What caught my eye this week.
Bad news! Not only are the machines now coming from our cushy brain-based desk jobs, but our best response will be to hug it out.
At least that’s one takeaway from a report in the Financial Times this week on what kinds of jobs have done well as workplaces have become ever more touchy-feely – and thus which will best survive any Artificial Intelligence takeover.
The FT article [1] (no paywall) cites research showing that over the past 20 years:
…machines and global trade replaced rote tasks that could be coded and scripted, like punching holes in sheets of metal, routing telephone calls or transcribing doctor’s notes.
Work that was left catered to a narrow group of people with expertise and advanced training, such as doctors, software engineers or college professors, and armies of people who could do hands-on service work with little training, like manicurists, coffee baristas or bartenders.
This trend will continue as AI begins to climb the food chain. But the final outcome – as explored by the FT [1] – remains an open question.
Will AI make our more mediocre workers more competent?
Or will it simply make more competent workers jobless?
Enter The Matrix
I’ve been including AI links in Weekend Reading for a couple of years now. Rarely to any comment from readers!
Yet I continue to feature them because – like the environmental issues – I think AI is sure to be pivotal in how our future prosperity plays out. For good or ill, and potentially overwhelming our personal financial plans.
The rapid advance of AI since 2016 had been a little side-interest for me, which I discussed elsewhere on the Web and with nerdy friends in real-life.
I’d been an optimist, albeit I used to tease my chums that it’d soon do them out of a coding job (whilst also simultaneously being far too optimistic about the imminent arrival of self-driving cars.)
But the arrival of ChatGPT was a step-change. AI risks now looked existential. Both at the highest level – the Terminator scenario – and at the more prosaic end, where it might just do us all out of gainful employment.
True, as the AI researchers have basically told us (see The Atlantic link below) there’s not much we can do about it anyway.
The Large Language Models driving today’s advances in AI may cap out soon due to energy constraints, or they may be the seeds of a super-intelligence. But nobody can stop progress.
What we must all appreciate though is that something is happening.
It’s not hype. Or at least for sure the spending isn’t.
Ex Machina
Anyone who was around in the 1990s will remember how business suddenly got religion at the end of that decade about the Internet.
This is now happening with AI:
[2]
Source: TKer [3]
And it’s not only talk, there’s massive spending behind it:
[4]
Source: TKer [3]
I’ve been playing with a theory that one reason the so-called ‘hyper-scalers’ – basically the FAANGs that don’t make cars, so Amazon, Google, Facebook et al – and other US tech giants are so profitable despite their size, continued growth, and 2022-2023 layoffs, is because they have been first to deploy AI in force.
If that’s true it could be an ominous sign for workers – but positive for productivity and profit margins.
Recent results from Facebook (aka Meta) put hole in this thesis, however. The spending and investment is there. But management couldn’t point to much in the way of a return. Except perhaps the renewed lethality of its ad-targeting algorithms, despite Apple and Google having crimped the use of cookies.
Blade stunner
For now the one company we can be sure is making unbelievable profits from AI is the chipmaker Nvidia:
[5]
Source: Axios [6]
Which further begs the question of whether far from being overvalued [7], the US tech giants are still must-owns as AI rolls out across the corporate world.
If so, the silver lining to their dominance in the indices [8] is most passive investors have a chunky exposure to them anyway. Global tracker ETFs are now about two-thirds in US stocks. And the US indices are heavily tech-orientated.
But should active investors try to up that allocation still further?
In thinking about this, it’s hard not to return to where I started: the Dotcom boom. Which of course ended in a bust.
John Reckenthaler of Morningstar had a similar thought. And so he went back to see [9] what happened to a Dotcom enthusiast who went-all in on that tech boom in 1999.
Not surprisingly given the tech market meltdown that began scarcely 12 months later, the long-term results are not pretty. Bad, in fact, if you didn’t happen to buy and hold Amazon, as it was one of the few Dotcoms that ultimately delivered the goods.
Without Amazon you lagged the market, though you did beat inflation.
And yet the Internet has ended up all around us. It really did change our world.
Thematic investing is hard! [10]
I wouldn’t want to be without exposure to tech stocks, given how everything is up in the air. Better I own the robots than someone else if they’re really coming for my job.
But beware being too human in your over-enthusiasm when it comes to your portfolio.
The game has barely begun and we don’t yet know who will win or lose. The Dotcom crash taught us that, at least.
Have a great weekend!
From Monevator
Does gold improve portfolio returns? – Monevator [11] [Members [12]]
How a mortgage hedges against inflation – Monevator [13]
From the archive-ator: How gold is taxed – Monevator [14]
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
UK inflation rate falls to lowest level in almost three years – BBC [15]
Energy price cap will drop by 7% from July [to £1,568] – Ofgem [16]
House prices are modestly rising, driven by 17% annual spike in new build values – T.I.M. [17]
Hargreaves Lansdown rejects £4.7bn takeover approach – This Is Money [18]
Judge: Craig Wright forged documents on ‘grand scale’ to support Bitcoin lie – Ars Technica [19]
FCA boss threatens private equity with regulator clampdown – CityAM [20]
Sunak says it’s 4th July, in the rain, against a subversive soundtrack [Iconic]– YouTube [21]
Sir Jim Ratcliffe scolds Tories over handling of economy and immigration after Brexit – Sky [22]
[23]
No, it’s not all the Tories’ fault… but Sunak and Hunt were too little, too late – Bloomberg [24]
Products and services
Pay attention to catches as well as carrots when switching bank accounts – Guardian [25]
Which energy firm offers the cheapest way to get a heat pump? – T.I.M. [26]
How to get the most from second-hand charity shops – Which [27]
Get £200 cashback with an Interactive Investor [28] SIPP. New customers only. Minimum £15,000 account size. Terms apply – Interactive Investor [28]
Nine out of ten savings accounts now beat inflation – This Is Money [29]
Problems when transferring a cash ISA – Be Clever With Your Cash [30]
Nationwide launches a trio of member deals worth up to £300 – Which [31]
Transfer your ISA to InvestEngine by 31 May and you could get up to £2,500 as a cashback bonus (T&Cs apply. Capital at risk) – InvestEngine [32]
Seven sneaky clauses in estate agent contracts that can cost you dear – This Is Money [33]
Halifax Reward multiple account hack: worth up to £360 a year – Be Clever With Your Cash [34]
Hidden homes in England and Wales for sale, in pictures – Guardian [35]
Comment and opinion
No, the stock market is not rigged against the little guy – A.W.O.C.S. [36]
The life hedge… – We’re Gonna Get Those Bastards [37]
…is easier said than implemented [US, nerdy] – Random Roger [38]
Checking out a fake Ray Dalio Instagram investing scam – Sherwood [39]
An open letter to Vanguard’s new CEO – Echo Beach [40]
If you look past the headlines, London is charging ahead – CityAM [41]
Most of us have too much in bonds [Search result] – FT [42]
Why we still believe in gold – Unherd [43]
Are ‘fallen angel’ high-yield bonds the last free lunch in investing? – Morningstar [44]
For love or money – Humble Dollar [45]
Naughty corner: Active antics
[46]
Fund manager warns putting £20k in the US now will [possibly!] lose you almost £8k – Trustnet [47]
A deep dive into US inflation, interest rates, and the US economy – Calafia Beach Pundit [48]
A tool for testing investor confidence – Behavioural Investment [49]
When to use covered call options – Fortunes & Frictions [50]
Valuing Close Brothers after the dividend suspension – UK Dividend Stocks [51]
Meme stock mania has entered its postmodern phase [I’m editorialising!] – Sherwood [52]
Kindle book bargains
Bust?: Saving the Economy, Democracy, and Our Sanity by Robert Peston – £0.99 on Kindle [53]
Number Go Up by Zeke Faux – £0.99 on Kindle [54]
How to Own the World by Andrew Craig – £0.99 on Kindle [55]
The Great Post Office Scandal by Nick Wallis – £0.99 on Kindle [56]
Environmental factors
Taking the temperature of your green portfolio [Search result] – FT [57]
The Himalayan village forced to relocate – BBC [58]
‘Never-ending’ UK rain made 10 times more likely by climate crisis, study says – Guardian [59]
So long triploids, hello creamy oysters – Hakai [60]
Robot overlord roundup
We’ll need a universal basic income: AI ‘godfather’ – BBC [61]
Google’s AI search results are already getting ads – The Verge [62]
AI engineer pay hits $300,000 in the US – Sherwood [63]
With the ScarJo rift, OpenAI just gave the entire game away – The Atlantic [64] [h/t Abnormal Returns [65]]
Perspective mini-special
How much is a memory worth? – Mike Troxell [66]
We are all surrounded by immense wealth – Raptitude [67]
How to blow up your portfolio in six minutes – A Teachable Moment [68]
My death odyssey – Humble Dollar [69]
Off our beat
The ultimate life coach – Mr Money Mustache [70]
How to cultivate taste in the age of algorithms – Behavioural Scientist [71]
Trump scams the people who trust him – Slow Boring [72]
Buying London is grotesque TV, but it reflects the capital’s property market – Guardian [73]
The algorithmic radicalisation of Taylor Swift – The Atlantic via MSN [74]
And finally…
“Three simple rules – pay less, diversify more and be contrarian – will serve almost everyone well.”
– John Kay, The Long and the Short of It [75]
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