Artificial Intelligence (AI) has already changed how we run our own business in a very short space of time. Based on what we’ve seen in our own business the past year, we expect to see job losses in office-based (white-collar) industries over the next 12 to 24 months. While we don't know the exact scale—whether it's 20% or 80% of workers—the risk is large enough that it is now the biggest factor shaping our investment strategy. If major job losses happen, it will trigger a domino effect across society and the economy.

Here is how we see it potentially playing out:

1. The Shock to Personal Spending. When whiite collar workers lose their jobs, they lose their income.

First cuts: They will immediately stop spending on "extras" like dining out, buying new cars, or upgrading houses.

Second cuts: If unemployment lasts, they will start to trim essential costs like insurance, healthcare, education etc. They could start selling assets under financial duress and because companies rely on this spending to make a profit, these spending cuts could negatively impact investment returns across almost every sector.

2. Lower Wages for Those Who Keep Their Jobs: Even for people who stay employed, the outlook isn’t great. With so many unemployed professionals looking for work, companies will have the upper hand. People will be willing to accept lower pay just to get a job, which means smaller salary increases across the board. This leaves everyone with less money to spend and invest.

3 .The Elimination of Entry-Level Roles: Young people entering the workforce will face a steep uphill battle. Because AI can handle about 80% of the basic, repetitive tasks usually given to rookies, entry-level jobs will start to vanish. The few graduates who do find work will likely have to accept much lower starting salaries.

4. Financial Crisis for Governments. Fewer people working means fewer people paying income tax. This leaves governments with less money to fund public services like healthcare, infrastructure, and social grants. To fix this, governments will be forced to choose between three difficult options:

Cut public services and spending: This would likely lead to massive public protests as benefits get cut and will most likely result in the ruling party losing the next election.

Borrow more money: Taking on more debt will increase the government's interest payments and could potentially make the country look financially unstable.

Raise taxes: In most places, taxes are already so high that raising them further could backfire, causing the economy to shrink even more.

5. Why the "Age of Abundance" is Unlikely. We disagree with tech figures like the brilliant Elon Musk, who suggest that AI will create an era where everything is incredibly cheap, big tech companies fund a "universal basic income grant" for everyone, and nobody needs to save for retirement. We believe this view is overly optimistic and unrealistic.

Final thoughts : We are still at the very beginning of the AI revolution, and none of these outcomes are certain.

Our best advice to investors right now is to look past the media hype and carefully consider the very real economic effects that AI could bring to their personal situation and to adjust their spending habits and investment strategies accordingly.

People will still find great ways to make money, but we think that the rules have changed and the strategies that worked for the last 20 years will most likely not work moving forward.

‍

INVEST . THRIVE . GROW

Authorised FSP 55173

Windall Bekker | Chief Investment Officer

‍