Is AI creating a Brave New World?

Authors: Ian Quigley, Head of Investment Strategy

Over the summer, I re-read Aldous Huxley’s famous novel Brave New World as part of my attempt to understand how today’s world is changing. I’ve always been drawn to this great novel as well as George Orwell’s dystopian epic 1984. Perhaps this is just my personality, and I like thought-provoking predictions of the future, or maybe it’s borne out of a profound unease and discomfort at the current pace of change.

In Huxley’s vision of the world, people are conditioned from birth to value pleasure, consumption, stability and the avoidance of pain and discomfort over individuality, freedom and autonomy. The World State maintains order by ensuring that people are content with the lives they’ve been given and have little desire to question them.

Orwell’s vision is much more oppressive and frightening, with tyranny imposed on the populace through surveillance, fear and coercion – a sadly prescient insight into the nature of totalitarian regimes.

Today in the West, part of Huxley’s vision feels all too familiar. Re-reading the book led me to question whether the current pace of technological progress is bringing elements of his world into our reality. Are we gradually becoming accustomed to a world of constant stimulation, convenience and entertainment in ways that he would recognise?

The world is changing fast and how we interact with it is changing too. Consider artificial intelligence (AI). Early evidence suggests that AI use is changing how we engage cognitively with technology, with many of us becoming addicted to short-form videos and our new AI companions. The concern isn’t that technology is imposing Huxley’s world upon us, but that we may be choosing immediate stimulation and convenience over concentration, reflection and the ability to tolerate boredom.

Nearly every parent I meet shares stories of telling their kids to turn off YouTube shorts or to ‘get off’ TikTok. Personally, I find it much harder to sit and read a book since the COVID period – my attention seems to constantly seek stimulus in a way it didn’t prior to 2020. Have I lost the ability to just ‘be’?

My use of AI has only compounded this issue – and to think, AI adoption is still only in its infancy. I’ve noticed I’m now orchestrating the work more than drafting it – setting the approach, reviewing outputs, and applying judgement. I suspect this is changing how I think, and I need to work harder on finding time to think without stimulus. 

AI’s unknown future

When we consider the pace of progress in AI models, it’s hard to understand where all of this will take us. Our use of technology is changing, our consumption patterns are changing, and our brain pathways may be changing.

I should state at this point that I’m actually optimistic about the future of AI. I think history tells us we should be positive about the benefits new technology brings, but I also believe it’s possible to be worried and optimistic at the same time.

Concerns about AI are increasingly evident in public debate today. There’s growing unease over data centre construction, for example, and a fear that AI may ‘go rogue’.  It’s striking how this is occurring at a time of increased addiction to technology.

Society is clearly wrestling with the change. We like the benefits the technology brings – providing pleasure, ease and joy, as Huxley envisaged – yet we’re very worried about what the change means for employment, inequality and mental health.

There’s now even a political movement in the U.S. trying to limit AI development. While understandable, this feels like trying to push toothpaste back into the tube. The genie is already out of the bottle, for better or worse.

The AI-model companies are in a rush to create a digital deity, and the capital is there to back them. When we consider this alongside the geopolitical strategic imperative to win the AI race, there seems very little prospect that AI progress will slow – indeed it will likely only accelerate.

Therefore, the conclusion follows that we need to learn how to adapt in this world, to recognise AI is changing how we think and possibly how we feel. It’s a truly profound shift and we don’t know how the future will evolve.

The investment perspective

Our job, of course, is to understand this evolution through an investing lens, which candidly, feels uniquely challenging today.

Whilst we have been in a bull market, this has been an exceptionally challenging environment to navigate, with wild swings across sectors as investors attempt to discount the pace of change. And outside of an economic crisis and a global pandemic, I don’t believe we’ve experienced this level of uncertainty during my career.

Many of our clients are perplexed by how markets have gone up over the past year in the face of escalating geopolitical uncertainty, tariff ‘wars’ and rising bond yields.

The main reason is that companies have continued to deliver strong profits. Much of this has been driven by the enormous investment in AI, which has created a surge in demand for the companies providing the chips, data centres and other technology needed to develop and run AI systems.

Sensible, prudent investors have learned to be wary of such cycles and their sustainability. Indeed, those who chose to avoid investing in technology or, worse, invested in companies that are now perceived to be at risk of AI disruption, may well be asking “what bull market?”

It’s very reminiscent of the technology boom of the late 1990s, and I can’t recall seeing so many sensible investors underperform the broader market as they have done over the past year. This naturally brings us to the bubble question and whether this is all about to come tumbling down.

Yet when we observe what’s happening, when we see the progress AI models are making, when we see the adoption of the models today and when we look at the valuations for the leading AI stocks, it doesn’t look like a bubble.

The hard part, though, is to try and think through how this evolves. From a valuation perspective, we believe the market isn’t in a bubble, yet this is based on earnings that have been supercharged by AI investment. 

It therefore follows that to hold a positive view today, one must have a positive view on continued AI investment, continued AI-model improvement, continued AI adoption by consumers and companies, and a resultant productivity boom.

I didn’t say it would be easy.

Right now, the evidence supports a positive thesis, but this can change and it’s important to recognise the limit of the insight we can have in this Brave New World.

Our approach is to stay away from prediction and to watch out for market narratives that go too far. We’re attempting to remain grounded and to speak to industry experts and investors that are investing behind the technology. We also carefully read the insights from the leading technology industrialists to understand how they envisage the world changing.

We need to stay true to our investment principles and our core objective to protect and grow our clients’ capital. If this means we don’t capture all the upside in a boom, that’s fine, we don’t think it’s our job to do so. 

It’s not easy being a conservative investor in this market – frankly it’s uncomfortable. Yet we recognise the world is changing and the discipline of doing the thinking ourselves matters more, not less, even if it gets easier to avoid it.

It may be a Brave New World, but we shouldn’t forget the lessons of the boring old one.

If you’d like to discuss any of the themes in this article, please reach out to your wealth manager.

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About the author

Ian Quigley

Head of Investment Strategy

Ian is Head of Investment Strategy for RBC Brewin Dolphin Ireland. Ian is a member of RBC Brewin Dolphin Ireland’s Executive Committee and sits on RBC Brewin Dolphin’s Investment Committee.

Ian has a First Class Degree in Economics from Trinity College and a Master’s in Finance from the Smurfit Business School. Ian has worked in Wealth Management since 2004, having previously worked for Investec Wealth & Investment and NCB. Ian has led the Investment Strategy team for over a decade and believes strongly in supporting the collaborative investment culture we have in the firm.

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