AI is Making the World Less Predictable! Oaktree’s Marks: Impact of Artificial Intelligence Still Underestimated

Howard Marks, the legendary value investor and Co-Chairman of Oaktree Capital Management, stated on Tuesday that Artificial Intelligence (AI) is making the world more unpredictable than ever before.

 

"Most people in the investment industry base their courses of action on their judgments of what the future holds," Marks said during an interview at a capital markets industry conference in New York. "But that is no longer enough."

 

He noted that the very power that gives AI its significance also makes it unpredictable in terms of "what it will or won't do" and "to what extent it will replace human jobs." Furthermore, AI has intensified investor concerns regarding private markets and their relative lack of transparency.

Investing in AI Equities is Wiser

Marks remarked that he has lived through enough cycles to witness the rise and fall of many concepts.

 

"New things fire the imagination and are easy to sell because, being new, people haven't had the chance to see the flaws in practice," he said. "There has never been a steel bubble or a hamburger bubble in history. But with new technology or financial innovation, people buy in based on a promise without understanding the risks."

 

Marks suggested that investors might be better off buying shares in AI-related companies rather than lending them money (debt investment).

 

"If you're taking the risk of the underlying business model, shouldn't you be rewarded by being a shareholder rather than a fixed-income investor?" he added.

AI Impact is Underestimated

Marks also pointed out that the impact of AI is still being underestimated.

 

He cited the example of Jack Dorsey’s Block, which announced last month it would lay off 4,000 employees—roughly half of its total workforce.

 

"How many people in the world truly understand the significance of that move?" Marks asked.

 

While Marks stated that AI has not yet disrupted his own firm’s business model, he admitted that he has begun using AI to help draft his famous memos to clients.