As the AI Boom Dies Down, Look for Offline Businesses as the Next Source of (Slower) Growth

Searching through past posts in this blog, I am surprised that there is one important topic that has never been mentioned across its 1,240 posts: stock trading. Having worked for more than two decades now, my savings have mostly been converted to shares in dozens of companies across the world, some of which are earning healthy returns while others have been pretty much written off as the share values approach zero. As my jobs take me across multiple countries and companies, I have no hope of relying on savings set aside in pensions, so those stock positions are, in essence, my retirement funds.

It goes without saying, then, how important it is for me (and millions of others anxious about their financial trajectory) to pick stocks that at least preserve the value of past earnings, in line with the relentless march of inflation that erodes nominal purchasing power. That importance is only made more apparent in recent months, as jubilation of our AI-enabled future turns into doubt and the uncertainty of the war in Iran introduces the kind of volatility that has not been seen, at least since the early days of COVID-19 when no one was sure whether the pandemic would end in months or decades.

The anxiety over the stock market's ups and downs is all the more pronounced this time around, given just how many newbies have entered the market. The emergence of cheap, easy-to-use trading apps has made it possible for even those with little financial literacy to jump on the shareholding bandwagon, unlike the financial wizardry required to earn a significant payoff from the previous cryptocurrency boom. These newbies, with limited savings, have jumped into borrowing through leveraged bets, sinking them into significant debt as AI stocks now show significant declines.

Seeing the headlines of those suffering significant losses reminds me of years ago, when I heard about those who bet on the Turkish lira, only to jump off buildings as the lira's value collapsed from excessive speculation, unorthodox economic policies, and unrestrained inflation. The AI supercycle has yet to end, but for those who entered the market late, and at its current peak, it would not be surprising to see a few more broken dreams and suicides. The road to striking it rich quick in legitimate ways is littered with stories of failures paid with the ultimate price.

The wise ones may be asking, "So, what's next after AI?" There is no good answer. Humanoid robots are far from widespread practical use, vertical takeoff aircraft have yet to transform urban transport, and autonomous vehicles face constant doubts about safety and emergency control. And each remains dependent on AI to some degree, leaving investors and those thinking about their future careers still more or less convinced that AI remains the way to go despite the recent downturn. But the wiser way may not be to look past AI but to see what can be done in conjunction.

A recent Economist article spoke about the perfect alignment of conditions that make the US an unprecedented environment for entrepreneurship. Sure, many of these new startups are whizzy AI-based outfits, but plenty more are nitty-gritty ones that serve demands that have existed before the word "AI" even came into existence. Ideas from cleaning out solar panels to baking cakes to, indeed, helping high school students with their college applications are certainly not nearly as lucrative as something with an explicitly AI bent, but also do not come with the anxiety of AI's ups and downs.

The time is ripe to recast our attention to these traditional industries. As tech permeates everyday life, some are craving the more hands-on, physical connections before the tech days. The rise of offline dating, digital detox through "dumb" phones, and the increased sales of childhood toys to adults (dubbed "kidaulting") also point to an increasing desire for people to spurn tech. Can that pursuit of the simple and the physical also carry into how people think about their careers and professional development? It is a question worth exploring.

And as more people explore that question, the stock market could change too. AI may not go away, but it simply cannot sustainably continue growing at the breakneck speed that it has for the past couple of years. Non-tech firms cannot scale as quickly and keep human costs as low as tech ones, but can deliver the next phase of steady, visible growth that AI can no longer carry. People would not be excited by the slowness of the growth, and it is certainly not worth taking out large loans to jump into the market for, but it is still worth looking into for the sake of future pensions.