Author Topic: The AI Proof Portfolio  (Read 1512 times)

wealthviahealth

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The AI Proof Portfolio
« on: May 03, 2023, 06:10:09 AM »
All sorts of talk about what companies to invest in to ride the AI wave but I am more interested in this groups thoughts on which companies will likely weather best in the imagined “ AI is replacing everything” scenarios. I imagine most of these companies will have to have a solid AI strategy and roadmap but will also have to have core components that are more immune to automation and disruption from generative AI.

reeshau

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Re: The AI Proof Portfolio
« Reply #1 on: May 03, 2023, 06:26:08 AM »
I think that's the wrong way to think about it.  It seems like a remainder strategy--more and more, of less and less.  Generative AI is not an isolated technology; it is a pursuit of a certain set of goals, just like other technologies pursue other goals.  To seek to be "immune" to change is going to lead to a dead end; it would be like finding the best saddle manufacturer, in response to the rise of the automobile.  Or, looking at sellers of cinder blocks and paint as resistant to being Amazon-ed; yes, those products aren't really viable in ecommerce, but one isn't really a money maker on its own for anyone, and the other one isn't a new idea.  The opportunity is much less than participating in ecommerce.

I would rather be looking at companies that have economically productive ideas that utilize technological improvements.  Adobe's Sensei, for example, will generate pictures like other AI's, but tracks the sources it uses so that they can be licensed for commercial use.  That's exactly the kind of incremental, but important, change that business can bring in reflecting on "a great idea."

ATtiny85

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Re: The AI Proof Portfolio
« Reply #2 on: May 03, 2023, 06:34:55 AM »
There always seems to be a negative angle to these discussions. Companies have come a long way while being run with "Real Stupidity" so it's not clear that being run with AI is somehow worse. There is a long list of major disruptors across almost all industries over just my small 30 year investing career. And even larger ones before that. In the end, there will still be a need for "things" to make the human world (the only thing I care about in the end) go. If AI decimates some sector, so be it.

I will maintain my staunch position of Total Stock Index. Maybe in 30 years the top holdings will look as different as it would have 30 years ago. I'll take whatever it gives.

Timing the market is hard. Stock picking is hard. But both of those are simple compared to predicting technology. It's fun to discuss, but trying to pick a company that will flourish is not going to be any easier than picking Micro-Soft in 75 and tracking them for a decade until the IPO. Take some shots if you want, might get lucky.

ChpBstrd

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Re: The AI Proof Portfolio
« Reply #3 on: May 03, 2023, 09:07:27 AM »
Real estate seems AI-proof. No matter how smart AI gets, the construction of a building still requires human hands. Natural resource extraction seems to be in a similar spot. It takes more than a computer to run an oil rig. Now might not be the time to enter either area, but those would be my long-term bets.

The case for AI disrupting the non-physical trades goes something like this: AI eliminates most white-collar professions and increases the supply of construction or resource extraction labor. The surplus of blue collar labor leads to a building boom and natural resources extraction boom as these things get relatively cheaper. Of course, we're out on a limb talking about second-order effects here.

You could also focus on the areas most likely to be disrupted instead of the inverse. These are companies that mainly produce information or decisions, and will likely face AI startups to applications as competitors. You could short these areas specifically to hedge your diversified portfolio while making a bet on industrial decline.
 
-Businesses whose product is written or graphical materials, including analysts, marketers, and programmers.
-Physicians and pharmaceutical researchers
-News and entertainment
-Drivers, pilots, and captains
-Counselors, financial advisors, and consultants
-Porn

Of course, while these professions might shrink, the companies employing such people might do fine by replacing most of their employees with an AI subscription. Even in that case, the AI subscription service might capture most industry profits as the companies' reliance on suppliers increases.

Recommended reading: Info about "Porter's Five Forces" and Clayton Christiansen's "The Innovator's Dilemma".

sixwings

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Re: The AI Proof Portfolio
« Reply #4 on: May 03, 2023, 09:33:50 AM »
AI isn't going to eliminate white collar companies, it's going to eliminate many of the employees and as a result those companies will be more profitable. I'm not going to try to pick the winners and losers here, it's way too foundational, new and disruptive. Instead I'm going to go all in on total stock indexes, probably increase my S&P500 stake, and my tech index stake, and let the chips fall where they may. The entire stock market could potentially explode as companies become more profitable.

Real estate is IMO a losing bet, it is not well positioned to take immediate advantage of the efficiencies and value of the AI boom.

We'll see I guess.
« Last Edit: May 03, 2023, 09:38:20 AM by sixwings »

Scandium

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Re: The AI Proof Portfolio
« Reply #5 on: May 03, 2023, 12:26:24 PM »
"AI everything" is the flying cars of our age. So far all it can do is feed you blog posts and wikipedia entry to questions, not really worrying.

dividendman

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Re: The AI Proof Portfolio
« Reply #6 on: May 03, 2023, 03:26:07 PM »
"AI everything" is the flying cars of our age. So far all it can do is feed you blog posts and wikipedia entry to questions, not really worrying.

Cold fusion is coming, it will provide cheap power for everything! Just wait!
           - Some investors and scientists, 1980
« Last Edit: May 03, 2023, 03:28:23 PM by dividendman »

Scandium

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Re: The AI Proof Portfolio
« Reply #7 on: May 03, 2023, 04:23:23 PM »
"AI everything" is the flying cars of our age. So far all it can do is feed you blog posts and wikipedia entry to questions, not really worrying.

Cold fusion is coming, it will provide cheap power for everything! Just wait!
           - Some investors and scientists, 1980
Cold fusion is just 10 years away!
... And has been for at least 40years. Maybe AI can solve cold fusion.
Any day now will have quantum computer, AI driven, cold fusion powered flying cars.. Just liiiitle bit longer

sixwings

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Re: The AI Proof Portfolio
« Reply #8 on: May 05, 2023, 09:20:59 AM »
"AI everything" is the flying cars of our age. So far all it can do is feed you blog posts and wikipedia entry to questions, not really worrying.

Ya this is a good point. Also if it does actually come the company that built will get bought by one of the big cap tech companies like Apple or Microsoft for a trillion dollars and power will be completely consolidated into a small group of very large companies with the resources to buy the company or develop it themselves.

ChpBstrd

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Re: The AI Proof Portfolio
« Reply #9 on: May 05, 2023, 11:21:38 AM »
IDK. All this talk about unobtainium and flying cars sounds a lot like what people might have said about Microsoft in 1990. Back then, lots of people looked at computers and decided they were marginally useful in only narrowly contrived business situations or for entertaining children.

Well, yes, they were marginally useful in 1990. At that time, accounting departments were trying to use computers to track receipts and finding themselves running out of storage space because the computer only had a 20 megabyte hard disk, and needed somebody to spend $500 to put in another 20MB so they could store 2000 more receipts! And back then everything was eventually printed on paper anyway, so you basically had a better typewriter with a backspace feature that cost a fortune and didn't do much else.

At that time even the most wild-eyed futurist was underestimating the economic upheaval that was coming, and suffering from a failure to imagine what the next decade of development would bring. Nobody then could have known that thousands of successive manufacturing improvements would bring processor speeds over a gigahertz within ten years, or that the cost of memory and storage was going to plummet for two and a half decades. Similarly, few 1990 people could have envisioned business applications made up of networked computers like TurboTax, PayPal, Ebay, Amazon, or Salesforce. Back then file sharing was something you did with a floppy disk, which was no more convenient than a stack of papers.

With AI, we already have sufficiently powerful hardware. Now it's a matter of being creative enough in programming to get around a handful of fundamental limitations that reflect differences between computer processing and biological neural networks. In other words, it's more of an advancement in the art and culture of software design than the overcoming of hard physical limitations with the size of transistors, hard disk sectors, or volatile memory banks. It would seem like these software design characteristics could be easier to resolve than the engineering challenges of fitting more data onto a magnetized spinning metal plate. Software has already advanced far beyond what was imaginable in the past, even though it still uses the design paradigms of the past.

Moreover, at some level the AI can be used to design better AIs, which parallels the introduction of computers to design better computer components in the 1990s.

By 1990, a whole generation of people had been exposed to sci-fi concepts of verbal robots with consciousness. What they were seeing instead was the better typewriter that cost a fortune and had a steep learning curve. Their disappointment was as palatable as their disappointment with the 1960s predictions of flying cars and moon vacations. Yet it would prove to be wrong to lump every sci-fi plotline into the same "it'll never happen" cynicism. Computers performing tons of our work for us happened. An economic transformation and new industrial revolution happened. Supercomputers that could fit into your pocket happened, and then they became verbal assistants who could tell you the weather, tell a joke, explain a concept, or give directions.

Maybe AI is happening too.