Howard Marks Says AI Is ‘Terrifying’ for Jobs
(Bloomberg) — Artificial intelligence has created a “terrifying” outlook for employment, Oaktree Capital Management LP co-founder Howard Marks cautioned, and an assumed productivity boom fails to consider how many people will be able to afford the additional goods produced.
“I’m concerned that a small number of highly educated multi billionaires living on the coasts will be viewed as having created technology that puts millions out of work,” Marks wrote in a blog on Tuesday. “This promises even more social and political division than we have now, making the world ripe for populist demagoguery.”
Some firms are having to take on “aggressive” amounts of debt because AI is a “winner-take-all arms race” and for companies like Microsoft Corp., Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Oracle Corp. “it’s reasonable to think one of the reasons they’re spending vast sums is to make it hard for lesser firms to keep up,” Marks said.
Wall Street has been preparing to lend vast amounts of money to fund the roll-out of AI investments that could take years to reward its backers. More than $161 billion of data-center related US credit deals have been struck this year so far, according to data compiled by Bloomberg News. As a result, lenders have been looking to protect themselves from any bubble that may emerge if the technology ultimately underwhelms.
Investors are behaving in a “speculative” manner even though the demand growth for AI technology is “totally unpredictable,” Marks said, pointing out that Meta and Alphabet’s 30-year bonds to finance their AI investments pay about 100 basis points more than Treasuries of the same maturity.
“Is it prudent to accept 30 years of technological uncertainty to make a fixed-income investment that yields little more than riskless debt?” he questioned. “And will the investments funded with debt – in chips and data centers – maintain their level of productivity long enough for these 30-year obligations to be repaid?”
It’s too hard at this stage to say whether the current enthusiasm for the technology is excessive and it will take years to know whether it was irrational or not, Marks said. On the positive side, AI could make up for the millions of baby boomers who will retire through 2035.
Still, “the AI revolution is different from the technological revolutions that preceded it in ways that are both wonderful and worrisome,” Marks said. “It feels to me like a genie has been released from a bottle, and it isn’t going back in.”
–With assistance from Michael Gambale.
(Corrects reference in the third paragraph to firms in relation to the aggressive amount of debt)
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