Sweeping job losses from AI could trigger a domino effect that tanks the stock market and makes universal basic income a reality, Carson Block says.
The Muddy Waters Capital founder and CEO, known for publishing bombshell reports and taking public short positions, issued the bold pronouncement during an episode of the "Merryn Talks Money" podcast released on Monday.
Block said it's "entirely conceivable" that within the next few years, the US could see "roughly 15% of knowledge workers displaced from their jobs."
There are about 100 million people employed in knowledge fields such as tech, law, and finance in the US, suggesting 15 million jobs could be on the chopping block.
Block gave the example of litigation, saying that large language models (LLMs) like Anthropic's Claude are so good at compiling and ordering information that they can save "innumerable billable hours," paving the way for the profession to "shrink significantly" going forward.
The veteran investor made the case that job losses during the global financial crisis were reversed through economic growth and workers moving to different roles, whereas AI replacing people will mean "those jobs are gone, and the number of chairs for humans is going to continue shrinking."
Block laid out how workers who lose their jobs to AI might pull money out of their retirement accounts to compensate for their lost income, and cease investing in their 401(k)s each month.
Combined with a wave of withdrawals as a generation of Americans approaches retirement, that could mean the S&P 500's net inflows become net outflows, pulling down stock prices, he said.
Block added that the rise of passive investing in recent years means there won't be enough active managers to "catch the falling knives" and temper the market downturn, especially as stock valuations have so far to fall.
Echoing Michael Burry of "The Big Short" fame, he said the passive-investing trend has created "significant fragility" in the market that could lay the groundwork for "GFC-type events."
A new world of work
Block might see disaster looming, but he struck a positive tone about AI's ultimate impact on society.
"The good news is I think most people will live reasonably comfortable lives," he said.
Middle-class people will be "working two or three days a week" and will have disposable income to spend on travel and leisure, as well as at small businesses like cafés, he said.
Block also described an "underclass" that will "receive universal basic income, and they won't have to work at all."
Elon Musk, the CEO of Tesla and SpaceX, has similarly said that government checks are the "best way" to deal with AI-driven job losses, and saving for retirement could become "irrelevant" in a decade or two as AI and other technologies stand to create enormous abundance.
Block said on the podcast that prior to February, he was skeptical of AI and didn't consider models like ChatGPT to be intelligent. But the launch of Claude's Cowork and other next-generation tools made him realize there were "real labor savings to be had" from compiling and organizing information in knowledge industries.
The vocal cryptocurrency skeptic once again cast doubt on digital tokens. He said that in a catastrophe, he'd "rather have cans of tuna stockpiled than a USB drive with bitcoin."
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