Horst D. Deckert

AI’s Disruptive Effect on Traditional Assets


AI has unprecedented power to influence the prices of currency and stocks, and by connection, the prices of bonds.

Artificial Intelligence has already had an incredibly disruptive effect on many industries.

It has allowed inexperienced workers the ability to increase their productivity and outpace older workers with less tech-savvy. It has begun to help some companies make efficient decisions that they would have been blinded to if they had only considered their own industry conventions. AI is different from many other tools because it can shift the direction of industry rather than merely being a tool used towards a predetermined end. Because of its ability to make decisions objectively and create unpredictable objectives, AI will throw a great deal of uncertainty into the prices of money, stocks, and bonds. 

In many industries convention and tradition hold a powerful role in determining evaluation of past performance and also preparing future plans. If an industry as a whole has been seeing lackluster performance, the operators of various firms will not be sensitive to their own poor performance as strongly as they would in a more profitable industry. Many analysts and business owners will be numbed to their own inefficiency as they believe that their industry conventions are allowing for the fastest progress they can hope for, given their circumstances. Humans thrive on patterns and routines and both investors, consumers, and business owners are often slower to accept change than would be effective.

AI overcomes these human barriers by being able to constantly reevaluate past performance and create innovative solutions that go outside of traditional conventions. AI can recognize a fundamental shift in underlying data and effectively advise a firm to make a rapid switch into an unrelated industry. Human resistance to change can be broken down by AI’s constant monitoring of opportunity cost. Its analytical capability allows it to point people toward opportunities that would otherwise be impossible to see. The opinions of stockholders will also hold less power over a company’s actions. AI can discover and research profitable opportunities that would mortify a traditional CEO or stockholder in terms of their disruptiveness.

The disruptive and creative force of AI can greatly destabilize stock prices. If businesses act much more unpredictably to the human eye, stock prices will be a much less stable asset than they were in the past. Even their current instability will be overshadowed by a new era of constant restrategizing and analysis. Businesses will be more efficient in the long run but their present stability will be much less appealing to shareholders. Some will be self-disciplined enough to continue holding stocks but demand overall will be less constant.

AI can also greatly influence international trade by allowing poorer countries access to innovative strategies tailored to their needs and resources. Many small countries will be allowed to pivot what they export and also change their production strategies. Just as with business, past practices will be put under closer scrutiny and their inefficiencies will not be maintained. AI could bring some small countries to international financial prominence. Apparently insignificant skills can be exploited to allow new opportunities to arise. The national paradigms of the past can be rearranged more quickly as they face rapid analysis and scrutiny from a creative and analytical force.

AI’s ability to promote wise national strategy will make exchange rates unstable. As different countries make radical strategy shifts, the demand of other countries for their currency will change to an extent not seen before. While the default strategy for many countries is to maintain a constant national strategy, in particular to maintain the confidence of other countries, the powerful strategic advice of AI could outweigh the reputational effects of a more radical strategy. While a certain strategy is being tested for efficacy a currency will be valued lower, but it will bounce back to higher heights after the effects of the strategy are proven. Any currency will have great potential to be far more unstable than was possible in the past.

AI has unprecedented power to influence the prices of currency and stocks, and by connection, the prices of bonds. As demand for currency and stocks fluctuates powerfully, the demand for bonds will also adjust chaotically. The traditional safe harbors of value will face a new challenge. Short-term investing will become a much more difficult task and more reliable assets will take center stage. Gold and Silver will allow extreme safety in comparison to the constantly fluctuating other assets. While the other assets may see more long-term growth, their present volatility may make them a less appealing asset.

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