• It’s tough to profit from new technology
  • AI – threat or opportunity?
  • How to use AI in investing

You’ll be relieved to hear the in-laws are finally leaving the country. Things got a bit awkward each evening after the kids were put to bed… and tied down to make sure they stayed there. There just aren’t that many television shows with Japanese subtitles on our streaming services.

It’s a bit embarrassing, given the futuristic day and age we supposedly live in. But, more importantly, it severely constrains what we can all watch together.

For most of this year, my wife and I were cornered into watching The X-Files. Yes, all of them…

One unusually bizarre episode featured a visit to a sushi restaurant run by artificial intelligence (AI). A particularly malicious form of AI that attempted to bully its guests into leaving good reviews and a whopping tip. And woe betide anyone who dared to refuse…

Part of the plot was a dig at the nature of our culture in the age of smart phones. The main characters barely spoke a word to each other for the entire episode! They were too busy posting pictures of their robotically prepared sushi…

But the key theme was that giving AI too much control over our lives could cause rather a lot of trouble. In this case, a rogue vacuum robot tearing up your home while you’re away…

To be fair, this was a significant improvement on the previous episodes’ attempts to instil a fear of technology. Nobody got stuck inside a computer game and a computer didn’t try to take over the whole world…

But perhaps, given time, the episode about AI sushi will look just as ridiculous to our children.

Whenever a grand new innovation comes along, the different departments of academia begin to slug it out over who will capture the benefits from the new invention and who will bear the costs.

That process is now well underway for the latest tech revolution to grace our lives – AI. It’s not quite running a restaurant yet… but it might be close.

So, how should you invest for the immense changes about to ripple through our economy?

Historically speaking, the actual inventors of an innovation have a rather poor track record at capturing the profits for themselves. Usually, some large corporation butts in.

But even then, classical economists would point out that over time the returns from innovation are cancelled out by competition. Sure, you might’ve been the first car manufacturer, but good luck keeping that industry to yourself…

These days, the early TV streaming companies have a lot of competition. The same is true for ride-sharing and even cryptocurrencies.

Under this theory of economics, profit itself is an aberration that the market whittles away over time. Competition springs up until the profit is negated by lower prices.

The only way to sustain profits is to continue to innovate. Or to provide government protections like intellectual property, subsidies, licenses and trade barriers to limit competition.

Who is left with the gains if not the companies? The consumer and the user, of course. The entire benefit goes to us… unless governments manage to secure them for their cronies for a little longer.

AI may fit that mould fairly well, with a rather good chunk of AI tools already available for free and competing freely with each other. This doesn’t mean there’s no benefit to the companies creating them. It means the benefit is broken down over time – not the best investment proposition.

Personally, I believe that some profit continues to be accrued for those who have the ability to run a business. Entrepreneurship pays, in other words. But the big gains that come from being a first mover in a new technology do of course diminish over time. That’s why it’s so important for investors to move early, once a technology has been invented but its commercialisation is still unclear.

Futurists will point out how easy and convenient our lives will become when we can delegate thankless tasks to AI versions of ourselves. How often do you think to yourself, “There must be a way to automate this task” each day? Well, soon there might be. You just have to teach the software or robot once and away it’ll go…

More importantly, this will open up entirely new business and investment opportunities, especially in leisure. And hasn’t that been a boom industry in the history of humanity? We may be on the cusp of a whole new leap in entertainment types and the time spent on them.

The Marxists and their intellectual offspring, who are obsessed with classifying society into groups of oppressed and oppressors, will see any new technology as a way to either oppress or resist oppression.

AI certainly has the potential to be used as a tool of oppression. It can, for example, apply vast amounts of computing power to predicting human behaviour… and pre-empt it.

In the film Minority Report, a bunch of well-bathed oracles predict crimes before they happen and Tom Cruise is sent out to prevent them. We may not be so far from that style of policing, thanks to AI. These days, a bank robber’s peculiar gait captured on CCTV may spell his doom before he secures it himself…

Social scientists would point out that AI’s second-order effects could be rather destabilising – mass unemployment being the go-to reason. Never mind that this has been the fear for every innovation in the history of humanity, while the outcome has always been the opposite.

Indeed, some economists would argue that it’s the worker who captures the gains of new technology. They become more productive, making them more valuable to employers. And that results in higher pay, not unemployment.

This also seems to be true for AI, with AI specialists earning plenty as the boom gets going and companies try to figure out how they can use AI in their industry. Where they succeed, they’re likely to be able to pay their employees more, not less. After all, AI will save staff time by automating drudgery, leaving them free to do additional or more useful things instead.

But if the social scientists are right and the economy is a house of cards rather than a dynamic system that constantly reshapes itself to adjust for many changes, including new technologies, then you’d have to conclude that it isn’t just the workers who risk being dispossessed. I mean, what’ll happen to all the companies that can’t compete with AI?

Who will be the Kodak and the Myspace of AI’s coming extinction drive? Travel agents, law firms, ad agencies, fund management firms…

Whichever side you sit on in the grand debate over technological innovation, change is definitely in the air. Some claim it’s of a different sort and magnitude than just the invention of the computer or loom.

Perhaps that’s why, this time, our tech expert Sam Volkering is taking a whole new angle. Instead of predicting which stocks will benefit from the AI revolution, he’s using AI itself to generate investment opportunities.

Actually, he’s already helped his subscribers profit from the AI boom by figuring out which specific sector of the market stands to benefit. And it has. But now he’s onto the next phase – actually using AI as a tool and he’s off to a promising start.

Find out how you can harness AI in your investment decisions here. Capital at risk.

Until next time,

Nick Hubble
Editor, Fortune & Freedom