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Welcome back to Mind Over Money. I’m Kevin Cook, your field-guide and story-teller for the fascinating arena of Behavioral Economics, where my goal is to make you curious about everything from how the brain works to how we make decisions about money and uncertainty without knowing or caring how it works.
I’ve got a very exciting topic for you in this episode. And while everything we talk about here involving “your brain on risk” is exciting and will be fruitful to listen to a decade from now, today might be the most controversial and prophetic topic of all.
So I expect my children and grandchildren to look back and say either “Wow Dad, you were really ahead of your time!” or “Gee Dad, it’s kind of embarrassing how off you were.”
Our story begins in early 2016 when I read a report by Citigroup and the Oxford Martin School which explored the varying impact that automation will have on jobs and economies in countries around the world.
Technology at Work v2.0: The Future Is Not What It Used to Be builds on 2013 research by Carl Benedikt Frey and Michael Osborne which found that 47 per cent of US jobs were at risk of automation over the next two decades.
Then there was this startling projection:
Risks of job automation in emerging economies such as China and India are as high as 77% and 69% over the next two decades.
As a technology investor at Zacks, I quickly became more interested in the pace and nature of innovation and automation after I saw the crisis ahead for literally billions of workers in the next 10-20 years. So In June I wrote my own special report to help investors prepare for what was to come.
The title was Big Economic Disruption: Big Data, AI, & Robotics and instead of focusing on which robotics company to buy, I concluded that the long-term, no-brainer investments to capitalize on these trends were simply to buy the 4 existing dominant players in Big Data and AI. More on them in a moment.
First, here’s what I wrote in my June 2016 report…
That's a lot of emerging markets workers put out of work in a fairly short time.
And it challenges what I had long believed: that China and India would make steady progress in their efforts to bring over 1 billion people collectively into the ranks of the global middle class.
That assumption was based on the efficient ability and desire of corporations to move manufacturing and service jobs to those countries and thereby balance the global market for goods and labor with the most cost-efficient choices available.
But the reality is that automation trends -- broadly defined as those involving cloud computing, business intelligence (Big Data analytics), artificial intelligence, and robotics -- will create far more disruption for capital and labor sources than most are imagining.
It's not just about the select company going out of business because a new technology or software solution -- like 3-D "printed" parts -- just replaced what their 50 employees did for far less money. It's about entire industries getting turned inside-out. In short, the industrial revolutions of China and India could be over sooner than many would like.
Here's how the Citi-Oxford report summed it up...
"While manufacturing productivity has traditionally enabled developing countries to close the gap with richer countries, automation is likely to impact negatively on their ability to do this, and new growth models will be required.
"The impact of automation may be more disruptive for developing countries, due to lower levels of consumer demand and limited social safety nets. With automation and developments in 3D printing likely to drive companies to move manufacturing closer to home, developing countries risk ‘premature de-industrialisation’.
"Analysis of cities in the US found that those most at risk included Fresno and Las Vegas, with those least at risk including Boston, Washington DC and New York. In relatively skilled cities, such as Boston, only 38% of jobs are susceptible to automation. In Fresno, by contrast, the equivalent figure is 54%.
"Digital industries have not created many new jobs. Since 2000, just 0.5% of the US workforce has shifted into new technology industries, most of which are directly associated with digital technologies.
"The largest number of job openings in the coming decades is projected to be in the health sector, which is expected to add more than 4 million new jobs in the US from 2012 to 2022."
(end of Citi-Oxford Martin excerpts)
This amount of disruption should not be taken lightly. Massive changes are coming to industry that will have deep impacts for economies and workers.
I think every citizen should be studying these changes and impacts on an ongoing basis to find the best ways to position their career, their business, and their investments.
Getting Started on Investing for the Future
Given the disruptive landscape described above, what questions and investment opportunities are first presented?
Here's a quick list of simple choices I made when I first considered the question a few months ago...
A) Stick with Alphabet, Amazon, and Apple as companies that will thrive
B) Explore new life for legacy Tech like IBM, HON, and GE
C) Avoid direct investment in Emerging Markets and focus on US companies that can develop business there
D) Concentrate in Healthcare as demographics and innovation will drive earnings
E) Always look for new potential disruptors like MBLY, IRBT, and TSLA?
To help us better organize questions like this, I am grouping the relevant technologies into four major buckets:
1. Big Data: includes the increasing access that powerful cloud computing gives to all types of Business Intelligence (BI) users like data scientists, developers, marketers, and strategists.
2. Internet of Things: I did a Zacks Confidential in April 2015 on this area. The intelligence networks built increasingly bigger by billions of devices and sensors all around us will continue to feed the Big Data ocean.
3. Artificial Intelligence and Machine Learning: this is the truly exciting and explosive part of what Big Data can do. We will spend the most time discussing this area.
4. Robotics and 3-D Additive Manufacturing: this might be considered the practical application of what all the bleeding edge technologies listed above can do.
I am not including autonomous cars in this discussion even though it is another clear practical extension of these advanced technologies. For more on that see my Zacks Confidential from June 2015 "Playing the Smart Car," where I explain how Mobileye (MBLY) is using machine learning to advance driving.
There are probably better ways to organize my 4 Technology buckets, but right now they will serve to simplify. We just want to be able to easily label innovative Tech areas and then try to determine who the winners might be.
(end of notes from my June 2016 report Big Economic Disruption)
So this brings me back to my top 4 picks for the future of work. And they will all be involved in robotics and additive manufacturing (3-D "printing") in some form, whether providing the software to design, build, and operate the machines, or the cloud-AI-machine learning data to give them "intelligence."
Had you followed my advice, you would have bought Microsoft (MSFT - Free Report) around $52, now trading $69. And you might have bought Amazon (AMZN - Free Report) around $725, and this week it’s making new all-time higs above $950. Or you might have bought Alphabet (GOOGL - Free Report) around $735 and watched it hit new all-time highs above $960 this week.
My final pick was IBM, which had a decent run from $153 up to nearly $183 in February of 2017, but has now fallen all the way back. More on IBM coming up and why you don't count them out.
Check out the full podcast to hear parts 2 and 3 of this discussion where I describe IBM’s partnership with NVIDIA (NVDA - Free Report) in the “massively parallel architectures” that create AI.
I also talk about Tesla (TSLA - Free Report) founder Elon Musk’s latest technology experiment, Neuralink, which aims to make implants for the human brain that can wirelessly interface with a computer.
In the final section, I recommend 3 must-read books on evolution and a new book by Yuval Noah Harari, Homo Deus, that ties together our wild future on the frontiers of machines vs. humans.
Disclosure: I own NVDA shares for the Zacks TAZR Trader service.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs the new Healthcare Innovators portfolio.
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What to Do Before the Machines Take Over
Welcome back to Mind Over Money. I’m Kevin Cook, your field-guide and story-teller for the fascinating arena of Behavioral Economics, where my goal is to make you curious about everything from how the brain works to how we make decisions about money and uncertainty without knowing or caring how it works.
I’ve got a very exciting topic for you in this episode. And while everything we talk about here involving “your brain on risk” is exciting and will be fruitful to listen to a decade from now, today might be the most controversial and prophetic topic of all.
So I expect my children and grandchildren to look back and say either “Wow Dad, you were really ahead of your time!” or “Gee Dad, it’s kind of embarrassing how off you were.”
Our story begins in early 2016 when I read a report by Citigroup and the Oxford Martin School which explored the varying impact that automation will have on jobs and economies in countries around the world.
Technology at Work v2.0: The Future Is Not What It Used to Be builds on 2013 research by Carl Benedikt Frey and Michael Osborne which found that 47 per cent of US jobs were at risk of automation over the next two decades.
Then there was this startling projection:
Risks of job automation in emerging economies such as China and India are as high as 77% and 69% over the next two decades.
As a technology investor at Zacks, I quickly became more interested in the pace and nature of innovation and automation after I saw the crisis ahead for literally billions of workers in the next 10-20 years. So In June I wrote my own special report to help investors prepare for what was to come.
The title was Big Economic Disruption: Big Data, AI, & Robotics and instead of focusing on which robotics company to buy, I concluded that the long-term, no-brainer investments to capitalize on these trends were simply to buy the 4 existing dominant players in Big Data and AI. More on them in a moment.
First, here’s what I wrote in my June 2016 report…
That's a lot of emerging markets workers put out of work in a fairly short time.
And it challenges what I had long believed: that China and India would make steady progress in their efforts to bring over 1 billion people collectively into the ranks of the global middle class.
That assumption was based on the efficient ability and desire of corporations to move manufacturing and service jobs to those countries and thereby balance the global market for goods and labor with the most cost-efficient choices available.
But the reality is that automation trends -- broadly defined as those involving cloud computing, business intelligence (Big Data analytics), artificial intelligence, and robotics -- will create far more disruption for capital and labor sources than most are imagining.
It's not just about the select company going out of business because a new technology or software solution -- like 3-D "printed" parts -- just replaced what their 50 employees did for far less money. It's about entire industries getting turned inside-out. In short, the industrial revolutions of China and India could be over sooner than many would like.
Here's how the Citi-Oxford report summed it up...
"While manufacturing productivity has traditionally enabled developing countries to close the gap with richer countries, automation is likely to impact negatively on their ability to do this, and new growth models will be required.
"The impact of automation may be more disruptive for developing countries, due to lower levels of consumer demand and limited social safety nets. With automation and developments in 3D printing likely to drive companies to move manufacturing closer to home, developing countries risk ‘premature de-industrialisation’.
"Analysis of cities in the US found that those most at risk included Fresno and Las Vegas, with those least at risk including Boston, Washington DC and New York. In relatively skilled cities, such as Boston, only 38% of jobs are susceptible to automation. In Fresno, by contrast, the equivalent figure is 54%.
"Digital industries have not created many new jobs. Since 2000, just 0.5% of the US workforce has shifted into new technology industries, most of which are directly associated with digital technologies.
"The largest number of job openings in the coming decades is projected to be in the health sector, which is expected to add more than 4 million new jobs in the US from 2012 to 2022."
(end of Citi-Oxford Martin excerpts)
This amount of disruption should not be taken lightly. Massive changes are coming to industry that will have deep impacts for economies and workers.
I think every citizen should be studying these changes and impacts on an ongoing basis to find the best ways to position their career, their business, and their investments.
Getting Started on Investing for the Future
Given the disruptive landscape described above, what questions and investment opportunities are first presented?
Here's a quick list of simple choices I made when I first considered the question a few months ago...
A) Stick with Alphabet, Amazon, and Apple as companies that will thrive
B) Explore new life for legacy Tech like IBM, HON, and GE
C) Avoid direct investment in Emerging Markets and focus on US companies that can develop business there
D) Concentrate in Healthcare as demographics and innovation will drive earnings
E) Always look for new potential disruptors like MBLY, IRBT, and TSLA?
To help us better organize questions like this, I am grouping the relevant technologies into four major buckets:
1. Big Data: includes the increasing access that powerful cloud computing gives to all types of Business Intelligence (BI) users like data scientists, developers, marketers, and strategists.
2. Internet of Things: I did a Zacks Confidential in April 2015 on this area. The intelligence networks built increasingly bigger by billions of devices and sensors all around us will continue to feed the Big Data ocean.
3. Artificial Intelligence and Machine Learning: this is the truly exciting and explosive part of what Big Data can do. We will spend the most time discussing this area.
4. Robotics and 3-D Additive Manufacturing: this might be considered the practical application of what all the bleeding edge technologies listed above can do.
I am not including autonomous cars in this discussion even though it is another clear practical extension of these advanced technologies. For more on that see my Zacks Confidential from June 2015 "Playing the Smart Car," where I explain how Mobileye (MBLY) is using machine learning to advance driving.
There are probably better ways to organize my 4 Technology buckets, but right now they will serve to simplify. We just want to be able to easily label innovative Tech areas and then try to determine who the winners might be.
(end of notes from my June 2016 report Big Economic Disruption)
So this brings me back to my top 4 picks for the future of work. And they will all be involved in robotics and additive manufacturing (3-D "printing") in some form, whether providing the software to design, build, and operate the machines, or the cloud-AI-machine learning data to give them "intelligence."
Had you followed my advice, you would have bought Microsoft (MSFT - Free Report) around $52, now trading $69. And you might have bought Amazon (AMZN - Free Report) around $725, and this week it’s making new all-time higs above $950. Or you might have bought Alphabet (GOOGL - Free Report) around $735 and watched it hit new all-time highs above $960 this week.
My final pick was IBM, which had a decent run from $153 up to nearly $183 in February of 2017, but has now fallen all the way back. More on IBM coming up and why you don't count them out.
Check out the full podcast to hear parts 2 and 3 of this discussion where I describe IBM’s partnership with NVIDIA (NVDA - Free Report) in the “massively parallel architectures” that create AI.
I also talk about Tesla (TSLA - Free Report) founder Elon Musk’s latest technology experiment, Neuralink, which aims to make implants for the human brain that can wirelessly interface with a computer.
In the final section, I recommend 3 must-read books on evolution and a new book by Yuval Noah Harari, Homo Deus, that ties together our wild future on the frontiers of machines vs. humans.
Disclosure: I own NVDA shares for the Zacks TAZR Trader service.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs the new Healthcare Innovators portfolio.