TexSpaceToday. China is on the cusp of a manufacturing revolution with the emergence of “dark factories,” fully automated facilities that operate without human workers or traditional lighting. Powered by artificial intelligence (AI), robotics, and advanced sensors, these plants represent the next step in the nation’s aggressive push toward industrial automation, positioning China as a global leader in technological innovation. And circling back to ports and dockworkers, here’s the EE Times: The global shipping industry is significantly transforming due to automation, with China leading the way. Automated ports with intelligent machines and self-driving vehicles are revolutionizing cargo handling. China is leading in developing and implementing these technologies, which will have broad implications. How do we balance the private sector’s interest in using AI to increase efficiency/profits with the need to protect our human labor force? Are we to trust politicians to decide what an appropriate return on AI-capital-invested should be for companies that have invested billions? Keep in mind, any law that protects error-prone human workers is a bit like a tariff protecting inefficiency and waste. Beijing won’t be doing that. What about the money you, as an investor, have aligned with the companies that have poured billions into AI development? What happens to the company’s share price – and your portfolio value – when the government throttles future profits through a robot or AI tax? Taking it one step farther, though it’s not the focus of our Digest today, what happens if/when the government takes AI profits for redistribution as a form of “AI Universal Basic Income” since robots render human workers increasingly unnecessary? Lots of questions. Few answers. For now, before global governments address this question and implement legislation, AI will explode the “have/have nots” wealth divide Let’s return to our ChatGPT summary, this time with a focus on the investment markets: The AI stock winners will crush their competition. - Think Amazon vs. Foot Locker. AI-powered companies will absorb entire industries, leaving old-school businesses in the dust.
- If you’re investing, bet on the disruptors, not the disrupted.
- For now, the biggest profits will go to the early AI adopters—investors, business owners, and tech giants.
On this note, this Thursday, March 27, at 10 a.m. ET, Eric is going on camera with legendary investor Louis Navellier and our technology expert Luke Lango to share an announcement related to the Technochasm and AI’s impact on it. These three experts will update you on what’s happened with the Technochasm since 2020 while highlighting what’s coming next. And they’ll discuss what to do about it in your portfolio. Here’s Eric: Luke, Louis, and I will show you the three critical steps you must take now to stay on the right side of the Technochasm. We’ll also explain how a trillion-dollar flood of money could soon surge into AI, thanks to moves by President Donald Trump. We are at an inflection point—those who act now will reap the rewards. Those who ignore this shift risk being left behind. You can reserve your seat by clicking here (by clicking this link, you will automatically sign up for the free briefing). As you wait for Thursday… Regular Digest readers will recall an issue last year in which I shared part of an internal email from InvestorPlace’s CEO Brian Hunt to a few members of our leadership team. Brian described the technological advancements coming (like a robotic workforce), the potential for market volatility, but the even greater potential to make enormous wealth over the next five to 10 years. With that as our context, here’s Brian from that email with the most effortless way to ride this trend: If you want to make it simple, easy, and powerful, just look up the five largest AI/robotics ETFs and buy them in equal parts and go to sleep for a while. Maybe throw in some QQQ. Ignore the corrections. They will be painful but temporary. This tailwind will blow with hurricane force. This Thursday, Eric, Louis, and Luke will do a deep dive into this “hurricane-force tailwind.” Here’s that link again. Since today has been all about AI, I’ll let ChatGPT take us out: Bottom Line: - AI is the biggest money shift of our lifetimes.You’re either positioned for it, or you’re getting left behind.
- Own the companies building AI, not the jobs being replaced by it.
Have a good evening, Jeff Remsburg | 
No comments:
Post a Comment