Hello Reader,
Tom Yeung here with today’s Smart Money.
Over the past several weeks, you’ve heard me talk about the benefits of AI. The technology is creating a surge of innovation in biotech and healthcare… not to mention an absolute gold rush in data center stocks.
But as we’ve been talking about the Road to Artificial General Intelligence (AGI), I’ve also noted that automation also has a darker side. That is a big part of why Eric is hosting a free event on Thursday, August 22, at 1 p.m. Eastern. The Road to AGI Summit isopen for anyone to attend. I’ll have more on that in a minute — but it’s critical that you register ahead of time to reserve your spot.
The big downside of automation is a worrying story that we’ve seen before…
Consider what happened in the U.S. automotive market when robots were first introduced.
In 1959, inventor Joseph Engelberger created the Unimate #001 prototype, a 2,700-pound robotic arm that featured six degrees of movement and was sensitive enough to hold cocktail glasses without shattering them. The machine was installed at a General Motors die-casting plant in Trenton, New Jersey, for testing.
Coming soon to a factory near you.
It was a success. Within two years, GM had deployed over 450 of these arms in its die-casting plants. By the end of the 1960s,, the number of industrial robots had increased to nearly 4,000 across the country. Today, U.S. automakers have roughly 150,000 robots installed among them.
That led to an incredible increase in labor productivity. Since the 1970s, the number of cars produced in the United States has roughly doubled to 18 million units annually without any significant rise in overall industry employment.
So, how did we repay these workers for doubling their output?
From an inflation-adjusted standpoint, autoworker salaries have lagged. According to the 1970 U.S. Census, the average full-time automotive worker earned roughly $8,618 annually during that period, or $69,800 when adjusted for inflation. By comparison, the average autoworker now makes roughly $55,000 per year, according to ZipRecruiter and the U.S. Labor Department, or about 20% less in purchasing power.
But what if we compare wages to total American wealth output?
Here’s where things get scary. That’s because, over the same period, U.S. GDP grew from $1.07 billion to around $27.4 billion, a 25.5-fold increase. Using that figure, autoworkers would theoretically have to make $208,120 in 2024 dollars to earn the same share of American GDP they once enjoyed in 1970!
The reason, of course, is that the vast majority of American productivity is now captured by the “haves” of society. The top 1% of Americans now control over 40% of U.S. wealth, up from 25% in 1978. And among the very top – the 0.01% – after-tax incomes have quadrupled in real terms.
In other words, robotics didn’t make America more egalitarian… it did quite the opposite.
AI Is Making Robots Smarter… What Could Possibly Go Wrong?
We believe AI will likely turbocharge the robotics trend. Last week, OpenAI-backed robotics startup Figure AI released a two-minute video of its humanoid robots completing tasks at a BMW plant in Spartanburg, South Carolina. These machines are now capable of learning from their mistakes and, unlike their robotic-arm predecessors, are designed to move in spaces made for humans.
That allows them to take on directly competing roles.
One of BMW’s latest employees.
We’re also seeing AI show up in places beyond the factory floor. The Financial Times reports that roughly 45% of job applicants now use ChatGPT for writing résumés and completing forms.
Many recruiters are now contending with large volumes of AI-generated CVs from candidates who have used the tools to polish their personal statements and add key search words. The actual figures could be higher, some added, but these estimates are based on those that are obviously detected.
Obviously, much of this AI-produced output is still pretty bad. The Figure 2.0 robot is currently only able to perform the simplest tasks on a factory floor, while much of AI-written content is recognizably poor.
“Without proper editing, the language will be clunky and generic, and hiring managers can detect this,” Victoria McLean, chief executive of career consultancy City CV, said in the same Financial Times article.
Frankly, the Unimate #001 prototype was not great when it was first released. However, it only took a little bit of time for the technology to catch up and for it to improve.
What’s Next for AI?
That’s because, this time around, change is happening exponentially faster than in the 20th century. Computing capacity is roughly doubling every 18 months, and the speed of AI improvements is dizzying. It’s easy to forget how clunky and hallucination-prone ChatGPT was less than two years ago.
So, even if someone does not use AI for their job, they will be increasingly competing with those who do. Non-users will either be forced to join in or drop out.
Unfortunately, we’re already seeing a new global race to the bottom. Recruiters are facing a torrent of low-quality résumés from people who may or may not be qualified for the job. It’s becoming impossible to know. And we’re seeing automotive companies quietly negotiate union contracts without any AI protections attached.
Meanwhile, the “haves” of this divide are motoring ahead. The five top U.S. tech companies have now seen their market valuations surge $4.2 trillion over the past 12 months, enriching shareholders wealthy enough to own large stakes. Figure AI itself is now worth $2.6 billion, making its 38-year-old founder, Brett Adcock, a billionaire. (An autoworker saving $10,000 annually would need to work 140,000 years to become as wealthy.)
That’s why I believe it’s essential that you join Eric at his free special event, The Road to AGI Summit, next Thursday, August 22, at 1 p.m. Eastern time. During the event, he will talk about the accelerating pace of AGI… and how you can protect yourself from getting left behind. He also gives away a FREE stock recommendation.
Register now for The Road to AGI Summit. You won’t want to miss it.
Regards,
Thomas Yeung, CFA
Markets Analyst, InvestorPlace
