Article by Zhao Ying
Source: Wall Street Journal
Artificial intelligence is making the world more unpredictable than ever before, and most investors have yet to realize the full depth of this impact.
Howard Marks, co-founder of Oaktree Capital Management, said on Tuesday at a New York capital markets industry conference that AI's impact is inseparable from its unpredictability, and investors can no longer rely solely on predictions about future trends to formulate their strategies.
He cited Block, Jack Dorsey’s company, which announced last month the layoff of 4,000 employees—about half of its workforce—as evidence of the market’s severe underestimation of AI’s impact.
Marks believes that, in the face of fundamental business model risks posed by AI, owning equity in AI-related companies is preferable to providing them with debt financing, and investors should participate as owners rather than fixed-income investors.
The unpredictability of AI: both a strength and a risk
Marks told Bloomberg TV anchor Lisa Abramowicz that the same power that elevates the importance of AI also imbues it with elusive uncertainty—regarding what it will do, what it won’t do, and to what extent it will replace human jobs.
Marks supports his viewpoint with specific data. He mentions that Block, founded by Jack Dorsey, announced last month that it was laying off approximately 4,000 employees—about half of its total workforce—and asks, “How many people worldwide truly understand the significance of this?”
“Most people in the investment world base their actions on their own predictions about the future,” he said, “but that’s not enough.”
Marks also noted that the rise of AI has intensified investors' concerns about insufficient transparency in private markets.
Historical patterns of technology bubbles
Marks, who has witnessed multiple boom-and-bust cycles, remains cautious about market frenzies triggered by new technologies. He notes that new things always ignite people’s imagination and are easily marketed to the public; precisely because they are new, their flaws have never had the chance to be exposed in practice.
“There has never been a steel bubble or a hamburger bubble,” he said, “but new technologies or financial innovations lead people to buy based solely on a promise, without understanding the downside risks.”
AI Investment Allocation Logic: Equity Outperforms Debt
In terms of specific investment strategies, Marks clearly expressed a preference for equity investments. He believes that if investors are bearing the fundamental business model risks of AI companies, they should be rewarded as owners, not as fixed-income investors.
“If you’re taking on the risks of a basic business model, shouldn’t you be rewarded by becoming an owner rather than a fixed-income investor?” he said.