The dark side of AI … an example of how it might affect your portfolio … how Eric Fry is analyzing this groundbreaking technology … we’ve opened Pandora’s Box
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We hope you have a wonderful Memorial Day weekend with your friends and family.
Do we really want AI?
To be clear – not the potentially explosive investment gains from AI, such as we saw yesterday with Nvidia, but the technology itself.
Yes, it’ll bring all sorts of conveniences, jaw-dropping functionality that transform our day-to-day lives, health care advancements, you name it…
But there’s a steep price.
Consider the coming job losses… the scams… the social division.
As to job losses, Goldman Sachs predicts AI could replace the equivalent of 300 million full-time jobs. That’s almost the entire population of the United States (332 million).
Goldman’s report also predicts that two-thirds of all jobs in the U.S. and Europe will be “exposed to some degree of AI automation.”
For scams, consider how AI will make it infinitely harder for even intelligent, wary individuals to be duped.
Here’s The Washington Post with a story from March:
The man calling Ruth Card sounded just like her grandson Brandon.
So, when he said he was in jail, with no wallet or cellphone, and needed cash for bail, Card scrambled to do whatever she could to help…
Card, 73, and her husband, Greg Grace, 75, dashed to their bank in Regina, Saskatchewan, and withdrew 3,000 Canadian dollars ($2,207 in U.S. currency), the daily maximum. They hurried to a second branch for more money. But a bank manager pulled them into his office: Another patron had gotten a similar call and learned the eerily accurate voice had been faked, Card recalled the banker saying. The man on the phone probably wasn’t their grandson.
That’s when they realized they’d been duped.
Finally, as to social division, what happens when we can’t trust anything we see? When bad actors use AI to further deepen the polarization between our increasingly-angry political parties?
Here’s The Irish Times:
AI could harm the health of millions via the social determinants of health through the control and manipulation of people…
“When combined with the rapidly improving ability to distort or misrepresent reality with deep fakes, AI-driven information systems may further undermine democracy by causing a general breakdown in trust or by driving social division and conflict, with ensuing public health impacts,” they contend.
You may recall back in March when AI-generated photos of former President Trump being arrested rocketed around the internet.
Here’s one such photo.
And don’t think that AI can’t negatively impact your portfolio – it’s already happened in a mild form
You might have missed it, but this past Monday, a fake image showing an alleged explosion near the Pentagon took off on social media, resulting in a brief selloff in the market.
Below, we show a 1-minute chart of the S&P on Monday with the effect of the fake news.
While the drop was relatively tame and short-lived, it illustrates the danger.
There’s no reason to believe such AI-generated fakes won’t be replicated to far more devastating effects.
Only a handful of weeks ago, the “Godfather of AI,” Geoffrey Hinton, resigned from Alphabet so that he could speak openly about the dangers of AI.
From Hinton:
It is hard to see how you can prevent the bad actors from using [AI] for bad things.
Here’s more from MarketWatch:
Hinton warned that in the near term, false photos and text generated by AIs will flood the internet, making it even more difficult for people to tell the difference between fact and fiction…
Thousands of tech leaders and others have already signed an open letter calling for giant AI experiments to be halted so the implications of the technology can be studied before it is released into the wild.
Our macro expert Eric Fry has been researching AI’s multi-spectrum impact on our world for months
In his latest issue of Investment Report, he profiled the ground-breaking technology – looking honestly at its potential for both good and harm.
From Eric:
AI will produce both massive opportunity… and massive disruption…
It is a mystery of epic proportions. Its far-reaching power and potential are both exhilarating and frightening. Or as the technology writer Kevin Roose put it recently, the conversation about AI operates “between the binary poles of euphoria and terror.”
Because AI can do what humans cannot, it possesses the power to improve the plight of humanity. But since AI can also do what many of us humans can do, it possesses the power to harm our lives by putting us out of a job.
And that’s not all.
AI also possesses the power to replace our creativity. It can produce the kind of art we might like to produce… or write the kind of song lyrics we might like to write… or create the kinds of novels or screenplays we might like to create.
In other words, AI has the potential to steal humanity from humans… and never give it back.
That’s terrifying.
But as terrifying as AI can be, its euphoric potential is no less real.
Theoretically, AI could produce modern miracles, like inventing the cures for cancer that have eluded scientists for decades.
“All power tends to corrupt and absolute power corrupts absolutely”
The quote comes from Lord Acton, a British historian from roughly 100 years ago.
Today, we find a wonderful illustration of his message with the poster child of AI, ChatGPT.
Back to Eric to explain:
ChatGPT traces its roots back to 2015…
That was the year Elon Musk, Sam Altman, and a few other tech billionaires formed their non-profit entity called OpenAI. They started this venture with the high-minded goal of helping to shape the future of AI in ways that would benefit society as a whole.
Because these tech insiders understood AI’s power to revolutionize many areas of human life, they also understood its destructive power – like the power to eliminate jobs and create extreme wealth inequality.
Therefore, the OpenAI founders formed their organization to address these issues head-on to help ensure that AI technologies would develop in a responsible and ethical manner.
Those lofty goals sounded great until the moment this altruistic, nonprofit became a capitalistic, for-profit enterprise.
That moment occurred on Nov. 30, 2022, when OpenAI flipped the switch that released ChatGPT to the public…
And when they flipped that switch, they also opened the gates to an AI free-for-all. No more rules, no more boundaries, no more ethical constraints. Just a no-holds-barred free-for-all…
Eric goes on to quote Musk, who parted ways with OpenAI five years ago. Musk has complained that what started as an open-source nonprofit that could serve as a counterweight to Google has now become a “closed-source, maximum-profit company effectively controlled by Microsoft. Not what I intended at all.”
We’ve opened Pandora’s Box
To some extent, the question opening today’s Digest is futile.
Asking “do we really want AI?” is pointless, as it’s already here. And keep in mind, for as amazing as its current capabilities are, it is now the least intelligent, worst version of the technology that will ever exist. It will only grow “smarter” from here. Tying back to Kevin Roose, this awareness fills me with both euphoria and terror.
Of course, the topic we haven’t even touched upon yet is the enormous wealth creation that will accompany AI.
Yesterday brought a timely illustration of this when AI-chipmaker Nvidia added $200 billion to its market cap based on blowout earnings. For bit of context, $200 billion is more than the entire yearly GDP of Qatar, or Kuwait, or Luxembourg. Nvidia created it overnight.
Keep in mind, this is just the beginning. The wealth generation stemming from AI technology will be like nothing our world has experienced before.
Here’s Eric on that note:
AI will certainly create new generations of millionaires and billionaires, perhaps even the world’s first trillionaire…
The good news for us, both as humans and investors, is that the opportunity to profit from AI-driven investments is a “today thing,” while most of the scariest AI risks are a “tomorrow thing.”
So, I suggest focusing on the today things, while still keeping a wary eye on the tomorrow things.
How to learn more about AI
Our Digest is beginning to run long, so as we wrap up, let me point you to the research video Eric has created about AI.
If you’re looking to wrap your head around this revolutionary technology – as well as how to invest – this is a great resource.
Bottom line: Whether we want it or not, AI is here. Get ready for all that this entails.
Have a good evening,
Jeff Remsburg
