What caught my eye this week.
Josh Brown at The Reformed Broker wrote this week about the rise of the robots – and of artificial intelligence (AI) – from an investing perspective.
The perceived danger of advances in AI is a common theme these days. (I just saw Blade Runner 2049, and very good it is, too.)
But Josh struck a novel note when he suggested fears about AI and automation mean some investors are no longer putting money to work to replace their income when they retire in their 60s – but rather to have a life-raft if AI kills their job long before then:
There is a sense of desperation underlying the way in which we’re investing. […]
A 45 year old married father of two with a mortgage and a pair of college educations to fund. The remote yet persistent threat of a nuclear war is not what keeps him up at night.
In fact, he might almost see it as a relief should it come. He is a bundle of raw nerves, and each day brings even more dread and foreboding than the day before.
What’s frying his nerves and impinging on his amygdala all day long is something far scarier, after all. He, like everyone else, is afraid that he doesn’t have a future.
He is petrified by the idea that the skills he’s managed to build throughout the course of his life are already obsolete.
“Just own the damn robots!” concludes Josh, and I agree you should have a few horses in the race.
Hopefully there aren’t many Monevator readers who only own the UK stock market or companies listed on it. But if you’re one of them, know that you are getting very short-changed in the robot department. When chip designer ARM was acquired by SoftBank we lost our last great listed tech titan. You have to look overseas.
Personally I own technology investment trusts and individual tech shares. If you are a passive investor with solid exposure to the US market (perhaps through a global tracker) you’ll be getting a lot of technology through that, too.
Fun and games
I wrote an unfinished post (actually a chapter of a very unfinished investing book) along the same lines as Josh a few years ago. I agree it’s worth some thought.
But actually, I am not at all sure that all the riches will go to the robot owners.
For starters, it’s very unclear whether robots and AI really will take all our jobs. I’ll grant you things do feel different right now, but historically technology creates far more work than it destroys. Also, my friends working in the field say progress is very over-hyped.
But even if robots do take all today’s jobs, that doesn’t mean they’ll necessarily take all the wealth.
When industrialization replaced 98% of the jobs in farming, farmers didn’t become rich, nor did the manufacturers of farm equipment inherit the world. You’d have done better to invest in companies benefiting from the resultant urbanization boom, and the changes to leisure and consumption.
What will we do if robots do all the work but fail to get all the pay?
Perhaps we’ll play more computer games. Maybe instead of shares in robot makers – or even companies that make use of robots – we should own game creators like Electronic Arts.
Think that’s a depressing future for humanity? Then alternatively you could buy shares in Diageo, the UK whiskey behemoth. Perhaps we’ll all drink ourselves into oblivion…
From Monevator
Book Review: Living Off Your Money by Michael McClung – Monevator
Brexit logic in 140 characters – Monevator on Twitter
From the archive: Rebalance your portfolio with new contributions – Monevator
News
Note: Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber.1
Reverse Brexit to avert economic disaster for UK, says OECD – Evening Standard
Sterling’s long-term decline [Search result] – FT
Half of UK adults are financially vulnerable, City watchdog finds – Guardian
Are you ready for an interest rate rise? [Search result] – FT
Property market divide and pensions mean 45% of UK wealth is held by top 10% – ThisIsMoney
Robert Shiller: A stock market panic like 1987 could happen again – New York Times
UK inflation at five-year high of 3%; real wages squeezed – Reuters via Twitter
Products and services
Leeds launches new best easy access Isa and Virgin Money pays 2.4% – ThisIsMoney
Millennial railcard to launch next year offering a third off fares – Guardian
As annuity rates rise, does it still make sense to stay invested? – Telegraph
Government’s pension dashboard set to go ahead – Money Observer
TSB’s new 28-month balance transfer card is fee-free for 30 days – ThisIsMoney
Yorkshire Building Society closes thousands of accounts paying 3.55% – Telegraph
Property raffle website offers chance to win London flat for ‘price of a coffee’ – Telegraph
Comment and opinion
Return data on example portfolios from a British perspective – Portfolio Charts
If Bitcoin isn’t a bubble it’s a spookily good impression – The Value Perspective
Alternatives to screening for stock pickers – Gannon on Investing
Simon Lambert: A rate rise is about credibility not inflation – ThisIsMoney
Advise for aspiring share traders [Careful!] – The Irrelevant Investor
“I make £10,000 a year from my cards business – and still have my day job” – Telegraph
Deconstructing Amazon Prime: Loss leader or value creator? – Musings on Markets
The Fearful Fifties – SexHealthMoneyDeath
The theory of maybes – Morgan Housel
So what does all this Brexit baloney really mean then? – Simple Living in Somerset
The economics of having twins – A Wealth of Common Sense
What have these financial bloggers changed their minds about? – Abnormal Returns
Off our beat
Grand Theft Life: Interview with Wait But Why’s Tim Urban [Podcast] – ILTB
The weird strategy Dr Seuss used to create his greatest work of art – James Clear
The War to sell you a mattress is an Internet nightmare – Fast Company
“Neutron stars are some of the smallest, densest stars we know. They do not have much more mass than our sun, but all of it is compressed into a ball no bigger than the width of a mid-sized city (about 15 km, or 9 miles). That’s a lot of compression. A teaspoon of neutron star would weigh 10 billion kg (or 22 billion lbs) – about the same as 1 million very large elephants.” – Quartz
And finally…
“Today’s most dangerous crises, the ones that threaten the very survival of the financial system, are not modern dress reenactments of the ‘tulip mania’ bubble of old Amsterdam. They are warp-speed flashbacks to Black Monday.”
– Diana Henriques, A First-Class Catastrophe: The Road to Black Monday
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Comments on this entry are closed.
“the UK whiskey behemoth”: ‘whisky’.
“45% of UK wealth is held by top 10%”: what a remarkably even distribution. I wouldn’t expect people under 30 to have much wealth at all – I know I hadn’t much at that age. I’d expect a lot of wealth to be concentrated in the hands of old widows.
But the article was so feeble that it’s probably a waste of time trying to discuss the issue. With perhaps one exception: whatever point they were trying to make should be greeted with the great basic question, namely ‘how do you know?’
Ignoring my own advice: “The distribution of wealth in the UK, which consists primarily of private pensions, property and other financial assets …”. Do they really mean just private pensions? Surely it should include rights to occupational and state pensions? The biggest part of my and my wife’s wealth is the capitalised value of our occupational and state pensions.
@dearieme – I traced back the wealth analysis to its original sources. It seems the IPPR report leans heavily on an analysis of wealth published by the Resolution foundation in June – a very interesting read. The primary data source for that report is the ONS wealth and assets survey. In brief, ‘private pension wealth’ includes DC pots, and DB pensions valued according to current annuity and discount rates. State pension and other welfare benefit promises are excluded.
The Resolution foundation report finds that pension wealth is a big driver of wealth inequality, even more than property. So I guess that makes your situation pretty typical.
And the inter generational issue is real – younger cohorts have accumulated less wealth than earlier cohorts AT THE SAME AGE. In fact this effect sets in for all cohorts born after 1956 but has accelerated ever since. A large part of that is DB pensions.
A good volume of links to work through this weekend, nice!
Here’s another I enjoyed this week
https://www.theguardian.com/money/shortcuts/2017/oct/17/the-big-money-question-would-you-quit-work-for-1m
RE: Bitcoin
Every is calling it a bubble and yet all it does is go up, it seems its all anyone can talk about at the moment. I cant understand why people are buying now when 1 year ago it was 1/10th of the price.
Re the robots and automation stuff… I do like the general principle behind this “if X is going to make you redundant, it’d be good to own some X” idea. Seems related to other ideas I’ve come across like: “if you’re planning on retiring to country Y, you should probably start growing some investments in country Y beforehand”. Other similar things might be investing in supermarkets and “consumer staples” (because if your weekly shopping basket inflates, their shares and divis probably will too) or investing in healthcare as a hedge against future healthcare costs inflating or investing in utilities as a hedge against utilities bills rising (I’ve yet to buy any but I quite like the idea of owning enough ~7% yielding Centrica for the divis to cover the gas and electricity bills) or investing in travel and tourism companies as a hedge against holiday costs inflating.
This Telegraph article (behind premium paywall) says it’s practically only in housing that the old have more wealth … “large proportions of all age groups have no savings of any form. There are those with assets and those without in every cohort.”.
http://www.telegraph.co.uk/tax/income-tax/tax-old-savings-data-suggests-not-much-wealthier-young/
Thank you, Vf. “State pension and other welfare benefit promises are excluded.
The Resolution foundation report finds that pension wealth is a big driver of wealth inequality ..”: well, if you want to draw that conclusion, suppressing the value of State Pension rights is a good way to go about it.
I’ve read a few articles over the last year saying that robots should be taxed just like employees are. Which seems a nonsensical idea to me. The businesses that use them will be taxed through tax on profits (and dividends etc), and any robot purchases will have a VAT charge same as every other purchase. But don’t tax robots themselves, that’s ridiculous and anti-progress as well.
Hopefully most people will be sensible when it comes to robots. Mind you I thought putting a cap on gas/electricity charges was a badly thought out idea when Ed Miliband first put it forward, and now Theresa May of all people is following through with it! Madness.
If a large percentage of the population are going to be out of work, and living in poverty because of the robots.
Who is going to be buying all the stuff that the robots are making?
@P when I read it the Torygraph has very few articles where they favour the young, I guess their readership tends to have a few miles on the clock… Although I’d agree “large proportions of all age groups have no savings of any form.” In the young it’s excusable since they haven’t had time to accumulate wealth, I recall railing against the fact that the greybeards had all the money after a lot of pints of ESB in the mid 1980’s when yet another person was saying how much their house had made while I was in a crummy bedsit. In the old, not so much if they had known days of plenty…
@wephway would businesses not reclaim the VAT on robots as an input tax anyway? Although I agree it seems a bizarre idea to tax them specifically, rather than like any other plant and machinery.
@dearieme, perhaps not so much, since retirees with large private pensions also have state pension rights. Anyway if you actually read the report the authors explain that most of their data sources, including the ONS wealth survey, don’t include state pensions. They do acknowledge that there is a case that they should ideally be included, for a more complete picture. I would think a bigger driver is the way DB pensions are valued, based on prevailing annuity and discount rates, which is a reasonable approach but given current low interest rates produces historically high values.
@P – can’t access the Telegraph article as I’m had my article for the week – but I did wonder whether they included pension values? It’s certainly true that the bulk of wealth in the UK is in property and pensions, and financial assets are trivial in comparison.
Bitcoin is now beyond me. The stuff about block chain though, as highlighted by several commentators on the Abnormal Returns blog, is interesting. I see it given a lot of attention by serious people and companies in a way that bitcoin never was.
I’m still not sure how to invest in it, or even if it is possible, as I understand it to be a generic technology without much in the form of IP or proprietary technology… I may be wrong.
The wealth inequality analysis appears to suggest that a 70 year old pensioner with a DB income of £4,000 a year is far richer than a 25 year old investment banker earning £200,000 a year but renting and with no savings. Which makes the utility of such an analysis extremely limited.
@Lord
Blockchain is a technology that will allow companies to offer new products and services, or operate existing ones in a new way. So The big gains will be from companies exploiting it rather than the thing itself. See for example Jessi Baker talking about what her start up Provenance could do for supply chains https://m.youtube.com/watch?v=QWkAx7Qw5v8
@ermine yes businesses would reclaim VAT, I was more thinking of robots that a consumer might buy, like in that film (and book) I, Robot, where the robots are like personal servants. I think we’re probably still quite far off that sort of technology though.
If Apple started producing robots would they call them iRobots? I’m not sure what I’d think of that…
The rise of the robots is good for investors, as they will own the means of production through their capital, and will see great investment demands from companies as they tool up. Its bad for governments, as they find it much easier to raise taxes against income from people who have a clear domicile than companies who can slip their profits away to other jurisdictions, where we are observing a race to the bottom. Its bad for the young who had expected to benefit from their labour, and good for the old who can deploy their capital.
Gosh, I am already worrying about the N.Korean guy with the odd haircut and the fact that I live somewhere where 52% of the population appear to be as thick as two short planks. Now you tell me that the robots are going to destroy our jobs. Actually, this last one worries me a bit less; I put some stuff into a robotics fund and its done well. Plus, as you suggest, we can adapt. The first two problems I am not so sure we can adapt to.
Robots taking over? I’m still waiting for the paperless office we were all promised the last time there was an “automation revolution”…