During a punishing economic climate and a time of war, technological change feels especially ominous. With careers and livelihoods jeopardized, whole industries on the brink of extinction, and inflation ravaging living standards, normal fiscal anxieties resist innovation—especially innovation that represents a sea-change in deeply embedded modes of work.
No, I’m not talking about artificial intelligence in 2023. I’m talking about automated textile equipment—and the rise of the Luddites who opposed it between 1811 and 1817. The Luddite movement began in Nottingham, England, and spread throughout the Isles. The Luddites were political activists who arose to coordinate public demonstrations and to destroy the “obnoxious machines” that imperiled their careers. The Napoleonic Wars had led to economic hardship and inflation, and steam-powered looms were threatening the jobs of workers in the cotton industry. Of course, “Luddite” has come to mean anyone who opposes novel technologies. But it’s only become a byword because this has happened so many times before.
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As Mark Twain said, “History doesn’t repeat, but it often rhymes.” No nascent period of technological and economic dislocation is exactly like any other, but all share common characteristics—particularly when it comes to financial concerns.
What will happen to the economy? To the stock market? These questions and their corollaries are on many people’s minds. Like the Luddites fretting over machine looms long before our time, we all have to worry about what AI means for our careers, our livelihoods, our investments, and our world.
The first answer is that no one, not even ChatGPT, knows where this leads. Any arrogance that actually comprises an answer is dangerous. The history of futuristic prediction is riddled with failure. There are just too many moving parts that surround any invention, especially one with so many obvious tentacles.
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But if we’re predicting the long-term direction of the stock market, despite or because of technological shifts, history provides us a much simpler answer: it goes up. From a starting value of 41 in 1884, the Dow has climbed to over 34,000 today. This is merely the price return and does not include dividends. This astonishing upsurge continues because, regardless of economic twists and turns, aggregate company profits rise over time.
Every innovation in history, starting with Gutenberg’s printing press in 1440, has destroyed jobs, convulsed society, gutted the social order, and threatened entire industries and communities. But each has also fostered new jobs, hatched state-of-the-art industries, enhanced productivity and created massive amounts of emergent wealth. Once the printing press put scribes out of business, skilled workers had to emerge to assemble printing presses. Once the automated looms made weavers redundant, factories had to employ loom makers. The Dow’s relentless march upwards was marred by many setbacks and bear markets. But in the end, it always goes up. From the first light bulb in 1879, to the advent of radio in 1920, to the development of antibiotics in 1928, to the first transistors (early semiconductors) in 1947, to the personal computer in 1971, the Dow—in the end—has never looked back.
At the advent of a novel technology, investors bet first on the direct purveyors—just as they are doing now with Nvidia, Meta, Alphabet and Microsoft. But for every leader that succeeds in the brave new world, many more companies fail. The dotcom boom spawned the colossus Amazon. Yet for every Amazon, there were hundreds of bankruptcies like Pets.com. In the end, the real fruits of technological advancement accrue to the humdrum established companies that employ the modern, pioneering methods to make their operations leaner, more productive, and vastly more profitable. And with that, the stock market rises over time, oblivious to the existential fears in the background.
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