Discussion about post white collar labour economics
These days, I can't help but keep on thinking about post white collar labour economy and it's implication on our day to day life....
We can keep on dwelling in our wishful cocoon but fact remains that world is going to be vastly different in 4-5 years vis a viz today...
In that scenario, let's us discuss some scenario :
- What will be impact on rental yields of tier 1 cities and consequently what will be overall impact on Indian real estate
- What would be impact on banking interest rates
- Where will you park your money in that scenario : Gold, Indian Equity , Big Tech Equity , FD, Real estate or Cash..
My opinion :
-
As high paying jobs for majority of people diminishes, Rental yields of tier 1 cities will come down thereby directly impacting real estate. This will result in huge NPA by those people who have taken loans for 20-30 years period. This will eventually bankrupt real estate developers thereby making real estate deflationary.
-
We will begin to witness overall a deflationary society where cost of services like Education, software, finance etc will drastically reduce. Moreover due to high NPAs, banking interest rate will reduce. Home loans for tenure of 20-30 years will drastically reduce due to increased uncertainty.
-
Gold has historically been inflation proof asset. However will it still be a good asset to invest into in a deflationary society? What are things that will still hold value then?
Don't you think current big techs will become East India Company of future indirectly controlling world's economy?
I would love to know what do grapevine folks think about the same !
Agreed on all 3. After a lot of pondering over months, my worldview is similar.
A price collapse due to massive deflation is inevitable post-AGI. When cost of cognition is cheap, everyone (mostly big tech at first) can build almost everything for a few dollars or cents. Competition might drive prices down into the drain for most useful digital products. Most digital products will not survive post-AGI too as AGI most likely can directly work with your database so screw your UI and APIs.
Everything post-AGI is speculation. Real estate is already a bubble waiting to burst and will 100% not survive any deflationary pressures. We might (lower probability) even have currency collapse - if fewer people want INR and can't do anything with it. Gold/silver might still be useful but again depends on currency dynamics. Big tech stock is definitely going to valuable as they will be the oligarchs and the British East-India or Weyland-Yutani of our time.
Assets in order according to me:
US treasury bonds, US big tech stock, gold / silver, Indian bonds, Bitcoin + Ethereum + Solana, Indian big industry stocks, Real estate.
Another important point is that in a deflationary society that's in chaos, physical assets like real estate and possibly even gold / silver are easily prone to be captured or looted from you.
Keeping in my own wallets because not your wallet, not your coins.
These questions can not be correctly answered by plebs like us as they need a deep understanding of economics and a lot of fundamental research. Just by pure guesswork, I think rental yield at tier 1 cities is going to stagnate or only increase mainly due to metro development that is ongoing. When the metro routes reach a critical point (perhaps in 5 year's time), the once inaccessible areas would become a good location and thus lead to a real-estate boom. Not to mention, indias urbanization rate is low, so there would be a lot of demand for real estate in cities.
As for interest rate, it is completely dependent on inflation and closely associated with US federal rates. For a high growth economy like ours, there is a very little chance of deflation in the next few decades.
Further, your basic premise "as high paying job for majority of people diminishes" is premature. First, the number of people employed by tech is less than 10M people in India, so they are nowhere the "majority", though they are very important for cities like Bangalore or Pune. Second, we don't know for sure if AI is going to cause that much disruption in the workforce or how governments around the world are going to react. For all we know, the governments can simply shut down AI companies if it comes down to widespread job loss or heavily tax the AI companies.
For that to happen, all governments have to be in sync with this decision. What makes you think the US government will trust China and Russia or vice-versa? Currently, AI development is very crucial for all countries in their quest to be the most powerful country.
Yes, because the alternative (i.e AI taking all the jobs) would not be in their best interests of all these countries. Xi Jingping or putin would rather have stable economy with relatively contented citizens, instead of a few individuals controlling AI, all others have no jobs with widespread discontent. That is like sitting on a tinderbox , ready to explode. That being said, China or Russia are totalitarian countries, so they may not fully have best interests of their own people.
In a democratic country like ours or US or EU, there is ZERO chance governments will let this happen
I don't agree with any of these. It's too soon to discuss this.
This is more like a tech bro in the valley which has never worked out in the rest of the world
I would like to hear your view in detail
Wanted to know your reasoning on point 1. Why would that happen? Due to AI or something else?
Why would you continue living in high cost of living tier-1 cities if you have no job? Why not move to a different tier city and control your costs? With large scale unemployment due to AI, most people will do this and let go of their costly rented places in tier 1 cities - leading to a rental yield collapse there.
Yeah that's what I wanted to know. Is the reason for predicted unemployment AI or younger folks taking over seniors
This shows how horse thinking works. As horse can see only what is in front of it and it considers the entire universe to be what is in front of it. Whereas the reality is different.
In today's economic world, there are 2 major contributors to the economy : Services (of which software is a part) and Manufacturing.
AI may impact software majorly but not manufacturing (i.e. labour intensive industry). Also, as @3xPlusOne pointed out software jobs are a fraction of overall jobs, so the overall impact would be less.
Apart from that, there would be people employed in the software field still as people will be needed to control the AI and to drive the results out of it so nature of jobs will change but jobs will still be there.
Now, coming to rental yields, few cities which are dependent on software services such as Bangalore and Pune may face some dull period but ultimately these cities have shown innovation is the key so I'm sure new AI focused jobs will mushroom in these cities thus making the low growth/stagnant rental yields a temp phenomenon.