The Implications of AI on Employment and Investment

Howard Marks, co-founder of Oaktree Capital Management LP, has expressed significant concerns regarding the implications of artificial intelligence (AI) on employment. In a recent blog post, he described the outlook for jobs as "terrifying," emphasizing that the anticipated productivity boom associated with AI does not account for the economic realities faced by the workforce. Marks highlighted that a small group of highly educated billionaires, primarily located on the coasts, may be perceived as the architects of technology that displaces millions of workers. He warned that this scenario could exacerbate social and political divisions, potentially leading to an environment conducive to populist demagoguery.

CityLab

Marks noted that many companies are engaging in aggressive borrowing to compete in what he termed a "winner-take-all arms race" in the AI sector. Major firms such as Microsoft Corp., Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., and Oracle Corp. are investing heavily, which Marks suggests may be a strategy to outpace smaller competitors. This year alone, over $161 billion in data-center-related credit deals have been secured in the United States, indicating Wall Street's readiness to finance AI initiatives that may take years to yield returns.

CityLab

Despite the enthusiasm surrounding AI, Marks cautioned that investors are behaving in a speculative manner, with the demand for AI technology being "totally unpredictable." He pointed out that the 30-year bonds issued by Meta and Alphabet to fund their AI projects offer yields only slightly above those of risk-free Treasuries, raising questions about the prudence of such long-term investments amid technological uncertainty. Marks questioned whether the capital invested in chips and data centers would sustain productivity levels long enough to meet the obligations of these long-term debts.

CityLab

While Marks acknowledged the potential benefits of AI, particularly in addressing the workforce gap created by the retirement of millions of baby boomers by 2035, he emphasized that the current AI revolution differs fundamentally from previous technological advancements. He likened the situation to a genie being released from a bottle, suggesting that the changes brought about by AI are irreversible and carry both promising and concerning implications.

CityLab

In his blog, Marks articulated a cautious approach to AI investments, advising against an all-in strategy without recognizing the associated risks. He urged investors to remain vigilant, as the long-term effects of AI on the job market and the economy are still uncertain.

CityLab

• “I’m concerned that a small number of highly educated multi billionaires living on the coasts will be viewed as having created technology that puts millions out of work,” — Howard Marks, Co-founder, Oaktree Capital Management LP

CityLab

• “Is it prudent to accept 30 years of technological uncertainty to make a fixed-income investment that yields little more than riskless debt?” — Howard Marks, Co-founder, Oaktree Capital Management LP

CityLab

• “the AI revolution is different from the technological revolutions that preceded it in ways that are both wonderful and worrisome,” — Howard Marks, Co-founder, Oaktree Capital Management LP

CityLab

As the discourse surrounding AI continues to evolve, the insights from Howard Marks highlight the complex interplay between technological advancement, employment, and investment strategies. The future of AI remains uncertain, with both potential benefits and significant risks that stakeholders must navigate carefully.

Howard Marks Says AI Is ‘Terrifying’ for Jobs