OMAHA, Neb. â Warren Buffett, CEO of Berkshire Hathaway, has mixed feelings about artificial intelligence (AI).
âIt has enormous potential for good and enormous potential for harm,â Buffett said at Berkshireâs annual shareholders meeting on Saturday.
He shared a personal experience with AI that had him shook.
âFairly recently, I saw an image in front of my screen,â he said. âIt was me, and it was my voice and wearing the kind of clothes I wear. My wife or my daughter wouldn’t have been able to detect any difference. And it was delivering a message that in no way it came from me.â
He explained: âWhen you think about the potential for scamming people⊠Scamming has always been part of the American scene. If I was interested in investing in scammingâ itâs gonna be the growth industry of all time.â
Warren Buffett speaks at the 2024 Berkshire Hathaway shareholder meeting. (Source: CNBC)
Buffett drew comparisons to the emergence of nuclear weapons.
âWe let the genie out of the bottle when we developed nuclear weapons, and that genie has been doing some terrible things,â he said. âThe power of that genie scares the hell out of me. And I donât know of any way to get the genie back in the bottle. And AI is somewhat similar. Itâs part of the way out of the bottle.â
Warren Buffett and Charlie Munger bobble heads. (Source: Sam Ro)
In the context of investing, analysts have mostly spoken bullishly about AI thanks to the potential for improving productivity across many sectors. TKer has written about this narrative here, here, and here.
Asked later about how Berkshireâs own businesses could be disrupted by AI, Buffett noted the technology would affect âanything thatâs labor sensitiveâ and that for workers it could âcreate an enormous amount of leisure time.â
Greg Abel, vice chairman of Berkshireâs non-insurance businesses, added that âweâre in the early inningsâ of understanding the impact.
Buffett Has Taken This Tone Before
Buffett, arguably the most successful stock market investor in history, is well-known for his persistent bullish long-term view of the U.S. economy and stock market.
âI understand the United Statesâ rules, weaknesses, strengths,â Buffett said on Saturday. âI don’t have the same feeling generally around the world. And the lucky thing is that I don’t have to.”
But heâs no stranger to expressing caution on matters with significant downside risks â especially in regards to technology.
For example, Buffett has been vocal about his concerns about cyber attacks. Hereâs some language I shared in the March 5, 2023 issue of TKer:
âThere is, however, one clear, present and enduring danger to Berkshire against which Charlie and I are powerless. That threat to Berkshire is also the major threat our citizenry faces: a âsuccessfulâ (as defined by the aggressor) cyber, biological, nuclear or chemical attack on the United States.â –Â Buffett in 2016
“I don’t know that much about cyber, but I do think that’s the number one problem with mankind.” –Â Buffett in 2017
âCyber is uncharted territory. Itâs going to get worse, not better.â –Â Buffett in 2018
âI think cyber poses real risks to humanity.â –Â Buffett in 2019
As you can see, this dire tone from Buffett is not new.
Whatâs important is that it has never stopped him from being bullish on stocks for the long run.
Zooming Out
Emerging technologies like AI come with risk, as they have the potential to scale up bad behavior in the same ways theyâll scale up good behavior.
Broadly speaking, you can never be certain about how risky anything is. And even worse, there are limits to how much you can hedge a risk before you eliminate the potential for a reasonable return.
Unfortunately, this is just the nature of investing in stocks. And it speaks to why returns in the stock market are relatively high â investors demand a high premium for the uncertainty tied to taking on the risk.
âNothingâs sure tomorrow,â Buffett said at last yearâs meeting. âNothingâs sure next year. Nothing is ever sure in markets or in business forecasts or anything else.â
We can only hope that history repeats, and the good outcomes far outweigh the bad outcomes â as they always have.
A version of this post was originally published on Tker.co.