The death of the stock market. A thought experiment.

[LAXputs]

I would appreciate your feedback on a thought experiment.

There is a non-zero chance that automation/AI could result in widespread job loss. The stock markets could collapse and not ever recover. (A knee-jerk critique of this could be “This Time Is Different” mentality, and that historically the equity markets always recover. But a scenario could happen, like AI, which drastically changes capitalist society and the markets.) Seems to me, if an early-retiree were to seek insulation from this scenario, then whatever money that is surplus to the required exposure to equities to satisfy his SWR, could reasonably be put into bonds/gold/cash. What do you think?

Thanks.

 

[Qs Laptop]

I think you have created a strawman argument, i.e. "The stock market will collapse and never recover." I make it my policy not to engage in foolish endeavors.

 

[GrayHare]

AI might make waves but it won't drain the money from the equities bathtub. That money will slosh back and forth to wherever there are earnings.

 

[jollystomper]

My view is that the stock market is not about jobs, it is about profits (note how many times a company's stock rises when they announce cutting jobs, as folks anticipate more profit). Companies are looking to leverage AI to make themselves more profitable, and there will always be a market for investing in profitable companies.

 

[MichaelB]

I would appreciate your feedback on a thought experiment.

There is a non-zero chance that automation/AI could result in widespread job loss. The stock markets could collapse and not ever recover. (A knee-jerk critique of this could be “This Time Is Different” mentality, and that historically the equity markets always recover. But a scenario could happen, like AI, which drastically changes capitalist society and the markets.) Seems to me, if an early-retiree were to seek insulation from this scenario, then whatever money that is surplus to the required exposure to equities to satisfy his SWR, could reasonably be put into bonds/gold/cash. What do you think?

Thanks.

Why don’t you stop by here and introduce yourself to our community, When it comes to existential debates we like to know with whom we are engaging.

 

[OldShooter]

Silly. If you're interested in this sort of thing I recommend Nassim Taleb's books and, specifically, his concept of "Anti-Fragile." It is far more useful than the random strawman.

 

[braumeister]

I would appreciate your feedback on a thought experiment.

There is a non-zero chance that automation/AI could result in widespread job loss. The stock markets could collapse and not ever recover. (A knee-jerk critique of this could be “This Time Is Different” mentality, and that historically the equity markets always recover. But a scenario could happen, like AI, which drastically changes capitalist society and the markets.) Seems to me, if an early-retiree were to seek insulation from this scenario, then whatever money that is surplus to the required exposure to equities to satisfy his SWR, could reasonably be put into bonds/gold/cash. What do you think?

Thanks.

Emphasis mine.
Since we don't know anything about you, this could be interpreted as a troll.
Try actually being a member here for a while before throwing out hypotheticals.

 

[Lorenzo]

This kind of "though experiment" could as well be asked to an AI chatbot. Maybe they can predict their future effect better than we can.

 

[Aerides]

There is a non-zero chance that automation/AI could result in widespread job loss.

Sure, maybe. I'm sure they said this when factories were made, and many other things like globalization, etc. and yet here we are.

The stock markets could collapse and not ever recover.

Yes, but these two statements are not related. Historically, repeatedly, the market has reacted favorably to companies reducing their OpEx. Shareholders love layoffs. They love companies increasing revenues, but they love reducing expenses even more.

Just last month, AI was telling people it's ok to eat rocks. So, while it might lead to a lot of changes in the job market, it might not, or it might take a whole lot longer than imagined.

 

[target2019]

I would appreciate your feedback on a thought experiment.

There is a non-zero chance that automation/AI could result in widespread job loss. The stock markets could collapse and not ever recover. (A knee-jerk critique of this could be “This Time Is Different” mentality, and that historically the equity markets always recover. But a scenario could happen, like AI, which drastically changes capitalist society and the markets.) Seems to me, if an early-retiree were to seek insulation from this scenario, then whatever money that is surplus to the required exposure to equities to satisfy his SWR, could reasonably be put into bonds/gold/cash. What do you think?

Thanks.

I think you may be AI, delving deeper into our needs and wants, to gain some advantage over the other AI darting here and there all over these inner webs. If I'm wrong, oh well, I'm sorry and so on and so forth.

 

[MC Rider]

Just last month, AI was telling people it's ok to eat rocks.

Actual people have been known to say far stupider things. Maybe it has been listening to some of them.

 

[dmpi]

It's just human labor vs. AI labor. People may have no jobs or money but on a good note the cost of goods and services will also go toward zero. In the end the goverment will probably provide some basic income for the masses. But among those masses private citizens will still 'own' the means of production.

 

[rk911]

If this premise is a collapse of society then stockpile food. You can't eat gold.

 

[MC Rider]

It's just human labor vs. AI labor. People may have no jobs or money but on a good note the cost of goods and services will also go toward zero. In the end the goverment will probably provide some basic income for the masses. But among those masses private citizens will still 'own' the means of production.

So, I'm reading,

Free Beer!

 

[Route246]

Stock market fundamental valuation models are basically the net present value of all future earnings and distributions. Sentiment has little to do with this pricing model. In the end this has to do with financials. Additionally, if you believe markets are efficient the pricing of the market has been done in a logical and rational way.

That said, whatever you or we think, the market will take care of it for us.

 

[LAXputs]

It's just human labor vs. AI labor. People may have no jobs or money but on a good note the cost of goods and services will also go toward zero. In the end the goverment will probably provide some basic income for the masses. But among those masses private citizens will still 'own' the means of production.

Thanks for the reply. This is what I'm getting at. Cost of goods will drop dramatically, automation will do much of the labour. People will have more free time. In the long run, perhaps a good thing. But there may be massive job loss that does not get redirected, less spending and less profits (while an increase in standard of living.) Many companies could drop out of the stock market. Profits concentrating. Perhaps a UBI and collapse of stock markets. I'm not saying this is likely, but I think it's worth considering.

 

[GrayHare]

Cost of goods will drop dramatically, automation will do much of the labour. People will have more free time.

We have a previous example of that in the industrial revolution. Yes, wheelwrights were thrown out of work, but automobiles created more jobs than were lost. And more leisure time produced more demand for entertainment.

 

[jollystomper]

Cost of goods will drop dramatically, automation will do much of the labour.

On this point I am still very skeptical Perhaps in some specific areas this may occur (as we have seen with computer electronics), but I hesitate to make this a broad application. In theory automation can lower costs, but in practice how broadly can this be applied across both good production and services, and how willing will companies be to lower the price and forego more profit. In addition, I suspect the more AI automation you see, the more government oversight and regulation might occur, and that is a cost to companies.

In sum, every new advancement rarely covers all of the initial claims, and there are downsides besides job loss that are just not apparent yet. I guess that would be called the "unknown unknowns" .

 

[Exchme]

Work will simply change. In 1900, the vast majority of folks were involved in food production. Now just a couple percent of folks in the US are farmers, but we aren't starving, instead our biggest societal health issue is we are too fat. Getting more efficient freed up minds and hands to do other work that those folks from 1900 could not even imagine. Same thing here, whole new types of jobs will be created that we can't even imagine today.

A.I. will be like every other tool - oversold and overspeculated about at first, followed by a shake-out, then the real use cases and inventions pop-up and are perfected and a couple decades later we are all much richer for it. Then of course we'll complain how soft kids have it and how we miss the good old days.

 

[Quattro73]

Umm, no. The AI and AI robots will do all the work for free, allowing for massive profits, which governments will distribute to the populace and we will enjoy a wonderful, carefree life……until the AI goes sentient, gets hacked off, and kills us all.

DOH.

 

[marko]

Emphasis mine.
Since we don't know anything about you, this could be interpreted as a troll.
Try actually being a member here for a while before throwing out hypotheticals.

I've often thought that new members should be required to just lurk for X days/weeks before being able to post. Might thwart a lot of trollers.

 

[Flyfish1]

Not sure I buy into the whole collapse due to AI theory. However, I often wonder what the markets will look like as population falls which is predicted across many if not all countries. Certainly companies will come and go but if the market lives by growth then what happens when there is a decline in the need for products and services? I certainly won't be around to see it but 2 or 3 generations from now may have to deal with it.

 

[Onda]

AI is poised to significantly enhance productivity and profitability across industries by streamlining processes, automating tasks, and enabling data-driven decision-making. Companies adopting AI technologies can achieve greater efficiency and innovation, potentially leading to increased profitability.

The wealth gap between those who benefit from AI-driven advancements (often companies, skilled workers and shareholders) and those who do not could widen.
No you do not want to be in bonds/gold/cash. You want to be in equities.

Don't we already see it happening?

 

[sengsational]

It seems like what we're talking about is having more needs met with less human input required. That gives humanity more time to pursue other goals. It doesn't sound like there will be shortages, except maybe of "meaning", for those that get meaning from a 4 letter word (w*rk). The biggest worry I'd have, and it's not that big, is distribution of wealth; if there's too much concentration at the top, or actually, not enough at the bottom, that would spell trouble. But given the AI's and robots will be cranking out all the stuff everyone wants, I don't see that riots will be required. These are the good old days, and I'm pretty sure they'll continue. At least until we get super-intelligent AI. At that point, well, I won't be here to worry about it.

 

[MichaelB]

Thanks for the reply. This is what I'm getting at. Cost of goods will drop dramatically, automation will do much of the labour. People will have more free time. In the long run, perhaps a good thing. But there may be massive job loss that does not get redirected, less spending and less profits (while an increase in standard of living.) Many companies could drop out of the stock market. Profits concentrating. Perhaps a UBI and collapse of stock markets. I'm not saying this is likely, but I think it's worth considering.

So, why don’t you share with us what you think? How likely do you think this scenario is, and what are you doing with yiour portfolio to address it?