Highlights: In 1949, George Orwell published a Novel called 1984 which was a satire of a dystopian future. Whilst today, everyone’s trying to fathom a future with Artificial Intelligence, a lot of Orwellian AI-fearmongering is on the rise. Doomsday type thought experiments that play on markets’ pre-existing fears have gone viral. One, written by Citrini, painted a vision of a world where AI precipitates white-collar lay-offs and mass-unemployment exceeding the 10 per cent mark, culminating into a stock-market precipice in 2028. It morphed the AI narrative from a productivity booster to being an existential threat to human prosperity. The report also propagated contentious concepts like “Ghost GDP”, labelled human relations as “nothing but friction” and the author later proposed higher taxes on AI adopters. We find the entire proposition – both the extent of the problem and the solutions offered – not just hypothetical but also out of sync with basic principles of economics and the learnings from economic history. In this paper, we decipher some of the extreme assumptions that such thought experiments use and contrast them with some reality checks.

Our take – let’s not demonise AI. The new AI world isn’t dystopian. It’s opportunity rich:

• AI’s creative destruction offers opportunities to those who learn, adopt and invest in it. Like the internet, we believe AI will act as an equaliser. It will democratise economic and investment opportunities for those who embrace it
• AI & Jobs: The future belongs to an AI augmented, rather than AI threatened workforce. Yes – there’s going to be some job displacement in areas where jobs follow a set pattern of physical or intellectual labour. But economies are dynamic ecosystems, and the number of jobs isn’t static, especially amidst tech revolutions. With AI’s continued adoption, productivity will increase, more problems will be solved & new industries will be created, which will create more AI enabled jobs. Human prosperity and cumulative consumption should therefore trend higher
• Human Accountability will still be key – because an AI agent can’t be held accountable if it hallucinates or lacks context. AI intelligent workflows will always depend on critical human cognitive skills that cannot be replicated by AI. Meta-capabilities like connecting the dots and providing judgement in the face of uncertainty; the human knack of innovative problem solving; strategic leadership and farsightedness; building relationships and trust will still be at the core of running successful businesses

What are the investment implications of this new AI enabled world?

• AI will create corporate winners and losers. Companies that meaningfully adopt AI in their operations continue to see lower costs, higher revenues and better margins, and steady share price outperformance vs their non-AI adopting peers. We see opportunities in AI adopters like a.) Financials, industrials & medicine; b.) Enablers like AI compute & cloud providers, and Utilities; c.) Physical infrastructure buildout like data centres & energy infrastructure d.) New frontiers of AI tech like building data centres in space & other AI enabled Space Tech. Besides, consistently rising earnings expectations, and relatively compressed US valuations offer an attractive entry point. Bottom-up stock picking & allocating to Hedge Funds will help