This month’s blog post is brought to you by popular demand as the recent popularity of large-scale Artificial Intelligence language models, most famously Chat GPT, has begun a worldwide conversation on technology regulation and how these innovative tools will impact everyday jobs. Other Mega-Cap Tech firms like Google and Meta have quickly released their own artificial intelligence tools, which use programs that take in human prompts and write sophisticated responses. But these chat-bot tools are just one of many Artificial Intelligence products. Computer-powered intelligence is being used to revolutionize the world we live in and solve some of humanity’s largest problems.

The evolution of machine learning and neural networks is by no means a recent development and we have held positions that benefit from this mega trend for quite some time.   In this post, we will dive into two topics our team has recently been discussing:

1. How do you see Chat GPT/Artificial Intelligence impacting the job market?
2. What is the best way to invest in this technology?

 

Technology and the Economy

There is little doubt that AI poses immediate threats to certain white collar jobs in much the same way that technological innovations posed threats to jobs in the past.  Anyone who has used ChatGPT in its earliest iterations can quickly surmise the immediate threat it poses to basic copywriting jobs and eventually more sophisticated drafting and administrative tasks in much the same way that other chatbots have reduced the need for call centres and other help lines.  However, it is our view that, over time, AI, similar to the technological revolutions before it, will simply boost productivity and aid in economic growth in our economies next expansion cycle.  Like many other cycles, technological advancement follows predictable patterns. First, newly created technology boosts productivity in the workplace. Some notable examples of this include the robotics integration into the manufacturing industry in the last economic cycle, or the invention of cell phones and email which allow for increased communication and idea flow across the globe. Increased productivity from modern technology ultimately results in higher corporate profits, rising wages, a larger tax base for the government, and ultimately higher living standards for everyone.

The chart below shows US employment levels over the last 120 years. This time period gave us groundbreaking inventions such as the airplane, model T, computer and industrial robots. Yet, throughout the century long period, job growth remains constant at 0-5%.

 

 

The notion that advancements in technology raise long-term unemployment is simply not backed by the data. Innovation in society does not destroy the total number of jobs, it changes the jobs that need to be done. Yes, many professions are lost to machines, but more are created in the areas impacted by technological development. Here are a few examples:

• in 1900, there were 220,000 Blacksmiths in the US and zero people working in auto manufacturing. By 1930, there were 34,000 more autoworkers than blacksmiths and by 1950, the ratio was 6:1 (Source: Piper Sandler)
• In 1920, there were 113,000 train engineers and zero commercial air pilots. By 1970, both groups held about 50,000 jobs (Source: Piper Sandler).
• The number of Farms and farm workers has dropped by over half in the US. But increased productivity has surged thanks to technology, allowing for the rapid development of restaurants and grocery stores (Source: US Department of Agriculture)

 

 

As our world evolves, new roles continuously emerge as well as new industries to service new demand (content creation, social media marketing, web development etc.). Furthermore, the number of people needed to improve upon existing technology will grow exponentially. Progress and innovation will always lead to entirely new ways of doing business, ways we cannot imagine yet.

How we are investing in AI

For some it is a surprise to hear that they are already invested in Artificial intelligence projects and have been for years through existing holdings in our Greenwood White Group portfolios.

Below are few examples of AI powered products that have recently been introduced into society by companies that continue to be disruptive innovators in their respective industries.

• Speech recognition: a capability which uses language processing to take human speech and convert it into a written format, allowing those without motor function to text, email and more. With this technology Apple created Siri giving their millions of customers access to AI.
• Customer service: Online customer service systems are replacing humans along the customer journey and streamlining simple tasks. For example, Buoy Health offers an AI-powered tool that helps people understand potential health problems, announced a partnership with CVS MinuteClinic. If the suggested diagnoses lend themselves to treatment at one of the 1,100 MinuteClinic’s around the United States, the app will use GPS to locate the nearest MinuteClinic and will offer to hold a place in line for the user.
• Recommendation engines: Using past consumption behavior, AI discovers trends that can be used to develop effective cross-selling. This is used to make relevant add-on recommendations during the checkout process for online retailers. No retail company has better leveraged this tool than Amazon.
• Automated stock trading: Trading exchanges facilitate millions of trades per day without human intervention connecting buyers and sellers across the globe. TMX Group has been utilizing clustering principles against historic bid/ask displayed volumes at multiple price levels, to help predict the most opportune times of the day or type of algorithm to use in order to trade size for each company.
• Transportation:  Self-driving cars and trucks, are gaining real world traction. Waymo One the driverless car services of Google parent Alphabet and General Motors’ Cruise are robo-taxiing passengers in Phoenix and San Francisco. Both firms plan to launch taxis in more cities, including Austin and Los Angeles, as well as to add thousands of self-driving vehicles to their operations over the next several quarters (Source: Capital Group)
• Health Care: AI is aiding professionals in the health care industry in diagnoses of medical conditions through fine-tuned pattern recognition. An example German industrial conglomerate Siemens, a global leader in AI-related patents, has developed tools for its imaging machines that can identify irregularities in a scan enhancing our healthcare workers effectiveness to do their jobs.  We also wrote about how the Deepmind project was using Google’s Calico AI division to accelerate the mapping of the human genome in this blog post back in 2021. 

 

And the best is still yet to come. The chart below showing AI adoption rates by industry illustrates not only how far we have come in such a brief period but how much growth is still possible. As has always happened with technological revolution the turning point occurs when engineers, developers and bright minds from across the globe come together to integrate the new technology with our everyday lives and as Microsoft founder Bill Gates wrote: “The development of AI is as fundamental as the creation of the microprocessor, the personal computer, the Internet, and the mobile phone.”

 

 

 

Final Thoughts

As we hope was made clear from the above, the top players in their respective industries are already harnessing the Power of AI to drive growth within their business. Therefore, most people are already indirectly invested in Artificial Intelligence without even knowing it! While we are still early in AI product growth and investment opportunity what we know is that the increased use of robots, in addition to massive computing power required for AI, will be a large tailwind for the semiconductor and cloud services space.

Lastly, we would be exercise caution in trying to capitalize on these trends by investing in thematic ETFs focused on AI technology. While these investment vehicles provide diversification in comparison to picking a few individual securities, diversification within a particular space will not do much good if the whole underlying theme takes a hit (e.g. blockchain ETF’s last year). Our team continues to back well capitalized companies that are applying this emerging technology to innovate, drive further synergies, and cut excess costs. If you have any questions about how we are integrating innovative companies into your portfolios give us a call (we promise that we won’t make you talk to a chat bot!).