On December 6, The House Financial Services Committee’s Taskforce on Artificial Intelligence will hold a hearing regarding the effects that AI will have on jobs in the financial services industry.
The Taskforce has not released its list of witnesses it plans to call, but what their responses are already well known on Wall Street.
Depending on the employee’s role within the organization, the technology’s impact will range from significant disruption to an extinction-level event for some.
I’m not sure why the Taskforce is spending time on the issue. Given that all AI is just automated calculations, it seems a waste of time. Industrial automation replaced a host of blue-collar jobs since the invention of the steam engine; AI has the same effect on white-collar positions today, tomorrow, and for the years to come.
Many internal teams, vendors, and consultants have spun AI’s role as one of augmentation rather than replacement. It might be valid for the lucky few employees who will have post-automation positions, but the culling will continue.
In a study published by the McKinsey Global Institute, entitled Skill Shift Automation and the Future of the Workforce, the authors estimate that hours spent on basic cognitive skills, such as basic data processing and input as well as basic literacy, numeracy, and communication will drop by 15% by 2030. On the bright side, the authors also noted that the hours spent on high cognitive tasks that entail creativity, complex information processing, and data interpretation, will increase by 24%.
There is not a single individual on a firm’s organization chart who will be left unaffected. Those employed in cost centers will bear the brunt of AI’s impact. Middle and back offices will the double whammy of AI and outsourcing as financial institutions sharpen their focus on their core competencies.
However, profit centers are not immune. Many portfolio managers have already started their second or third careers as asset managers adopt more AI-developed active and passive investment models.
Even those in the corner offices will feel the pressure as their performance will be measured against the gains their teams have reaped through implementing AI.
There is a reason AI is called a disruptive technology.
What Congress can do about increasing AI adoption is unclear. There is no precise legal definition for AI, which makes any legislative approach difficult and dangerous. Any definition developed by Congress certainly would have unintended consequences, and that is the last thing anyone wants when regulating Wall Street.