Editor's note: We may not be able to predict the future – but that doesn't mean we can't profit from it. In today's essay, originally published on July 17 in the free Health & Wealth Bulletin e-letter, our colleague Matt Weinschenk covers the unpredictable evolution of new technologies... details what the artificial-intelligence ("AI") boom could mean for investors... and discusses how to embrace uncertainty without throwing caution to the wind.
When you get a chance to make a joke at your bosses' expense, you take it.
That may not be good career advice, but I just couldn't resist.
A few years ago, our investment teams met for our annual Spring Editors' Conference. This is when all of our editors and analysts at Stansberry Research get together to discuss the outlook for the year, debate investments, and share ideas.
When it was my turn, I shared a presentation designed to poke fun at our top editors' predictions.
First, I played an audio clip of Steve Sjuggerud predicting that oil would go to $500 per barrel and bitcoin to $1 million by the end of 2019.
I played another clip, this time of Dan Ferris – our value guru – admonishing investors to "never buy a value stock."
Only after I played these recordings did I reveal the twist: All of these audio clips were faked with AI.
This was early 2020. And this AI technology was not nearly as advanced as it is today. But I found a software library that could, with some coaxing, read out text in the voice and accent of a particular speaker based on a 10-second audio sample.
The results weren't perfect, but they were passable. And we got a laugh out of hearing our experts make lousy predictions and give advice that was totally against their character.
But at the root of the talk was a warning.
I followed up by pointing out that AI "deepfakes" were coming. Fake audio. Fake video. I pointed out an actual 2019 case in which a fraudster faked a CEO's voice, called his company, and successfully got them to transfer $243,000 to the criminal's account.
And if you've been watching the news at all, you now see that my warnings have all played out. The question is what to do next...
"Generative" AI – the kind used to create text, audio, or video from various prompts – has undergone major breakthroughs. Now, it's already in everyday use by the public. According to a UBS study, ChatGPT became the fastest technology to reach 100 million monthly users, needing only two months.
I was entirely right about the potential of AI. But my innate modesty will only allow me to make such a claim when I follow it with a second truth: I got the investment implications completely wrong...
My takeaway from my 2020 study of AI was that the Internet would soon become a dumpster fire.
With the ability to create fake – but realistic – content on demand, nothing you'd see online would be trusted or relied upon.
Very soon, we'd see faked footage of politicians making offensive comments. Someone would automatically generate and post thousands of articles about a person committing some sort of crime to besmirch their character.
Eventually, the stuff people used to watch online, like incredible feats of athleticism or interesting travel locations, would result in a yawn. We'd think it was just fake.
Therefore, I expected folks would put greater value on real-world experiences... I thought everyone would shut down their fake-filled phones and go out to concerts and theaters, fill up the stadiums at sporting events, and travel to national parks.
Unfortunately for me, this conference occurred in early March 2020. The next week, the pandemic shut down all real-world experiences. All of the "experiences" stocks I favored – including Churchill Downs (CHDN), World Wrestling Entertainment (WWE), Formula One (FWONK), and Live Nation Entertainment (LYV) – tanked.
Now, many of these stocks eventually soared to new highs as the economy reopened. People are flocking to real-world experiences like concerts and travel, just as I'd predicted – but for different reasons.
I had ventured into a classic bungle. I made overly confident and broad predictions about where a revolutionary new technology would lead.
At the birth of a new technology, some immediate uses may be clear. But given the way technology, culture, and society evolve and interact, the long-term applications are nearly impossible to predict.
For instance, the earliest computers were big machines that crunched numbers. Few people had the vision to consider they'd do more than that.
To crack the German Enigma code during World War II, the British government commissioned world-class "Colossus" computers. After they cracked the code, Winston Churchill ordered them destroyed, stating that "there would never be any need for such machines once the war ended."
When smartphones were invented, they seemed exciting, too. But no one anticipated teenagers would post music videos of themselves singing – with computer-perfected faces – for millions of people. We figured that a BlackBerry (for phone calls and e-mail!) was about as "smart" as anyone really needed.
Technology grows and interacts with other things in ways that even the brightest technologist can't predict.
World-renowned science-fiction writer Arthur C. Clarke summarized this in his three laws...
Law 1: When a distinguished but elderly scientist states that something is possible, he is almost certainly right. When he states that something is impossible, he is very probably wrong.
Law 2: The only way of discovering the limits of the possible is to venture a little way past them into the impossible.
Law 3: Any sufficiently advanced technology is indistinguishable from magic.
Only words like "magic," the "impossible," and "probably wrong" can capture what happens when you look too far into the future of technology.
Now, with these new AI models unleashed upon the world, we're all grappling with just what they mean... what they will change... and, for some of us, how to invest.
This technology will change the world. We've already gotten a taste of how dramatic those changes will be. The right stocks will take off. And many of the biggest gains will come from ideas and uses that most of us can't see coming... yet.
If you're thinking of investing in AI, remember these three laws. Overconfidence is your enemy... With any new technology, your best advantage is to keep a clear head.
Editor's note: Nearly 10,000 people tuned in to our AI debate last week. If you missed it, don't worry – you can still watch a recording of our in-depth discussion. You'll find out whether the world can really trust AI... what to make of today's investment craze... and why knowing the difference between AI and machine learning could make or break your wealth in the future.
Best of all, you can still get predictions about where three of America's most popular stocks could go over the next 30 days. Check out the video here while it's still available.
Generative AI is already changing the markets. As businesses look to harness its power and potential, they'll break into the space in at least three key ways. Make sure you keep an eye on the companies making these moves... Read more here.
"The stakes in the AI arms race couldn't be higher," Sean Michael Cummings writes. As the boom continues, all eyes are on the tech companies competing for the lead. At first, one tech giant seemed like it would lag behind. But history shows we shouldn't count it out just yet... Learn more here.