SAI BETS: Investing Post-Singularity

bc1984adam

• 7 min read
SAI BETS: Investing Post-Singularity


Scenario: A well aligned superintelligent AI model is developed. What are some different impacts it could have on the economy and markets broadly, and under each of these (say 3-4 market scenarios you are able to imagine) which are the best asset classes or strategies you can reason about?

[NOTE: A Purely AI-Generated Response Follows]

[My observations at the end.]

o3 says...

The arrival of a genuinely well-aligned super­intelligence could push the economy down several very different paths, depending on how fast the technology diffuses, how society redistributes the gains, and what policy frameworks emerge around it.

Below are four internally coherent scenarios, followed by the asset classes and portfolio styles that look most advantaged in each.

1. “Golden-Age Productivity Boom”

Superintelligence is broadly deployed across sectors, labor is augmented rather than displaced, and policy keeps demand roughly in step with a surge in supply.

Growth/price backdrop
• Real GDP growth 4-6 % annually for a decade
• Mildly positive inflation (2-3 %) as demand stays strong
• Real rates drift higher with investment demand

Favored asset classes / strategies
• Global equities, especially cyclicals and small-caps that benefit from broad growth
• Infrastructure & industrial REITs (AI-driven capex wave)
• Commodity producers (energy transition metals, rare-earths)
• Venture / late-stage private equity in “AI-enabled” verticals
• Equity factors: High-asset-turnover “Quality Growth”, short duration (earnings arrive quickly)

Hedges
• Underweight long-duration nominal bonds (rising real rates)
• Tail hedge against overheating inflation (e.g., out-of-the-money commodity calls)

2. “Deflationary Abundance”

Superintelligence pushes marginal production costs toward zero in many goods and services; supply outpaces demand and real output soars while prices fall.

Growth/price backdrop
• Real GDP >6 %, but CPI −2 % to −4 % per year
• Policy rates pinned at, or below, zero; yield curves flatten
• Wage share of income falls sharply

Favored asset classes / strategies
• Long-duration nominal government bonds (capital appreciation from falling yields)
• High-growth, intangible-asset-heavy equities (software, IP licensing) that can still post pricing power
• Gold / scarce digital store-of-value assets as monetary authorities expand balance sheets to fight deflation
• Long volatility (low macro volatility drives cheap options; any policy shock reprices)

Hedges
• Short commercial real estate and leveraged retailers (rent and debt payments sticky while revenues fall)
• Employment-linked income streams (buy disability/unemployment coverage)

3. “Winner-Take-All Concentration”

Only a handful of firms (and their investors) capture most of the superintelligence rents; labor displacement is large and redistribution weak.

Growth/price backdrop
• Real GDP moderate (2-3 %), corporate profits/GDP rise
• Extremely wide dispersion between superstar firms and the rest
• Political risk premium rises (antitrust, wealth taxes)

Favored asset classes / strategies
• Market-neutral long/short: Long megacap AI platforms, short laggard incumbents (“barbell dispersion”)
• Private equity secondary funds buying distressed non-tech assets at deep discounts
• Event-driven strategies (antitrust break-ups, forced divestitures)
• Select frontier/emerging markets that supply inputs (rare data, minerals, low-cost energy)

Hedges
• Portfolio hedges on inequality-driven social unrest (defense stocks, catastrophe bonds)
• Diversified real assets (farmland, timberland) to guard against asset-tax regimes

4. “Regulated Slow-Roll”

Society, wary of upheaval, imposes stringent guardrails: licensing, compute caps, taxation funds large safety nets. Diffusion is slow and state-directed.

Growth/price backdrop
• Real GDP 1-2 %, supply constraints keep inflation choppy
• High public spending → elevated fiscal deficits
• Real rates near zero; credit spreads widen on policy uncertainty

Favored asset classes / strategies
• Inflation-linked bonds (index-linked gilts, TIPS)
• Renewable energy & grid infrastructure (government AI-directed industrial policy)
• Defensive high-dividend equities (regulated utilities, telcos)
• Factor tilt to “Low Volatility / High ESG compliance”

Hedges
• Avoid unregulated AI pure-plays (political litigation risk)
• Maintain cash or T-bills for optionality—policy path is regime-dependent

Cross-Scenario Common Themes

Human-capital arbitrage
Invest in continuous reskilling platforms or income-share agreements—valuable whether labor is complemented (Scenario 1) or displaced (2 & 3).

Data & compute infrastructure
Even under heavy regulation, ownership of clean energy, data centers, and semiconductor supply chains shows up in every plausible outcome.

Optionality matters
The distribution of macro outcomes is fat-tailed. Cheap long-dated calls on diversified innovation indexes, paired with convex tail hedges (deep OTM puts, volatility futures), give positive skew across scenarios.

These scenarios are stylized; reality could blend features of each. Sensitivity testing portfolios against all four regimes and actively re-balancing as real-world signposts emerge is more robust than betting solely on one path.

FOLLOW-UP

Under what scenarios is broad-based Universal Basic Income (UBI) more likely to be employed and established, and in such scenarios which approaches or assets classes might win out?

[NOTE: A Purely AI-Generated Response Follows]

When Does Society Reach for UBI?

UBI becomes politically feasible when three conditions stack up:

  1. Technological labor displacement is obvious and persistent.
  2. Inequality or demand shortfalls threaten macro-stability or legitimacy.
  3. The fiscal or monetary capacity to pay a recurring transfer is available (either from large new tax bases or very low real funding costs).

Mapping those pre-conditions onto the four AI paths outlined earlier:

1. Golden-Age Productivity Boom

• Wages are complemented, not substituted, and tax revenues soar.
• Demand is healthy without transfers; targeted negative-income tax more likely than full UBI.

Likelihood of UBI: Low.

2. Deflationary Abundance

• Employment income collapses while goods get cheaper.
• Central banks face chronic below-target inflation and are willing to monetize transfers.

Likelihood of UBI: High – it works as a demand-floor and mild reflation tool.

3. Winner-Take-All Concentration

• Profits pool in a handful of firms, tax base is extremely skewed.
• Social unrest and political populism rise.

Likelihood of UBI: Medium-High – redistribution is a pressure valve, but elite resistance possible.

4. Regulated Slow-Roll

• Government is already intervening heavily; labor displacement still occurs, just more slowly.
• UBI is an administratively simple add-on to an expanded welfare state.

Likelihood of UBI: Medium – ideologically consistent, but slower revenue growth makes generous levels harder.

Asset Classes & Strategies Favored in a UBI World

The common macro signature of a UBI regime is:
• Large, steady government transfer payments
• Potentially higher fiscal deficits and a steeper policy bias toward reflation
• A floor under mass consumption, even if labor income is weak

Equity Themes

Consumer Staples & Discount Retail
Stable or rising volumes as every household receives cash.

Mass-Market Digital Services
Mobile gaming, streaming, low-ARPU telecom — directly levered to small but universal spending.

Fintech & Payment Rails
Higher transaction throughput, potential role as UBI delivery infrastructure.

Affordable Housing REITs
Transfer-backed tenant income improves rent collection; supply is inelastic.

Fixed-Income

Inflation-Linked Bonds (TIPS, ILGs)
If transfers are money-financed or outpace real supply, breakevens widen.

Sub-Sovereign / Municipal Bonds
Local revenues become less cyclical because residents receive federal cash flows.

High-Grade Long-Duration Sovereigns
In the Deflationary Abundance variant, persistent slack still drives yields lower even with UBI.

Real & Alternative Assets

Renewable Energy Infrastructure
Governments may pair UBI with “green dividend” narratives; long-dated, regulated cash flows gain.

Farmland & Timberland
Income streams indexed to food and building-material prices, hedging any inflation overshoot.

Precious Metals & Digital Scarcity Assets
Insurance against aggressive monetary financing if tax solutions stall.

Factor / Style Tilts

Quality-Income
Firms with high return on capital and reliable dividends perform well when household demand is underwritten.

Low Volatility
UBI reduces the amplitude of recessions, lowering equity vol; systematic low-vol portfolios benefit.

Long Breakeven Inflation, Curve Steepeners
Budget deficits and central-bank accommodation put upward pressure on term premia and breakevens.

Tactical Hedges

• Out-of-the-money commodity calls (protection against transfer-driven demand spikes)
• Digital privacy / cybersecurity firms (government data pipes widen the attack surface)

Putting It Together

A barbell of:

  • (1) secular beneficiaries of guaranteed household cash flow (staples, discount e-commerce, payment networks) and
  • (2) inflation or fiscal-stress hedges (linkers, farmland, gold)

... is the most robust positioning across Deflationary Abundance, Winner-Take-All, and Regulated Slow-Roll — the three paths where broad UBI is plausible.

MY OBSERVATIONS:

  • I like that it specifically mentions "Cat Bonds" (catastrophe bonds) in the "#3 Winner-Take-All Concentration" scenario.
  • Investing in a basket of cat bonds to hedge against RAOV (random acts of violence) is dark but interesting... As is the idea of shorting insurance companies that could fail to meet their obligations under mass disaster scenarios that they are forced to cover for whatever reason...
  • Even under "Regulated Slow-Roll" I would never invest in Inflation-linked bonds (index-linked gilts, TIPS or any other "long bonds"), especially after what happened in 2020 with all the crazy money printing. Like, do you trust the government to tell you the truth about how much they are inflating away their own liabilities?
  • Cash and T-Bills are fine and it's probably always a good idea to have some.
  • Regarding the idea of investing in "Data & Compute Infrastructure": I am somewhat dubious that this can be done in an effective way:
  • -- Data Centers are mostly REITs, that have terrible tax treatment for investors in standard brokerage accounts. (These may be good in tax-advantaged retirement accounts like Roth IRAs, however.)
  • -- Semiconductors and related firms may be fine, but are likely to be very volatile. Do you just invest in the whole sector? Or let the broad market cap funds rebalance into them for you over time? (Vanguard VTI Maxis rejoice!)
  • I am generally opposed to UBI as it increases dependence upon the government and assumes AI will materialize abundance into infinity. I worry about the 2nd and 3rd order effects of everyone being put on welfare. For example, how might our spiritual and creative capacities be diminished if everything including our bi-weekly paychecks is simply ubered to our doors without us lifting a finger?
  • To the extent that local, peer-to-peer and reputation based online markets and networks can be maintained, the currencies of these micro economies (meshtadels) are likely to rely on some combination of bitcoin, monero, gold, silver and cold hard cash. I don't think we'll ever fully outgrow the need for connection with each other and the land.
  • -- If it is not shit, but abundance that hits the fan, vis-à-vis some superintelligent large language model that we jack into all of our socioeconomic subsystems, we still might need our "McBags" --> https://bc1984.com/pack-your-mcbags/