Want Job Insurance? Own Tech
Many investors approach the tech sector looking for a quick score. We have nothing against that. In fact, we provide plenty of those quick hits in our Breakthrough Tech Profits service.
But another good way to think of tech investments is as an insurance policy. Not only will tech continue to be among the top performing sectors, but if you lose your job to technology, you’ll be insured for some of that lost income by over-weighting tech in your portfolio.
And don’t think you’re safe if you’re a white collar worker. Tech is coming after many white collar jobs, too.
Trade Versus Tech
In the recent presidential election the blame for U.S. job loss was mainly put on international trade, when the main culprit is technology.
I have an old friend who works in a local plant making transformers, and I met him for drinks last week. He’s still riding high after Donald Trump’s electoral victory, mainly because he was afraid another Democrat would kill his job. Making transformers is environmentally dirty work, which is why much of it has been shipped overseas where environmental regulations aren’t as strict. To environmental regulations, throw in free trade agreements such as the Trans-Pacific Partnership, and he was sure Hillary Clinton would be the end of his industry.
My general policy is to not discuss politics in seedy bars after a few drinks, so I sidestepped that subject and asked him about automation in his plant. His facility mostly does custom work because there isn’t enough similarity among transformers to totally automate the process. The plant did once employ a few dozen machinists and tool-and-die makers who have lost their jobs thanks to developments such as AutoCAD and 3D printing. Jobs that once took those skilled tradesmen a few days to do can now be done in a few hours with those tools.
Free trade puts people out of work, no doubt. But its net effect is highly debated. Some scholars say the North American Free Trade Agreement has sent nearly 700,000 American jobs to Mexico, while others say more jobs have been created than lost. Of course, to those who lost their jobs and now are unemployed or work for a lower wage, that is cold comfort.
Pinning down how many jobs are lost to technological innovation is much easier. According to the Center for Business and Economic Research at Ball State University, of the 5.6 million manufacturing jobs lost between 2000 and 2010, 85% of them were because of innovation and automation, not trade.
Given falling costs and smarter machines, more technology-related job losses are coming. A report issued by the World Economic Forum earlier this year predicted that as many as 7.1 million more jobs will be lost to technology in the world’s richest countries by 2020. That will be offset partially by the creation of 2.1 million high tech jobs, but it’s still a net loss.
White Collar Blues
The technological terror isn’t just coming for blue collar jobs. An article last year in Forbes listed these white collar jobs that tech is eroding: financial analysts and advisers; law firm associates; anesthesiologists, surgeons and diagnosticians; online marketers; and financial and sports reporters (doing rote, statistics-based stories).
I hate to throw out such a depressing statistic so close to the holidays, but it happens to be appropriate: Suicide is the second-highest cause of death for Americans between the ages of 15 and 24. Unfortunately, a recent study from Cincinnati Children’s Hospital has shown that a mental health expert’s odds of predicting suicide is “no better than chance.”
Enter the machines. The same study entered patients’ answers to a five-question survey into a machine-learning enabled algorithm that went on to predict suicidal behavior with 93% accuracy. I don’t mean to be glib about such a serious problem, but first the machines came for the tool-and-die makers, now they’re coming for the psychiatrists.
You can still make some big scores investing in technology, and they happen almost every day. But job insurance may be an even more important reason to keep technology in your portfolio, especially companies that focus on automation and artificial intelligence.
We have a number of them in our Breakthrough Tech Profits portfolio, which specializes in companies that make outsize profits using technology to disrupt their industries.