"Any sufficiently advanced technology is indistinguishable from magic."
---Science fiction writer Arthur C. Clarke
I remember using a manual typewriter to type my papers when I was in high school and college. I could hit one of the keys and watch as the metal arm rose up to strike the ink ribbon to put a letter on the page. I wouldn't call it magic, but the typewriter was a marvel when it was first introduced in the latter part of the 19th century. People who employed their penmanship for office work were out of a job, of course, the same fate suffered by the buggy whip makers after the advent of the automobile. As technology advanced through the twentieth century and into the twenty-first, each successive innovation probably more and more seemed to resemble magic. Artificial Intelligence (AI) is now the latest trick out of the box--and Wall Street loves new tricks.
The chief magician on Wall Street right now, the Harry Houdini, if you will, of the technology sector, is NVIDIA (NVDA, $870), the company that makes the complex chips that are required to make AI work. If you had invested $10,000 in NVDA ten years ago, that investment would be worth about $2 million today. It is human nature to hold a fascination for shiny, new objects, and as investors, we don't want to bet against human nature. Teenage boys like to look at pictures of naked women, and men don't go to Hooters for the food. For better or worse, human nature is not likely to change. Visionaries over the generations have tapped into human nature to launch wildly successful enterprises. I am thinking not so much of Hugh Hefner, but instead of Walt Disney. Disney understood that people of all ages loved stories, and that children would be fascinated by animated cartoon characters. A simple rule is to give the people what they want, not what you think they should have. Better yet, convince them that what you have is what they truly want. That is what made Disney (DIS, $112) a rewarding investment for generations. As long as technology holds the promise of making life easier or more enjoyable, or making work easier, consumers and businesses will likely be willing buyers. I am writing this at my computer keyboard, and I have no idea how my keystrokes make it onto my blog. But I don't need to understand that, because all I really care about is that it does what I need it to do. And it's a lot better than that old, manual typewriter.
The Luddites were a group of textile workers in early 19th century England who saw the new textile machinery as a threat to their livelihoods. They felt so strongly about this threat that they took sledgehammers to the new machines. People who raise concerns about technology today are often referred to as modern day Luddites. They probably won't be smashing up any machines, though, because the brains of AI are working away in data centers spread across the country. For years, some people have voiced concerns that jobs will be lost as a result of new technologies. The analysts and economists typically respond by saying that the same dynamic economy that produces AI will also produce new jobs to go along with it. That is true in a macro sense, but you and I live our individual lives very much in the micro. If AI can write your company's marketing plan, just how many warm bodies do you need working in the marketing department? "Labor saving" technology sounds appealing, until the labor it saves is yours. And then what do you do if your skills are no longer in demand because your job is now being handled through the magic of AI? You can go get a degree in computer science from M.I.T., or you can start cleaning hotel rooms (until that job is done by a robot). Let's hope the choices are not really that extreme.
Another concern raised about AI seems to come from the conspiracy corners of the world. Namely, that the technology becomes so powerful that it has a mind of its own and takes over everything. Think about the AI computer HAL in the movie 2001: A Space Odyssey. If some AI system takes over and starts launching nuclear missiles to start World War III--well, nobody will be around to say, "I told you so." (And nobody will be around to listen.) I would like to think that if an AI system started running amok, then someone would just pull the plug and disconnect the wires.
Some more down to earth worries that we are likely to hear much more about in the not-too-distant future involve the technology's environmental impact. It takes enormous amounts of electricity to run these data centers--and huge amounts of water. Here are links to two articles on the topic:
Another question worth pondering here is, What happens when the rabbit doesn't come out of the hat? What happens when the technology fails? Just recently the AT&T cellular network went down, and I saw firsthand the panic that ensues when people can't use their cell phones. Waking up to this reminded me of the morning when I got up and was all ready for my day when I went outside and discovered that my car had a flat tire. So much for my best laid plans, at least for a few hours. We all take for granted that things are going to work--that when we flip the switch, the lights and the coffee maker will come on. But what if the power goes out and stays out for an extended period of time? Like weeks or months?That could be caused by a solar flare of great magnitude, or by a foreign adversary launching an Electro Magnetic Pulse (EMP) attack. Either way, the power grid gets fried like Oscar Mayer bacon. Such a massive and extended loss of electricity would send society into chaos as people and stores eventually ran out of food. If you think crime is bad now, just imagine hordes of starving people barging through your front door and plundering your kitchen. I thought all of this was just more conspiracy stuff until I read a book called Lights Out by Ted Koppel, the former host of the ABC news television program Nightline. It's a sobering look at how all of this could unfold.
Here is an article on the topic:
I have always been an optimist, seeing the glass as half full (until I drink what's in it). Rather than dwell on a low-probability yet terrible outcome, I choose to think about possible solutions. When choosing stocks, I like to look for problem solvers. The power grid is at the center of many concerns, whether due to the strains placed on it by electricity demands or the threat of a massive outage. The problem solver here might be Quanta Services (PWR, $240), which provides infrastructure solutions for the electric and gas utility, renewable energy, pipeline and other energy industries. The power grid needs to be upgraded and hardened, and PWR seems to be in the sweet spot for all of that work.
I don't usually make specific predictions, but I will venture two here. The first is that AI itself will actually be part of the solution, especially in the area of making more efficient use of power. Second, that we'll hear a lot more about nuclear energy as the solution to power demands. Meanwhile, I will be eagerly awaiting the next magic trick to come out of the box.
Life is short. Get busy.
Jim
Disclosure/Disclaimer: My family members and/or I own shares of NVDA, DIS, and PWR. Individual stocks are mentioned here for the sole purpose of illustrating investment concepts, and nothing stated here should be construed as the advice to buy or sell any security.
Copyright 2024 James Brinkley Taylor, Jr.
Email me with any feedback, questions, or comments:
jbrinkleytaylor@gmail.com
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