From Sky news.

This is connections.

I'm Evan Dawson.

Our connection this hour will be made in the artificial intelligence dominated future.

Maybe not dominated.

That's kind of a grim overtone, but there is no question that I will affect our lives.

In many ways.

It already is.

And this hour we are focusing on jobs, the jobs that will be eliminated, and then the impact that the labor market change will have.

It turns out Rochester could be positioned to benefit.

And wouldn't that be an unexpected twist in the AI jobs saga?

Local economist Doctor Eric Morris has been reading about the coming changes, and he landed on a new study that puts Rochester on the good kind of list, a list of American cities that have the right combination of factors to attract new workers.

Writing for the Rochester Beacon, Morris says that artificial intelligence stands to alter the economic geography of the United States just as technology and globalization sent Rochester and other Rust Belt cities into recession and spurred outmigration of workers from our region.

He cites a study from labor economists Scott Abrahams and Frank Levy.

As Morris writes, quote, Abrahams and Levy predict that artificial intelligence will impact nearly 20% of the workforce, particularly white collar, college educated workers in occupations like accounting, legal, research, and administration.

AI is expected to disproportionately impact urban coastal regions with large concentrations of highly educated workers, end quote.

So why would those displaced workers end up in cities like Rochester?

It turns out that many so-called Rust Belt cities might be positioned to benefit, starting with the relatively low cost of housing.

There's a list of other reasons, and we're going to discuss those at this hour as well.

Morris concludes, quote, an influx of highly educated and motivated workers ready to remake themselves for success in an AI economy would be good for the Rochester region.

While this doesn't necessarily translate to Rochester becoming the next San Jose, the potential impact that this population shift could have on our local economic landscape needs no elaboration.

End quote.

My guest this hour is Doctor Eric Morris.

He's a staff economist for Let's Go Advisors, is portfolio manager for Lesko and a contributor at times to the Rochester Beacon.

Welcome back connections.

Thank you for being with us.

Evan.

Always great to be here.

Thanks for having me on.

We're going to get to your piece in a minute.

But because we have an economist in the room, I know a lot of listeners say, well, you got to talk about what what's going on in the economy.

Turns out there's nothing going on in the economy.

But, there's a lot going on the economy.

last year during the presidential campaign, we talked to you about tariffs because that was something that, Canada then candidate Donald Trump talked a lot about.

And now we're dealing with a kind of tariff whiplash.

Some are on, some are off, some are paused, some are being used to retaliate against the number of American trading partners.

Just today, the National Economic Council director, Kevin Hassett, warned of, quote, some uncertainty in the coming weeks related to President Donald Trump's tariff policies and, quote, I felt like that's a euphemism, some uncertainty.

I mean, I feel like we have a lot of uncertainty right now.

Am I wrong?

There seems to be a lot, particularly with the tariffs.

And that uncertainty can be, troublesome.

And it the bottom line is that uncertainty makes it very difficult to plan.

It makes it difficult for households to plan.

it makes it difficult for businesses to plan and certainly, clarity.

it is it is a is a premium is put on clarity as opposed to, uncertainty, which can kind of create, some paralysis in terms of decision making.

So I've said before, and I will say it again, every time we have Eric or his colleagues in economics with this, their job is not to be a political pundit.

This is not a conversation about politics.

It is about policy.

I will say that then candidate Trump talked a lot about his feeling last year that he thought there were a lot of big companies, CEOs, big firms who are not hiring as much as they could because of, quote, uncertainty that he said.

We got to get them off the sidelines.

They need certainty.

They need to know who's in the white House.

They need a, you know, a strong set of leadership.

And so it strikes me that there's some irony here, because it feels like there is a ton of uncertainty because of the policies that are coming forward or the policy on policy off combination.

How important is certainty to a stable economy?

It's very important.

You can never be certain 100% certain of anything.

That's one thing you can be sure about is that you'll never be certain about, about anything.

what's interesting about uncertainty is that it's hard to measure.

So as from from an economist point of view, economists, what we do is that we look at vast amount of data and try to use that data to understand things.

We tell stories, we try and learn more about stories.

We discover stories, things that are going on.

Some economists make projections and forecasts.

It's not something that I do.

but, most economists and all economists really are trying to understand stories based on data.

So when we think about data, there are two forms of data.

In economics.

There's hard data which are measured, objective things like say dollars, that get spent or jobs that are out there, you can count these things, but then there's soft data.

Soft data are things like survey responses, how people are feeling.

which doesn't always necessarily line up with hard data.

But the soft data is really nice because you can get it instantly.

Hard data is tough to collect and it takes time.

But soft data really?

You ask survey respondents a question and you're going to have that answer to that question instantly.

So we rely on both sets of data.

We have to acknowledge that the soft data doesn't always tell us the actual reality, but it tells us perceptions and perception can be powerful in shaping reality.

So what I'm getting at here is that when it comes to uncertainty, what we're seeing is in the hard data, we haven't seen so much of an impact yet.

I say yet because there's an expectation that we probably will see uncertainty impact some hard data.

it could potentially, cause businesses to spend less, to hire less.

It could cause households to spend less.

Just because uncertainty is something that can be paralyzing, as I mentioned earlier.

But we are seeing uncertainty show up.

And quite significantly in the soft data.

There are regular monthly surveys that occur of consumer, of businesses, business leaders, CEOs.

And in those surveys we have seen in the past two months a dramatic uptick in the survey responses in terms of, a negative outlook and associating that outlook with uncertainty about tariffs.

So good or bad, you know, whether a tariff policy happens and it's, you know, reasonable people can disagree, good or bad.

Economists have a point of view that I will share.

but at the at the same time, that policy isn't quite there.

There's so much uncertainty and it's just simply the uncertainty about it not not knowing that is weighing on CEOs, on small businesses, on consumers.

All three different surveys of those three different groups have come through in the past couple months and indicated a real significant uptick in tariffs and the uncertainty around tariffs driving, negative sentiment.

When you talk about hard data, I don't know how closely we should look at the Dow Jones as linked to this.

But, you know, for years, President Trump said that the Dow was kind of the golden measure of how the economy is doing.

In 2012, he tweeted, there's always a tweet.

He tweeted in 2012 that if the Dow falls more than 1000 points in two days, whoever is president should be impeached.

I am presuming he does not believe that anymore.

we've seen, you know, some serious pain in the market in the last week to two weeks.

But I mean, how closely related do you think that at least if you just look at the Dow number, which is not a perfect number, the economy, as we've talked about, but if you just look at the Dow, how much is that related to tariffs.

Well so you're getting to really my wheelhouse here right.

So I mean my day job I'm really working with individual families with nonprofit institutions all over the Rochester region and beyond, with folks who are here.

We're working with the retirement funds, and they're trying to understand these market dynamics.

And your question is how much of the recent market downturn can be attributed to uncertainty around tariffs?

And I think that there's a fair degree of connection there.

I think, you know, you can, say these things are correlated.

It's interesting, though, because when you look at a single indicator like the Dow Jones or say, the S&P 500, which is a better, indicator for for understanding stock market performance, it's broader, it's market cap weighted, and we don't need to go into the details.

But the S&P 500 has has turned down relatively significantly the past few weeks.

And it coincides with that tariff uncertainty, where we haven't seen the markets turn down as much is in international stocks.

Actually, international stocks have been rising in value, which is really interesting.

And also a less risky.

Assets like bonds, Treasury inflation protected securities have also performed quite well.

So how do you square this.

Like why is it that that the large US stocks are going down in value and pretty much everything else is going up in value.

And it really has to do with risk.

So those large U.S. stocks had had run up in price the past two years, presenting a lot of risk to investors.

And it was because investors felt very good about taking risk.

They felt very encouraged.

There were, a market term they were bullish about risk and risk can be rewarding right now.

What's happened is we've seen, the markets go down in the riskiest places and go up in the less risky places.

International stocks were actually priced in a lot less risky fashion.

So when investors are feeling this risk from tariffs, from, tariffs potentially leading to a general economic slowdown, maybe to more inflation in the US, they're looking to for other places to deploy their money.

And so if they're not going to go to the riskiest places, where else can they look?

Well, foreign stocks looked relatively less risky.

Bonds are notoriously less risky.

Treasury Treasury inflation protected securities the same, less risky.

So it's not simply that people are taking money out of markets and cashing out, putting that cash into their mattress and leaving it there for a rainy day.

They're they're redeploying their assets in places that are less risky, because now the perception is that those U.S. large stocks are more risky because of these policies.

Okay.

and to be fair, I want to listen to a little bit so listeners can hear a little bit of the justification from the administration vice president J.D.

Vance said this weekend that for too long, this country has allowed manufacturing to move to other places, other countries.

And so, Vance says, what is happening now is a correction of sorts.

He said that, sure, there could be some economic pain for a while, but in the end it will produce a better American economy because tariffs will raise, first of all, a bunch of money and it will force manufacturing to return to our shores.

Let's listen to some of what Vice President Pence said this weekend, that what we're really after here and you see so many people attacking the president's economic programs and attacking the progress that we've made over the past seven weeks, you hear people saying, well, how dare Donald Trump impose tariffs on foreign countries that have been taking advantage of us for 40 years.

And the answer is that unless you're willing to use American power to fight back against what what those countries have been doing for a generation, you are never going to rebuild American manufacturing, and you're never going to support the American workers.

Right.

That's Vice President JD Vance who built in there is first the claim that for generations now, we've been getting taken to the cleaners by foreign countries that are supposed to be our trading partners, and we are the sucker.

What do you think?

Well, economists broadly would agree that that's not quite the case.

you know, it's interesting and I think it actually relates to the backdrop of the article that I wrote in thinking about, the drastic changes that happen in the US manufacturing sector.

broadly speaking, beginning in the 1980s.

And what you saw during that time was two things one automation and two globalization.

And it's the second one, I guess we'll focus on.

It's globalization with, many trade barriers removed, or lowered, what we saw was not just that goods and services were falling across borders, but that labor was being used across borders in different ways and, access to cheap labor.

allowed firms that might have been manufacturing things in the US to manufacture those things for cheaper in other places.

Now, the immediate impact was a, a significant, downturn in U.S manufacturing jobs.

what happened as a result was that manufacturing went overseas and goods got produced for a lot cheaper.

It drove down the cost of goods, drove up corporate profits.

people, the American worker and the American spender was able to were able to buy cheaper goods.

and folks that were investing were able to, to earn more profits.

Employment went up in other places.

So, you know, it it hurts in some place, in some small areas.

I shouldn't call it small in some areas that aren't the the economy as a whole say like manufacturing, that there could be a temporary harm in that.

But as the economy grows and grows because of these things, there's a widespread benefit across the board.

Now, what happens to those workers?

Right.

Because it's a real concern is that there are parts of the economy that that that don't benefit.

this gets back to something that's as old as time, but it's really a coin, a term that was coined 100 years ago by an economist, Joseph Joseph Schumpeter.

It's called creative destruction.

Where, when, when when globalization happened and jobs were being shifted around, you know, many manufacturing workers were laid off.

but new opportunities were created.

Now, not every single person found a new opportunity right away, and not every person found an opportunity that was the same as the same as the old one.

but on the whole, what we saw is a real rising tide.

That net benefit, a rising tide that lifted all ships.

Now, to flip this around, to give you an example of how this might, that how a pleasing sounding narrative that might have plausible positive results actually doesn't work out.

you can go back to the, to the steel and aluminum tariffs that happened in the first Trump administration and those that by the way, this isn't political because those those were left on by the Biden administration.

And I'm going to offer a critique, an economist critique of these things.

Again, both both red and blue presidents have these tariffs in place.

what happened was, you know, the justification for these tariffs on steel and aluminum were, hey, we got to protect our steel producers, our aluminum producers.

So we're going to slap tariffs on on foreign imports of steel and aluminum.

And and what happened was there were some jobs that were saved.

But as a result of those those jobs being saved, the price of steel and aluminum in the U.S. went up.

Significant.

And when it did, the producers that depend on steel and aluminum as an input say, like auto producers or, producers of of household appliances and things like that, those firms suffered significant cost increases immediately because the that the aluminum and the steel that they source had become more expensive.

Facing those cost increases, they had to make a choice.

What are we going to do?

Are we going to increase the price of our goods, or are we going to cut back on our cost to try and make up for this?

Many of them cut back on their costs, and they did so by laying off workers to the tune of hundreds of thousands of workers.

So while the jobs may have been protected in those immediate industries of producing steel and producing aluminum, the the thousands of firms that use steel and aluminum as an input in the goods that they're making had to actually lay off workers.

So you've created winners and losers with these tariffs, which is what economists often see happening, is that with isolated tariffs on specific goods, you see winners and losers that happen.

So it's easy for a politician to talk about simply the winners.

Right.

Without getting into the details of the fact that there might be net effects that actually could be a wash, or there was a recent economic paper that I read that said that those steel and aluminum tariffs actually were a net negative for the economy.

Okay.

A couple other things on tariffs.

And then I promised we're going to talk to Doctor Morris about why we invited him in the first place.

But you know, it's it's people talk about this all day to keep going.

For our articles on the beacon.

You can go to the beacon.

Read it.

Oh we're going to get to there and we're going to have, by the way, the Rochester Beacon.

They do wonderful work there.

Smitty, Jacob and the team do outstanding work, and we will link to the piece that we're going to talk about coming up here about AI and its impact on jobs.

A couple other things here.

I'm curious to know what you think.

Just the general public education.

The reason I'm going to ask this question is in the last couple of weeks, I've seen a number of political commentators who are right leaning, basically saying, how come I never learned about tariffs, like, what's wrong with schools?

Like schools are a disaster.

I shouldn't be just learning about tariffs now like I don't I don't think I like these, but how come we didn't know.

And so a lot of people are linking to the wonderful scene in Ferris Bueller's Day Off, in which Ben Stein is playing the teacher in class.

You know, Ferris is skipped school, and what he's missing is the lecture on, you know, in the 1930s, the presidential administration used anybody, anybody, anybody.

Tariffs.

Did they work?

Anybody?

Anybody?

Anybody.

They did not work.

And like people are falling asleep in class.

Maybe that we all fell asleep in class during the tariff lessons.

Maybe Ben Stein was our teacher.

Are we teaching well enough on this so that we have a pretty well educated public on this subject?

But I hope so.

this is a this is hitting close to home because I, after spending a couple of years working in public policy and before, now spending several years working in investments, I spent nine years working as a classroom teacher in high schools and an adjunct professor in colleges.

And I taught economics and tell me you didn't do that.

anybody anybody I, I think there was a day or two where I had to walk over and, gently wake a student up, but.

And look where it's gotten us, professor.

It's, you know, it's great because it actually in New York state.

and I know we're getting a little off track here, but in New York State, there actually is a requirement that to graduate from high school in New York State with a New York State Regents diploma, you have to have a half credit of economics.

It's a half year course, and most students take it senior year.

And I taught at, I spent the bulk of my teaching career teaching at my alma mater, Brighton High School, and at Brighton.

That course was really something that, was a hallmark of the senior experience.

I have, I was standing on tall shoulders there.

I have a predecessor.

Before.

I was the kind of teacher there who who really built up the program, to be something that was very, very helpful for students across the board, but that there's not every state or every district where that emphasis is made in economics.

And, you know, for tariffs, it's really a there's a very simple textbook example of our explanation for tariffs, which actually isn't the full thing that you need to understand to see what's going on today.

But it's certainly a start to understand that tariffs and this is again not political.

This is just economics.

Tariffs.

Absolutely.

Tariffs by design restrict trade.

That's the point.

And trade by vast experience and research.

Going back to Adam Smith and David Ricardo.

And we're talking about hundreds of years of lived experience.

Trade is the number one improver of quality of life across the world.

The more trade that you have, the better off everyone involved is.

and that's on the whole, on average, of course, there are pockets of stories that we have about, say, like steel and aluminum and such, but trade has lifted hundreds of millions of people out of poverty.

It has taken us from from levels of, you know, in the 1950s when, when, many people think America was great, we are all accounting for inflation.

Far, far, far richer today than we were back then because of trade.

Right.

and the effects of trade.

The problem is it's really hard to point to saying, hey, trade started here, and now we're at today and now I'm better.

it's it's a slow again rising tide that kind of lifts all ships.

And it's, it's, it's very tough to, to, to, to, to quantify why that for an individual person.

But for societies the benefits of trade have been huge.

Tariffs by design restrict trade.

So I'm glad your students had you in the classroom.

You know the conversations I've been having lately, I was just having this with a colleague.

Just seeking to understand a little bit more about this is that tariffs seek to restrict trade.

So there is some pain.

There's a purpose often for the tariff.

So there is some sort of benefit for some party somewhere.

Right.

The question has to be how do you feel about it.

How do you feel about the cost versus the benefit.

Right.

And that when you hear for out of the Trump administration that there's going to be some short term pain for some long term gain?

There's a couple questions.

One is like will there be the long term gain to is who will feel it.

And then also there's questions about the pain, right.

How deep for how long and who will feel that too.

If you can make your best assessment, lay it all out and say, hey, here's what I understand about the potential gain.

Here's what I understand about the potential pain.

Do I feel like this is worth it?

Then you can make that decision.

But there's often too too often people are coming at this without that type of, objective.

Thank you.

All right.

So my here's my last question on this.

And then we'll we're going to shift to AI.

And if you're just joining us, we're going to talk to Doctor Morris about a piece he wrote for the Beacon on the the possible impact.

Again, not a prediction, but just looking at the landscape of where American cities are and regions and who could benefit from displacement and workers movement.

So we're going to talk about that coming up here.

Last thing I want to talk about on tariffs, just so I understand it a little bit better, is this first of all, I it is a little weird to hear this administration saying, well, like the president said, well, there might be a recession.

I don't know if you feel like.

I mean, is that a whole other show?

Are we moving back into recession territory?

Even the president says he can't guarantee we're not going to have a recession.

Well, that's wise for the president to say, because no one can guarantee.

Well, that's not what he said last year during the campaign.

No.

And again, that's not a political thing.

Saying this is, this is great.

But yeah, of course, politicians, when they're seeking office, don't want to, say anything bad is going to happen when they get there, when they're in office, they want to say that anything that bad happens, it won't be their fault.

It.

Right.

And this is it's very clever.

No, no, no party has a has a patent on that.

Shrewd.

Yeah.

and that was, that was something that kind of drove markets, to have an increased sense of uncertainty and fear as well.

Recently, was that idea that, the president openly acknowledged that that short term pain could mean an economic slowdown?

And, you know, this is really giving credence to the economist view on this, right, like that, that tariffs are restrictive to trade.

And so if you impose tariffs, it could have this kind of effect.

However this is what I want to make sure I understand.

So taking what the Vice president says in good faith, and he seems to be saying he really is deeply concerned about what he sees as a manufacturing deficit.

He wants tariffs to be the tool that rebalances that.

You heard him in the clip say, this is the only way we're going to get a manufacturing back on American shores.

And that may take some time.

What I don't understand is this help me with this.

The president said last year during the presidential debate, he had he said that we could raise so much money in tariffs that we could pay for free childcare for all Americans, that tariffs would fund so much that he was talking about 40, 50, 60% tariffs.

Now we're not getting quite that level.

But are you saying that tariffs will be this found money.

However, if what the vice president is saying is true which means that we're going to see tariffs lead to manufacturing coming back to this country, then we're not actually making money from tariffs because we're not trading.

Now the benefit may be okay, but the jobs are back.

So that's good.

But it can't be both unless I'm missing something.

Is that correct?

Evan, you get an A-plus, okay.

It can't be both.

Right.

It could feasibly be one or the other or the other.

Sure.

it can't be both.

And I could get into a long history lesson on how tariffs have been used in the US for a long time.

We started off using tariffs at the beginning of our republic simply as a form of revenue generation.

There was no income tax.

It wasn't in the Constitution and had to get a constitutional amendment to put that in there.

There was an income tax a little bit before that, but just to to to cross the T's and dot the I's, that there was an amendment that was put in there.

tariffs were also used as restriction during the industrial Revolution, late 1800s and in into the to the 1900s and then post-World War two tariffs have really only been used to try to, as a short term, reciprocation tool to try to negotiate free to trade.

So if we had a 0% tariff on, Japanese import and Japan had a 10% tariff on ours, maybe we'd go up to five and then that would start negotiation.

We both dropped down.

And there's been a lot of discussion about whether or not that is the current administration's goal.

And if it is the end goal, there would actually be encouraging.

Maybe it'll work, but it but that wouldn't be a bringing manufacturing jobs back or be a raising money.

So that would be a third outcome, which economists would generally say, okay, well that might be supportive.

You know, you might you might see some productive gains in the long run, but still in the short run, that could be very damaging.

And and the extent of the damage and where it would occur, is really unknown.

But you're right that it can't happen in both ways.

for the same good.

It just can't.

No, I promise, this really is the last time.

I'll go ahead.

Let's say that we did see an influx.

And maybe it's not this year, maybe it's not next year.

But to the vice president's point, maybe we get a lot of manufacturing back and we we we go through this period of economic pain in this downturn, but then we repatriate these jobs.

We see more on shoring of jobs.

And yes, as the president's team is now saying, you'll probably see prices continue to go up again.

Didn't hear during the campaign hearing it now, but if more Americans have good manufacturing jobs, then prices going up won't hurt as much because we'll be making more money.

Our economy will be stronger and relative to the price of goods.

That's okay.

Right?

We're doing better.

Yeah.

Not quite because.

No, no, when you think about that, if it's a manufactured goods, say like, automobile.

Yeah.

Okay.

so, so a car, if, if the price of cars goes up, so.

Oh, that's not good.

But but my wages go some manufacturer, some automobile manufacturers, their wages go up, which is great.

automobile manufacturers make up a very, very small part of the workforce.

You would need all car purchasers wages to go up and that that that.

But in a healthy economy, the idea being that the benefits start to spread and more hiring happens and, you know.

Yeah.

And that of net I mean, it's a, it's a pleasing sounding argument that could be plausible, but I don't know of the research that stands to support that.

I know of research that stands to refute that, but not to support that.

So, until I was presented with evidence, actual evidence that would make me change my mind.

right now, my opinion would be no.

All right.

After this break, we're going to dive into the piece that Eric wrote for the Rochester Beacon.

We're going to be talking about the labor market, the changes in AI.

There's been a lot of talk about forecasts of what jobs are going to be gone because of AI, what is AI going to take away?

And, so this is one of the rare times where I've read a piece and I went, oh, that's, that's that's not as bad as I feared.

And we're going to talk more about that with Eric on the other side of this break.

About going car light, not giving up your car entirely if you own one, but going car light, taking the car when you're going to work or when you're going to the store less often if you can.

Is it possible?

What would it take to really reduce the amount of time that you drive?

Over the next six months?

We'll talk to people who've done it next hour.

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This is connections.

I'm Evan Dawson I already have an email from a listener talking about possible AI job disruption and listeners.

I'm very curious to know if whatever you do for work, if you work, are you worried about what I will do to that?

And, a lot of what we've heard in the last couple of years, and this really was at the end of 2023, there was a lot of talk about this.

There was a Goldman Sachs forecast.

It was like 70, 80% of jobs could be disrupted by AI in the next decade or two.

you know, I don't know that people are backing off that there's just a wide range.

And what my guest, Eric Morris, is talking about, he, by the way, he's a staff economist for a Lesko advisor.

He's a portfolio manager and a contributor to the Rochester Beacon.

And what he just talked about for the break was wanting to see the data, saying, okay, I'm open to any argument.

Show me the data.

So what he writes about is, well, now there's some data that indicates that if there's disruption, it probably effects.

Unlike past recessions or major disruptive episodes in this one, that could affect white collar workers and high knowledge base workers.

And that's probably coastal workers.

And they may be on the move.

And there are some advantages that Rochester and about two dozen other cities have.

We're talking Akron, Buffalo, Rochester, Milwaukee.

These are not the cities that you typically see in the hot jobs of the future cities.

So I want Eric to take us through what you are learning.

And then we'll we'll kind of explore where Rochester in our region stands.

Yeah.

It's a really, interesting thought to, to, to think about the fact that artificial intelligence stands to disrupt the labor market.

And that's where this whole story begins.

and that, as you said, it's been talked about a lot.

it's just for listeners out there to think about how this how this plays out.

Some people might not even have ever used AI themselves.

Many of you maybe are deep into AI and using it all the time, maybe every day.

my artificial intelligence journey, started recently, and I've been using it more and more to, to help me with, both professional and personal things.

Can you give me an example, by the way?

Sure, absolutely.

I often, and, sorting through a bunch of thoughts and I time I'm a note taker.

And so I'll pump my notes in the eye and say, draft a one paragraph summary of what's going on here, like GPT.

Yeah, I'll use GPT.

So I still haven't used it, by the way.

Yeah.

It's it's it's it's interesting mostly because I'm like the second I start it's probably that's probably it.

Everything changes.

It does it does change.

So for listeners out there, the particular art fields, artificial intelligence we're talking about is, GPT or their chat models.

So think about like a chat bot, but think about a really, really, really smart one that, that, you can interact with that has, the ability to, give responses to questions and tasks, nearly instantly.

if I have to wait for a task, it's not very long.

and these, these these things have the capability and the capacity and maybe the potential in the future to be, a tremendous resource, to, to workers.

So, the idea is that right now, they're kind of like chat bots.

They can interact with you and give you some responses to things, help you learn things, help you think about things, help you research things in the future.

The idea is that these things would become, what's called a genetic, which is a fancy way of saying, you know, you hear the word agent in there, which means essentially, they'd be their own thing.

They'd be like having a worker, right?

Be like having a coworker next to you and you're working with them.

and you got to think about the tasks that they can do.

Like, what can they do?

Well, they can't make a car, right?

They can't fix your sink.

they're not very good at working with their hands.

Right?

or their feet.

All right.

This is not something they do, but they're they're really good at thinking and knowledge, and they're not necessarily as good as human brain.

Although some people might say that that day is coming relatively soon, but they can really, help in terms of, taking over tasks that might be a little bit more wrote a little bit, less high cognitive level.

and when I say cognitive, I mean, like create creativity and having some, some deep, deep, deep critical analysis, and that presents a great opportunity for some workers.

But for other workers, it also presents a threat, for those workers that are in, areas, say like, tax preparation and legal research in, general administrative roles, those functions that they are performing are going to be most threatened by an, a genetic, an agent AI model, that could actually perform those, those tasks and maybe not as well as them, but they can perform them adequately enough that when it comes to jobs and the functions of jobs, that could change.

Now, this is not a new story.

Go all the way back to the Industrial revolution.

You have the flying shuttle and the spinning Jenny and and folks like the Luddites, you know, burning down the homes of factory owners and, and boarding up the factories and breaking the machines because they were angry about this, because their jobs are being replaced by new technology.

fast forward to, to, the 1980s, which we are I talked about in this show, when you think about automation technology, we talked about the globalization point.

But automation technology, taking over some more significant tasks, you know, robots taking over, maybe we've talked about automobiles, the automobile manufacturing process using far less people and much more machines.

again, this was an uncomfortable thing for people.

But now, those those the industrial revolution, the 1980s, automation, phase, those were really, really, impacting the same type of workers, workers that worked with their hands doing physical labor.

I, I don't love the, the collar labels, but thinking about blue collar workers, you're being impacted by this AI stands to impact white collar workers, white collar workers of a certain, skill set that are doing things that could be more easily replaced by AI.

Again, I'm not saying it's a 1 to 1 replacement, but if you're making decisions about functions of your firm and you see that you could have capital, a machine like I be doing an adequate job and you don't have to pay it, that could be very disruptive to the work.

So I'm just looking at my shirt.

Your collar.

You're wearing a white shirt.

What's your green pants for?

Saint Patrick's day okay, but a white shirt, white collar, white shirt, white collar.

I think in the last couple of years, I'm.

I'm hearing a lot of people change their argument that I heard 24 months ago, which was I never going to be able to think like a person.

It won't be able to produce literature or marketing campaigns, you know, corporate notes like a person.

And now they go, oh boy, it it can it does all those things.

I mean it really.

And yeah.

And every single day it's the worst it will ever be at it.

It will only get better.

That's right.

So I think for all of us we have to ask what is coming.

I think culturally we have to ask what changes we want to come.

But in a lot of ways it's pretty undemocratic and it's going to come.

And so why Rochester?

Why Milwaukee?

Why Akron?

Why Buffalo?

What does this list tell us about why Rochester in this region could actually stand in some ways to benefit?

Yeah.

So these researchers that inspired my thinking on this, they had an interesting idea.

They said, okay, they actually relied on another set of researchers who had, developed a, a formula to try to estimate what jobs would be most likely to be replaced by AI.

So this are three categories with job impact for I mean, it's this specific type of AI, this chat bot style.

Right.

There's and near replacement of the function.

Right.

So they can do most of the tasks to the point where it's just not really worth employing that, human to do.

So, there is complete isolation from it, right?

Where, like, the job just doesn't like, again, fixing a sink.

Yeah, right.

It's just not going to happen.

but then there's the, third option, which is the complementary role where I, might threaten some parts of, of a role, but the vast majority of it actually can complement, you have your AI agent working with you, and it's actually going to make you more productive.

So it's actually going to going to increase your productivity instead of threaten you.

So what these researchers did is they categorized these these the jobs into these three different categories.

And what they found is that those that are most threatened, right, really are those white collar workers.

They are, for the most part, educated.

They are for the most part in coastal cities.

And these coastal cities have high concentrations of these types of workers.

What Rochester has, which is different than these coastal cities, is they have some of these workers as well, but it's not as concentrated with those types of functions and roles.

Rochester has a very diverse, small, but diverse economy that actually has a lot of different roles that are isolated from AI.

And also this is important, complementary.

So they stand to benefit from AI instead of being replaced.

Think of like health care, right?

When, when now you see nurses and health techs and doctors wheeling around hospitals and health care centers with a computer in front of them, and that's been productive to them.

But imagine if that computer was an agent of AI.

And what that could do in terms of going over, the results of, of, of tests and, and and, you know, comparing that to vast databases of other types of tests and seeing what people might be, you know, what symptoms might be leading to things and what human eyes and ears and, might not have uncovered, you know, that could really make them a lot more productive.

And Rochester has a lot of health care to it.

the optics work that happens around here is the same way.

a lot of the different things that happen on the high end manufacturing that Rochester now has left over after this sort of gutting of the manufacturing workforce, what's left over again, very complimentary to this type of AI.

So what these researchers found is, hey, look, Rochester is is a type of economy that has evolved into one where AI doesn't necessarily stand to threaten as much.

It actually could create opportunities.

But importantly, there are two other things.

You know, these workers that are in these higher concentrated coastal cities that that stand maybe to have their jobs replaced, they're going to be well-educated, they're going to be highly motivated.

They're going to make choices.

And what these what these researchers did is they said, okay, if they're going to be disrupted, where might they go?

Because in the 1980s, when that disruption happened, these workers moved.

And Rochester doesn't need any reminding of that.

They moved out of Rochester toward opportunity.

They were looking for certain things.

So they're going to be encouraged to look for opportunities.

Those opportunities might be in places like Rochester and Akron and Buffalo and other cities that aren't necessarily rustbelt cities either, like Oklahoma City or Houston or New Orleans or Baton Rouge.

But the two other things that these workers might be looking for, one would be they're looking for training.

They might be looking for training to help them become, instead of AI competitive or try to compete with AI and be replaced by complementary.

So they might might be looking for skills and they need to find those skills.

And it might not just be on the job, it might be they might be relying on education institutions, world class education institutions like we have in Rochester, a high concentration of.

And the last thing is that these workers are better stand to be replaced are 21st century modern workers.

And we've learned a lot over the past five years about what 21st century workers want.

One of the things is they want relative affordability.

Now, Rochester's housing market has seen an increase in prices lately, but relatively speaking.

So there were some commenters on my piece in the beacon that I think might have missed my word relative.

They're relatively speaking, the housing in Rochester is still far more affordable than those coastal cities.

So when these workers go to look for a place where they could find opportunity with, with, jobs that are complementary, get the skills and training for them through maybe like, you know, training programs or reskilling programs from world class institutions and find a place where they could live for relatively affordable, cost Rochester lands on that list.

So just reading through some of the notes from the piece, it really is interesting to think about the data that these economists have collected about what workers want.

I like the idea of a big enough city.

That's an interesting phrase, but it makes sense in that, if you think about the biggest American cities, they're not very affordable right now.

for the average person, Rochester is a whole different thing.

The question for workers and for these industries would be, Is Rochester a big enough city?

And the answer is it probably is given the educational infrastructure you talked about, given some of the advantages with the cost of living in housing.

So we're not just big enough categories.

What's really interesting about the big enough is that the consideration for that was the fact that people are going to be looking for reasonable substitutes for their amenities that they've been able to enjoy in these urban areas.

And Rochester has reasonable substitutes.

I mean, you're not going to be able to go to Yankee Stadium and Cierra and Judge swat a home run, but come on down to to to Innovative Field here and watch the wings.

And you're going to realize that this is a great place to catch a great ball game.

I see Aaron Judge on a rehab assignment.

Exactly, exactly.

I saw Gerrit Cole.

It was great.

Yeah.

or think about our orchestras and our arts here that are, again, world class, as good if not better than those coastal cities.

and the access to those things.

So the big enough piece was actually thinking about some of those amenities that people are looking for.

Again, these are 21st century workers.

And this isn't necessarily a cold, hard, rational analysis.

All they want is dollars.

They need dollars and they're looking for other things too.

Sure.

And if you're in San Francisco, you go, I'm only an hour to Napa.

If you're in Rochester, you go, I'm an hour to the Finger Lakes.

I mean, there are analogs here that are really interesting.

Yeah.

And I think it's important we think about San Francisco, New York, Boston as these coastal cities that might be more vulnerable.

You know, rewind 40, maybe 50 years.

They have to be 50 years to the time period before globalization and automation upended those manufacturers, and those cities were struggling.

Right.

It hasn't always been that those coastal cities were the most vibrant cities in our nation.

That disruption that occurred because of that technology and the development of of a globalized trade made those cities the beneficiaries of that.

So part of this analysis is based on the fact that, you know, history doesn't repeat itself, but it often rhymes.

And this type of workforce disruption could have, impacts on the geographic economy of the US.

Looking at some of the ways that these cities across especially the Rust Belt, but the savannas of the world, they're all different in different ways here.

But you do write in your piece a little bit of a cautionary tale that this is, comparatively speaking, pretty heavily regulated and pretty heavily taxed compared to our competitors.

And if we go any more in the direction of what probably the marketplace would view as burdensome regulation and taxation, we would be losing out to other cities that aren't in that category.

Yes.

Yeah.

I think that it's, probably a widely held view, no matter where you lie.

on local politics, that New York State has, heavy tax and heavy regulation.

Well, that's not a view, right?

That's just facts.

right.

yes.

It's objective.

Yeah.

and Rochester has, found ways to survive and become dynamic and relatively thriving given its size.

you know, it's hurting in a lot of ways, but really, it's it's a we're a scrappy city, and our economy has been able to have some limited measure of success, not because of those regulations.

And the tax abatement, but in spite of it.

So I do I do finish the piece with a little bit of advice for leaders just thinking, look, we, you know, we need taxes and we need regulation.

But to make to spoil this opportunity with any more cumbersome, business, un friendliness would be a shame.

and so, you know, the opportunity can stand to be there right now as we see it.

But if we were to spoil it that way, that that would be a shame.

Yeah.

Let me read some feedback from listeners.

David writes I was riding in my wife's car.

That's my explanation for why I was listening to commercial radio.

David, it's okay.

I just want you to know.

I mean, it's not, but I have to say, you know, it's fine.

he says I was listening to commercial radio a couple weeks ago, and an ad came on for something.

Used cars, the lottery, who knows?

But at the end of the ad, there's a voiceover in about 2000 words per minute with a legal disclaimer.

It occurred to me that guy is going to be replaced by AI generated output soon.

If he hasn't already, just add it to your list.

So yeah, I probably so sure sure, sure.

And there there are a lot more, even more thoughtful jobs that that aren't there.

But I think the number one job that I saw on the the initial research study that that could potentially be replaced was translator.

And that's not that job.

But it's, interesting because the translation is, amazing.

Translation.

device is translation.

Tech is already, yeah.

I mean, in a lot of different tracks.

I mean, you need a translator for those disclaimers.

Yeah, you do.

And foreign language translation is another thing that AI is doing amazingly.

Lee.

Well, already we're going to be able to have conversations with people and basically barely pause when we're speaking two different languages in the same room.

That's right.

It's it's an amazing thing.

Again, I, I hope it doesn't convince us we don't have to learn anything.

I heard somebody say recently, why would you read books anymore?

I can sum up everything you need to know about a book and I'm going.

I think we're missing the point of books.

Yeah, okay.

That's right.

Mike writes to say it's interesting that one of the things that AI is good at is knowledge jobs that are somewhat rote and don't require a lot of creativity.

I could argue that I could replace a lot of C-suite executives, and I'm only being somewhat sarcastic.

Yeah.

That's right.

I mean, yeah, that's right.

I think maybe what those, I mean, this is devil's advocate here, right?

This is not necessarily I'm not pushing back personally, but, Yeah.

How much responsibility do you want assigned to those?

Right.

So I think that a C-suite executive would find that an agent, I would be remarkably helpful to them in freedom.

Up a lot more than they they already are.

but then when it comes to responsibility, I think the CEO's, big responsibility of all the employees that they have under them.

I don't think you want to leave that to the AI.

Yeah.

a question from listener basically saying that the first half hour and the second half of these programs tie together and wants to know how much manufacturing is likely to be affected by AI.

So you've been talking about more white collar.

but how do you see manufacturing in that category?

Yeah.

So again, I is not very good at working with the hands.

but the, the robots that exist, the automation technology that exists could be greatly enhanced by AI.

I think that from the research that I've seen, it's not necessarily standing to replace any of the jobs.

In fact, because manufacturing has already gone through this transformation of getting it to really, really, machine intensive or non-human intensive production methods that, I can't think of a better word, but sort of like the culling of like, yeah, of jobs has, occurred there.

And so there's a lot less to lose.

whereas in the white collar professions, when you see that sort of base level worker in the white collar field, hasn't really gone through that experience, and there wasn't a technology that threatened them in the same way.

But now there is, again, it's a little ironic.

but also it's very, very interesting and I don't I think that the comparison, you know, it's not 1 to 1, but it as a mental framework to understand how it could be disruptive.

I think it's history is so important here and it's really informative I think in this case.

All right.

Two similar comments from Kyle and Joel Kyle.

Right.

Similar to what we just heard, aren't chances good that any return of manufacturing to the United States will be work done by automation and robots?

If I were going to build a manufacturing facility from scratch in 2025, I would lean heavily on automation.

That is from Kyle, where, as Joel says, are there companies in manufacturing that will be able to create new factories?

Aren't the cost too high?

that's a great consideration.

then we're getting into econ 101 here.

Mr. Morris's old class.

When we talk about fixed costs and incentives that way, I will say this, this is something that went unsaid in the beginning.

We think about maybe, like, trying to bring manufacturing jobs back from, say, China.

you think about what's manufactured in China.

And those are the types of headline grabbing jobs that, people are salivating over for just trying to get their hands on here in the US.

People.

Really, it would you love to open up a Foxconn like factory where you're assembling iPhones out of already produced pieces?

you know, assembling TVs, assembling shoes?

A lot of the shoe assembly has been outsourced to, you know, places like Thailand, Thailand and Vietnam and such.

But, I think that we have to understand a little bit more about this is one of those reasons where Americans have benefited because we're not using our labor to, produce those things.

We're using our labor to produce, semiconductor chips and automobiles and, to do high level, legal services and financial services and all sorts of medicine and research.

so I think it's not quite a 1 to 1 comparison.

When we get that in our minds, it's a little more complex than that.

All right.

A couple more quick ones here.

Another comment.

Didn't we learn the folly of high tariffs when McKinley was in Congress and after.

Yeah.

So, that was that sort of late Industrial Revolution time period I referenced earlier in the show.

The after would be the the Ferris Bueller, Smoot-Hawley, tariffs.

And, yeah.

You know, people do forget, that the Smoot-Hawley tariffs, which happened in the 1930s, they coincided actually with the beginning of the Great Depression.

those tariffs are attributed to not, can be attributed to not starting the Great Depression, but certainly making the Great Depression far worse than it probably had to be.

And again, it's because it was restrictive of trade.

Patrick says, going dark.

That's what they mean when they say there's no human doing the work.

I wonder if that's what that phrase going dark will eventually mean.

and, Mark wants to say, for those of us.

Hold on a second here.

Oh, boy, I hope you don't go dark here.

I know people keep having me on the show.

no, no, Mark says don't ask.

For those of us near retirement, it's, It's not easy.

Not essentially saying not to get overwhelmed by the whip song market week to week.

What would you again, I don't and you give investment advice but for people investment advice.

Nothing I said here should be considered investment of course.

But what would you say to Mark who's saying, hey, I'm closer to retirement and it's hard for me to see the market kind of dealing with this.

One is I would encourage people to work with the financial professional.

If you have A41K plan with or a company, that company has, advisor attached to that.

You should consult that advisor.

but the second thing, and the reason why you want to consult them is to think about your own personal risk tolerance.

And that should inform the way you're invested in the financial professional can help you understand your risk tolerance, especially your age, near retirement and what that means for you in the future.

So consult your financial professional.

Thanks for being here, as always.

Thanks for having me.

This is really fun and he is bringing the camera.

Can't capture it on our YouTube channel.

He's wearing these great green Saint Patty's Day pants.

I should have been thinking about that very colorful doctor.

Eric Morris is staff economist for a Lesko advisor, is portfolio manager as well, and contributor to the Rochester Beacon.

It's a really interesting piece.

And the beacon, again, the beacon is doing great work and we will link his piece for the beacon in our show notes so you can check it out and share it if you'd like more connections coming up in a moment.

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