Site icon Of Dollars And Data

How to Invest for a Post-AGI World

The year is 2030. OpenAI has just released its o7 model which they claim is smarter than any human on Earth. Artificial General Intelligence (AGI) has been achieved and we have just entered the world of Artificial Super Intelligence (ASI). There is no intellectual task that can be done by a human that can’t be done even better by an advanced LLM. A market rally ensues.

***

If I had shown you this passage a few decades ago, it would have read like something out of a sci-fi novel. But today, there are many who believe that such a future is on the near horizon. Of course, I am not qualified to discuss whether AGI/ASI will ever come to pass (or when). But, let’s assume they are right and that we are only 5 years away from such an event.

In this scenario, what will it mean for humans? Some believe that the creation of AGI will reduce the need for humans and human labor, making many of us unemployable. If this ends up being true and capital ends up crowding out labor altogether, how can we prepare ourselves for this coming economic upheaval? How do we invest for a post-AGI world?

In this post, I will propose three possible solutions to this problem:

  1. Just Own the Damn Robots (Part 2)
  2. Hedge Your Labor, Not Your Portfolio
  3. Stay the Course (and Paddle Faster)

Let’s look at each in turn.

Just Own the Damn Robots (Part 2)

Back in 2017 Josh Brown wrote a piece called “Just own the damn robots” that reads like it was written today. In it he argued that the solution to a technologically-dominated future was to “just own the damn robots.” In other words, invest in the companies that are trying to replace you with software and machinery.

If you had taken this advice back in 2017, you would’ve done quite well for yourself over the next 7 years. And it’s quite possible that “just own the damn robots” is the right choice today as well.

But, before you go all-in on Nvidia or the Magnificent 7, consider the fact that this “solution” is already priced in. After all, why do you think these tech companies have outperformed the broader market since 2023? It’s because investors are already anticipating some sort of AGI future and are bidding up prices accordingly.

Of course, you may argue that they aren’t investing enough in these companies given your belief about the coming AI singularity, but that’s a separate issue. So if you believe that AGI is going to have us all replaced, then it wouldn’t hurt to own the damn robots.

However, I’m of the opinion that such a strategy may prove disastrous if our AGI future doesn’t turn out as planned. In the event we never get to AGI or it ends up being prohibitively expensive or a host of other things derail it, then you may lose a lot of money. As the phrase goes, “predictions are hard, especially about the future.”

Changing your allocation to be more tech heavy is just one solution to the post-AGI world. Another doesn’t involve your portfolio at all.

Hedge Your Labor, Not Your Portfolio

While the assets you own may be the perfect hedge to an AI-dominated future, what skills you decide to pursue may be even more important. Having capital will be important under AGI, but unless you are financially free, you will still need to work.

In this scenario, the ideal solution is to hedge your labor for a post-AGI world. What does this mean exactly? It means to build the skills that AI cannot so easily replace. What are these skills? Consider these:

At the end of the day, all of the skills listed above are my best guess about what could be valuable in a post-AGI world. Unfortunately, I know I will miss the mark with some of them. Predicting the future is so hard. If you had asked me five years ago whether AI would ever be able to create something that looks like art, I would’ve said no chance and I would’ve been wrong. Trying to understand how AI will integrate with our future civilization is something that we will all need to wait on.

If hedging your labor doesn’t seem like the right choice for a post-AGI world, there is a third option which may not require you to do anything at all.

Stay the Course (and Paddle Faster)

The last option to choose from in an AI-dominated future is to simply stay the course. If you own market-cap weighted index funds (like the S&P 500), then you will naturally increase your ownership of the tech giants as they get larger.

This is exactly what’s been happening for index investors over the past few years. They’ve been following a “just own the damn robots” strategy (to a lesser degree) whether they like it or not.

The thing that I support about this strategy is that it provides some allocation toward AI-facing companies without betting the farm on this single idea. Therefore, in the event that AGI doesn’t materialize as some hope, you shouldn’t see your portfolio crash as badly.

While staying the course is probably the most reasonable approach to take today, I can see why some might think it’s not enough. If you feel this way, then do what many in the AI community are doing now—work harder and acquire as many assets as you can before the advent of AGI.

This is a form of “stay the course” on overdrive that is also likely to provide the best risk-adjusted path forward. In other words, instead of changing directions, stay the course and paddle faster.

No matter what the future holds, it’s hard for me to argue against this strategy. I’m not one to promote hustle porn and working 24/7, but working a little more before a possible AGI future seems like a good bet. If you end up working more and we don’t hit AGI, no big deal. But, if we do get there, then you’ll be grateful you built a slightly larger financial buffer.

Whatever you decide to do, I wouldn’t worry about it because we have more time than we think.

We Have More Time Than We Think

While I don’t know a ton about AGI/ASI, the economist in me tells me that we have more time than we think. Here are a few reasons why:

Don’t just take my word for it though, Sam Altman, OpenAI’s CEO, tweeted the following just a few weeks ago:

twitter hype is out of control again.

we are not gonna deploy AGI next month, nor have we built it.

we have some very cool stuff for you but pls chill and cut your expectations 100x!

If Altman is directionally right on AGI progress, then we don’t have much to worry about…for now.

Happy investing and thank you for reading!

If you liked this post, consider signing up for my newsletter.

This is post 436. Any code I have related to this post can be found here with the same numbering: https://github.com/nmaggiulli/of-dollars-and-data


Exit mobile version