AI Agents & Humanoids

AI Agents & Humanoids

The pace of AI Agent and humanoid advancement has accelerated to the point where human worker replacement can now be based simply on a payback cycle.  Many companies are activity "augmenting" their workforces with both AI Agents and humanoids. They are achieving sub-10 week payback cycles according to Rob Garlick, a tech analyst with decades of spotting definitive tech inflection points.

Stacked microprocessors, 3D printing, and battery innovations have all led to AI Agent and humanoid solutions. At this point, both AI Agents and humanoids can handle mundane tasks for hours, but given the exponential growth rate in development, increasingly more complex tasks are right around the corner.

If we look at the current workspace and ask "where are there shortages?" and "what is the remedy?" AI Agents and humanoids are increasingly the answer to both questions...humanoids can do many warehouse functions now, with increasing ability to assemble items. In short order, assembly should lead to construction / destruction activities like shoveling snow, mowing lawns, planting trees, harvesting crops, and building homes for example. AI Agents can already act as full travel agents, salesman, and diagnostic techs. Humanoids are coming online slower...albeit with greater potential impact for physical work.

Obviously there is a form/function relationship that doesn't necessarily dictate that all humanoids strictly resemble mirror images of humans...in fact, task specific robots currently performing niche duties most likely will retain their shapes, but have the added advantage of complex data storage, retrieval, and implementation functionality (think da Vinci surgical robots.)

It is hard to believe humanoid workers will help human workers for long before replacing them though, similar to how many Americans were forced to train their replacements in manufacturing offshoring. With labor costs accounting for the highest cost for most corporations, "hiring' humanoids makes smart corporate economic sense. Plus there is no need for health insurance, vacation, sick leave or the most dreadful of all...discrimination lawsuits which have morphed into a "mansion industry" (for both the attorneys and plaintiffs.)

Now companies can "hire" with assurance that their workers will show up on time, sober, fully qualified, and ready to work without complaint (essentially until they need a recharge or break.)

What industries are most suited to harnessing the power of humanoids? This author would argue that initially positions that require LESS dexterity and more DANGER are ripe for replacement. Along those lines, the global agricultural industry seems ideal for disruption.

Concurrent with the LESS dexterity and more DANGER filters for humanoid replacement of workers, AI should be able to successfully replace workers in positions with limited to no PHYSICAL activity like LAW, MEDICINE, and FINANCE. The one saving grace on these industries is "the human element." 

"The human element," or what Citrini Research describes as "friction with a friendly face," should provide a buffer for some (limited) time against the total replacement of a human worker by either a humanoid or AI Agent, especially if the product or service is humanistic...ie requiring human empathy, lineage, or connection to successfully deliver such services or products.

Without strong human relationships, though, the value proposition of whether an implied result is more important than a relationship will be at the forefront of the buyer, consumer, or patient. And to a lesser extent, the seller, producer or provider. How valuable is that "friction" versus getting the best price, service, or result?

Dow 100,000

Dow 100,000

Here at ILAF we are an optimistic crew, and whether you are smarting from the 2025 stock market rally or simply riding a tsunami of schadenfreude, it is poignant to consider what the future may hold.

As described in the 2025 Stock Trader's Almanac: The fifth year of almost every decade is the best in terms of stock market performance, as is the 1st year of a new presidency. If Santa Claus comes to the rescue again this year, whatever results 2025 brings might be the best of the decade. But like an old curmudgeon, we at ILAF are not satisfied with simply average returns, or even the best, we dream of stellar, euphoria-inducing returns. Read on dear investor.

Assuming several economic events break our way and AI can deliver the productivity boost it is capable of doing, ILAF predicts...wait for it...Dow 100,000 in 5 years (say Christmas of 2030.)

Dow 100,000 in 5 years assumes a 15% return per year for the next five years. As we all know, linear returns are a fallacy. Developed by the big ETFs and fund companies to convince people the stock market can be tamed and silo'd into discrete linear patterns, linear returns are the original "fake news." Day-to-day, week-to-week, and month-to-month movements CANNOT somehow be converted from a Four-dimensional marketplace into a glossy Two-dimensional marketing brochure. It don't work that way.

How it does work is daily chaos derived from fear and greed trying to maximize return while taking as little risk (allegedly, see 2007-2009) as possible to do it. That 15% annual growth rate can be had, and double the Dow to 100,000 if we can significantly improve productivity, while somehow keeping unemployment under 5%, inflation tame around 3%, and real wage growth exceeding inflation. Big "ifs," but the likely scenario to reach Dow 100,000 may not be what investors suspect.

My theory is that "this time around" AI is going to replace entire job sectors, and as robots improve their dexterity almost every industry that has a "touch" component is vulnerable. California should lead America, if not the world, again...but for all the wrong reasons. California is a great example of where the fusion of AI and robots should have an increasing immediate impact (and a lasting one at that) because of the extreme difficulty in both having a business in the state and even more dangerous having employees.

Look to where there are poor incentives to do business, and there is where AI and robotics will flourish. Keep an eye on places with a heavy labor union presence. Onerous taxes. And lots of lawyers. AI and robot adoption will help transform heavily regulated industries with high plaintiff-cost to productivity darlings. Coastal America looks ripe for massive productivity surges, and given their existing high population densities the Al and robot utility spikes will translate directly to the bottom line of corporations, and possibly even local, state, and federal government.

In the next five years it will be more important than ever to be an OWNER of AI and robotic assets, which for many of us that means owning shares of companies immersed in the sectors. As an owner you should be able to ride the wave of increasing profits, increasing dividends, and sector share ownership. Woe to those who do not own a piece of the action...the downside of all this productivity increase almost assuredly will be job loss.

It is hard to believe AI and robots will INCREASE the numbers of jobs, or increase real wages. At some level (think control or ownership) they might, but for the vast population AI and robots will not be creating jobs, they will be eliminating jobs and lowering the collective standard of living...save for those who are owners of the tech.

Dow 100,000 has a good probability of happening within 5 years, but there is also a good possibility of significant societal changes to effect the stock market doubling. As usual, buy or create assets.

Barbell Society

Barbell Society

It is becoming increasingly obvious, just as AI imbedded in Google's Blogger helps predict my next words, that society has undergone some fundamental changes in just the past several years. Perhaps the biggest is the emergence of what I consider to be a "barbell society."

In the traditional sense, barbell economics means a concentration of wealth or economic activity at two ends of an economic spectrum; ie your working poor and your working rich. The Middle Class was the thick bar in the middle holding up both given its size, asset ownership, and political power. But with the rapid adoption of AI in the workforce, academia, logistics, fulfillment, food prep, etc., etc. combined with a monopolistic concentration of assets (read cash, gold, bitcoin, stocks, real estate, pensions, 401Ks, business ownership, IP assets, political power, etc.) in the hands of a single generation what has emerged is a barbell society.

This barbell society is new in the annuals of history; typically there was a pyramid type of structure where a few controlled or owned everything and the vast majority of people led lives of serfdom. This has drastically changed over the past two thousand years via successive revolutions. Up until recently in fact, almost every successive generation looked forward to a better standard of living than their parents. That is no longer the case, as "The American Dream" is poised to succumb to a barbell society.

The question that arises now with the arrival of AI in society is where on the barbell is AI? I propose that it is actually the left "BELL" increasingly responsible for more work utility (task importance times volume.) The left BELL is growing insanely fast, replacing mundane, dangerous, and increasingly knowledge-based tasks, jobs, and marketing/sales. The left BELL needs no sleep, no comp, no medical insurance, files no lawsuits, and works for the cost of its coding and electricity. The left Bell grows stronger by the second.

The BAR is what once was the working poor and middle class which have essentially are doing less task importance times volume work, but there are much more of them. Society today resembles more of hockey stick lying on the ice with five feet of it nearly flat and the last foot shooting up.

Mathematically the vast majority of Americans could not pay for health insurance without subsidies or employer contributions. Most Americans do not own their own homes. Most Americans could not round up $400 in an emergency. Simply put, most Americans are poor not middle class. 

In terms of asset concentration, the BAR represents the working poor and middle class with some tinge of upper middle class. Yes, all of these segments have varying degrees of ready cash, bitcoin, stocks, real estate, and perhaps political power but they are fragmented and hence the BAR appearance, flat and linear. The right BELL however is a completely different story.

The right BELL (and make no mistake, this does not imply a singular political party, both Democrats and Republicans transcend into the right Bell) not only controls vast swaths of assets, but also has managed to create wide moats to entry (think Prop 13 in California.) We are seeing the rise of socialism because of this very development. When the odds seemed stacked (and they are), younger generations embrace forceful redistribution of assets.

Consider: Baby Boomers own over 54% of stocks. Likewise with real estate. Small businesses. Obviously nearly 100% of Social Security cash flow. And political power? Well there has never been a Gen X or Millennial President. Average age of U.S. Senator? 65. That used to be the mandatory retirement age! As the poster child of his generation, Warren Buffett is finally retiring (sort of) at age 95 at the end of this year.

Modern medicine, healthy living habits, and unwillingness to "pass the torch" has led to some unusual societal developments...combine this with the rise of AI and what we see is a true barbell society. Think about this: Over 33% of someone's LIFETIME medical costs occur in the last 5 years of their lives. There are approximately 75 million Baby Boomers in the United States. The average Baby Boomer is 68 years old with a life expectancy increasing daily. With miracle drugs like GLPs many in this generation have a good chance of living into their 90s. "Centurion" is one of the fastest going demographics.

From a societal standpoint, it will become increasingly difficult to support the largest demographic. If both the left BELL does not significantly increase economic productivity and the BAR does see real wage growth healthcare costs will drive this country bankrupt. Let me say that again, AI (the left BELL) needs to drastically increase productivity while the working poor, middle class, and upper middle class (the BAR) needs to drastically increases their real wages. 

Corruptflation

 Corruptflation

 

 

"Where there is smoke, there is fire," the old adage goes. So too is the relationship between corruption and inflation; where one finds raging inflation, inevitably one will find corruption pushing those prices up via any number of nefarious schemes.

 

As per the Bureau of Labor Statistics, consider the following facts since January 2021: Overall Inflation UP 17.2%, with Food UP 33.7%, Housing UP 18.7%, and Energy UP 32.8%. If you are a small business owner or someone working in the private sector paying full boat for your mandated healthcare insurance, that number is approaching UP 50% depending in which state your reside. It is no wonder that inflation is often referred to as "the silent killer."

When too many dollars chase to few goods or services, inflation is the natural result. Too few goods or services are often a victim of government regulation which often seeks to control outcomes by restricting free market choice. Stifling private competition is a classic tactic of big government.

Joe Biden's "Inflation Reduction Act," culpably passed by Congress, is as laughable as a Netflix comedy special. It may have done more damage to America than anything since Obamacare was forced upon us. The destruction to the economy is in the trillions, as freedom of choice has been destroyed and replaced with mandatory purchases at government mandated prices.

 

Consider how crazy things have become: If you do not purchase healthcare insurance as a legal California resident, you can be thrown in jail. Yet, if you are an illegal resident in California, you are provided with free healthcare insurance. Think about that one.

How did we get here? Tremendous power begets tremendous lobbying. And the taxpayer citizen really has no representation at an individual level anymore. The best a taxpayer citizen can hope for is perhaps membership in a labor union to shake down other taxpayers or such wealth that they cannot be ignored by their "representatives."

 

Barring those two scenarios, a taxpayer citizen is left at the whim of chance. The net result of fiscal corruption results in inflation which reduces your purchasing power. Your "fair share" has silently become whether you can afford to buy a house, start a family, or even retire in dignity.