Sunday, 3 March 2024

Business News

AI’s winners and losers have a historical precedent: The canal boom of the 18th century

AI's winners and losers have a historical precedent: The canal boom of the 18th century

With Wall Street lauding artificial intelligence as a driver of the “fourth industrial revolution,” and pushing investors to take advantage of the “gold rush” as soon as possible, there’s been a veritable hype cycle for AI-linked tech stocks in recent years. AI leaders like Microsoft and Nvidia are soaring amid the enthusiasm, and earnings boost, but some experts still fear that the AI hype is overblown, if not an outright bubble

With all this in mind, investors are surely wondering: Just how long can AI stocks’ run last?

To answer that question, Peter Oppenheimer, Goldman Sachs’ chief global equity strategist and head of macro research in Europe, looks to history, which offers plenty of lessons on how past technological advancements have helped, or tricked, investors. 

Oppenheimer spoke with Fortune about his new book, Any Happy Returns, which details the rise of a number of groundbreaking technologies, and how investors have navigated the upheaval they’ve created. The discussion even included one under-the-radar, and somewhat unexpected, technological marvel: canals.

Now largely forgotten, canals revolutionized transportation, allowing for quick transport of goods to ports and creating tremendous profits to boot—at least initially.

The first canals in the U.K. were built in the mid-1700s to ferry heavy cargo, such as coal and iron ore, as well as fresh produce around the country. The new infrastructure shortened shipping times and its popularity allowed investors who financed canals to make strong returns. Their success drew in crowds of new investors, and by the 1790s, a bubble developed in canal stocks on the London Stock Exchange. As is typically the case, that bubble eventually burst, and canal stocks turned out to be a bad investment for many. But the canals themselves remained, helping to drive industrial output and productivity growth for years to come. 

This rise and decline has a parallel in today’s AI boom, with two key lessons for investors.

Lesson 1: Networking effects take time—but maybe less time with AI

First, while canals were a revolution that enabled heavy cargo to be transported faster and more affordably than the horses and carts before them, their impact wasn’t felt right away. “Innovation that spurs change typically takes quite a long time to fully impact the real economy and boost productivity,” Oppenheimer said, arguing “networking effects” need to work their magic…

Click Here to Read the Full Original Article at Fortune | FORTUNE…