Most of us by now have read an article, or seen a YouTube video, warning us that artificial intelligence (AI) is going to have the same impact on the global economy as the arrival of the Internet did just over 25 years ago.
Some of us are old enough to remember ‘the dot.com bubble’, but if you are not, it occurred between 1995 and 2000, and while most of us were still getting to grips with how to send an email on a Hotmail account, and tolerate the awful screeching sound that accompanied the whole process as the modem ‘dialled-up’ (if you never heard it, imagine R2-D2 from Star Wars being slowly tortured), investors were throwing money at new internet companies like there was no tomorrow.
For most of those websites, which promised to dominate the global market selling everything from pet food to holidays online, tomorrow never came, but for some, like Amazon for example, the hype was definitely appropriate. However, if you knew with absolute certainty back then that Amazon was going to be the big winner in online retail you would probably not be reading this article, you would be sitting on your private yacht in the Caribbean being fed grapes by one of your staff. Amazon was listed in June 1997 at $0.08 per share (share split adjusted), and 26 years later, it is worth around $120. So, it has increased by 1,500 times, which means that an investment of £10,000 would be worth £15m today.
It is not surprising that the same overenthusiasm is now being aimed at AI stocks, although most of us still have no idea how this new technology is going to transform our lives over the next 25 years. When we started sending those first few emails in the late-1990s we were being told that you will be able to ‘buy stuff’ on websites in the near future, but we could not foresee the rise of smartphones and iPads, streaming sites like Netflix, cryptocurrencies like Bitcoin, or the likes of Spotify, Uber, social media etc.
Entire industries were destroyed by the Internet but you can probably count on one hand the number of people that you know today that are unemployed. That is because the Internet has also created a lot of jobs. A recent MIT report estimated that 60% of workers in the US are now employed in occupations that did not exist in 1940.
So, will it be the same this time around, or will AI literally do all the work and replace the increasingly useless humans? And, just as the internet has had a massive impact on commercial real estate, from cinemas to record shops to travel agents, what will the impact be on commercial property investing this time around?
How will it transform the global economy?
In a recent survey by Capital Economics (CE), almost 80% of its clients said that AI would have a transformative effect on the global economy. But the same survey revealed uncertainties as to what this transformation will look like.