Investing in the machine age

A new report from the World Economic Forum predicts that machines will do half of all work tasks by 2025, this means that investors are investing in the machine age.

Article updated: 21 October 2020 12:00pm Author: Michael Baxter

It seems that the machine revolution will giveth and taketh. The World Economic Forum (WEF) report predicts that the so called robot revolution will mean that no less than 43 per cent of all businesses will reduce their workforce, and 85 million jobs will be lost, but that at the same time, 97 million new jobs will be created.

Before I go any further, let me point out that the headline figure that machines will do half of all tasks does not mean half of all jobs will go. Instead, for many workers, automation will free them up to do less routine work. Or to put it another way, tasks do not equal jobs. To an extent the automated tasks will be mind numbing tasks that few people enjoy doing.

Even so, a lot of jobs will go and a lot of jobs will be created. But ensuring displaced workers will have sufficient skills to do these new jobs won’t be easy. There will be massive demand for coders, data scientists and AI experts. I don’t want to sound unkind, a lot of people who will lose jobs will find it hard to re-train as data scientists. (They might need to get a PhD in maths first.)

This infographic shows increasing and decreasing job demand by 2025.

There will also be jobs created in care and education too. Expect the green economy to boom.

The WEF report also says that remote working is here to stay. And of course it is right.

I would say that the overall effect of this shift will be big growth in productivity— that’s good. But not all jobs will add to output, jobs such as in cybersecurity or compliance will be vital, but these tasks will be defensive (a bit like 21st century policing, just not formally called police) and won’t add to GDP.

Even so, I expect that this decade will see something of a golden age for productivity growth. That is why, even since the early days of this crisis, I have been predicting a very rapid economic boom once Covid is finally defeated. My time horizon has changed though. I now expect this period of exceptional growth will begin in 2022, previously I projected 2021.

As a result of this change that the WEF is predicting — correctly predicting, in my view — many businesses will go bust. Many will become very successful.

Inequality

This shift will unfortunately be associated with growing inequality. This could lead to dangerous social issues. I would not be surprised to see some kind of universal basic income introduced later this decade to grapple with inequality.

Markets

This period of economic boom will create outstanding opportunity. Stock markets will do well, but there will be high volatility and I expect a lot of change in the makeup of key indices such as the FTSE 100, Dow Jones and S&P 500.

What can investors do?

For one thing, be aware of the change that is occurring, don’t be cynical about it. Don’t say “yeah, yeah, I’ve heard it before.”

So often I read investors talk about a tech bubble, the absurd valuation of Tesla, how we have lost all reason. I am sorry, but they are wrong. No one knows the future. We may see a tech correction, the giant techs may get broken-up, because of its high valuation, an investment in Tesla is quite risky. But the certainty with which some dismiss these techs suggests to me they don’t understand what is happening. The long run trajectory for techs is up. And the next generation of technology: gene editing, augmented and virtual reality, wearable tech, nanotechnology, more sophisticated use of AI, autonomous cars (maybe flying cars), green energy, etcetera, will have a much bigger impact upon us than the current technologies which are creating so much interest.

My advice to investors is understand. Read up about it. Read books. You may want to read my latest.

Look at funds that are investing in this revolution. Look at regions of the world that seem more in tune with what is happening (hint: south east Asia and Korea) and look at companies that are embracing change. Dump companies that seem to be focusing on old technologies.

See also; Investors must grab the opportunity that is technology on the trajectory of the Jerk.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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