For those of you who would prefer to listen:
I was in Denver this week for Schwab’s annual Impact conference. Meredith joined me. Firms from across the country converged on the Rockies to study trends, collaborate on common challenges and try to map out the future. No surprise, the advancement of Artificial Intelligence was a dominant theme.
It was said that 2026 will be the “Year of the Agent”. Agentic AI is an Artificial Intelligence system which has the autonomy to act independently to achieve a goal. It understands rather than merely responding to human prompts and intervention. It is another step towards Artificial General Intelligence (AGI), where the machines are expected to be as smart, if not smarter, than we humans. It aims to match the cognitive abilities of the human brain. AGI is believed to be achieved widely by 2028. Innovation is racing at light speed.
Vast quantities of cash have been thrown at AI’s advancement. Over $1.5 Trillion will have been spent when this year ends. Next year is expected to see $2 Trillion. It’s fueled the Stock Market. Investors have switched gears a bit on expectations though. The excitement of the hyper-growth has transitioned towards results. Getting a return on these massive investments is key. But AI’s success will not be just measured in profits. For many companies there will be a focus on time saved versus Dollars gained.
In one of my sessions, the presenter, a Silicon Valley lifer who is now running his own AI business, asked how many people are currently using AI. Pretty much everyone raised their hands. The common AI use case for firms like ours is for research, note-taking and messaging. That’s precisely how we use it. For most, AI is still highly experimental.
AI can be perceived as a valuable tool but also a threat. Jobs are becoming more productive and efficient. Corporate productivity and profitability has never been higher. But AI is also taking some of those jobs. That has been evident with the recent round of layoffs.
I highlighted Waymo’s advancement at our recent events. Autonomous vehicles are a clear example of AI in motion. They’re the ultimate mobile device. And they drive themselves. Today, over 4 Million Americans are employed in driving. Trucks are prime for disruption from AI, particularly the long hauls. Nearly half of a Trucking company’s costs are employees. America’s truck drivers average age is 55. Two-thirds are over 44. Just 15% are age 34 or younger. Trucking companies are not hiring many drivers anymore.
The Financial Services industry is embracing AI as much as any. But it will take both time and work to see results. It’s kind of like a gym membership; just having it does not lead to results. You need to use it. You need to know how to use it. Education and strategy are required. You also have to commit to it in order to get consistent and lasting results. There’s also this: Using AI incorrectly can be devastating. Not knowing what you’re doing at the gym can easily lead to pulled hamstrings and torn muscles. You gotta know how to work the machines.
Schwab has taken a leadership role in embracing AI. The company is leveraging Artificial Intelligence across its operations for both internal efficiency and client-facing innovation. Schwab is using AI to automate elements of investing, enhancing employee productivity, improving client services, and launching new tools that are powered by natural language processing and machine learning.
The company rolled out Schwab Knowledge Assistant, an AI tool. It’s an internal ChatGPT-like assistant that supports client service specialists by answering questions, summarizing information, and helping reduce research time. This initiative saw 90% adoption growth last year and continues to expand. Schwab asserts Knowledge Assistant has lowered operational costs and improved accuracy.
Schwab is also using an AI-Enhanced Call Routing and Voice Assistance tool. AI-driven voice assistants help route advisor calls to the appropriate teams without the need for menu navigation, streamlining support and improving advisor productivity. This is an area that will definitely improve and enhance our overall service on your behalf.
Investing has always been on the cutting edge of innovation. The game changed when Chuck Schwab created the discount broker in the 1970s. Online trading changed the game again in the 1990s. Today, Schwab is embarking on AI-Optimized Trade Executions. Schwab’s proprietary machine learning is being deployed to improve trade routing and execution. It is designed to lower costs and enhance outcomes. It is especially beneficial for firms like ours on the institutional platform.
AI is making things more efficient. Schwab asserts its AI initiatives are distinguished by their scale and deep data resources. With $11.5 Trillion in assets across 40+ Million brokerage accounts, Schwab has a ton of data. Account opening and money movement is now faster and safer than ever before. The company is focused on both automating routine financial processes and enhancing personalized client and advisor experiences. This AI integration is credited with reducing operational costs while also supporting growth. Schwab anticipates a 25% drop in cost per account in the next decade.
The AI-Trade has dominated Market activity this year. It’s been that way since 2022. Spectacular gains in Tech have triggered fears of bubble-like conditions, reminiscent of the Dot-com days. We view this environment more like an AI boom than bubble. That said, there have been bubble-like conditions in certain areas. Both booms and bubbles lead to excesses in price and valuations for stocks. Those excesses got burned off a bit this week. It was only a matter of time.
Corrective price action is healthy. We are firmly in the camp that Artificial Intelligence is driving a Digital Revolution. We think it’s sustainable. But the Stock Market can get ahead of itself. Market corrections are designed to address the excesses. It’s been a rarity for Tech to decline since Spring. It sure happened this week. But declines are normal. It’s part of the deal. Besides, areas that have lagged caught a bid this week. Call them the Boring, Beautiful Blue Chips. That’s a good thing.
So, what does this all mean? A colleague and I discussed some takeaways. We started with this: AI cannot and will not replace humanity. It will be spectacular at doing tasks. But the human connection is a miracle that will be everlasting. There’s also this: Human beings aren’t naturally good at being human. We’re not always nice to each other. Dependencies on devices put strains on human relations. It has certainly fueled the political divide. This is one of the biggest risks.
AI is to be used as a tool. It can’t replace the most essential human skills. In case you’re wondering, I write these weekly pieces from scratch. I enjoy it, like an art form of sorts. So many in my industry use AI to write their messaging. I will never be one of them. Every Friday, I strive to be better than AI. Only you can be the judge of that. But if you’re listening to this rather than reading, that’s my AI voice. It’s absolutely my words you hear, but AI voice generation saves me time.
Our society has become obsessed with instant gratification and guaranteed results. It’s like in school when you just want the answer without really understanding the material. But the journey and the knowledge accumulated is what’s most important. That’s wisdom. And wisdom was described to me this week to be intelligence mixed with empathy. I like that. One thing machines lack is empathy. So perhaps machines will get smarter. But it’s our human superpower to be wise.
Facing challenges and adversity is always difficult. But that’s where opportunity lives. Do we actually learn anything meaningful when things go well? It’s when they don’t go well which provides the greatest lessons. Skilled people are most valuable when things go wrong. What we do with that knowledge and experience makes all the difference in the future. That’s human intelligence, and it’s real.
Have a nice weekend. We’ll be back, dark and early on Monday.
Mike
