Investing in Innovation
How AI is reshaping forward-thinking companies
Ric Edelman: It's Tuesday, March 5th. On today's show, what America's corporate CEOs are saying about the future. I remember when Mitt Romney was running for president. That was back in 2012. He lost, of course, to Barack Obama. I like the fact that Mitt was a successful business leader, and he was famous for turning around the Olympics, which then was in serious financial and organizational trouble. But as good a corporate executive as Mitt Romney was, he was a lousy candidate. He said some pretty dumb things on the campaign trail that ultimately doomed him. One in particular was when he said, corporations are people. Now, he's technically right about that. Under the law, a corporation has the same rights as individuals do. Corporations can hire and fire. They can obtain trademarks and copyrights. They can sign contracts and open bank accounts. They can sue. They can do all sorts of things that you and I do. But on the campaign trail, to actually say that corporations are people, well, that was a disconnect with the American public, for sure. And it was comments like that that contributed to Mitt losing the election. What a disconnect between the stuff he said compared to the stuff he did. So, when we look at corporate CEOs, let's ignore what they say and let's look at what they are doing in their companies. Back in 2017, in my book, The Truth About Your Future, I warned you that AI and robotics were going to eliminate 40% of all the jobs that currently exist and that lifelong learning, not college degrees, was going to become vital.
Now the CEOs are showing us that this is starting to happen. PWC just surveyed 5000 CEOs from the biggest companies in the world, 105 countries. These companies generate $100 million in revenue apiece. These are big businesses, and 25% of these CEOs say they're laying off at least 5% of their workforce this year, all specifically because of advances in AI. These layoffs are underway. The biggest sectors getting job losses this year media, entertainment, banking, capital markets and insurance. The jobs that are safest from these job cuts due to generative AI or engineering, construction and the mining industry. I guess that makes sense. I don't know that ChatGPT or Alexa can pick up a shovel. This is just the beginning, though. 70% of the CEOs said that within three years they expect AI to change their fundamental business models. So, they're going to be requiring their employees to develop new skills. The PWC survey comes on the heels of a new report from the International Monetary Fund, which says that 40% of all jobs are exposed to AI. No kidding dudes, that's what I said back in 2017 when I said I was going to wipe out 40% of all jobs.
Now, six years later, the IMF is agreeing with me. And here's what's interesting about what the IMF had to say. If your job is going to change because of AI, you can actually expect your salary to rise because you'll be more valuable to your employer. But if your job is not related to technological innovation, your pay is going to go down and your job itself might disappear. So not only do you have to focus on AI if you want to keep your job, you need to rethink the very companies that you're investing in. I've been telling you for years that you have to invest in companies of the future, not of the past. And the example I've often given you is Kodak.
Kodak is one of the best-known brand names on the planet, 130,000 employees, a company 130 years old. Suddenly, in 2012, Kodak files for bankruptcy. Why? The existence of digital photography. Kodak was in the film processing business, and they couldn't use this digital tech because it was wiping out the entire platform of their business model. So in the very year Kodak goes broke, a victim of technological innovation, Instagram, a company only 18 months old with only 13 employees, was sold for $1 billion. That is disruption. That is technological innovation, and that is what we need to recognize as the world we're living in today.
So today, it's no longer enough to have in your portfolio companies that are 21st century companies, because if today's market leaders don't continue to innovate, they'll simply become the next Kodak. And the CEOs who were surveyed by the PWC study, they know it. 40% of them said that their companies will no longer be viable within just ten years, if they keep on doing what they're currently doing. These CEOs acknowledge that they have to reinvent their companies. It's great that 40% of these CEOs realize this. But my question is, what are the other 60% doing? Are they living under a rock? And is your portfolio filled with the companies of the 40% who get it, or the 60% that don't? 60% of CEOs say that generative AI will improve the quality of their products and services. 70% say that within just the next three years, generative AI will increase competition, force them to change their business models, and require new skills from their workforce. And like I said earlier, 25% of CEOs are cutting their headcount by at least 5% this year alone due to generative AI. But get this. More than half of these CEOs also say they're going to hire more people, people who know technology. So, you have your marching orders, learn how to use generative AI and talk with your financial advisor about your portfolio to make sure that your investments reflect the future, not the past, not even the present.
Thanks for listening to this podcast. You might not know that in addition to this show, I'm the guy who created Wealth Management Convergence. It's turning the traditional financial advisor conference model upside down. And if you're a financial advisor, I'm inviting you to join me. It's going to be in West Palm Beach this coming Sunday, March 10th through Tuesday, March 12th. And it's devoted to giving you the investment strategies you need today in a format unlike any other conference. No breakout sessions, no PowerPoints, only financial advisors and RIA firms can register to attend. You'll learn from some of the most successful people in this business with conversations focused on generative AI, exponential technologies, longevity, estate planning, crypto and a whole lot more. You can also sign up for free one-on-one meetings and dine-arounds. This is the conference you've been looking for to help you grow your practice. Plus, you'll get plenty of CE credits. Join me in West Palm Beach this Sunday, March 10th through Tuesday, March 12th. The discount code is WMC2024. You'll save $100. This code is exclusively for financial advisors listening to this podcast. I look forward to seeing you there. On tomorrow's show, I hate to say it, but we're going to talk about…porn.
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