How AI-Driven Layoffs Could Spark Social Unrest, Warns Oaktree Capital Co-CEO

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As an analyst with over two decades of experience in the investment industry, I find myself constantly intrigued by the ever-evolving landscape of technology and its impact on our economy. The recent surge in AI investments, as discussed by Armen Panossian during his interview with Sonali Basak, has certainly piqued my interest.

On August 12, Armen Panossian of Oaktree Capital Management expressed his views on artificial intelligence (AI) during a conversation with Sonali Basak, who is a leading Wall Street reporter for Bloomberg Television.

Armen Panossian serves as a joint CEO and heads the Performing Credit division at Oaktree Capital Management. He plays a pivotal role in supervising Oaktree’s investment teams and ensuring the company’s performance. Additionally, he manages the firm’s liquid and private credit strategies as part of his duties. Within Oaktree’s Global Private Debt and Global Credit strategies, Panossian also functions as a portfolio manager. He has been with Oaktree since 2007, starting in the Global Opportunities group before assuming co-portfolio management responsibilities for the U.S. Senior Loans team in 2014. During this time, he also spearheaded the growth of Oaktree’s CLO (Collateralized Loan Obligation) business. In 2019, Panossian was promoted to lead all performing credit activities at the firm. Prior to joining Oaktree, he worked on distressed debt strategies at Pequot Capital Management.

In today’s Bloomberg TV interview, Panossian expresses his belief that Artificial Intelligence (AI) could yield significant financial benefits. This is due to potential revenue boosts and cost savings, making AI an enticing prospect for investors. The buzz about AI is noticeable, with the market showing strong support for AI-focused businesses. Notably, companies such as NVIDIA, which contributes significantly to AI infrastructure, have experienced a dramatic increase in their stock value, symbolizing the shared enthusiasm of investors towards AI.

Despite the excitement surrounding AI, it’s important to note that it comes with its own set of risks. Panossian likens the AI boom to the internet frenzy of the late 1990s, where overestimated revenue growth led to inflated valuations and a market correction. The benefits of AI may not materialize as quickly as anticipated, which could result in a sudden adjustment of valuations, causing substantial losses for those who have heavily invested.

Apart from the financial sector, Panossian highlights a significant issue that demands attention: the societal implications of AI. He argues that rapid advancements in AI technology could render numerous traditional occupations obsolete. For example, the emergence of autonomous systems might lead to job losses in industries like retail and transportation, where roles such as cashiers and drivers are potentially at risk.

The real challenge, Panossian warns, lies in the retraining of these displaced workers. He warns that without proactive measures to equip people with new skills suited for an AI-driven economy, society could face severe social unrest. He goes on to say that the displacement of jobs on a massive scale could deepen the divide between the wealthy and those living paycheck to paycheck, exacerbating existing social inequalities.

AI’s influence transcends just economic and societal changes; it also carries substantial geopolitical consequences. As Panossian notes, AI knows no borders, and countries, even those hostile towards the United States, can exploit AI to develop technologies and abilities that may pose strategic risks. The quest for AI dominance could therefore significantly shape global power relationships, impacting factors ranging from economic rivalry to national security matters.

As per Panossian’s perspective, the investor enthusiasm towards Artificial Intelligence (AI) is akin to being under the influence. He highlights the massive influx of investments into infrastructure related to AI as astounding, with vast amounts being dedicated to constructing data centers, acquiring semiconductors, and setting up the digital foundation necessary for AI technologies. He suggests that this excitement has caused investors to concentrate more on the potential benefits than the potential risks.

Panossian points out NVIDIA as a case study, whose market value skyrocketed due to predictions of future growth. He notes that early investors in AI have reaped substantial profits, stimulating additional investment and causing valuations to soar even higher. However, he expresses concern that the lure of potential earnings may overshadow the inherent risks, creating an atmosphere where caution is overlooked in the quest for profit.

Even though there’s widespread excitement, Panossian suggests a more cautious stance when it comes to investing in AI. At Oaktree Capital Management, the plan is to choose wisely about where and how to invest in the AI field. Although they participate in the AI growth journey, they make a deliberate effort to limit their involvement and prevent excessive investment in AI.

As a researcher studying past technological advancements like the rise of fiber optics, I cannot stress enough the significance of maintaining a well-balanced perspective. If we encounter a market downturn or a reevaluation of AI’s worth, Oaktree Capital Management is strategically prepared to seize distressed investment opportunities. By leveraging our expertise in opportunistic investing, we aim to capitalize on these situations and drive growth in the ever-evolving AI landscape.

Moving forward, Panossian emphasizes the immediate necessity of dealing with the potential societal threats brought about by artificial intelligence. In his view, if we don’t educate and prepare workers for the new job market post-AI, the outcomes could be catastrophic. He warns that the widening gap between the wealthy and the less fortunate might result in widespread social upheaval or a more extensive need for a safety net to aid those affected by the AI transformation.

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2024-08-12 17:17