Allaying Client Fears About AI Advancements

In many ways, it's a blessing for advisors. “It” being an increasingly active, savvy and studious client base, many of whom are prioritizing virtue in their investments.

A benefit of clients having access to a seemingly never ending stream of free financial and market articles from mainstream and non-traditional sources is that those that are doing some homework on their own are coming up with questions. After all, that's one of the great things about the advisor/client relationship. Advisors get to prove their mettle by having conversations and answering queries.

Some clients may even be observant and studious enough to be pondering the impact of artificial intelligence (AI) on the labor force. Indeed, among the myriad disruptive technologies that have long-term implications – investment and otherwise – AI/automation is the one often viewed as a potential jobs dislocator.

Perhaps some advisors have already heard this. Chances are, clients have, too. “The robots are coming: and in that clarion call what the robots are coming for are jobs currently occupied by humans. So the argument goes anyway. However, technological advancements aren't always jobs killers. History proves as much and that lesson assuage virtuous clients that crave disruptive growth exposure.

Old Lessons Still Applicable Today

Wishing I could take credit for the poignancy of this comparison, but I cannot and while extend all due courtesy to ARK Invest analyst Sam Korus who brings up the example of farms in bygone era transitioning from mules to tractors.

In theory, the more efficient an enterprise becomes, the less human touch it needs. Right? Not necessarily. Increased farm automation did lead to higher rates of productivity, but it wasn't a jobs destroyer.

“In 1945, to produce 100 pounds of lint cotton with two mules, a farm had to devote 42 labor-hours and nearly half an acre of land. Thirty years later in 1975, farms with tractors produced the same amount of cotton with only 2.5 labor hours and less than 0.25 an acre of land,” notes Korus. “In other words, labor productivity soared more than 17-fold. Farm automation created more valuable jobs and higher wages. Thanks to tractors, real farm wages increased more than 76% from the 1940s to the early 1970s.”

Naysayers point to a decline in agriculture jobs between 1950 and 1975, but that criticism is myopic because it focuses on tractors and doesn't take into account trends such as increasing urbanization during that period, more women entering the workforce and rising levels of education, which opened the door to more white collar jobs. Agriculture isn't the only example of efficiency creating new industry labor dynamics.

“In the future, the automation of food services is likely to commercialize the non-market activity associated with grocery shopping and food preparation/cleanup into more cost-effective food delivery alternatives,” adds Korus.

Automation Could Lead to Better Jobs

Clients prioritizing sustainability may be apt to recognize that sustainability is a now broad term and part of it most certainly is economic opportunity. Put simply, technology should not displace workers. Rather, advancements should create now opportunities and it can.

Think about the mule/tractor example. It's reasonable to surmise that track mechanics have always made more money than some operating a mule sled on a farm. That could be the case again as automation takes hold.

For example, food delivery, ride-hailing and taxi driving jobs could eventually be the territory of robots, but that's not necessarily a death knell for the folks currently occupying those roles. In fact, their experience in those roles could prove meaningful.

“ARK estimates that the number of remote operators necessary to scale autonomous taxi networks would be triple the number of professional drivers employed today, roughly 3 million, all of whom would commercialize the trillions of dollars now categorized as non-market activity,” according to Korus.

Time will tell what ultimately comes of increased automation, but chances are it will facilitate demand for higher skill, better paying jobs and that's a good thing.

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