Those familiar with Moore’s Law will have heard the observation that computing power doubles approximately every two years. If this is true, businesses need to move fast to identify what the jobs of the future are, and how many of them will be rendered obsolete by automation. Investors, too, must be cognisant of the likely implications on their portfolio.
At AMP’s recent Amplify conference, Futurist Martin Ford, author of the New York Times bestselling book, The Rise of the Robots, asserts that advances in robotics and artificial intelligence will eventually make a large fraction of the human workforce obsolete.
“The growth of automation now threatens many highly educated people and with continued technological progress, it will be necessary to adapt our economic system to the new reality created by advances in artificial intelligence,” says Ford.
Andy Gardner, Portfolio Manager, Global Equities at AMP Capital, acknowledges: “While the application of enhanced robotics and artificial intelligence could help overcome some bottlenecks with qualified labour, these technologies could also undermine the cost advantage in emerging market exports of manufacturing and services.”
And Gardner warns: “Countries with high manufacturing exports as a percentage of GDP are most likely to suffer from this innovation.”
Investment implication: The future is becoming harder to model
Kristen Le Mesurier, Senior Portfolio Manager, Multi-Asset Solutions at AMP Capital, notes that disruption isn’t a new concept; it’s the fast pace of that disruption, fuelled by technological change, that’s different.
“When the past is no longer a reliable indicator of the future, it is clear that the future is already becoming harder to model,” says Le Mesurier.
“In the face of accelerating change, we expect that sustainable value creation will be increasingly dependent on the ability to harness bottom-up investment insights regarding the intangible assets of a company to understand how the company can anticipate or lead change.”
What does this mean for investors?
According to Tanya Debakhapouve, Head of Listed Market Solutions at AMP Capital, the evolution of the market environment –including the impact of artificial intelligence, automation and accelerating technology on our jobs, workplaces, economy and society – creates both opportunities and challenges for investors. On the one hand, artificial intelligence processes compete with traditional quantitative processes and with fundamental investors; on the other hand, these advances present an opportunity to disrupt existing investment capabilities.
“To succeed in this environment, active managers must possess the requisite skills and competencies as well as resources to deliver value and performance for investors”, says Debakhapouve.