More Articles | Free Reports | Premium Services Is Silicon Valley about to get the Detroit treatment? Will this thriving center of innovation soon become a hollowed-out shell? It sure looks that way. The same thing could also be about to happen to San Francisco and Washington D.C. It’s all part of the massive disruption AI is bringing in its wake. And it’s not just relevant if you own real estate in these places. As we’ll see today, as general investors we need to pay special attention to “AI-proof” assets – anything that isn’t at risk of this disruption… or that ideally actively benefits from it. Motor City – The Silicon Valley of the 1900s You hear the word Detroit today, and the image that springs to mind is crime-ridden urban blight and decay. But it wasn’t always like that. Motor City was the Silicon Valley of the early 1900s. It was the world’s engineering capital… a model of technological progress… and a powerhouse of industrial muscle. By the 1950s, it was the fourth-largest city in America and a major cultural hub. Detroit was the epicenter of muscle car culture with the production of the Ford Mustang, Dodge Charger, Chevrolet Camaro, and Pontiac GTO. And the Motown record label played a pivotal role in shaping the R&B, soul, and funk music revolutions. Then it all fell apart… Globalization opened the doors to foreign competition. This quickly exposed how big, bloated, and inefficient American Big Auto had become. Automation and robotics displaced industrial workers. And production spread to cheaper states, primarily in the South – where labor unions were weaker, less militant, or for all intents and purposes, nonexistent. This led to Detroit’s population plunging by 66%. It got so bad, city authorities opted to fight decay by simply bulldozing abandoned properties. Over the past 10 years, the city has demolished about 23,000 homes, selling the newly empty lots to neighbors for as little as $100 to allow them to expand their yards. And something similar is now about to happen to cities that are home to America’s knowledge workers. | Recommended Link | | | | A revolutionary technology has lit the fuse on what Keith Kaplan calls, “the biggest prediction in our firm’s 20-year history.” It centers on a super-rare event he calls a mega melt-up… and it could have a shocking impact on your wealth in 2025. Click here for a plan to prepare. |  | | White Collar Jobs Are in the Crosshairs Now Technology has been replacing workers since long before the Industrial Revolution. The first “technology visionary” who thought of attaching a plow to a horse made food production faster and cheaper, but naturally at the cost of putting untold numbers of farm laborers out of work. Of course, with industrialization and the hyper specialization of labor, this went into overdrive. In 1806, there were an estimated 250,000 handloom weavers in Britain. Following the introduction of the power loom, the number of weavers dropped to around 50,000 by 1850. There were an estimated 100,000 elevator operators in the 1940s. Today, the number is effectively zero, apart from a few high-end buildings, as the job has been completely automated away. There were around 350,000 phone operators in the 1940s as well. Today, apart from 911 operators, there are zero. Technology evaporated the need for that job. More recently, there were an estimated 600,000 bank tellers in 2007. But as mobile and online banking have reduced the need for trips to the bank, that number is now around 400,000. All past displacements had one thing in common. They applied to lower-skilled jobs – first in agriculture, then in industrial work, and finally in basic, administrative office work. The more thinking and creativity that went into your job, the less likely it was that a machine would replace it. Not today. The AI revolution puts knowledge jobs at risk of automation or replacement for the first time. A report last year by the Brookings Institution think tank found that more than 30% of all workers could see at least half of their job tasks affected by ChatGPT. And 85% of workers could see at least 10% of their tasks affected. This puts software coders, engineers, lawyers, and – ahem – writers and financial analysts in the crosshairs. For example, I used to regularly pay for legal work, such as contracts, leases, and the like. I don’t anymore. ChatGPT now generates all the basic, low-level legal work I need. I’ll call a lawyer if things go sideways, and I need to litigate. But the low-level work that kept associates busy – it’s gone. Generative AI is coming for white collar jobs. That means the cities that have been hubs for educated high achievers are the most at risk of getting the Detroit treatment. Bye-Bye, Knowledge Boomtowns In a new report, Brookings broke down the impact by location, calculating the percentage of jobs exposed to potential AI disruption. The list of cities with the highest exposure is indistinguishable from a list of the fastest-growing knowledge boomtowns of the past 20 years: San Jose-Sunnyvale-Santa Clara (Silicon Valley): 43% -
Boulder, Colorado: 41% -
Washington D.C. metro area: 39% -
San Francisco – Oakland – Berkeley: 39% -
Durham – Chapel Hill, North Carolina: 38% -
Austin, Texas: 38% What does this mean? Are 43% of Silicon Valley workers about to get canned? No. Not every job at risk of disruption is lost. Plenty of these folks will use AI to become more productive and better at their jobs, commanding higher salaries than ever. But we will see companies getting by with slimmer staffs and showing large swaths of knowledge workers the door. We’re already seeing this today. Autodesk makes the computer aided design (CAD) software the world’s architects and engineers use. It just announced plans to cut its workforce by 9%. Accounting and budgeting software maker Workday also recently chopped about 9% of its workforce. And Meta CEO Mark Zuckerberg says he expects to release an AI agent this year with the coding ability of a mid-level engineer. That’s someone formerly commanding a $110,000-$150,000 job who will now be competing with a bot that can do the job effectively for free. The average apartment in San Francisco rents for $3,300 a month. Who’s going to pay that rent when the knowledge workers go? And what happens to demand for office space when a tech company can get by with vastly fewer workers? To Infinity and Beyond? If companies can cut most of its expenses by firing workers and cancelling its office leases, do profit margins go to infinity and beyond? Over the short term, yes. All of those cost savings go directly to the bottom line. But longer term, the picture gets murkier. Just as nature has a way of filling vacuums, freakishly high profit margins generally aren’t sustainable. They attract new competition. This lowers prices and brings margins down. That’s how competitive capitalism is supposed to work. There has never been a system better at delivering the goods or services while bringing prices down. But it also means massive disruption ahead – particularly in the areas that have boomed as knowledge centers. If you’re a knowledge worker like me, you need to be on the right side of this. Build your brand. Get your face out there. Build the networks and personal relationships that make you critical to the system and harder to fire. Learn to use AI to leverage and amplify your skills and focus on being an “idea guy.” And as investors we should pay special attention to AI-proof assets – assets that this breakthrough technology can’t make irrelevant. Gold, farmland, timberland – anything that is a finite resource, can’t be reduced to ones and zeros on a computer screen, and not at risk from disruption. Gold remains my preferred hedge because, frankly, it’s already proven to be a reliable store of value throughout every major economic revolution to date. A 5,000 year track record is hard to dismiss. We’ve been long the yellow metal in our flagship Freeport Investor advisory since we launched this service in December 2023. So, far we’re up 40%. And as the AI revolution picks up speed, I see a lot more upside coming. To life, liberty, and the pursuit of wealth, | 
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