It’s widely known by now that the U.S. and global economy are being profoundly re-shaped by software technology. Human jobs are being eaten by software, specifically Artificial Intelligence (AI) algorithms able to ingest and analyze massive volumes of data to inform and remotely control better process management decisions, more efficient outcomes. Our political leaders don’t seem up to the policy challenges of job displacement — at least not yet, but the application of Big Data software algorithms is elevating decision-making precision to a whole new level, creating efficiencies, saving costs or delivering new solutions to important problems. This will be an avatar for some of the best investment opportunities in years to come. Our private firm, Xerion Investments, is investing primarily in what I’ll call “A-AIaaS” plays — Applied Artificial Intelligence-as-a-Service.
After decades of speculation and justifiable anxiety about the social implications for humankind, the AI era is finally here. The Bank of England estimates that 48% of human workers will eventually be replaced by robotics and software automation, and ArkInvest predicts that 76 million U.S. jobs will disappear in the next two decades — almost 10 times the number of jobs created during the Obama years. And it’s more than low-skilled factory workers losing their seats to software intelligent robots. Even Wall Street is being disrupted: cloud-based software technologies, such as Blockchain, are displacing sales/trading and settlements professionals and increasing price discovery and transparency on the sell-side of the Street, while data analytics is helping quantitative trading eliminate the fundamental mis-pricing of securities, formerly the mission and exclusive domain of active mangers.