Howard Marks Says AI Is ‘Terrifying’ for Jobs
(Bloomberg) — Oaktree Capital Management LP co-founder Howard Marks warned that AI is creating a “dire” outlook for employment, and a supposed productivity boom doesn’t take into account how many people can afford the additional goods produced.
“I am concerned that a small number of highly educated multi-billionaires living on the coasts are seen as having created technology that has left millions unemployed,” Marks wrote in a blog on Tuesday. “This promises greater social and political division than we have now, leaving the world ripe for populist demagoguery.”
Because AI is a “winner-take-all” arms race, some companies are forced to borrow “aggressive” amounts, and Microsoft Corp., Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Oracle Corp. For companies like these, “it’s reasonable to think that one of the reasons they’re spending large sums of money is to make it harder for smaller firms to keep up,” Marks said.
Wall Street is preparing to issue large amounts of debt to finance the implementation of artificial intelligence investments that may take years to reward backers. More than $161 billion in data center-related U.S. loan deals have been made so far this year, according to data compiled by Bloomberg News. As a result, lenders are trying to protect themselves from any bubbles that could emerge if the technology fails.
Marks said that although the increase in demand for artificial intelligence technology was “completely unpredictable”, investors acted in a “speculative” manner, and pointed out that Meta and Alphabet’s 30-year bonds to finance artificial intelligence investments paid approximately 100 basis points more than Treasury bonds with the same maturity.
“Is it wise to accept 30 years of technological uncertainty to invest in fixed income that returns little more than risk-free debt?” he asked. “So will debt-financed investments in chips and data centers maintain productivity levels long enough for these 30-year obligations to be repaid?”
Marks said it was very difficult to tell at this stage whether the current interest in the technology was excessive, and it would take years to find out whether it was unreasonable. On the positive side, it is possible for AI to compensate for the millions of baby boomers who will retire by 2035.
Still, “the AI revolution is different from the technological revolutions that came before it in both wonderful and worrying ways,” Marks said. “It seems to me like the genie has been let out of the bottle and is never coming back.”
–With help from Michael Gambale.
(Corrects reference to firms regarding aggressive debt amount in third paragraph)
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